Committee for the Abolition of Illegitimate Debt

‘Does Lula want to protect the Amazon or sell it to the fossil fuel industries?’ On the sidelines of the upcoming World Climate Conference it is hosting in November, Brazil is presenting an initiative that will monetise forests and is finalising a controversial mega-project for oil exploitation at the mouth of the Amazon. Gabriella Lima sheds light on the issue.

With one month to go before the Climate Conference in Belém (COP30) in the Brazilian Amazon, its president André Corrêa do Lago promises that a ‘fair and equitable transition’ will be at the heart of the discussions. A transition that focuses on social justice, sustainable development and the creation of green jobs, ‘without leaving anyone behind’. These promises are necessary to preserve the credibility of Luiz Inácio Lula da Silva, president of the host country of COP30, one year ahead of the presidential elections. But Brazil’s initiatives expose the contradictions between strong environmentalist rhetoric and policies that prioritise the interests of fossil fuel industries and financial markets.

Climate finance’s stranglehold on forests. Brazil’s big proposal at the COP is the Tropical Forests Fund Facility (TFFF), which aims to capitalise on the climate crisis by transforming forests into financial assets that would generate profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. . How? By creating an investment fund Investment fund
Investment funds Private equity investment funds (sometimes called ’mutual funds’ seek to invest in companies according to certain criteria; of which they most often are specialized: capital-risk, capital development funds, leveraged buy-out (LBO), which reflect the different levels of the company’s maturity. that would generate an annual profit of $4 billion. Part of these returns would be used to pay countries that preserve their tropical forests an annual remuneration of £4 per hectare. The logic is not unlike that of banks: borrow money at a low rate, then lend it at a higher rate and allocate the profits to conservation remuneration. To do this, the TFFF would need to raise US$125 billion, 20% of which would come from philanthropy and sponsor governments and 80% from private markets – including pension funds Pension Fund
Pension Funds Pension funds: investment funds that manage capitalized retirement schemes, they are funded by the employees of one or several companies paying-into the scheme which, often, is also partially funded by the employers. The objective is to pay the pensions of the employees that take part in the scheme. They manage very big amounts of money that are usually invested on the stock markets or financial markets. and insurance companies – by issuing debt instruments such as ‘green’ or ‘blue’ bonds. These are therefore loans, not donations.

The TFFF responds to the imperative of green capitalism to commodify everything that is not yet a commodity. It thus aims to fill the gaps in mechanisms such as REDD+ by financialising all services related to forest conservation rather than just avoided carbon emissions. In theory, $4 billion should be paid for conservation, but there is still no guarantee that the fund will succeed in raising the targeted $125 billion, nor that the $4 per hectare will actually be paid to the partner countries. The returns generated will have to cover, in order, investor interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. and administrative costs before feeding into conservation.

Forests will only receive what is left over, and the amount allocated will depend on the fund’s financial performance. If the rate of return is less than 7.5% or if the £125 billion target is not met, conservation payments will be reduced proportionally. The outlook is already bleak, as even the project’s architects estimate a 60% risk of failing to pay the promised amounts. Worse still, the project does not define who will bear responsibility for the debt if investors are unable to recover their interest. This uncertainty raises the threat of increased external debt for tropical forest countries.

Instrumentalisation of indigenous peoples. As the host country, the Brazilian government boasts of setting a historic record in terms of indigenous peoples’ participation in the COP. Nearly 3,000 representatives of indigenous communities will participate, 1,000 of whom will be directly involved in the negotiations. However, this symbolically powerful gesture masks the meagre material gains for these populations. The Global Forest Coalition (GFC), which brings together 144 indigenous peoples’ organisations, has already denounced the ‘false solutions’ promoted by Lula.

Indeed, the TFFF promises that part of the fund’s returns will be paid back to indigenous peoples and local populations. However, of the $4 per hectare, only 20% will go to local communities, with irregular payments. A GFC report also expresses concern that the very existence of indigenous peoples is not recognised within the national borders of certain states, or that the recognition of indigenous rights remains subject to the goodwill Goodwill The difference between the assets on a company’s balance-sheet and the sum of its tangible and intangible assets. When one company takes control of another company, the acquiring company generally pays a price that is higher than the value of the net assets. Goodwill generally consists of intangible elements, such as brands, which are evaluated subjectively. of the authorities. It asks a legitimate question: ‘What [does] “the forests remain intact” mean? Will indigenous communities be able to use wood or carry out small-scale deforestation to ensure their subsistence?’

