Open letter to the Financial Times – The economic damage of the Amazon fires
I have read the Financial Times daily for the last two years. The FT has helped me recognise the important roles that the financial markets, governments, corporations and investors play in keeping our world ticking forward.
Often, I have noticed the FT will emphasise different points compared with other mainstream news services when considering the same event. For example, FT articles often end by stating the reaction of the stock market. I have never had an issue with this, as it has helped to reveal the psychology of market investors and of course caters to the interests of the FT’s core readers.
However, I am becoming concerned by a lack of coverage within the FT over the past few days of the forest fires afflicting the Amazon rainforest. On Monday 19th August at 3PM, smoke that has been attributed to the forest fires caused a black out in Sao Paulo, despite being more than 1,700km from the fires. This issue has become an international fiasco for President Bolsonaro over the past 48 hours (the FT published an article 16 hours ago on the issues surrounding Bolsonaro’s presidency, but without mentioning the Amazon fires).
Other news sources have gone directly to the heart of the issue. This month, The Economist described President Bolsonaro as “arguably the most environmentally dangerous head of state in the world.”
I will lay out the reasons why the Amazon rainforest fires are a significant economic problem worthy of the FT’s attention below, but first it is important to establish the facts of the present situation. The facts are: The smoke is visible from space although the exact area affected is unclear. According to the INPE, Brazil’s Space Research Institute, there have been 72,843 fires in Brazil since January, representing an 80% increase compared to 2018, and an area of forest the size of a football pitch is being destroyed every minute. The Brazilian state of Amazonas declared a state of emergency due to the fires 7 days ago. The European Union’s Copernicus Climate Change Service has identified a surge in carbon monoxide emissions around the afflicted area.
The Amazon fires will have objective economic consequences in the short and long term. These include but are not limited to:
- 1. The EU-Mercosur Trade Agreement, Brazil’s largest ever trade deal that is expected to be a boon for South America’s fast-growing agricultural industry, is dependent upon Brazil sticking to its environmental obligations, including the 2015 Paris Agreement. If this trade deal were canceled by the EU as a result of conditions not being met, it would mean a significant lost growth opportunity not only for Brazil, but for the other Mercosur countries too: Argentina, Uruguay and Paraguay.
- 2. Rainforests are ecosystems which generate their own rain. Brazil has suffered devastating droughts in only the past five years and destruction of the rainforest will exacerbate this problem. The economic impact of severe droughts needs little explanation and will adversely effect the prized agricultural industry in Brazil and neighbouring countries. The vision of opening up rainforest into land for farming may be unsustainable.
- 3. Norway, which has donated about $1.2bn (£985m) to the Brazilian government’s Amazon fund over the past decade, has canceled future donations, effectively stopping a flow of free money to the Brazilian government. Germany has also ended its donation program.
- 4. The Amazon fires are being conducted illegally, so any wealth generated from this activity will not immediately feed directly back into the economy.
- 5. The ability of Ibama, Brazil’s environmental agency, to award fines to the perpetrators is being hamstrung by President Bolsonaro, meaning lost government revenue and a reduction to the perceived rule of law in the country.
- 6. The Amazon rainforest has acted as a carbon sink, yet destruction of the trees storing this carbon is releasing huge amounts of greenhouse gases back into Earth’s atmosphere, exacerbating the issue of climate change and having a domino effect upon the international agricultural industry, island nations, et cetera.
- 7. The carbon dioxide released also holds significant danger to human life, as the gas is of course fatal when inhaled. It would be concerning if clouds of smoke were allowed to float above Sao Paulo again. This is South America’s most highly populated city and Brazil’s financial centre.
My request to the writers and editors of the FT is for more articles evaluating the danger created by these fires and inviting conversation and a search for solutions. In an article titled Companies alone cannot tackle deforestation, the FT suggested that a tighter ‘regulatory environment’ is required to control the issue. The FT should use their role informing the leading minds of the business world to kindle a conversation on how this action would take shape, as the issue has now become all the more imperative.
Header photo from ben britten on Flickr.