The Economy of Deforestation Resistance: Scaling Up Community Led Enterprises in the Amazon

Marina Campos:

The fires and the high rates of deforestation in the Brazilian Amazon have made the headlines in most global newspapers. We Brazilians can write a different story. We actually have to. We all know that we people need the forests. The forests are important. Especially the Amazon rainforest is important for regulating rainfall patterns regionally in South America. Moreover we also know that the Amazon rainforests are important to maintain the planet climate stability. The same way that we need forests the opposite is also true. Forests need people. Forests depend on people to remain standing.

Forest peoples know how to manage soils, how to use our biodiversity and sustainable management practices to use those resources sustainably. They are enterprises dedicated to the use of these resources and then they contribute to the protection of the environment. They operate in value chains such as those of healthy foods, sustainable agriculture, agroforestry, even artisanal fisheries and community-based tourism. In 2018, Conexsus mapped more than a thousand community- based Enterprises throughout Brazil that helped generate an economy of [amount unclear] billion dollars annually. Four hundred of these enterprises were based in the Brazilian Amazon.

This data showed us that about 70% of these Enterprises had a profit of $100,000 or less per year. While a few of these enterprises, primarily cooperatives, can sell directly to some businesses, most of those Enterprises sell their products to intermediaries. By selling to intermediaries these Enterprises unfortunately are contributing less to Forest conservation and for the transition to a low-carbon economy. They generate few social benefits in the municipalities that have a lot of forests. To address this issue, currently Conexsus and several other organizations are working on three pronged strategies to really foster these community based enterprises.

First, we are creating adequate financing for these enterprises. Second, we are facilitating their access to markets and also helping them create new commercial arrangements. And third, we are helping them improve their business models so they can be stronger as organizations. In addition, these organizations should be a target of public policies and even investments from private businesses which have their supply chains dependent on these products. By strengthening these businesses we enhance the social and economic resilience of these communities, many of which struggle to protect their rights to their territory. Therefore, by improving community-based enterprises, we are developing an inclusive bioeconomy in the country.

This is the economy of resistance the resistance of standing forests. Overseas development agencies and philanthropic communities have already invested a lot of resources in conservation and development efforts and their results have been mixed. One reason for these disappointments is the difficulty of finding scalable solutions. So what do we do? We need to look for systemic approaches and solutions that can scale. And transform entire regions and to that end we need to be creative and focus on at least three main issues. The first is building new financial instruments the second is having collaboration across sectors and the third is using Innovation and Technology to create new forest products.

Let me give you an example of a finance instrument that Conexsus is currently using. Brazil has a national public policy called PRONAF which delivers [amount unclear] billion dollars every year in subsidized credit lines for smallholders. 5% is invested in sustainable production activities. Most of the funding ended up being used for cattle ranching, for corn, and for other traditional crops which fuel rather than deter deforestation and do very little to improve the livelihoods of the small producers. This is why we need a strategy that uses Blended Finance to redirect resources from the PRONAF credit line to community-based enterprises, ensuring that they capture a greater portion of those resources.

What we’re trying to do at Conexsus is greening PRONAF by using private capital and philanthropic funds to unlock public capital for community- based enterprises. We have created a small- scale fund that has tailored financial instruments such as loans and guarantees that together de-risk the operations with other banks. This mix of credit and business support really make this community-based enterprises more resilient and give them also the credit history that they need in order to access proper financing. We’re also trying to cast our net of partners wider. We are creating new partnerships with banks.

We have a partnership with the Amazon public bank, trying to see how we can improve the access to those credit lines. And to achieve scale we are establishing with them a network of credit enablers which are people who work as liaisons between the bank and the community Enterprises and will be rewarded for the repayment of those loans. In the long run, this will have a [term unclear] effect on financial markets for small producers. Our goal at Conexsus is to deploy $30 million to leverage 200 million more in public credits by 2030.

We really want to change the profile of those credit loans and make it more sustainable. But this is not just a theory. We’re already doing this. We tested this last year with 17 prototypes, and for each dollar that we invested, we were able to unlock $5 of credit, public loans. In the context of the pandemic we raised $2 million so far this year for efforts to reduce the economic impacts of the COVID in this businesses. We are deploying an emergency credit line. So far, as of mid-October, we have deployed $800,000 for more than 100 community based enterprises.

But this effort could be bigger. Can you imagine what we could have done if we had ten times more resources, a hundred times more resources. We really could change the economic well-being of these communities and create a climate resilient economy. That would help [verb unclear] at least 100 million hectares across the Amazon. The other point that I wanted to say is key for achieving scale is collaboration. No organization can do this alone. So we need true alliances and alliances across several sectors. This collaboration is already happening as I mentioned to you with the bank example.

Another very interesting initiative is the partnership platform for the Amazon or PPA. It is a privately led action that has more than 400 private businesses governments and community-based enterprises. 5 million and has improved the sustainability and the natural resource management of 15 million hectares. Lastly, innovation, including technology, has the potential to add a lot of value to Forest Products. They could play a much lar larger role in fostering new businesses, products, in the ecosystem of forest entrepreneurship. A study conducted by the [foundation name unclear] identified the existence of about 360 startups in the Brazilian Amazon.

About half of them have the potential of adding value to Forest products. There is also the knowledge base required for technology and innovation to work together and make a difference. There are, for example, 2,000 research areas with potential to also add value to Forest products. We need to bring these vibrant risk-takers with these experts and the innovator entrepreneurs with the communities. Together, they can find cutting-edge solutions to generate additional income for sustainable activities. Both Brazilians and international investors are Keen to invest billions of dollars in sustainable and climate smart projects.

But currently we lack investment ready projects. Investors need to realize that we must spend resources on the Readiness of these projects by providing the legal assistance, the managerial assistance, and governance structures that any Enterprise needs including Community based enterprises. There is a marriage of philanthropic funds and public and private Capital that can be instrumental to foster this new economy. We need the flexible and patient nature of philanthropic Capital with the volume of resources that the private and the public capital can bring to the game. In conclusion Amazonian Community organizations are very important for the aggregation of value and fairness of distribution of resources.

By strengthening this type of businesses we will increase the social resilience of these communities and protect their rights to their territory. We do have a wealth of opportunities inside of the forest. In fact we have an Amazon of opportunities we have the opportunity to build not only a climate resilient economy but just as important we have the opportunity to build an inclusive economy in the Amazon, an economy that rewards sustainability and local knowledge. An economy [wording unclear] forests and forest peoples. And more than ever, the time to act is now.