ABIOVEBrazilian Vegetable Oil Industries Association

New Agenda for Soybeans in the Amazon Biome

NEWSLETTER - February 2014

The Soy Moratorium, initiated in July 2006 by the industry as a voluntary commitment not to acquire soybeans produced in newly deforested areas of the Amazon Biome, will be replaced on December 31, 2014 by a new sustainability agenda that will maintain the Pact’s original objectives.

At their January 31, 2014 meeting in Brasília, the Soy Task Force (GTS) decided to extend the Soy Moratorium through December 31, 2014 and, in this period, defi ne a new working agenda for soybean sustainability in the Amazon Biome.

The proposal for a new agenda presented by ABIOVE (Brazilian Vegetable Oil Industries Association) and ANEC (National Grain Exporters Association) was well received by the GTS members (civil society, Brazilian government and soy industry), who will include in their discussions the European Soybean Consumers Group (McDonald’s Europe, Marks & Spencer, ASDA, Tesco, Ahold, Waitrose, The Co-operative Food, MVO, Carrefour, Sainsbury’s and Nestlé), producer associations such as APROSOJA (Mato Grosso State Soybean & Corn Producers Association) and state environmental secretariats.

The new program’s mission will be to make contributions so that soybean farmers are in compliance with Brazil’s new Forest Code and, thereby, reconcile food production with environmental conservation. The work will focus on incentivating and supporting soybean farmers to fi le a CAR with the environmental entities.

CAR is important because it identifi es the landowner and the area of the rural property, thus allowing monitoring and controls. It is a tool that enables a survey of the property’s environmental assets and liabilities and the environmental adequacy of farm high conservation value areas - Legal Reserve and APPs (Areas of Permanent Preservation). CAR defi nes land use and occupation and reconciles environmental conservation with food production. Most importantly, CAR provides legal security to the producer.occupation and reconciles environmental conservation with food production. Most importantly, CAR provides legal security to the producer.

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The Soy Moratorium will be replaced by a new working agenda because, after nearly eight years, including six renewals, it has lost its effi cacy and because Brazil has seen signifi cant evolution in environmental governance during this period. With the new Forest Code, dated May 2012, Brazil enters a new phase, characterized by important improvements in environmental governance. Since 2006, Brazilian government put in place the following set of measures:

The Soy Moratorium has lost its efficacy

2006

2007

2008

2009

2010

2011

2012

2013

Creation of Conservation Units with 230,000 km² (88,803 square miles); implementation of PPCDAM (Action Plan for Prevention & Control of Deforestation in the Amazon).

Creation of Chico Mendes Institute for Conservation of Biodiversity – Decree nr 6321 – Priority towns to focus on fi ght against deforestation and on regularization of rural landholdings.

Central Bank Resolution nr 3545 – Environmental requirements for agricultural fi nancing and insurance. Application of IBAMA (Brazilian Environmental & Renewable Natural Resources Institute) Embargo – Decree nr 6514.

Brazil establishes GHG reduction goal of 36.9% at COP15 – Start of Phase 2 of PPCDAM – Start of Integrated Inspection Operations – IBAMA, Federal Police, Highway Police, Army & State Environmental Secretariats – Operation Arco Verde (Green Arch) – Decree nr 7008.

National Climate Change Policy – Decree nr 7390 – System to detect deforestation and fi res in real time – Ecologic – Economic Zoning in the Amazon – Incentive for Forest Management – Creation of Brazilian Forest Services.

Integrated Inspections with Severe Sanctions – 30,000 hectares (116 square miles) embargoed and R$270 million in fi nes – Brazil meets the COP15 goal proposed for 2020 nine years ahead of time due to sharp fall in deforestation and burnings.

New Forest Code – Law nr 12651, dated May 25, 2012 – Decree nr 7830, dated October 17, 2012, creates the CAR (Rural Environmental Registration) System and sets standards for PRA (Environmental Regularization Program).

Signature by ABIOVE and other associations of the Terms of Cooperation with Ministry of the Environment to promote and support CAR (Rural Environmental Registration); Soja Plus Property Management Program serving 650 rural properties.

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It is important to stress that the environmental legislation now has prevalence over any “private code” and that implementation of the law, which applies to all land, with stringent rules and sanctions for violators, will achieve at least a similar objective as the Soy Moratorium that was limited to soy production.

The private sector’s proposal is to work with the ten municipalities that have the largest areas of forest converted to soybean production. They represent 70.3% of the Amazon Biome area that was deforested after July 2006 for planting soybeans.

The goal is to have 100% of the suppliers in these municipalities registered with CAR by April 30, 2016. Short-and medium-term actions will be developed for these places (Dom Eliseu, Paragominas and Ulianópolis in Pará state, Feliz Natal, Nova Ubiratã, Santa Carmem, Gaúcha do Norte, Itanhangá and São Félix do Araguaia in Mato Grosso state and Pimenteiras do Oeste in Rondônia state).

