August 27 2019, 10:53 a.m.
TWO BRAZILIAN FIRMS owned
by a top donor to President Donald Trump and Senate Majority Leader Mitch
McConnell are significantly responsible for the ongoing destruction of the
Amazon rainforest, carnage that has developed into raging fires that have
captivated global attention.
The companies have wrested
control of land, deforested it, and helped build a controversial highway to
their new terminal in the one-time jungle, all to facilitate the cultivation
and export of grain and soybeans. The shipping terminal at Miritituba, deep in
the Amazon in the Brazilian state of Pará, allows growers to load soybeans on
barges, which will then sail to a larger port before the cargo is shipped
around the world.
The Amazon terminal is run by
Hidrovias do Brasil, a company that is owned in large part by Blackstone, a
major U.S. investment firm. Another Blackstone company, Pátria Investimentos,
owns more than 50 percent of Hidrovias, while Blackstone itself directly owns
an additional roughly 10 percent stake. Blackstone co-founder and CEO Stephen
Schwarzman is a close ally of Trump and has donated millions of dollars to
McConnell in recent years.
“Blackstone is committed to
responsible environmental stewardship,” the company said in a statement. “This
focus and dedication is embedded in every investment decision we make and
guides how we conduct ourselves as operators. In this instance, while we
do not have operating control, we know the company has made a significant
reduction in overall carbon emissions through lower congestion and allowed the
more efficient flow of agricultural goods by Brazilian farmers.”
The port and the highway have
been deeply controversial in Brazil, and were subjects of a 2016
investigation by The Intercept Brasil. Hidrovias announced
in early
2016 that it would soon begin exporting soybeans trucked from the
state of Mato Grosso along the B.R.-163 highway. The road was largely
unpaved at the time, but the company said it planned to continue improving and
developing it. In the spring of 2019, the government of Jair Bolsonaro, elected
in fall 2018, announced that Hidrovias would partner in the privatization and
development of hundreds of miles of the B.R.-163. Developing the roadway itself
causes deforestation, but, more importantly, it helps make possible the broader
transformation of the Amazon from jungle to farmland.
The roadway, B.R. 163, has had
a marked effect on deforestation. After the devastation that began under the
military dictatorship and accelerated through the 1970s and ’80s, the rate of
deforestation slowed, as a coalition of Indigenous communities and other
advocates of sustaining the forest fought back against the encroachment. The
progress began turning back in 2014, as political tides shifted right and
global commodity prices climbed. Deforestation began to truly
spike again after the soft coup that ousted President Dilma Rousseff
of the Workers’ Party in 2016. The right-wing government that seized power
named soy mogul Blairo Maggi, a former governor of Mato Grosso, as
minister of agriculture.
Yet even as deforestation had
been slowing prior to the coup, the area around the highway was being
destroyed. “Every year between 2004 and 2013 — except 2005 — while
deforestation in Amazonia as a whole fell, it increased in the region around
the B.R.-163,” the Financial Times reported in September
2017. That sparked pushback from Indigenous defenders of the Amazon. In
March, Hidrovias admitted that its business had been slowed by increasing
blockades on B.R. 163, as people put their bodies in front of the destruction.
Still, the company is pushing forward. Hidrovios recently said that,
thanks to heavy investment, it
planned to double its grain shipping capacity to 13 million tons.
The Amazon, where a record
number of fires have been raging, is the world’s largest rainforest. It absorbs
a significant amount of carbon dioxide, a major contributor to the climate
crisis. The Amazon is so dense in vegetation that it produces something like
a fifth of the world’s oxygen supply. The moisture that evaporates from the
Amazon is important form farmlands not just in South America, but also in the
U.S. Midwest, where it falls to the earth as rain. Protection of the
Amazon, 60 percent of which is in Brazil, is crucial to the continued existence
of civilization as we know it.
