Economic and policy mechanisms affecting land use decisions in the Brazilian agricultural frontier

Abstract

The sustainable use of land resources is one of the most complex challenges facing the 21st century. As Brazil is one of the countries most endowed with land resources, it can facilitate global food and energy demands while providing vital ecosystem products and services. With half of Brazil’s forest in possession of private farmers and landowners, a better understanding of the mechanisms affecting their land use decisions is key to design and implement policies that promote synergies and reduce trade-offs between agriculture and nature conservation. Therefore, the objective of this dissertation is to scrutinize the mechanisms that affect farmers’ decisions when they are confronted with a changing economic and policy contexts in the biggest country in South America. The analysis throughout this dissertation focuses on the enormous region covered by the Amazon and Cerrado biomes, as they provide important local and global ecosystemic functions, but have also seen most of the agricultural expansion into forested areas observed in the last and current centuries. <br /> The study is guided by a conceptual framework on agricultural systems to look into three specific mechanisms steering land use decisions: the role of speculation; the production decision response to changes in agricultural markets; and the effect of value-chain and credit restrictions to reduce deforestation and increase land use intensification, such as the 2006 Soy Moratorium. The first analysis uses land market panel data at the regional level and reveals that land users speculate based on planned infrastructure improvements and may also relocate deforestation in response to the establishment of conservation policy. The second analysis uses cross-sectional information at the district level and finds that better economic conditions for agricultural activities do induce land intensification, yet, most of the increments in total production (between 70-99% of the total change) are expected from the expansion of agricultural land into forest and non-forest areas. Moreover, the impact of stronger forest monitoring schemes can result in small changes in production decisions. The third analysis uses information at the farm level between 2001-2017 to corroborate that value-chain and credit restriction policies reduce incentives to deforest, but found little evidence to support an observed policy-driven intensification effect. Moreover, these conservation policy impacts are only observed in years where governmental commitments to enforcing environmental regulations were strongly enforced by the federal government. <br /> To cost-effectively promote the sustainable use of land resources in agricultural frontier areas in Brazil, future policies should consider the implementation of economic and policy mechanisms identified in this dissertation. These findings also suggest that Brazil’s impressive conservation achievements during the 2000s succeeded in large part due to the commitment and collaboration of both government and private sector organizations to ensure that rural development abides by existing environmental regulations. If national political discourses raise expectations of weakening environmental law enforcement, the unique and irreplaceable ecosystems found in Brazil could be irreversibly damaged, creating conditions where the sustainable use of land resources needed for long-term global prosperity are no longer possible