The environmental legislation now has prevalence over any “private code”

Proposal for Short-Term Actions, Accepted by the GTSKeep the Soy Moratorium purchase criterion in effect until December 31, 2014;

Continue with the purchase and fi nancing criteria: consult the list of embargoed areas kept by IBAMA (Brazilian Environmental & Renewable Natural Resources Institute) and the list of working conditions analogous to slavery kept by the Ministry of Labor & Jobs;

Together with civil society, government and producers, develop an agenda for the Sustainable Amazon Soybeans (SAS) Group, the name proposed by the private sector;

Determine the responsibilities for all the Group’s participants;

Invite producer associations, the State Environmental Secretariats (SEMAs) and consumers to take part in the program.

a)

Promote state and municipal seminars for rural producers on the new Forest Code;

Promote courses to train rural producers in CAR procedures;

Promote courses for rural producers to plan their PRA (Environmental Regularization Program);

Offer fi eld workshops to orient producers in loco on how to proceed to meet PRA requirements;

Provide technical assistance on the farms of the producers who participated in the CAR and PRA courses;

After April 30, 2016, in addition to the purchase criteria related to the lists kept by IBAMA and the Ministry of Labor & Jobs, CAR registration will be required for the ten priority municipalities;

In addition to these fi lters, ABIOVE, ANEC and their member companies will further strengthen the Soja Plus Program for the economic, social and environmental management of rural properties. Three thousand producers and managers in the states of Mato Grosso and Mato Grosso do Sul have already received training on environmental and social legislation, and 500 farms in Mato Grosso state receive technical assistance and various tools for the continuous improvement of their management.

b)

c)d)e)

Proposal for Medium-Term Actions (2 years)

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a)b)c)

d)e)

f)

g)

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First of all, we must remember that the July 24, 2006 communication, signed by ABIOVE and ANEC, marking the start of the Soy Moratorium, stated that the initiative would have a duration of two years and would seek to reconcile environmental preservation with economic development through the responsible and sustainable use of Brazil’s natural resources. Almost eight years have passed and now legislation exists, with regulations, that takes over this role of promoting a better governance. The enforcement of the environmental law has improved considerably.

The objective of the governance program was to refrain from trading soybeans from the crop planted as from 2006 in areas of the Amazon Biome deforested after July 24 of that year.

Since its inception, the Soy Moratorium has been based on three pillars: 1) satellite mapping and monitoring of soybean planting in the Amazon Biome; 2) education and information on managing rural properties, considering the need to reconcile production with the conservation of natural resources; and 3) institutional relations to promote bringing together the private sector, civil society and government.

In the new work proposal to maintain the sustainability of soybeans in the Amazon Biome, essentially what changes is the method for achieving the monitoring pillar. The new agenda for sustainable soybeans in the Amazon Biome will have as its fi rst priority the pillar of information and producer awareness of the importance of CAR registration.

In this new phase, ABIOVE, ANEC and their member companies will, using satellites under the aegis of INPE (National Space Research Institute), monitor the 62 municipalities covered by the Soy Moratorium (which represent 97% of the Amazon Biome’s soybean acreage) through the 2015 crop. There will no longer be fl yovers of deforested areas. This monitoring program aims to maintain the transparency of soybean farming in the Amazon Biome and provide strategic information for orientation programs for rural producers. Monitoring is important to quantify soybean planting in this Biome, locate areas of expansion, orient public policies and resolve local problems with emergency actions.

ABIOVE and ANEC understand that their efforts should now be directed towards environmental education for rural producers and towards bringing their properties into compliance with the new Forest Code. Regarding this new stage that follows on from the Soy Moratorium, Carlo Lovatelli, ABIOVE president, states:

Why will the Soy Moratorium change?

ABIOVE, ANEC and their member companies contributed to the strengthening of environmental governance in Brazil while this was starting up. Now that the country has a new Forest Code, one of the world’s strictest environmental legislations, we are no longer the protagonists in this process. Our role is now one of supporting the government’s efforts to fight deforestation in the Amazon Biome. We will continue our partnership with the government, civil society and agribusiness entities. The Soy Moratorium has proved that soybeans are not a relevant vector in deforestation in the Amazon.

“”

The importance of CAR registration

Environmental education for rural producers

The context has signifi cantly changed since 2006. Today, the Ministry of the Environment and IBAMA, in partnership with INPE, monitor the Amazon by satellite in real time. IBAMA inspects and fi ghts illegal deforestation and fi res, publishes the list of areas embargoed because of irregularities and levies heavy penalties to those who do not comply with the environmental legislation throughout the country. As a result of these measures, deforestation fell from 27,772 km2 (10,723 square miles) in 2004 to 5,843 km2 (2,256 square miles) in 2013.

