Anna Ternova

23 September 2016
Oil, Farming and the Amazon
Eike Batista was at some point Brazils most flamboyant tycoon. His grand vision
involved extracting synergies from Brazils commodity wealth. By 2012, he had become the
worlds seventh-richest person due to his multi-million dollar companies and lucky investments.
However, in 2014, many of his companies went bankrupt, and his billionaire status was removed.
His rise and fall was like a metaphor for that of the countryboth his and Brazils claim to
greatness was a mirage based on a commodity boom. Another example of this stems from
Petrobrasan oil company in Brazil whose downfall was the result of overconfidence at the
slightest investment opportunity. Founded in 1954, Petrobras eventually became the worlds
most knowledgeable oil company about deep-sea operations, with BP as its only rival. Their
confidence rose after finding and claiming a huge new oil field in 2007. They invested in
multiple projects that would soon have them visibly struggling which caused a new CEO to be
appointed to sort things out before the entire company went under.
One of Brazils high points was that it was an agricultural superpower, and the only
tropical country to have achieved that status. It was the worlds third-largest exporter of farm
products and the top exporter of coffee and sugar. The past twenty years have seen a surge in
production mostly because Brazil started taking full advantage of the abundance of sun and
rainfall, and the plenty of space available to farm. As farms expanded and farmers migrated,
record harvests could not reap full profits because of expensive transportation and shipping costs.
Therefore, much of the productivity increase came from the adoption of genetically modified
crops which allowed for multiple harvests in a single season. Brazil also started producing and
using biofuels, which became its most important source of energy after oil. All of this
exponentially progressed the agricultural revolution happening in the country.
With the revolution booming at full force, many problems also accompanied it.
Highways were to be built through the Amazon to connect distant towns to each other. This in
turn attracted settlers along the roads. Cattle ranchers removed the forest by clear-cutting and/or
burning, and now occupy 75% of deforested land. Another predatory force was the loggers that
prized the hardwoods of the forest; they often worked hand-in-hand with the ranchers. The
clearing of trees and opening of the cerrado has caused widespread damage to the Amazons
ecology, but Brazilians would argue that the economic return and worlds need for food could
justify this. There became two opposing visions of the Amazon: one side believed the aim of
policy should be economic development, whereas the other side wanted the whole of Amazonia
protected as a giant reserve.
As the country urbanized, many Brazilians acquired greater environmental
consciousness, far greater than in most countries. Over three-quarters said preserving the
environment should be a priority even if that meant slower economic growth. This may be
because they know they have more capital to lose since almost all of it comes from things that
their environment produces. Fortunately, in the past decade the federal government designated

almost half of the Amazon as a protected area, started to monitor deforestation rates, and
imposed strict laws and tougher enforcement. Lula made a promise at the UN summit on Climate
Change that Brazil would cut deforestation rates 80% by 2020. This proved to be a challenge due
to the states weak presence in the wilder parts of the Amazon. The worst battle involved
building hydroelectric dams in the Amazon, which is where most of Brazils untapped
hydropower potential lies. The development of turbines would disrupt natural processes and
many of the native Indian tribes that lived there. However, until solar power became a
widespread option, developments like these were the least bad compromise between meeting
energy demands and limiting environmental change.
Reflection
As exhilarating as it must be to have the status of being the largest agricultural
superpower in the world, it must also be very stressful. Once you are at the top, you do not want
to let that spot go, so you do whatever is in your power to keep it. For Brazil, this meant that they
had to keep up with production and export demands for their various commodities, which also
unfortunately meant that ethical choices would be put on the backburner if those choices ended
up decreasing production rates. This is what caused much of the deforestation in the country
more people wanted more land so that they could increase their profits while the economy was
booming. On the one hand, any businessman or farmer would jump at this opportunity if they
knew they could be highly successful at it. On the other hand, they have to take into account that
if they overdo it (as Brazil has been known to do), there will not be anything left in the end. This
is where environmental conservationists come in and ruin the farmers fun; but for good reason.
It seems like a strange thing to think that one person could tell another that they arent allowed to
use what nature is providing to them, when in reality, neither of them have the authority to
dictate who mother nature belongs to. But, if the government does not step in to create volumes
of regulations and laws, many of our natural resources and environment in general would be
completely destroyed and sabotaged (granted, a great deal of it already is, but it would be much
worse if no one ever intervened and emphasized what nature would say if it had a voice).
Regulations are not meant to completely restrict people from producing various
commodities; everyone still needs lumber, sugar, coffee, etc. so it has to be produced at some
rate. The problem is, when companies claim ownership of areas that they get their hands on first,
they completely exploit the area because they want the most production and most profit within
the least amount of time. The book mentioned that Brazil enthusiastically adopted genetically
modified cropsat the time, they most likely did not know the adverse effects of GMCs, but
regardless of that, it goes to show that they attempted to find shortcuts instead of finding real
solutions to existing problems; even if those shortcuts meant putting future generations of
consumers into danger. That is why sometimes, restricting laws need to be created, or else that
area will be demolished within a few years. Many multi-million dollar companies that provide
much benefit to the economy (oil, agribusiness, etc.) did not understand the importance of
everything in moderation in the past. They have since become more efficient in their methods,
realizing that if they can replenish what they take away, then it truly will be better for them in the

long run. It is all about balance. This applies to both Brazil and practically every other country in
the world.
The book also mentioned how the country relied heavily on hydroelectric power and
biofuels, but not much on solar energy. This, to me, is bizarre considering how solar irradiance is
one of the highest in Brazil. Solar energy is relatively new, but a country that receives that much
sunlight should have been crazy with enthusiasm at this kind of technology that they could have
benefitted so well from. In an article written by Rafael Figueiredo and Larry B. Pascal earlier this
year, they talk about new developments in Brazils solar power sector. The Brazilian government
started to aggressively search for alternative forms of energy after a severe drought compromised
their dependence on hydroelectric dams. Since 2009, investment in the wind and solar sectors
have been rapidly increasing (Figueiredo and Pascal, 2016). In a country of this size with so
much exposure to the sun, they have a colossal advantage in seizing this solar opportunity by the
neck so that they could eventually provide/sell it to neighboring countries. This could be a
massive boost to their economy, allowing for rapid growth if they have other countries
depending on them for clean, renewable energy. Brazil appears to be headed in the right direction
as long as they can overcome transmission infrastructure and keep up with cost of capital
barriers. If they maintain a steady pace in their progression, they could potentially build a stable
alternative energy foundation in the country and eventually start to reap the rewards of their
investments.

References
Figueiredo, R., & Pascal, L. B. (2016). New Developments in Brazil's Solar Power Sector.
Retrieved September 24, 2016, from http://www.renewableenergyworld.com/articles/
2016/02/new-developments-in-brazil-s-solar-power-sector.html