The effort to transform the
Amazon from a rainforest into a source of agribusiness revenue is central to
the conflict, and linked to the fires raging out of control today. The
leading edge of the invasion of the jungle is being cut by grileiros, or
“land-grabbers,” who operate outside the law with chainsaws. The grileiros then
sell the newly cleared land to agribusiness concerns, whose harvest is driven
on the highway to the terminal, before being exported. Bolsonaro has long
called for the Amazon to be turned over to agribusiness, and has rapidly
defanged agencies responsible for protecting it, and empowered agribusiness
leaders intent on clearing the forest. The land-grabbers have become
emboldened.
“With Bolsonaro, the invasions
are worse and will continue to get worse,” Francisco Umanari, a 42-year-old
Apurinã chief, told Alexander Zaitchik,for
a recent story in The Intercept. “His project for the Amazon is
agribusiness. Unless he is stopped, he’ll run over our rights and allow a giant
invasion of the forest. The land grabs are not new, but it’s become a question
of life and death.”
Fires in the Amazon have been
producing devastation described as unprecedented, many of them lit by farmers
and others looking to clear land for cultivation or grazing. Bolsonaro
initially dismissed
the fires as unworthy of serious attention. Several weeks ago,
Bolsonaro fired
a chief government scientist for a report on the rapid escalation of
deforestation under Bolsonaro’s administration, claiming that the numbers were
fabricated.
Beginning with the military
dictatorship in Brazil, when agribusiness was fully empowered, roughly a fifth
of the jungle was destroyed by the mid-2000s. If the Amazon loses another fifth
of its mass, it is at risk of a phenomenon known as dieback,
where the forest becomes so dry that avicious,
cascading cycle takes over, and it becomes, as
Zaitchik writes,“beyond the reach of any subsequent human intervention or
regret.”
SCHWARZMAN, A FOUNDER of
Blackstone, owns roughly a fifth of the company, making him one of the world’s
richest men. In 2018, he was paid at least $568 million, which was, in fact, a
drop from the $786 million he made the year before. He has been generous toward
McConnell and Trump with that wealth. In 2016, he gave $2.5 million to
the Senate Leadership Fund, McConnell’s Super PAC and put Jim Breyer,
McConnell’s billionaire brother-in-law, on the board of Blackstone.
Two years later, Schwarzman kicked in $8 million to McConnell’s Super
PAC.
Blackstone employees have
given well over $10 million to McConnell and his Super PAC over the years,
making them the biggest source of direct financing over McConnell’s career.
McConnell’s Senate campaign declined to comment.
Schwarzman is
a close friend and adviser to Trump, and served as the chair of his
Strategic and Policy Forum until it fell
apart in the wake of the Charlottesville neo-Nazi rally, in which
Trump famously praised “very fine people, on both sides.” In December
2017, as the final details of the GOP tax cut were being ironed out, Schwarzman
hosted a $100,000-a-plate
fundraiser for Trump. Some of the president’s dinner companions complained
about the tax bill, and days later, Trump slashed the top percentage rate in
the final package from 39.6 to 37.
In recent months, the Sackler
family, whose members founded and own the pharmaceutical company Purdue Pharma,
have become pariahs for their role in facilitating the opioid crisis and the
deaths of tens of thousands of people. Schwarzman’s contributions to the
destruction of the Amazon, which stands between humanity and an uninhabitable
planet, may ultimately render him as socially untouchable as the Sacklers,
given the scale of the fallout from the destruction of the rainforest.
IN DEFENSE OF the
project, a Blackstone spokesperson noted that it had been approved by the
International Finance Corporation, an affiliate of the World Bank, and that the
IFC had determined that the project would, in fact, reduce carbon
emissions. Blackstone also forwarded a statement that it credited to Hidrovias,
which also emphasized the support of the IFC:
Hidrovias has always worked
within the highest Environmental, Social and Governance (“ESG”)
standards, constantly evaluated by audits from international multilateral
agencies, such as the World Bank – IFC (International Finance Corporation). In
addition, Hidrovias maintains all the environmental licenses required by
the competent authorities.
