How the ‘Amazon Mafia’ operates

. Sep 17, 2019
human rights watch deforestation amazon

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Good morning! Today, we break down a new report by Human Rights Watch on how tree loggers and armed militias are literally operating ‘under the radar’ in the Amazon. Petrobras to hold fuel prices, despite international hikes. And a Chinese mega-dam was announced in Minas Gerais. (This newsletter is for platinum and gold subscribers only. Become one now!)

When urban militias and loggers unite

NGO Human Rights Watch publishes a report today on how

criminal networks operate in the Amazon region. The so-called Ipê Mafia (the Ipê is a tree that has become a symbol of Brazilian flora) has groups that provide logging machines, and are backed by paramilitary squads that threaten—and often kill—indigenous people, producers, and state agents who try to report illegal activities.</p> <p><strong>Why it matters.</strong> The document offers a glimpse into how the rainforest is being devastated, as the federal government has no data on land-related crimes. Small-scale illegal logging already accounts for half of Amazon deforestation, says the report, making it a billion-dollar industry. A single ipê trunk is valued at up to BRL 6,000.</p> <p>Here are the report&#8217;s main findings:</p> <p><strong>Organized crime.</strong> Deforestation is perpetrated by criminal networks which are able to pay for machinery and labor to enter the forest and take the most valuable trees, such as the ipê. If done on a small scale, the activity can&#8217;t be detected by monitoring satellites.</p> <p><strong>Human rights.</strong> Those who stand up to the practice are bullied and, in many cases, killed. Deaths occur in areas of difficult access and far from state presence, leading to a high number of unsolved crimes. Of 300 land-related crimes in the last ten years, only 14 went to trial.</p> <p><strong>No oversight.</strong> In 2009, there were 1,600 environmental agents in Brazil. Now, the number is down to 780—and only a fraction are in the Amazon. In the state of Pará, an area as big as Venezuela, there are only eight inspectors.</p> <p><strong>Dismantling.</strong> Human Rights watch claims that, although deforestation has grown since 2012, it reached unprecedented levels in 2019. HRW associates that to Jair Bolsonaro&#8217;s laissez-faire environmental policy and a &#8220;dismantling&#8221; of environmental institutions.</p> <h2>Despite oil price shock, Petrobras will hold fares</h2> <p>Oil prices spiked Monday following drone attacks on Saudi Arabia&#8217;s main oil processing plant, with futures on Brent crude closing the day up 14.6 percent, at USD 69.02 a barrel. It was the biggest spike in a decade, reflecting fears of escalating tensions in an area that accounts for one-third of the world&#8217;s oil production. But, in a televised interview, President Jair Bolsonaro said Petrobras won&#8217;t increase its prices at refineries within the next few days. The plan is to wait for international prices to stabilize before making a move.</p> <p><strong>Why it matters.</strong> This oil crisis is a major test for the company&#8217;s pricing policy, as Petrobras is responsible for 98 percent of oil refining in Brazil. Since 2016, the company has stopped controlling prices, following international fluctuations instead. That led to historical hikes in diesel prices, culminating with the May 2018 truckers&#8217; strike—which caused food and fuel shortages across Brazil and severely impacted the GDP. Investors will be closely monitoring how the government will handle things now.</p> <p>In April, President Bolsonaro stepped in to block a price bump, scaring off markets and causing Petrobras to <a href="">lose BRL 32bn in market value</a> in a single day.</p> <p><strong>Pulling back.</strong> Oil price hikes slowed during Asian trading hours. Brent crude futures, the global benchmark, declined 0.4 percent to USD 68.75 per barrel.</p> <p><strong>Truckers.</strong> At least for now, truck drivers aren&#8217;t planning a strike, despite already expecting short-term price increases. &#8220;We know this is not the government or Petrobras&#8217; fault,&#8221; said one union leader.</p> <p><strong>Winners. </strong>Corn and sugar producers saw their product gain value on Monday, as demand for ethanol is expected to grow. In New York, sugar futures closed the day up 2.7 percent.