Stimulating the bioeconomy – economic activities that do not destroy forests, instead unlocking natural capital from standing trees – may be one possible solution. Clearly, when forests or agroforestry are more profitable than monocrops like soy or traditional cattle ranching, there will be an incentive to preserve trees.
Our research shows that the bioeconomy is an important piece of the puzzle in conserving natural forests—but also that it has limits. As with all puzzles, no single piece can ever complete the picture.
Integrating the bioeconomy in broader structural transformation reduces deforestation
The bioeconomy has long played an important role in Amazonia. It has considerable economic and cultural value for indigenous and other traditional peoples. It has also brought major booms (and busts) to the Amazon—the magnificent opera house in Manaus, for example, was financed by the rubber booms (1879-1912 and 1942-45). Açaí, Brazil’s premier superfood, is conquering health stores across the world, and there is growing interest in producing more cocoa in the Amazon, where it is native and from where it was introduced to West Africa. There is also scope to process bioeconomy inputs into high-value products like soaps, creams, and perfumes.
. Structural transformation is the process underlying economic development, raising productivity and shifting employment from agriculture to manufacturing and services, resulting in a more urbanized society. In Amazonia, it has led to more productive farmers gradually crowding out less productive ones, who tend to be poorer family farmers.
Yet these less productive farmers lack the skills to transition into jobs in manufacturing and services—and they may not want (or be able) to migrate to cities where most of these jobs are located. Clearly, soybean farmers find it much easier to switch to other types of agricultural production – especially cattle ranching – than, say, to manufacturing (see Figure 1, where a higher score implies a higher likelihood of switching to that occupation).
Family farmers, especially the poorest ones, are at the losing end of Amazonia’s structural transformation process. Not only do they tend to be much older than non-family farmers (35 percent of family farmers in Mato Grosso are pensioners) as their children move beyond farming, they also often lack the required capital and skills to remain competitive – only by switching to cattle ranching have they managed to stay competitive (Figure 2). Therefore, many family farmers end up working for more productive farmers.
Since cattle ranching in Amazonia typically involves low-productivity, highly land-intensive technologies, disruption from structural transformation among less productive family farmers probably causes deforestation – it could also help to explain the relatively high deforestation rate in Amazonia’s rural settlements. .
Figure 1: Potential alternative occupations for workers transitioning out of soybean production
Source: World Bank
Figure 2: Changes in production share of family farmers in total production, 2006 to 2017
Source: World Bank
Limitations of the bioeconomy
- Small market size. Markets for many bioeconomic products are small, limiting their potential to boost economic growth. For example, açai accounts for 0.6 percent and cocoa for 1.6 percent of the agricultural Gross Dometic Product of the Amazonian states. The world cocoa bean market has a value of about US$8 billion a year, compared with US$56 billion for soybeans. Small markets constrain the growth of production because prices fall as supply grows.
- Risk of slipping into monocultures. Stimulating growth in bioeconomic products would raise marginal costs of sustainable extraction steeply, incentivizing plantations. This happened with açaí, now largely produced as a monocrop, like in Pará. Guaraná (a common ingredient in energy drinks) and rubber used to be extractive products, but they are now mostly cultivated as monocrops too.
- Sustainability risks compounded by weak forest governance. Overstimulating the bioeconomy could even aggravate deforestation since land remains an important production factor. If Brazil’s lax enforcement of the Forest Code continues, expanding production into forests may be commercially most practical.
- Sustainability risks compounded by weak land governance. Stimulating the bioeconomy would increase the demand for land. Higher land prices, in turn, make land grabbing more lucrative, especially in areas where land governance is weak: about 25 percent of deforestation in Amazonia happens in undesignated areas and is linked to the fraudulent conversion of undesignated public land to private land. So stimulating rural production in one area could promote land clearing for future production in another.
One piece of the puzzle
– but only if it complements other pieces of the puzzle:
1) Extension services, to raise the productivity of poor farmers to combat competition (remembering that agricultural productivity increases also pose deforestation risks)
2) Promoting urban jobs while training and reskilling rural populations since improving urban productivity is critical to generate incomes and containing the agricultural frontier
3) Strengthening forest and land governance to restrict illegal land clearing for commercial gain
4) Repurposing fiscal support to agriculture by shifting towards support for climate-smart production technologies while cutting funding for unsustainable production
5) Supporting agricultural productivity in other parts of Brazil where deforestation risks are lower.
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