A Top Financier of Trump and McConnell Is a Driving Force Behind Amazon
Deforestation
By Ryan Grim, The Intercept
30 August 19
Two Brazilian firms owned by a top donor to President Donald Trump and
Senate Majority Leader Mitch McConnell are significantly responsible for the
ongoing destruction of the Amazon rainforest, carnage that has developed
into raging fires that have captivated global attention.
The companies have wrested control of land, deforested it, and helped build
a controversial highway to their new terminal in the one-time jungle, all to
facilitate the cultivation and export of grain and soybeans. The shipping
terminal at Miritituba, deep in the Amazon in the Brazilian state of Pará,
allows growers to load soybeans on barges, which will then sail to a larger
port before the cargo is shipped around the world.
The Amazon terminal is run by Hidrovias do Brasil, a company that is owned
in large part by Blackstone, a major U.S. investment firm. Another
Blackstone company, Pátria Investimentos, owns more than 50 percent of
Hidrovias, while Blackstone itself directly owns an additional roughly 10
percent stake. Blackstone co-founder and CEO Stephen Schwarzman is a close
ally of Trump and has donated millions of dollars to McConnell in recent
years.
Blackstone is committed to responsible environmental stewardship, the
company said in a statement. This focus and dedication is embedded in every
investment decision we make and guides how we conduct ourselves as
operators. In this instance, while we do not have operating control, we know
the company has made a significant reduction in overall carbon emissions
through lower congestion and allowed the more efficient flow of agricultural
goods by Brazilian farmers.
The port and the highway have been deeply controversial in Brazil, and were
subjects of a 2016 investigation by The Intercept Brasil. Hidrovias
announced in early 2016 that it would soon begin exporting soybeans trucked
from the state of Mato Grosso along the B.R.-163 highway. The road was
largely unpaved at the time, but the company said it planned to continue
improving and developing it. In the spring of 2019, the government of Jair
Bolsonaro, elected in fall 2018, announced that Hidrovias would partner in
the privatization and development of hundreds of miles of the B.R.-163.
Developing the roadway itself causes deforestation, but, more importantly,
it helps make possible the broader transformation of the Amazon from jungle
to farmland.
The roadway, B.R. 163, has had a marked effect on deforestation. After the
devastation that began under the military dictatorship and accelerated
through the 1970s and 80s, the rate of deforestation slowed, as a coalition
of Indigenous communities and other advocates of sustaining the forest
fought back against the encroachment. The progress began turning back in
2014, as political tides shifted right and global commodity prices climbed.
Deforestation began to truly spike again after the soft coup that ousted
President Dilma Rousseff of the Workers Party in 2016. The right-wing
government that seized power named soy mogul Blairo Maggi, a former governor
of Mato Grosso, as minister of agriculture.
Yet even as deforestation had been slowing prior to the coup, the area
around the highway was being destroyed. Every year between 2004 and 2013
except 2005 while deforestation in Amazonia as a whole fell, it increased
in the region around the B.R.-163, the Financial Times reported in
September 2017. That sparked pushback from Indigenous defenders of the
Amazon. In March, Hidrovias admitted that its business had been slowed by
increasing blockades on B.R. 163, as people put their bodies in front of the
destruction. Still, the company is pushing forward. Hidrovios recently said
that, thanks to heavy investment, it planned to double its grain shipping
capacity to 13 million tons.
The Amazon, where a record number of fires have been raging, is the worlds
largest rainforest. It absorbs a significant amount of carbon dioxide, a
major contributor to the climate crisis. The Amazon is so dense in
vegetation that it produces something like a fifth of the worlds oxygen
supply. The moisture that evaporates from the Amazon is important form
farmlands not just in South America, but also in the U.S. Midwest, where it
falls to the earth as rain. Protection of the Amazon, 60 percent of which is
in Brazil, is crucial to the continued existence of civilization as we know
it.
The effort to transform the Amazon from a rainforest into a source of
agribusiness revenue is central to the conflict, and linked to the fires
raging out of control today. The leading edge of the invasion of the jungle
is being cut by grileiros, or land-grabbers, who operate outside the law
with chainsaws. The grileiros then sell the newly cleared land to
agribusiness concerns, whose harvest is driven on the highway to the
terminal, before being exported. Bolsonaro has long called for the Amazon to
be turned over to agribusiness, and has rapidly defanged agencies
responsible for protecting it, and empowered agribusiness leaders intent on
clearing the forest. The land-grabbers have become emboldened.
With Bolsonaro, the invasions are worse and will continue to get worse,
Francisco Umanari, a 42-year-old Apurinã chief, told Alexander Zaitchik, for
a recent story in The Intercept. His project for the Amazon is
agribusiness. Unless he is stopped, hell run over our rights and allow a
giant invasion of the forest. The land grabs are not new, but its become a
question of life and death.
Fires in the Amazon have been producing devastation described as
unprecedented, many of them lit by farmers and others looking to clear land
for cultivation or grazing. Bolsonaro initially dismissed the fires as
unworthy of serious attention. Several weeks ago, Bolsonaro fired a chief
government scientist for a report on the rapid escalation of deforestation
under Bolsonaros administration, claiming that the numbers were fabricated.
Beginning with the military dictatorship in Brazil, when agribusiness was
fully empowered, roughly a fifth of the jungle was destroyed by the
mid-2000s. If the Amazon loses another fifth of its mass, it is at risk of a
phenomenon known as dieback, where the forest becomes so dry that a vicious,
cascading cycle takes over, and it becomes, as Zaitchik writes, beyond the
reach of any subsequent human intervention or regret.
Schwarzman, a founder of Blackstone, owns roughly a fifth of the company,
making him one of the worlds richest men. In 2018, he was paid at least
$568 million, which was, in fact, a drop from the $786 million he made the
year before. He has been generous toward McConnell and Trump with that
wealth. In 2016, he gave $2.5 million to the Senate Leadership Fund,
McConnells Super PAC and put Jim Breyer, McConnells billionaire
brother-in-law, on the board of Blackstone. Two years later, Schwarzman
kicked in $8 million to McConnells Super PAC.
Blackstone employees have given well over $10 million to McConnell and his
Super PAC over the years, making them the biggest source of direct financing
over McConnells career. McConnells Senate campaign declined to comment.
Schwarzman is a close friend and adviser to Trump, and served as the chair
of his Strategic and Policy Forum until it fell apart in the wake of the
Charlottesville neo-Nazi rally, in which Trump famously praised very fine
people, on both sides. In December 2017, as the final details of the GOP
tax cut were being ironed out, Schwarzman hosted a $100,000-a-plate
fundraiser for Trump. Some of the presidents dinner companions complained
about the tax bill, and days later, Trump slashed the top percentage rate in
the final package from 39.6 to 37.
In recent months, the Sackler family, whose members founded and own the
pharmaceutical company Purdue Pharma, have become pariahs for their role in
facilitating the opioid crisis and the deaths of tens of thousands of
people. Schwarzmans contributions to the destruction of the Amazon, which
stands between humanity and an uninhabitable planet, may ultimately render
him as socially untouchable as the Sacklers, given the scale of the fallout
from the destruction of the rainforest.
In defense of the project, a Blackstone spokesperson noted that it had been
approved by the International Finance Corporation, an affiliate of the World
Bank, and that the IFC had determined that the project would, in fact,
reduce carbon emissions. