This essay is part of a series of articles, edited by Stewart Patrick, emerging from the Carnegie Working Group on Reimagining Global Economic Governance.
Since Brazil’s redemocratization in 1989, the country has oscillated between neoliberal and more interventionist development models, the latter championed by the governments of the Workers’ Party. Now, during Luiz Inácio Lula da Silva’s third presidency, the government has initiated a state-led program of “neoindustrialization” aimed at advancing decarbonization efforts. Even though Brazil has several advantages in the transition to a green economy, such as its clean energy matrix and abundance of natural resources, the success of this transition depends on overcoming barriers imposed by two important domestic constituencies: agribusiness producers and impoverished citizens that rely on extractive activities, particularly in the Amazon region. Those groups perceive environmental policies as a threat to their economic interest and livelihoods, respectively, posing significant challenges to the government’s sustainable development efforts. The political barriers to decarbonization in Brazil provide a compelling case study of the challenges that progressive governments in Latin America face when attempting to pursue policy directions that run counter to the entrenched interests of powerful economic groups. Brazil’s circumstances also underscore the importance of implementing policies that provide alternatives and compensation to the poorest citizens to keep the forest standing.
For the past three and a half decades, Brazil has alternated between neoliberal and state-led developmental models. A significant contrast between these frameworks lies in the role played by the Brazilian Development Bank, commonly referred to as the BNDES. Neoliberal administrations typically have constrained the BNDES’s scope, restricted the amount of subsidized credit it extends, and at times redirected its resources toward downsizing the public sector and facilitating the privatization of state-owned enterprises. By contrast, when the Workers’ Party has been in power, the BNDES has occupied a central position in the Brazilian economy. Under these administrations, the bank has financed development initiatives to address regional inequalities, enhanced access to credit for small and medium-sized enterprises, and funded industrial policies and the global expansion of Brazilian multinational corporations. Consequently, the breadth of BNDES’s operations often serves as a barometer of the policy priorities set by Brazilian administrations.
Now, under Lula’s third administration, the BNDES once again exemplifies the government’s commitment to advancing industrial policies, this time with a specific focus on promoting the country’s green transition. Consistent with this strategic orientation, the bank has announced a program of neoindustrialization intended to reinforce decarbonization initiatives within the Brazilian economy. The BNDES also oversees the management of the Climate Fund (Fundo Clima), which is expected to serve as a critical instrument within Brazil’s national climate change policy framework. This emphasis on environmental considerations is consistent with Lula’s two previous administrations. It reflects the government’s sense that Brazil’s abundant natural resources, clean energy infrastructure, rich mineral deposits, and ecologically significant biomes (such as the Amazon and Cerrado) leave the country uniquely positioned to capitalize on the global transition toward a green economy. It also reflects the political leadership’s decision to place the climate issue at the center of Brazil’s strategy for international engagement.
However, the success of Brazil’s transition to a decarbonized economy and its leadership on climate policies under Lula depend on overcoming at least two significant domestic barriers. The first is posed by an affluent, politically organized, and influential agribusiness sector, which reacts adversely to environmental regulation. The second stems from impoverished populations engaged in extractive activities, especially in the Amazon region, who perceive environmental concerns as a threat to their livelihoods.
Brazilian Agribusiness and the Environment
Unlike nations in the Organisation for Economic Co-operation and Development, where the primary source of carbon dioxide (CO2) emissions is fossil fuels, in Brazil, approximately two-thirds of emissions originate from agriculture, forests, and land use activities. Consequently, no national decarbonization strategy can be credible without the support of Brazil’s agribusiness sector, which remains highly resistant to environmental regulations.
The significance of agribusiness to the Brazilian economy cannot be overstated; in 2023, the sector accounted for half the country’s exports. This relevance increased tremendously during the 2000s, primarily because of Brazil’s rapidly expanding trade with China. In less than a decade, China transitioned from Brazil’s twelfth major export destination to its primary economic partner, both in trade and, more recently. in direct investments and finance. Whereas in 2000, Brazil received 2.3 percent of its imports from and sent 2.0 percent of its exports to China (by value), by 2023, these figures had surged to a remarkable 22.1 percent and 30.7 percent, respectively.
Chinese imports, which are focused on a few primary products such as soy, meat, and iron ore, have precipitated a significant reprimarization of Brazilian exports. Thanks to the geographic concentration of commodity production in Brazil, Chinese demand has generated a positive shock in the country’s agro-exporting areas and expanded the frontiers of Brazilian agricultural production. Traditional agro-exporting states also have gradually shifted to prioritizing soybean cultivation aimed at the Chinese market. Consequently, four states—Mato Grosso, Paraná, Rio Grande do Sul, and Goiás—now account for about 70 percent of Brazil’s soy production. These states have grown most rapidly in recent decades and have amassed significant political influence despite their small populations.
This growing influence is exerted through the cross-partisan agribusiness caucus Frente Parlamentar da Agropecuária (FPA). The FPA dates back to 1988, when a group of landowners organized to ensure their interests were represented in Brazil’s Constituent Assembly. Its political impact has significantly expanded since then, particularly over the past decade. In the current legislature, the FPA includes some 324 out of 513 representatives in Brazil’s lower house, and 50 out of 81 senators in the upper house. Unlike other caucuses, the FPA has its own news agency (FPA Agency), and also a think tank, the Think Agro Institute (Instituto Pensar Agropecuária, or IPA). The IPA, founded by farmers associations in 2012 and now predominantly funded by the agroindustry, is by far the main lobby operating in a country where lobbies are still not regulated. It is located in a mansion in Brasília’s luxurious South Lake district and promotes gatherings between agribusiness leaders and legislators on a weekly basis.
