The Amazon is, in many ways, a microcosm of how the rest of the world deals with climate change. Headlines with percentages about forest cover lost or gained have long felt like a bellwether for the global state of environmental degradation. In Brazil, after years of COPs, devastating floods and much climate denialism, a serious institutional push towards a green transformation has taken hold.
The country recently launched an online platform to attract investment into climate projects, which aims to draw in $10.8bn (65.31bn reais). It is focused on three areas: energy, industry and mobility, and nature-based solutions. The projects will work in tandem with Brazil’s state development bank BNDES and must align with the country’s green policies.
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It is the latest in a series of climate initiatives that suggest a deep familiarity with the impacts climate change will have on the country’s people and economy if not addressed.
At the launch event for the platform, Fernando Haddad, the country’s finance minister, summed it up: “We have little time for a lot of work.”
Economic powerhouse
Brazil attracts the most foreign direct investment (FDI) of any country in Latin America. In 2022, it received 41% of the continent’s FDI intake. That same year, it was the fifth-largest destination for global FDI flows, with an intake of $86bn. The south-eastern region of the country, where Sao Paulo is located, has traditionally been the country’s economic engine. Its main industries include agriculture, mining, energy and manufacturing.
There are already platforms to help foreign investors navigate what many cite as a challenging business environment due to a complicated tax system, regulatory requirements, poor infrastructure and tough labour laws. The Direct Investments Ombudsman receives FDI inquiries, while the Investment Partnership Platform is a sort of matchmaking tool for investors looking for opportunities.
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By GlobalDataNow, the government is making a concerted effort to make sure incoming capital is being used to transform the country’s economy. Earlier this year, it launched an industrial policy centred around six “missions” focused on agro-industrial chains, the bioeconomy and energy transition, defence, digital transformation, health and wellbeing in urban centres.
Rick Nogueira, a climate finance expert and former senior climate finance officer at the US State Department, says that the government’s willingness to leverage its diplomatic and economic positions towards the adoption of climate solutions has “turbocharged” the use of these tools.
These platforms also try to address structural obstacles that would typically cause investors to shy away from Brazil. Currency volatility and the tax system, for example, are some of the country’s least attractive features for investors.
Nogueira, who helped negotiate the Paris 2015 climate agreement, says that while there is often much discussion about insufficient global funding for the green transition, the bigger issue tends to be around local conditions in low and middle-income countries.
“There is often a struggle to deploy money because there is a lack of quality investment or impact opportunities compared to what you hear people talk about,” he explains. “People say there are trillions of needs, but when you look at it more granularly and [ask] okay, what will we actually do with the funding, it is very difficult.”
On this front, he says Brazil has been doing better than most. Hosting the G20 this past November, and preparing to host COP30 next year, has given the country some diplomatic momentum, which Nogueira says it has used to identify investment opportunities and attract funding.
As a major exporter and middle-income country, Brazil is in a favourable position to leverage its green transition to stand out in the global economy as climate regulations become stricter.
“There is a strong market signal that Brazil is open for business, in particular, if it is business that is going to be aligned with their NDC [nationally determined contribution] and their climate goals,” Nogueira explained.
The EU Deforestation Regulation (EUDR), for example, will ban any goods connected to deforestation from the EU market. Brazil supported the recent one-year delay for the policy, but in the global landscape of commodity exporters, it may fare better than other countries. There are reports that buyers have shown less interest in Ethiopian coffee exports, for example, anticipating that the country will have more difficulty meeting the EUDR reporting standards. Instead, they may be turning to major Brazilian providers that could be better adjusted to adapt to the upcoming requirements.
“They realise that solving their deforestation problem could create a competitive situation for their agricultural products,” Nogueira notes. It is “something they could use to differentiate themselves”.
Bumpy road for progress
The green push may be coming from the top right now, but it wasn’t always that way. Before the start of President Luiz Inacio Lula da Silva’s second term in 2023, deforestation in the Amazon had skyrocketed under former President Jair Bolsonaro who, famously, did not believe in climate change. He once told a journalist to “poop every other day” in response to a question about how the country should deal with the issue.
In that sense, Lula’s administration has at the very least changed the policy direction of the country when it comes to the green transition (although some say he has not done enough to halt oil developments). However, even with a greater political consensus, Brazil’s size and clashing interests mean that there are sometimes parallel realities in the country. This is particularly true for the Amazon, where the growth of sophisticated networks of illicit economies threatens environmental progress.
By July 2024, there had been a 30% reduction in the levels of deforestation in the Amazon from the previous year. Only a month later, the Amazon basin experienced a record number of mass fires, many of these deliberately set by illicit gold miners.
Gabriel Funari is the head of the Observatory of Illicit Economies in the Amazon Basin at the Global Initiative against Transnational Organized Crime (GI-TOC). Much of his work focuses on researching how major criminal organisations function in the Amazon.
