Volume 28, No.2, Summer 2010

Soybeans Give Forests Their Space

Brazil is the world’s largest exporter of soybeans, most of which come from the Amazonian state of Mato Grosso. As vast tracts of jungle are clearcut to make room for soybeans, environmentalists have pleaded with farmers to save rare species and preserve ecological diversity. A better approach would have been to increase their incomes if they saved the forest. One of the first laws of economics is “incentives matter.” Farmers carving out their own destinies in the rain forest understand this. Their incentive is the income from a soybean crop planted on newly cleared land. Blario Maggi also understands incentives. He is one of the world’s richest men and its largest soybean producer. He clearcut vast tracts of forest to expand his holdings in western Brazil. When confronted about these practices, he responded that more of the rain forest should be cut because more farmland could ease the global food crisis.

After Maggi was elected governor of Mato Grosso in 2003, he did an about-face on cutting the forest when he saw a new opportunity to make money in the emerging carbon market. The United Nations (UN) has a plan called “Reducing Emissions from Deforestation and Forest Degradation” (REDD ), that would allow rich nations to pay poor ones to preserve their forests. According to the Woods Hole Research Center, deforestation in the Amazon could be reduced to zero in 10 years for an annual cost of $100 to $600 billion. This is doable. The UN and cooperating nations have already raised $2.2 billion for REDD programs.

Compensation from carbon markets will be more lucrative than soybean farming, as Maggi accurately calculated. If REDD becomes a reality, farmers will find greater economic value in the forest than clearcut fields. Incentives matter.

Related Content