mobilizing capital to scale responsible expansion of crop livestock in brazil

BOSTON CONSULTING GROUP 7 Recovery of degraded pasture for productive purpose stands as a key component among various essential strategies needed to counteract deforestation Addressing deforestation in Brazil requires a comprehensive strategy encompassing financial, legal, and market forces. A primary avenue towards mitigation lies in the better utilization of already available lands. Through the recovery of degraded lands, there is potential to expand agricultural and cattle ranching activities without encroaching on native vegetation. Better use of already available lands: Contrary to the common belief that increased yields would escalate pressure on natural ecosystems, empirical studies in Brazil and other regions suggest the opposite. To reduce environmental impacts, one strategy is to boost food production on existing farmland, minimizing the need for additional farmland and preserving land for habitat conservation. In Brazil, productivity gains from agriculture modernization between 1960-2000 slowed deforestation, as farmers transitioned to practices with higher capital-to-land ratios, contributing to the preservation of natural resources. Better use of land also means that practices shall be adapted to each region depending on its socio-environmental specificities. Factors such as impact on biodiversity, water resources, social impact in the region and livelihood of local communities shall be the object of an in-depth analysis. Financial incentives for producers: In this agenda, creating economically sustainable long-term opportunities, as well as incentives for producers, is crucial and urgent. Producers ought to see tangible financial benefits in preserving native vegetation on lands that they are legally entitled to clear, which could manifest in various forms such as attractive credit facilities or payments for environmental services. Such incentives could encourage them to preserve native vegetation they are legally entitled to convert, thus playing a pivotal role in reducing deforestation. Market demand: Consumer markets and companies need to recognize the value of standing forests in commercial relationaships, by incentivizing demand for DCF products whithin their value chains, and by providing additional incentives for conservation beyond legal requirements, known as surplus legal reserve. Regulation & Law: Effective enforcement of applicable regulations is a key pillar in achieving DCF production. The agricultural land has been growing, and the pasture areas for cattle, while showing a slight net expansion, have undergone substantial land use conversion. Annual farming land cover and land use change Area in Mha, From 2000 to 2022 2000232 Mha 2022+27 +4 +1034 Mha61 Mha 44 Mha48 Mha 154 Mha 164 MhaAgriculture Mosaic of uses1 Pastures+42 Mha (+18%) 274 Mha +10 Mha over the periodfrom new pastures converted from abandoned or converted pastures+ 55 Mha -44 Mha Source: MapBiomas Brasil, INPE, Word Bank, BCG analysis +6.7 Annual Conversion +2.8 1. Includes both pastures and agriculture land.