IBAMA’s inspections are integrated with the Federal Police, Federal Highway Police and National Security Force. In areas embargoed by IBAMA, rural producers may not produce anything and may not trade any product. According to Decree No. 6514/2008, the fi ne for the company acquiring product from an embargoed area is R$500/kg, corresponding to over US$200,000 per ton, or about 500 times the price of a ton of soybeans.

With the new Forest Code, rural producers gain greater legal security, mainly as a function of two tools: CAR (Rural Environmental Registration) and PRA (Environmental Regularization Program). The private sector understands that it must value Brazil’s new environmental regulatory mark. When even stricter restrictions, such as those of the Soy Moratorium, override current legislation, that legislation is weakened. It should be noted that the Forest Code was widely discussed by all of Brazilian society and is considered to be the strictest in the world.

ABIOVE highlights that:

Changes in context over eight years

The Soy Moratorium met its objective of inhibiting deforestation for soybean planting in the Amazon Biome while public governance was starting up.

It has been proven that soybeans are not a relevant vector in deforestation, after seven years of monitoring in partnership with INPE and civil society organizations. Since 2006, just 0.7% of the deforested areas in the Amazon Biome were used for soybean farming.

ABIOVE’s and ANEC’s member companies will continue to collaborate with the government to further improve public governance and stimulate compliance with environmental legislation.

The sector will prioritize execution of CAR because it understands that this tool is suited for reconciling food production with the conservation of natural resources.

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The new Forest Code: producers gain greater legal security

6

7

2013

5,843 km²

1,149 km²

New Forest Code

Law nr 12651/2012

Wider institutional framework

Embargo of areas, restriction of economic activities and

high fi nes

Satellite images used in real time with high defi nition

Inspections integrated with Federal Police, Federal

Highway Police, SEMAs and National Security Force

IBAMA’s List of Embargoed Areas

Ministry of Labor & Jobs’ List of Degrading Working

Conditions

PPCDAM; GHG reduction goal; Arco Verde (Green

Arch) Operation; ABC; SFB Forest Management

Incentive; BNDES Amazon Fund; CAR and PRA

2006

14,286 km²

4,333 km²

Provisional Measure(nr 2166/2001)

Lack of legal security

Limited institutional framework

Warnings and fi nes with low collection rate

Satellite use began

IBAMA technicians

No requirements

Specifi c and demonstration

FNMA (National Environmental Fund)

Governance Factors

Deforestation rate Amazon Biome

Deforestation rate Mato Grosso state

Environmental legislation

Compliance with legislation

Penalties for illegal deforestation

Monitoring of environmental crimes

Field inspections

Requirements for purchasing agricultural products

Government programs for fi ghting deforestation

IMPROVEMENTS IN BRAZIL’S ENVIRONMENTAL GOVERNANCE

After the Soy Moratorium terminates, how will producers guarantee to customers/consumers that the soybeans they purchase did not contribute to deforestation in the Amazon Forest?

ABIOVE, ANEC and their member companies want to value Brazilian legislation and increase the synergy of efforts. Customers will receive products that were monitored by the Brazilian government, supported by satellite images. Rural producers that clear new areas in violation of the Forest Code will have that area and its production embargoed. In the Amazon Biome, the law allows rural producers to use only 20% of their land for productive activities and, in exchange, they bear the cost of conserving native vegetation in the remaining 80%. The income generated from the property’s productive 20% needs to be enough to compensate the investment, as well as pay for the expense of protecting the Legal Reserve and the APP (Areas of Permanent Protection). Contrary to the practice in other countries, the rural producer receives no support or subsidy for rendering this environmental service, which is a requirement of Brazil’s Forest Code. Because they already bear the social cost of rendering an environmental service on 80% of their property, any additional demand above and beyond current legislation will have to be accompanied by adequate mechanisms to compensate such voluntary extra environmental services, as premiums paid for certifi ed products. Launching international consumer campaigns to create special funds for the purpose of remunerating developing countries for rendering voluntary environmental services could be an effective and sustainable path.

Is the balance of the Soy Moratorium’s eight years positive?

