Brazil: A Story of Economy and?Ecology

In 1500, Portuguese explorer Pedro Alvares Cabral indulged the fantasy of the New World in the west and took a detour across the Atlantic as he followed the newly discovered maritime route to India. By pure chance, his ships landed on the coast of Brazil at what would come to be known as the town of Porto Seguro. He dubbed the people he encountered “Indians”, which was the least correct answer except for “Portuguese”, and promptly set sail for the country he named them after on the other side of the globe.?

Although Portugal initially showed little interest in the new territory, the discovery of brazilwood as a source of an exotic red luxury dye squarely established deforestation as the fuel for the country’s economic engine throughout the next 400 years. As you might have already caught on, the Amazonian cornucopia is so fundamental to the country’s existence that it’s named after that tree. Whether it’s harvesting Pernambuco for exquisite violin bows or clear-cutting to make way for agriculture, the relationship between the forest and finance has created a unique challenge for the world’s 7th biggest economy moving into the next decade.

Growing Pains and a Troubled?Past

The oppression that colonialism had brought to Brazil greatly compounded the difficulties of molding a modern and environmentally sound policy platform today. Despite being the third largest democracy in the world after India and the US, it remains one of the most wealth-disparate. In 1888, Brazil was the last place in the western hemisphere to abolish slavery, and its legacy is still evident. For context, the port of New Orleans — once the center of the African slave trade in America — was illuminated by electric lights 6 years before Brazil decided to divest itself of its Bronze Age-style economy, and huge numbers of its black and brown population are still living in the dark of its sprawling slums.

The 6 richest people in Brazil have more wealth than the bottom 50% of the entire population, most of whom are of African or mixed-ethnicity descent. Nearly 20% of that population lives on less than $5.50 a day, and although this issue is constantly raised in politics, the super-wealthy ruling class seems to have little interest in making any meaningful changes. However, it hasn’t been all bad. Until the last decade, things had been looking up.

Always strong on commodity exports, Brazil had ridden a wave of high steel and petroleum prices as China began buying and consuming its way towards a developed economy in the ’90s. The good times lasted until 2014 when the bottom fell out of the market for good and collapsed the country into a recession it’s only now starting to claw its way out of. The “New Economic Matrix” Brazil’s government had adopted after the lull of 2008 was promising, but ultimately proved to be a flawed theory that increased wages at a much higher rate than improvement in worker productivity.

Contributing factors were a poor investment in infrastructure, a complicated tax code, excessive regulation, and — worst of all — an uncompetitive portfolio that was fundamentally retarded by low incentives to innovate. When the export market tanked seven years ago, the piper was paid handsomely for these shortcomings. Unemployment went through the roof, the economy recessed for 8 straight quarters, and the wealth gap increased dramatically. This volatility has been an ongoing impediment to Brazil’s ability to participate in climate change initiatives.

The Lungs of the?World

Here’s a truth: the world needs Brazil on board. Everyone understands that the Amazon is the single most important CO2 sink on the planet. Both Emmanuel Macron and Kamala Harris have described the Amazon as the “lungs” of the earth, crediting the rainforest for creating “20% of the world’s oxygen”. The trope plays well with the public, but it’s a mischaracterization.

Most people think trees grow out of the dirt. They don’t. Plants are made out of carbon, which they get from — surprise! — the air. Yes, plants are made of air. As you’ll remember from 8th-grade science class, photosynthesis harnesses sunlight to break apart CO2. It uses carbon atoms to build the plant’s backbone and kicks out the oxygen molecule for us to breathe. But here’s the thing: it’s not about the oxygen, which is largely sucked up by various animals in the rainforest. It’s about keeping the carbon that forms CO2 locked up in all that biomass.

When you cut down trees and burn them, you release the carbon they’ve banked and the greenhouse effect goes crazy. It’s estimated that about 17% of the Amazon has been deforested, and experts believe 20–25% is the point after which the rainforest, not to speak of the planet, will never be able to recover. When the trees go, so too does the ability of the soil to hold water, creating a feedback loop of rising global temperatures and aridity which has introduced an entirely new threat to a nation known for trees even before soccer: fire.

