The Brazilian Amazon disaster: The untold economic effects

As we all know, Brazil has been in the news a lot over recent times, with the fires in the Amazon grabbing some truly unsavory headlines.

Unsurprisingly, a lot of these headlines focus on the climate issues – and rightly so. The importance of the Amazon from an environmental perspective cannot be ignored, and this should the priority.

However, there are also several untold economic impacts that need addressing. This is what we will do through the course of today’s article, as we scrutinize four areas that deforestation in the Amazon can impact.

The loss of key funders

First and foremost, a lot of countries have made no secret about their displeasure with Brazil over the fires. For example, Norway and Germany opted to immediately freeze their contributions to the Amazon fund.

The repercussions of this are fairly obvious to see. There’s less money to tackle sustainable development projects in the area, while funds tend to be drawn from other places. One only has to see that little foreign aid tends to be directed to Brazil in the first place, so reducing this can have serious consequences.

The “boom and bust” philosophy

We had to search back to 2009 for this next source, but New Scientist ran a really interesting article back then which talked about the “boom and bust” nature of deforestation in the Amazon.

A lot of today’s article looks at the economy of Brazil and the rest of the world as a whole, but let’s quickly take a look at the immediate “benefits” of deforestation. Let’s not forget that the reason this happens is so that locals can use the cleared land for farming, and ultimately profit from it.

Based on this, take a read of the 2009 New Scientist article. It shows that while there are initial financial benefits to be had, over the long-term locals lose out even more significantly. This is something that often gets lost when the media covers the global repercussions of deforestation in the Amazon.

The potential loss of trade deals

This relates to the first point we talked about, where other countries were reviewing the amount of funding they were directing to Brazil.

Over recent years a lot of work has been put into the EU-Mercosur agreement, which could make a real difference to the South American countries that it impacts.

Since the furore about the Amazon came to light, some world leaders have questioned if this is the right path to take. From an economic standpoint, we don’t need to say much else.

Climate change becomes a lot more expensive

As we alluded to at the start of today’s article, the environmental impacts are the main reason the Amazon fires have been so concentrated in the news.

However, quite often these environmental impacts tie in with the economy. After all, it’s generally understood that protecting the Amazon is one of the easiest ways to stabilize the global temperatures.

It means that as soon as these fires start spreading, and the Amazon starts shrinking, we lose one of the most cost-efficient methods to curb global warning. The economic result? We need to turn to more costly solutions.

Author: Chakraborty

Dr Chakrabarty is the Chief Innovation Officer of IntuiComp TeraScience. Earlier she was Assistant Professor of Delhi University, a QS ranked university in India. Before that she has held research positions in IIT Mumbai, IIT Chennai and IISc Bangalore. She holds 2 patents and over 20 research publications in her name which are highly cited. Her area of research is in smart technologies, integrated devices and communications. She also has a penchant for blogging and is an editor of Business Fundas.