How much leeway would investors have to define the conservation model deemed satisfactory for releasing payments from the fund? These questions remain unanswered for the time being.

Mega oil exploitation project discussed behind the scenes. Lula’s Brazil could certainly play a pivotal role in the energy transition, as one of the world’s leading oil-producing countries. The phase-out of fossil fuels is also a central demand of indigenous and environmental organisations. But holding the COP in the Amazon highlights the contradictions between Lula’s environmentalist rhetoric and the pursuit of policies based on the unbridled exploitation of natural resources, hand in hand with fossil fuel interests and the banks that finance them. On the sidelines of the COP preparations, a controversial mega oil exploitation project is being planned at the mouth of the Amazon River.

With some unease, Lula stated in a recent interview [1] that he wants to exploit the oil, but in an environmentally friendly manner. This will be a difficult task, given that the project aims to produce no less than 14 billion barrels of oil, notably by the semi-public oil giant Petrobrás, which ranks 20^th among the world’s largest CO₂ emitters. According to the ClimaInfo Institute, oil exploitation on this scale would release 11 billion tonnes of CO₂ into the atmosphere, representing 5% of the remaining carbon budget needed to stay below the 1.5°C threshold.

Petrobrás intends to massively increase its production and multiply its exploration sites over the next four years. To justify this strategy, Lula is mobilising a narrative of defending national sovereignty over energy resources. However, the development of the oil sector is primarily aimed at satisfying the appetite of foreign capital. Nearly 63% of Petrobrás’ capital is held by private investors, two-thirds of whom are international. Increasing production therefore means generating more profits for foreign investors, while consolidating the Brazilian economy’s dependence on oil exports, currently the country’s main export product. Most of the oil extracted by Petrobrás is already exported abroad, particularly to Israel, where it is used as fuel and to power the war effort. Between 2023 and 2024, oil exports to this country increased by half. Highlighting this development helps to explain why Lula positions himself as a fervent denouncer of the genocide in Gaza on the international stage, while refusing to break off trade relations with the State of Israel.

The ambivalence between Lula’s sovereignist rhetoric and his complacency towards foreign capital is even more acute in the current privatisation programme, under which the government has launched auctions for onshore and offshore oil basins in the Amazonian equatorial margin.

Last June, 146,000 km² of hydrocarbon concession rights were sold, mainly to giants such as Galp (Portugal), ExxonMobil (USA), Equinor (Norway) and PetroChina (China), which will be able to exploit and sell the oil. Entrusting the production and marketing of fuels responsible for more than 75% of global greenhouse gas emissions to foreign industries is hardly a strategy for energy sovereignty, let alone a policy for reducing emissions.

Other possible ways to finance conservation

Local organisations are fighting just as vigorously against Lula’s ‘fossil developmentalism’ and the stranglehold of finance on forest conservation. As an alternative to the TFFF, the Global Forest Coalition proposes allocating 1% of all countries’ national defence budgets to tropical forest conservation. For Brazil, this would represent $226 million, or one-sixth of the $1.3 billion that the country could receive from the TFFF, assuming that the deforestation rate remains below 0.5% and that the fund is able to honour its commitments.

Another, more ambitious option would be to suspend debt payments, which are currently stifling Brazil’s finances. Last year, debt servicing reportedly absorbed nearly R$2 trillion ($363 billion). This amount alone is nearly three times the amount of the TFFF! In 2024, debt payments absorbed 42% of the Brazilian budget, while only 21% was allocated to pensions, 6% to social assistance, 4% to health and only 0.3% to environmental management. Suspending debt payments is an effective way to free up resources for conservation without turning it into a source of profit for the financial market Financial market The market for long-term capital. It comprises a primary market, where new issues are sold, and a secondary market, where existing securities are traded. Aside from the regulated markets, there are over-the-counter markets which are not required to meet minimum conditions. . It is also a necessity to ensure the ‘fair’ ecological transition that André Corrêa do Lago intends to implement.