In August 2019, 8 months after President Bolsonaro had been sworn into office on a platform of climate science denial and deregulation as a means to combat the aforementioned economic stagnation (yes, there was a practical purpose to all that), Brazil’s National Institute for Space Research (INPE em portugues) reported that at least 80,000 separate fires were raging in the Amazon. That’s up 77% over previous years. The impact of this conflagration was so extreme that the Monitoring of the Andean Amazon Project determined that the Brazilian Amazon is actually emitting three times more CO2 than New York City.?

Got that? The biggest rainforest in the world is spitting out more than triple the carbon dioxide than the most congested city in the solar system. It’s a terrible outcome and one that sends shivers through the spirits of climate scientists and environmental advocates. Worse, it puts a huge question mark beside the next decade of Brazilian development.

As economies polarize between the eastern and western hemispheres, the strength of a vital democratic ally in the west may be in jeopardy.

Hope, Hydroelectric Power, and E-Commerce

Let’s not count Brazil out just yet. In every slum, there’s a Pele dribbling a football through the alleys, and there are 3 major season-changers on deck in Brazil that are setting the table for an economic World Cup bid before the decade is out.?

First, the river that runs through that burning rainforest? Yeah, the Amazon. There’s a reason it has the largest freshwater discharge of any river on earth. In North America, the Continental Divide in the Rockies splits the direction water takes on its journey to the sea. In Brazil, the Andes are situated right on the Pacific coast, and all that H2O rages in one direction with the Amazon being the femoral artery. Brazil has used this fact to generate an eye-popping two-thirds of its electricity from hydroelectric power. At nearly 110 GWl it’s second only to China, but in terms of percentage of its domestic grid, it’s Secretariat at the Belmont. No other country comes close to matching Brazil’s green hydroelectric reliance, and probably never will.

And about those trees: Brazil is evolving into a powerhouse of e-commerce and paperless trading in the world. The average age in Brazil is 32, and all those young buyers and sellers have embraced online shopping. The e-commerce market is expected to grow by over 14% annually moving into the next decade. By 2030, nearly 225 million Brazilians will be buying tens of billions of dollars worth of goods in wood pulp-free transactions. Although every cut tree produces 17 reams of paper that represent 110 lbs of CO2, every living mature tree absorbs 48 lbs of CO2 every year. That’s going to be a huge benefit to the global climate and to a Brazilian economy that’s replacing it with electricity created by pure running water.

Brazil Goes?Digital

The Amazon is going to be powering much more than, well, Amazon in the upcoming decade. A digital infrastructure and automation revolution is at the forefront of the country’s transformation into a sleek, modern, and environmentally friendly economy. Much like how the empowerment of women is the solution to poverty, digital automation is a recession strategy that works everywhere, every time. Brazil is fresh out of a whopping economic collapse in the mid-2010s, and the lesson the nation learned is that updating its digital infrastructure is the lifeline it needs to stay competitive.

Microsoft has been a huge partner, and in the past two years, they have made their Azure cloud services available in several regions including Sao Paolo. Advances have come on the back of the government’s Brazilian Digital Transformation Strategy (2018), which aims to incentivize and implement a digital revolution to meet the 2030 Agenda of the United Nations. Included in the initiative are goals for increased digital citizenship to strengthen democracy and reduce poverty, utilizing the Internet of Things to advance equality and improve education, and finally, deploying digital infrastructure and automation to innovate and modernize the industry.?

It’s a hectic, complicated, and undoubtedly thrilling time to be in Brazil as the nation progresses into a unique digital fusion of their environment and their way of life. Where they will end up in the next ten years is about as predictable as kicking a round ball at a full-on sprint down a football pitch. Whatever happens, it will be thrilling to watch.