The IFC has financed some
of the world’s most environmentally destructive projects, so its
endorsement in itself is not particularly persuasive. But even on its own
terms, the IFC’s study of the Blackstone project calls the project’s
sustainability into question. Transporting soy or grain by waterway is indeed a
less carbon-intensive method of transport, the IFC
correctly noted in its report. But, it went on, that assessment doesn’t
take into account the reality that “the construction of the Miritituba port,
close to still-intact areas of the Amazon forest, is likely to lower transport
costs for farmers and thereby accelerate conversion of natural habitats into
agricultural areas, particularly for soy production.”
The project is OK, the bank
argued, because Hidrovias and its clients can be trusted to be responsible, and
that “the Miritituba port is being purpose-built to handle soy traded only by
responsible traders who are sensitive to the preservation of natural habitats.”
The bank assured that “100% of the company’s transport capacity in the North
System is contracted to large trading companies, which observe high levels of
governance and abide by the Amazon Soy Moratorium. The Moratorium, which
prohibits purchasing soy produced on illegally deforested lands, was originally
negotiated in 2006 between the big traders, Greenpeace, and Brazilian
authorities. It has been renewed on a yearly basis since then.”
The moratorium, however, is
only as strong as the government’s ability to monitor it. Proving that soy was
grown on illegally deforested lands is highly difficult, as land-grabbers move
quickly to clear forest and sell the newly cleared land to ranchers or
agribusiness operators who quickly put it into cultivation and later claim that
they had no way of knowing it was illegally deforested. The scheme also
presumes that the government is interested in regulating
agribusiness; the Bolsonaro administration has been quite explicit that it is
not interested in doing so, putting top agribusiness officials in key posts,
while defunding regulatory agencies.
And even if it were somehow
true that all of the soy shipped from the Hidrovias port met all the
requirements of the moratorium, commodity markets are fluid. A new port for the
big traders eases congestion and lowers transportation costs elsewhere for
smaller traders, thereby encouraging more development and more cultivation.
(The IFC noted that Hidrovias promised to watch its soy clients closely: “HDB
will establish and maintain internal procedures to review clients’ compliance
with all provisions of Amazon Soy Moratorium or any other relevant legal
requirements aimed at preventing trade in soy produced in illegally deforested
areas. If the purpose of the port or the mix of HDB’s clients changes, the
company will advise IFC of such changes and may be required to undertake
further due diligence to ensure that these do not lead to undesirable indirect
impacts.”)
The final justification the
IFC made for the project comes down to incrementalism. Other development is
also happening, the bank noted, so this single port can only cause so much
harm. It concluded that “the port’s incremental contribution to the overall
reduction of transport costs is judged to be marginal, given the myriad other
factors (paving of B.R.-163, installation of other ports in Miritituba
district, etc.) that are contributing to development in the region.” Bolsonaro
has plans to pave significantly more roads in the Amazon that have
otherwise been impassable much of the year, a project made feasible by
international financing.
Of course, Hidrovias is also
involved in paving B.R.-163 and other development projects in the region. Those
projects, such as the paving of the highway, have additional indirect — though
entirely predictable — consequences, as they spur side roads that make
previously difficult-to-reach areas of the Amazon accessible for mining,
logging, or further deforestation.
A Blackstone spokesperson
noted that the fund only owns 9.3 percent of Hidrovias. But that ignores the
55.8 percent of Hidrovias that is owned by Pátria Investimentos. On Hidrovias’s website, Pátria
is described as a company “in partnership with Blackstone,” and it is known in
the financial industry to be a Blackstone company. A November 2018
article in Private Equity News about Bolsonaro’s election was
headlined: “Blackstone’s Pátria: Brazilian Democracy is Not in Danger.”
It quoted the company’s chief
economist assuring the public that “descent into authoritarianism is
exceedingly unlikely.” That prediction has not borne out terribly well, but
Blackstone appears to remain a strong supporter of Bolsonaro. The Brazilian
president traveled to New York in May to be honored at a gala, which was
sponsored by Refinitiv — a company majority-owned by Blackstone.
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