Yes, it is very positive. The Soy Moratorium has had a very important role in making rural producers aware of the need to reconcile food production with the conservation of natural resources. In 2004, before the Moratorium, Brazil’s public environmental governance was incipient and fragile, and deforestation that year reached its peak of 27,772 km2 (10,723 square miles). Before the Soy Moratorium, the scenario in relation to the monitoring and control of environmental crimes was one of low compliance with environmental legislation and high indices of conversion of native forest areas for agricultural and livestock farming. Since then, continuous improvement in governance has resulted in a steep drop in deforestation in the Amazon Biome, which registered 5,843 km2 (2,046 square miles) in 2013.The results obtained in the sixth monitoring cycle showed that soybean planting occurred on just 0.7% of the total area in the Amazon Biome that was deforested during the period of the Soy Moratorium. SOYBEANS ARE NOT A RELEVANT VECTOR IN AMAZON BIOME DEFORESTATION. Ninety-nine percent of the deforestation in the Amazon Biome derives from other agricultural and livestock activities, from agrarian reform settlements, inadequate forest management, from the steel sector (coal), civil construction, furniture industry and from real estate speculation.In the 2012/2013 crop year, Brazil planted 28 million hectares (108,109 square miles) of soybeans, of which 2.3 million hectares (8,880 square miles) were in the Amazon Biome. It should also be noted that only 0.46% of the Legal Amazon area was used for soybean production.

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What are the main differences between the Soy Moratorium and the new agenda?

The Soy Moratorium covers a restricted area with 115 farms (projected 200,000 hectares, or 772 square miles), while the new agenda will focus on the soybean properties of the ten priority municipalities which cover an area of 737,888 hectares (2,849 square miles). The Soy Moratorium developed a punitive agenda for the purchase and fi nancing of soybeans from the Amazon Biome. The Forest Code with the support of business and the new agenda will play an educational role in orientating the producers.

What are the elements that will ensure the Soy Moratorium will be appropriately replaced?

First of all, there is now a much stronger legal context with the Forest Code and its clear and stringent requirements; then there is the CAR as a system for the registration of farm land.

Public authorities are monitoring land use and have the means to severely sanction those who violate the law.

Business with the New Soy Agenda will provide support through a whole set of initiatives, such as education and information for farmers (in the ten key municipalities) with a view to triggering their registration with CAR.

In the meantime, ABIOVE will continue satellite monitoring to observe whether soy production indeed continues to be a very minor contributor to deforestation.

And, fi nally, ABIOVE commitments as regards purchasing requirements will continue until the end of the year (Soy Moratorium); as of January 2015, the industry will observe the sectorial purchase and fi nancing criteria (the list of embargoed areas kept by IBAMA and the list of working conditions analogous to slavery kept by the Ministry of Labor & Jobs); and as of April 2016 CAR registration will also be required from the ten priority municipalities.

Will deforestation in the Amazon become uncontrolled after the Soy Moratorium ends?

The Soy Moratorium was an auxiliary tool to control deforestation, one that lost its relevance gradually as the government implemented an effective control and inspection system with heavy penalties. ABIOVE and ANEC do not expect a sudden increase in deforestation as a result of the change in the soy sustainability agenda. Rural producers are now aware of the importance of conserving natural resources and know it is not worthwhile to violate the law. Illegal deforestations will be detected by satellite images, including when CAR is prepared, and the rural producer at fault will be fi ned and the property will be embargoed until such time as the native vegetation is restored. Who would drive a vehicle above the speed limit on a highway that has electronic supervision and heavy penalties?

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On February 3rd, the European Consumers Group declared their support of this fi nal ex-tension of the Soy Moratorium: “We believe that the extension will help protect what has been achieved over the last seven years. It will allow all parties involved to work actively together to determine the new path and to reach agreement on a realistic roadmap for a more permanent solution. It is essential now that the GTS quickly establish an appropriate dialogue to deal with all the challenges of monitoring and of registering rural landowners in CAR (Rural Environmental Registration), essential for implementation of Brazil’s new Forest Code. We continue to support the efforts of the GTS and we welcome the opportunity to become more actively involved in the process.”

European Consumers Group Declaration of Support

GTS Members

The Soy Task Force (GTS) is made up of the private sector (ABIOVE and ANEC), of ABIOVE’s members (ADM, Algar Agro, Amaggi, Baldo, Bunge, Cargill, Fiagril, Imcopa, Louis Dreyfus, Noble Group, Óleos Menu, Santarosa), of ANEC’s members (Alfred C. Toepfer, ADM, Algar Agro, Amaggi, Baldo, Bunge, Cargill, CGC Trading, CHS, Coamo, Fiagril, Glencore, Louis Dreyfus, Marubeni, Mitsui, Multigrain, Nidera, Noble, Óleos Menu, Seara, Sementes Selecta, Sodrugestvo), of the Ministry of the Environment and of NGOs (Amigos da Terra, International Conservation Brazil, Greenpeace, Imafl ora, IPAM, STTR-Santarém rural workers union, The Nature Conservancy, WWF-Brasil).

Source:ABIOVE Communications Departmentwww.abiove.org.br@abiovebr+55-11-5536-0733; +55-11-996-440-363

ABIOVE