Brazil caught in climate Catch-22 as global agriculture crisis threatens
Mining proposals are caught between indigenous rights, economy, environment
(Michael Molinski is a senior economist at Trendline Economics. He’s worked for Fidelity, Charles Schwab and Wells Fargo, and previously as a foreign correspondent and editor for Bloomberg News and MarketWatch.)
AUTAZES, Brazil (Callaway Climate Insights) — On a bare hillside near the Rio Madeira, just 75 miles southeast of the Amazon city of Manaus, is a patch of land that some say holds the key to solving Brazil’s fertilizer crisis.
This is the site of the mining project for the Canadian company Brazil Potash. Potash, a potassium-based compound, is one of three materials that go into inorganic commercial fertilizers, the other two being nitrogen and phosphates. Over the past year, the global cost of fertilizers has more than doubled. Brazil is caught in the middle of it all.
Brazil imports roughly 95% of its potash, with Russia, Belarus and Canada being its main suppliers. But since Russia invaded Ukraine, the global supply chain sent the price of fertilizers through the roof, including potash. The shortage of fertilizers has led to an increase in agricultural products worldwide.
Yet the Brazil Potash project is at a standstill, and has been since 2013 when mining was halted on the project over environmental and indigenous claims.
Respecting indigenous rights
“The Mura indigenous tribes in the region voted on the project and more than 60% approved it,” said Matt Simpson, CEO of Brazil Potash. “The really key point is we have to respect the Mura’s wishes, and the government should approve it.”
Brazil, in a sense, has been struggling with a decades-old issue between the rights of the indigenous, the environment, jobs for its impoverished population and feeding its own people.
Brazil Potash is still waiting for two key approvals from the government before it can resume mining operations: FUNAI, the indigenous rights agency, and IBAMA, the federal environmental protection agency.
Federal prosecutors say the Mura remain divided. Gov. Wilson Lima has backed the mine to bring investment and jobs to Amazonas state. In theory, Brazilian President Luiz Inácio Lula da Silva has also backed it to increase domestic supplies if the project can get the backing from IBAMA and FUNAI.
Respecting the environment
In terms of the environment, Simpson says the Brazil Potash project wouldn’t cut a single tree in the Amazon and said it would donate more than 10 times the land that it occupies as preserves and name the Mura as protectors of that land to keep it from deforestation.
Also, because 100% of the potash being mined would be used in Brazil, it would reduce transportation costs and greenhouse gas emissions by 80%.
“We own most of the land and the rest is owned by cattle farmers,” Simpson says. The company plans to hire 1,300 people to work at the mine, and as many as 14,000 jobs would be created to run small businesses such as grocery stores and restaurants.
“This project would have a positive effect on their lives in an otherwise very depressed area,” he said.
To be sure, opening a mine in the heart of the Amazon could have a cascading effect on the neighboring area. As development spreads, the Rio Madeira becomes congested, and trees are taken down.
Simpson also said it was possible that Brazil Potash would add the other two fertilizers ingredients, phosphates and nitrogen, as mining projects in the future.
Brazil’s place in global agriculture
Right now, Brazil consumes 13.6 million tons a year of potash, and that is growing at an annual pace of 6.8%. Brazil Potash is planning to produce 2.4 million tons a year. The only other foreign producer in Brazil is the American company Mosaic, which produces some 350,000 tons a year.
Brazil is the world’s second or third largest agricultural products net exporter at around $100 billion a year, tied with the Netherlands and behind only the United States. Potash is essential to growing many of those agricultural products.
Where potash and inorganic fertilizers are not available, some farmers have turned to organic fertilizers, which are growing as more consumers seek products that are organic.
However, potash is important because it strengthens the crops making them resilient to temperature swings, floods and insect bites.
In the end, though, the decision is going to be made by the Brazilian government as to whether or not to proceed on Brazil Potash or some other project. President Lula is likely going to weigh the effects of the project on the deforestation of the Amazon, where he has vowed to stop deforestation by 2030. But that decision will likely depend on whether or not the project is good for the Brazilian people economically.
