Land speculation and conservation policy leakage in Brazil

Abstract

The Brazilian Amazon and Cerrado biomes have been subject to strong pressure from agricultural expansion over the past two decades. A common claim is that the associated tree cover loss was partly driven by speculative land acquisition. In this paper, we analyze the effects of information on planned road infrastructure improvements and changes in conservation policy implementation on expectations of forest conversion. We use a unique land price dataset covering the period from 2001-2012. Based on land rent and hedonic valuation theory, we argue that forestland prices convey information on expected future land use. We decompose forestland prices into a conventional forestland rent and a speculative part related to forestland conversion and alternative land use rents. Using a fixed-effect panel, we then assess whether, where, and to what extent changes in conservation policy affect forestland prices over time. Our results confirm that forestland prices contain expectations about converting forestland to agricultural or pasture land. We also find indications that the Brazilian land market conveys information about potential conservation policy leakage and explore this conjecture descriptively using dynamic deforestation hotspot maps.

Using supply chain data to monitor zero deforestation commitments: an assessment of progress in the Brazilian soy sector

“…Finally, soy ZDCs will only be effective if committed actors seek solutions across the agricultural sector. Even where soy expands over pasture and is 'deforestationfree', it displaces beef production and creates incentives for further deforestation by driving up expected agricultural rents and injecting capital into agricultural markets (Richards 2015, Richards and Arima 2018, Miranda et al 2019. Rapidly expanding crops, such as soy, can therefore only be deforestation-free if deforestation is constrained in the agricultural sector into whose land it expands.…”

Large-scale pasture restoration may not be the best option to reduce greenhouse gas emissions in Brazil

“…Our study does not consider integrated systems where pasture is rotated with crops, because in this case beef production is typically a secondary product of intensive crop farming. Although beef intensification was proposed as a land sparing strategy (Phalan et al 2016), here we also assume that, based on evidence from Koch et al (2019), intensification is induced by conservation policies that shift investments from deforestation and land speculation (Miranda et al 2019) to capital investments in more profitable ranching practices that avoid illegality (Merry and Soares-Filho 2017), hence with no indirect impact (leakage) in land use changes (Richards et al 2014).…”

Impacts of Public and Private Sector Policies on Soybean and Pasture Expansion in Mato Grosso—Brazil from 2001 to 2017

“…Researchers who have conducted field work in the area pointed out the effects of land speculation, where market actors will foresee land appreciation due to future agricultural expansion. These actors will carry out deforestation actions, with a view of selling or renting this land to ranchers or farmers later [46,47]. In this perspective, deforested areas are not immediately converted to pasture and croplands but are left fallow with an expectation of substantial gains in the future.…”

“…This result is consistent with both speculation and consolidation actions. In the case of land speculation, which we consider to be stronger in 2005 than in 2017, forest areas are cut for future rent appropriation [46,47]. If these clear cut areas are left unused, they will be covered by secondary vegetation.…”