♻️ Carbon crime

Good morning! This week, we talk about a police operation targeting a ring that sold defrauded carbon credits. The government’s controversial rice auction. And it’s D-Day against polio.

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Feds target gang selling fake carbon credits

The Federal Police launched an operation last Wednesday against the illegal sale of carbon credits, a case that is being described as the biggest scandal involving carbon credits in the country. Five people have been arrested, and BRL 1.6 billion (USD 300 million) in assets belonging to the suspects (including two planes, a speedboat, and luxury cars) were frozen.

Operation Greenwashing. According to investigators, the group has operated a land-grabbing scheme in the southern part of Amazonas state (which is the same size as Venezuela) for more than a decade. By forging property records with the help of public officials, they obtained control over 538,000 hectares of public Amazon rainforest land worth approximately BRL 820 million. 

• For comparison’s sake, that area is five times that of Dallas, Texas.

• The ring sold BRL 180 million in carbon credits, according to the Federal Police.

 Why it matters. The operation comes at a time when several self-regulation initiatives are trying to restore the credibility of the voluntary carbon credit market, in which firms acquire carbon credits to offset their greenhouse gas emissions.

Fake credits. The gang sold carbon credits of the REDD+ variety. REDD stands for “reducing emissions from deforestation and forest degradation,” while the + stands for additional forest-related activities that protect the climate, namely sustainable management of forests and the conservation and enhancement of forest carbon stocks.

More problems. In September last year, the Public Defenders’ Office in the northern state of Pará filed a lawsuit against three projects selling carbon credits on Verra, the world’s leading carbon standard. 

• These projects allegedly used fraudulent documentation to illegally use public land for profit. Among the companies that have reportedly purchased these carbon credits are Air France, Boeing, and Liverpool FC. 

What they are saying. In an interview with deputy editor Fabiane Ziolla Menezes in October 2023, Luis Felipe Adaime, founder and chief executive of Moss.Earth, stated that, contrary to what the media has said, the United Nations’ REDD+ framework does work to reduce deforestation. 

• Mr. Adaime claims that newspapers cherry-pick flawed cases to condemn an entire system. “Isolated cases do not invalidate REDD+.”

Brazil’s controversial rice auction

The government last week organized an auction for the import of 263,300 tons of rice for BRL 1.3 billion. The move is a strategy to avoid major price hikes of the product after the southern Brazilian state of Rio Grande do Sul was hit by crippling floods. The state provides roughly 70 percent of the rice consumed in Brazil, and losses to production and stocks are still being assessed. (More below.)

• The rice will be sold by the National Supply Company with hard price caps.

 Why it matters. Rice is the most widespread staple food in Brazil. The government, which is already facing stumbling approval ratings, wants to avoid a hike in food prices — which always turns voters’ moods sour.

State of play. According to the latest Rice Price Update report by the UN Food and Agriculture Organization, rice prices have increased 10 percent over the past month alone and 30 percent in the last year. According to the Brazilian Institute of Geography and Statistics, rice inflation stood at over 25 percent in the 12 months through April.

Yes, but … The list of auction winners raised many eyebrows, as it included a cheese store and a company whose owner has already admitted to paying bribes to win a public tender in federal capital Brasília. Only one winner has bonafide rice importing experience. 

• Moreover, three companies with winning bids were represented by a firm belonging to a man who worked with Neri Geller, Brazil’s agricultural policy secretary, raising suspicions of insider trading.

• After backlash from Brazilian rice producers and members of the congressional opposition, the government announced that it would make the winners prove they have the capacity to honor their commitment to import and distribute the product.

Reaction. In Congress, conservatives have started to whip up support for launching an inquiry into alleged fraud in the public tender. They also filed complaints before the Federal Accounts Court and antitrust regulators requesting investigations.

Markets

Estimates of the financial impact that massive floods hitting the state of Rio Grande do Sul caused have climbed to BRL 62 billion (USD 11.58 billion) already. The state government is asking for help from the federal administration to compensate for the loss in tax revenue and avoid a financial shutdown. Rio Grande do Sul is Brazil’s fourth-largest economy.

Chart of the week: Brazil’s polio D-Day

Brazil on Saturday held a “D-Day” in its polio vaccination campaign, which runs through June 14. The country has not met its vaccination targets (at least 95 percent coverage) for almost a decade, in part due to the rise of anti-vax movements — but also because the virus has not circulated in the country since 1990, making many parents nonchalant about the need for immunization. As a result, polio has become a threat to Brazil once again.

• Vaccination coverage dropped further during the Jair Bolsonaro administration (2019-2022) but increased in each of the past two years.

Stories we’re following

The Mines and Energy Ministry and Aneel, Brazil’s energy regulator, are discussing a possible intervention in Amazonas Energia, the biggest power provider in the Amazon. The Brazilian Report revealed the company’s situation of near-bankruptcy.

A bill limiting tax rebates could have a BRL 10 billion (USD 1.87 billion) impact on fuel distributors, says the Brazilian Oil Institute, a lobbying group. That could raise prices at the pump: 4-7 percent for gasoline and 1-4 percent for diesel fares.

Boeing has increased its engineering staff in Brazil by 20 percent. According to the company’s president for Latin America and the Caribbean, Landon Loomis, Brazil is part of the solution for the planemaker’s struggles.

Former President Jair Bolsonaro celebrated on social media the results of the European Parliament elections, as far-right parties made serious gains in France, Germany, and Austria. “The establishment is foaming with rage,” he said.

 The House could fast-track a bill equating abortions after 22 weeks to murder. The Lula administration is unlikely to interfere with the proposal, despite being against it. 

In case you missed it

The Brazilian gross domestic product grew by 0.8 percent from Q4 2023 and 2.5 percent annually. Both numbers were slightly above market expectations measured by Bloomberg, but the Finance Ministry expects a slowdown for the rest of the year.

A new study suggests that roughly 127 tons of gold were produced in wildcat mining areas in Brazil between 2018 and 2022. Formal imports of mercury, often used by wildcat miners, are down — suggesting a growing black market for the metal.

In a televised address prior to World Environment Day, Environment Minister Marina Silva said the government is drafting a strategy for climate change adaptation and will launch a national plan to face the climate emergency.

 Two bills aimed at going easy on suspects of criminal activity are being set into motion in the House. One grants amnesty to those who carried out an insurrection on January 8, 2023, while the other would limit plea bargains.

The Great Resignation, a phenomenon that defined the pandemic-era labor market, is not yet over. Brazilians are still quitting their jobs in droves, with the highest number of resignations on record (since 2004) coming last year. 

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