Cofco Partners with Brazil to Finance Degraded Land Recovery

According to Augustin, Cofco expressed interest in the concept during business discussions in late March, prior to President Luiz Inacio Lula da Silva's visit to China this week. "They have every interest," Augustin said, adding that a Cofco group will be in Brasilia next month for negotiations. It would be an opportunity to increase grain production and ensure supplies."

The programme's launch with a big Chinese merchant would emphasize the importance of Brazil-China commerce in Lula's objectives to cut emissions in Brazil's burgeoning agricultural industry. China is Brazil's largest trading partner, accounting for 22% of Chinese imports, which are primarily agricultural items. According to a March 24 agriculture ministry statement, after talks with the Brazilians in Beijing, Cofco Chair Lyu Jun expressed hope for the future of cooperation talks. He didn't go into detail.

Brazil currently provides subsidized credit lines to farmers who convert degraded pastures to more productive crop fields, so sequestering more carbon and alleviating pressure to destroy forests for planting. However, the programme barely accounts for 2% of Brazil's subsidized farm loan, or approximately 6 billion reais ($1.2 billion) in the most recent harvest.

According to Augustin, a new model for public-private partnerships with international corporations is still being discussed, which might involve Brazil's development bank BNDES or direct contracts with farmers. According to one proposal, farmers would guarantee the sale of their produce to corporations that finance land recovery.

According to Lula's experts, Brazil possesses 30 million hectares (74 million acres) of underutilized pastureland where crops may replace livestock. According to Augustin, the ministry intends to begin by focusing on the midwestern agriculture belt, where the Cerrado savanna is being removed at nearly the same rate as the Amazon rainforest.

According to government satellite data, deforestation in the Cerrado, the world's most species-rich savanna, increased by 25% last year to 10,689 square kilometres (4,127 square miles). "You don't need to deforest another hectare to increase (farm) production," Augustin explained.

However, funding remains a barrier. According to Agriculture Ministry estimates, recovering one hectare of damaged land will cost between 15,000 and 23,000 reais. The effort, which aims to recover 2 million hectares per year, might cost up to 46 billion reais per year, which is more than seven times the government's existing financing programme.