Funari explains that in the past ten years, thanks to a rearrangement of trade routes, major criminal groups started competing against each other to control the Amazon River route. While this caused a huge surge in crime and violence, Funari says the groups also realised that other illicit economies in the Amazon could be extremely profitable, which led them to expand beyond the drug trade. The trading and selling of gold, for example, shows the blurred line that can exist between illicit products and their flow through international markets.
Gold is “almost all mined illicitly, but it is sold in international markets and on the wholesale level, it is sold as if it was legal. It is very easy to legally certify gold,” Funari explained. There can also be a lot of corruption and “alliances of convenience” between criminal groups and local governments.
Most of the fires that were set in the summer took place in Para, one of the Brazilian states most affected by illicit gold mining practices. In September, a government investigation found that small-scale miners were starting fires to clear the area. A crackdown followed, which sparked anger among locals who rely on mining for their income. It highlights the current incentive structure for low-income workers who participate in illicit economies, often in areas without much other economic activity.
Carbon credits have been touted as a possible alternative, where locals can get funding to conserve the Amazon while international companies get to offset their carbon emissions. Nogueira points out that Brazil has obvious potential in this sector, particularly in the nature and forestry areas.
However, the lack of an international regulatory body for them and past scandals have given them a bad name. In January 2023, the Guardian published an investigation revealing that more than 90% of carbon offsets, many used by major companies like Shell and Gucci, were “largely worthless and could make global heating worse”.
A Washington Post investigation found that many of the carbon credits being sold on international markets overlapped with public lands, meaning they had been illicitly obtained. In some cases, local communities were unaware that credits were being sold for the land they lived on.
This sort of corruption collapses trust between locals who already undertake conservation work and “outsiders”, who they become wary of. For locals, Funari points out that the idea of carbon credits can even represent a “kind of patronising attitude because, in their perspective, they are already trying to keep the forest alive”.
Brazil’s Senate recently voted to formalise the carbon credit market in the country. Despite the rocky history behind carbon credits, everyone Investment Monitor spoke to for this story expressed some optimism that, with reforms and increased regulations, they had the potential to bring in international capital.
Economy for the future
There are initiatives that seek to dissipate this tension by involving local communities at a more fundamental level. Amazonia 4.0, for one, was launched in 2017 by climate scientist brothers Ismael and Carlos Nobre. They wanted to find an economic model that would prevent the Amazon from reaching its tipping point, a term coined by Carlos, which is when deforestation is so vast the forest doesn’t regenerate and turns into a savannah.
The Amazon produces plenty of primary commodities that are then outsourced for production elsewhere. Ismael sees no reason why added-value production processes that turn a cocoa bean into a chocolate bar, for example, shouldn’t be done locally.
“People buy these materials as raw matter and then process it elsewhere, and make a lot of wealth for other people, that then doesn’t connect with the local economy,” Ismael told Investment Monitor.
A 2023 study analysed 13 primary commodities from the Amazon, such as cacao and honey, and predicted that just a small share of these products could grow the bioeconomy’s GDP by at least $8bn per year.
Repatriating this income has the potential to change local incentive structures that may lead workers to participate in environmentally damaging activities, like the illicit economies Funari researches.
Nobre has met with the Ministry of Justice’s National Secretary for Drug Policies and Asset Management (SENAD) to discuss how initiatives like Amazonia 4.0 can offer alternatives to local communities.
“The focus is on promoting production chains linked to the socio-bioeconomy in indigenous territories, seeking opportunities to generate income as alternatives to involvement in illicit activities such as drug trafficking and illegal mining,” SENAD’s National Secretary Marta Machado outlined in a social media post discussing their meeting. The government office and Amazonia 4.0 signed a partnership for the joint installation of a biofactory in the Amazon in 2025.
With well-paying, respectable jobs that repatriate the value-added capital that commodity exporters lose out on, incentive structures are changed for locals but also for big companies, Nobre notes.
He acknowledges that the bottom line will be about the price tag. The winning strategy is to make this process less costly than other industries such as cattle and soy farming, which leads to a lot of deforestation.
“As climate change proceeds and gets further on their consequences, I believe it will make for a different accounting of what value that economy has,” Nobre says. The practices that may seem profitable today, like mechanised crops and selling wood, do not account for climate-change-related losses in the future. “When there is money loss in other regions because of breaks in the system’s integrity, people would probably reassess and be more in favour of putting our model of a forest economy in place.”
The type of production Nobre wants to create is also heavily reliant on high technology. Nobre hopes this will enable them to have production hubs that are far away from each other but that can work together to provide the market with a uniform product. It will also improve the traceability of products across the supply chain, helping them meet climate regulations like the EUDR.
Nobre hopes this traceability will persuade investors who he says could have an app on their phone with regular updates of production.
“They wake up and see the green light and know that their investment is doing well.”
