European Investors Threaten to Leave Brazil
Seven of the largest investment companies in Europe announced the possible withdrawal from the Brazilian market.
European investors are not happy with the Brazilian government’s policies, led by President Jair Bolsonaro, in the field of environmental conservation. First of all, in the sphere of control over illegal deforestation in the Amazon and other regions of the country, which has reached record levels under the current government.
Investors from Norwegian Nordea and British LGIM, and five other companies (Storebrand, AP7, KLP, DNB Asset Management, Robeco, Reuters clarifies) are threatening to stop investing in key sectors of the Brazilian economy. In particular, in producers of meat (beef, pork and poultry), as well as in the agricultural sector — the cultivation of soy.
All of these areas are critical for Brazil’s foreign trade. In addition, the Europeans intend to recommend stopping investing in Brazilian government securities, including debt securities.
Such pressure should seriously alert Brazilian leadership and business. Indeed, only these seven companies, according to various estimates, currently operate in Brazil with assets worth more than $2 trillion.
Skeptics among the Brazilian government, who at first did not take these threats seriously, received confirmation at the end of last year of the seriousness of the demands of EU investors.
In 2019, after the extremely unconvincing actions of local authorities in combating fires in the Amazon region, the Norwegian bank Nordea announced the freezing of purchases of Brazilian debt securities by more than 100 million euros.
The failure of the Bolsonaro government to stop illegal logging threatens not only the loss of European investors but also problems with Latin American partners in the Mercosur bloc. The fact is that at the beginning of June the Dutch parliament opposed the majority of the free trade agreement signed between the EU and Mercosur last year.
Just under the pretext that it will lead to even greater deforestation of Brazilian forests.
Earlier, the Austrian parliament took a similar position. Now the fate of this treaty looks even vaguer since it is completely unclear how long it can be ratified by the European Parliament.
Accusations from the European capital against the Brazilian authorities seem to be quite reasonable. The rapid growth of illegally logged forest areas is confirmed not only by EU experts but also by Brazilian experts.
The local NGO MapBioMas, which analyzes satellite images of Brazilian forests for deforestation, released a new report on the situation with forests in the country in 2019 in May. Such massive deforestation, according to Globo, has not been observed in the country for the past 11 years — only the Amazon region lost more than 2.1 thousand hectares of forest per day.
That is, an area of almost 2 thousand football fields was cut down every day. However, only 0.5% of these plots were legal.
Author: Marko Vidrih
Featured image credit: Unsplash