The structure of the IPA mirrors that of the agribusiness caucus, with both being organized into committees dedicated to specific topics such as property and minority rights, environment, and agricultural policy, among others. Each IPA committee includes a legislator, who is also responsible for the relevant committee in the FPA, and those committees produce legislation to be initiated in Congress. No other congressional caucus has this level of financial and physical resources in Brazil’s political system.
Brazilian agribusiness played a significant role in the impeachment of former president Dilma Rousseff, who succeeded Lula after his second term, and it was also a major force behind the election of Jair Bolsonaro, who appointed a former FPA president as his minister of agriculture. With the unapologetic support of agribusiness representatives, Bolsonaro’s government worked to dismantle Brazil’s system of environmental governance. This process encompassed defunding institutions, eliminating administrative procedures, and weakening oversight and control agencies. In Congress, the Bolsonaro administration initiated laws pardoning land invasions and exempted basic sanitation projects, maintenance on roads and ports, and low-voltage electrical distribution infrastructure from environmental licensing requirements. It also attempted to reduce protections enjoyed by Permanent Preservation Areas and approved more than 2,000 new pesticides between 2019 and 2022, the highest number of any presidential administration since 2003. In the four years of Bolsonaro’s administration, 45,586 square kilometers of forests—an area larger than Denmark—were destroyed.
Although Bolsonaro was not reelected, his anti-environmental agenda continues to wield significant influence in Congress, thanks largely to the economic and political clout of Brazilian agribusiness. Given the considerable size of the agribusiness caucus, the current administration depends on its members to advance any legislation. Contrary to the stated goals of the Lula administration, for instance, the FPA recently introduced a law that loosens regulation of environmental licensing, as well as another law that relaxes regulations on deforestation of the Atlantic Forest. Additionally, the Brazilian Congress recently approved the Marco Temporal, a law advocated by Brazilian agribusiness interests, which establishes that only territories occupied by indigenous peoples on October 5, 1988—the date of enactment of the Brazilian Constitution—will be legally acknowledged and demarcated as Indigenous peoples’ land. Although deforestation in the Amazon declined sharply in 2023, Lula’s first year in office, it increased by 43 percent in the Cerrado in the same period.
Interestingly, whereas FPA legislators vote almost unanimously to dismantle environmental preservation, the public rhetoric of agribusinesses themselves varies significantly depending on their levels of integration into global markets. Companies extensively involved in international trade face increasing pressure to adopt and adhere to environmental standards to maintain and expand market access, and thus tend to adopt more pro-environment stances with regard to farmers. Unfortunately, thus far, these pressures have failed to extend beyond mere rhetoric.
Amazon Populations and the Environment
The transversal nature of climate policies also implies that successful strategies to defend Brazilian forests necessarily involve compensating and offering alternatives to poor populations that live in regions devoted to extraction, particularly in the Amazon. Although they are among the most vulnerable to the impacts of climate change, these communities still perceive a tradeoff between environmental conservation and their immediate economic well-being. The majority traditionally have supported conservative candidates, some of whom are openly hostile to climate action.
According to electoral data compiled by the Laboratory of Geopolitical Studies of the Legal Amazon (LEGAL), the consolidation of a right-wing vote in the Amazon region peaked during the 2018 election. Bolsonaro emerged victorious in all Amazon states except one (Pará), securing over 75 percent of the votes in states like Acre. In that same election, Bolsonaro also won in all capitals of Amazonian states. His support in Amazon states remained strong in 2022, when he won in all but two states, and in all but one capital (Belém do Pará).
Interestingly, despite the various challenges related to environmental protection in the region, the environment ranks low on the legislative agenda of Amazonian states. Take the example of Acre, the home of assassinated environmental activist Chico Mendes and of Minister of the Environment and Climate Change Marina Silva, and which was governed by the Workers’ Party for twenty years (from 1999 to 2019). An analysis of the bills introduced in the Legislative Assembly of the State of Acre between 2019 and 2021 reveals that out of 658 bills initiated, only thirteen (1.97 percent) referred to the environment and energy. Of those thirteen propositions, only three were approved.
The scarcity of representatives advocating for an environmental agenda in the Amazon mirrors the limited demand for public policies addressing environmental issues among voters. Focus groups conducted by LEGAL indicate that environmental concerns lack traction with Amazonian voters. Instead, residents prioritize what are commonly termed socioeconomic issues—such as healthcare, education, and jobs—and perceive environmental policies as disconnected from and subordinate to those priorities.
Conclusion
After four years of a neoliberal government that systematically dismantled environmental regulations in Brazil, the country is once again transitioning toward a state-led model of development, now with a strong emphasis on decarbonizing the economy. Considering that the majority of Brazil’s CO2 emissions originate from land use, though, efforts to promote a development model aimed at shifting Brazil toward a green economy will confront two significant domestic obstacles.
The first obstacle arises from agribusiness producers, who currently hold considerable political power and influence within the Brazilian Congress and have actively pursued the rollback of environmental regulations in previous administrations. The second barrier involves impoverished populations that support themselves through extractive activities in the Amazon region. Even though these groups already are experiencing the adverse impacts of climate change, they continue to support conservative candidates who portray environmental regulations as incompatible with their immediate livelihoods.
The Brazilian experience during the third Lula administration serves as a cautionary tale about the challenges that domestic politics present in transitioning to a post-neoliberal, sustainable economic model, especially in resource-rich countries. It highlights the necessity of confronting entrenched interests of agribusiness producers, who amassed significant economic and political influence following China’s emergence as Brazil’s primary trade partner. Additionally, it calls for reimagining development paradigms that prioritize environmental protection while simultaneously addressing urgent demands for social equity.
