How tougher environmental protection in the Cerrado could unlock $72 billion for Brazil's economy

The Cerrado has long languished in the shadows of its far more famous sibling, the Amazon. But this year, the Cerrado – the world’s most biodiverse savanna – has hit the headlines for all the wrong reasons. There has been particular criticism, by environmentalists, of the meatpacking industry and farmers, given the conversion of native vegetation in the region. Yet within Brazil, the Cerrado is also celebrated as a modern miracle, a land of plenty that generates 60% of all the country’s agricultural production, fuelling exports and supporting livelihoods.

So how can these apparently conflicting priorities – ecological protection and the production of food, feedstock and fuel – be resolved in a way that works for nature, society and the economy? For the Cerrado, this is now a question of existential urgency – but the answer could hold lessons for many countries facing similar challenges, including those in Central and South America and sub-Saharan Africa.

The past year brought some welcome news to the Amazon, as deforestation more than halved in 12 months. But during the same period, the area of Cerrado savanna converted to agriculture soared by 43%. In recent decades, over 30 million hectares – half of this entire ecosystem – has been lost due to rapid demographic and agricultural expansion, alongside infrastructure and industrial development.

This matters, and not just for the 330,000 species (5% of all the planet’s biodiversity) that have made the Cerrado their home. It matters for Brazil’s race to reduce carbon emissions. It matters for Brazil’s farmers, particularly in the long term as their entire agricultural model depends on the health of the biome and its ability to deliver ecological services. It also matters for Brazil’s economy overall and the many countries that depend on its exports of soy, corn, sugarcane and beef.

Let’s take emissions first. Although the Cerrado is not rainforest, its trees, grasslands and rich soils lock away one-sixth of all Brazil’s stored carbon. Yet agricultural production and land conversion are consuming this critical reserve, releasing 304 million tonnes of CO2e in 2022 – nearly one-fifth of Brazil’s total net emissions.

Equally alarming is the impact of modern agriculture on the vital ecosystem services the Cerrado provides. Chief among these is freshwater. The savanna acts like a giant water tower, storing 14% of the nation’s surface water resources. Water, while clearly essential for agriculture, is equally vital for energy security, since 60% of Brazil’s electricity is generated by hydro. However, the conversion of native vegetation into cropland disrupts regional rainfall patterns, exacerbates erosion and reduces the soil’s capacity to retain water. Since 1985, nearly 90% of analysed watersheds have seen decreased waterflows. At this rate, river flows within the Cerrado will fall one-third by 2050.

Put simply, the Cerrado’s agri-business model is slowly strangling the goose that lays the golden egg. But it doesn’t have to be this way. According to a new report just published by the World Economic Forum’s Tropical Forest Alliance (TFA), smart technology, better policies and ramped-up investment could create synergy between the antagonistic twins of production and protection, while generating up to $72 billion more value for Brazil’s GDP every year by 2030.

Brazil is already heading in the right direction. Policies including the Forest Code and the Plan of Action for Prevention and Control of Conversion and Fires in the Cerrado (PPCerrado) have helped set the ground rules. But there is much work to do, some of it bureaucratic. For example, landowners must self-declare the preserved areas on their land through a submission to the Rural Environmental Registry (CAR). Yet in the past decade, due to limited state resources, less than 1% of those submissions have been fully processed.

There is a vital role for international investors and development finance institutions to play. In May last year the government launched its Ecological Transformation Plan, which aims to foster economic growth in harmony with nature, to boost jobs, productivity and decarbonization. A key part of this plan is the RenovAgro programme that aims to raise $120 billion from both Brazilian and international investors to revitalize degraded pasturelands and implement integrated crop-livestock-forestry systems. Offering producers lines of low-interest credit to invest in such measures is one practical way that financial institutions and philanthropists alike could play their part in protecting the Cerrado.

The imperative to safeguard the Cerrado from further conversion is a global challenge. Demand-side measures, including the European Union’s Deforestation Regulation (EUDR), send important signals about the need to decouple agriculture from nature loss, but as it stands the EUDR only applies to land classed as forest according to the FAO and therefore leaves much of the Cerrado – which is a complex mosaic of forests and savanna – unprotected. Expanding the scope of the EUDR to include “other wooded land” could have important benefits for the protection of the Cerrado.

The capacity of this unique biome, the largest in South America after the Amazon, to continue providing critical freshwater resources, its future as an agricultural powerhouse for the world, its vast reserves of stored carbon and its role as home to one in 20 of all species on Earth – all this is threatened by the trajectory of deforestation and land conversion currently underway. It is time that international organizations, agri-businesses, the region’s farmers, and financial institutions act immediately in concert with the Brazilian government to ensure a better future for this precious but threatened ecosystem.

Author contribution from Jonathan Walter, freelance writer.