</p> <p><strong>Losers. </strong>Brazilian airlines are the biggest losers of this new oil crisis, as their fuel costs are heavily affected by international shocks. Azul (-8.45%) and Gol (-7.77%) led the losses.</p> <h2>A Chinese mega-dam in Minas Gerais?</h2> <p>The Minas Gerais state government signed a letter of intent with Sul Americana de Metais, a subsidiary of China&#8217;s Honbridge Holdings, for the construction of a BRL 9.1bn mining complex in the northern part of the state. The &#8220;mega-dam&#8221; would be around 70 times bigger than the tailings dam which collapsed in the municipality of Brumadinho on January 25, killing 249 people.</p> <p><strong>Why it matters.</strong> Minas Gerais has witnessed two of the world&#8217;s most devastating environmental disasters over the past four years. In 2015, a dam owned by <a href="">Vale and BHP Billiton spilled the equivalent of 25,000 Olympic swimming pools of toxic sludge</a> into the surrounding area—<a href="">burying</a> entire cities and killing 19. Then, in January, another dam owned by Vale also collapsed. Groups of residents in areas close to mining sites condemn the new &#8220;mega-dam.&#8221;</p> <p><strong>Track record.</strong> In 2016, Brazil&#8217;s environmental agency had rejected the project, claiming that it was not ecologically viable. Technical reports highlighted negative impacts and safety risks for neighboring communities. &#8220;The project would result in a massive generation of waste, which proves that the technology chosen is not compatible with the most modern techniques in mining—which seek to minimize dependence on tailings,&#8221; read the report.</p> <p>The company claims that the project has been restructured since, and that it is now safe. Minas Gerais Secretary of Mines and Energy Germano Vieira also said that a system of dykes would prevent Brumadinho-like tragedies, should this &#8220;mega-dam&#8221; collapse.</p> <h2>What else you should know today</h2> <p><strong>Bolsonaro. </strong>Back in Brasília after undergoing surgery, President Jair Bolsonaro said his top priority will be signing off on a bill allowing people to bear arms in rural areas—one of his campaign promises. Currently, people can only carry firearms at farm houses, and not the surrounding areas. The government says the move will curb crime rates in farmlands, while critics say it will increase violence. Mr. Bolsonaro also declared he will be able to attend next week&#8217;s UN General Assembly.</p> <p><strong>Lula.</strong> A federal judge rejected corruption charges filed by Operation Car Wash against former President Lula and his brother, calling them &#8220;inept&#8221; and &#8220;based on a series of assumptions.&#8221; Lula has already been convicted in two corruption cases, and will face trial in another seven. He has been in prison since April 2018, after a court of appeals confirmed his first guilty verdict. But he could soon be released, if the Supreme Court holds a trial on whether or not defendants may be jailed before exhausting all appeals routes.</p> <p><strong>SoftBank. </strong>Japanese investment group SoftBank has made yet <a href="">another move in Brazil</a>, leading a USD 100m fundraising round for online home goods platform MadeiraMadeira. The group also increased its position at fintech Banco Inter, reaching almost 15 percent of shares (enough for a board seat). SoftBank is using its USD 5bn fund for Latin America, launched in March, to invest in sectors ranging from banking and real estate to home goods and delivery services.</p> <p><strong>Prosecutor general.</strong> Raquel Dodge leaves her post as prosecutor general today, ending her two-year term. The first woman to ever be appointed to the position, Ms. Dodge was heavily criticized by other prosecutors for a perceived favoring of politicians. In some cases involving high profile names, investigations have been stalled for 21 months. The most recent case was her recommendation to shelve a probe against House Speaker Rodrigo Maia, prompting the resignation of six Operation Car Wash prosecutors. She will be replaced by Augusto Aras, an expert in electoral law who gave signs that he will use his office to help President Bolsonaro&#8217;s agenda—especially regarding environmental laws and human rights disputes.

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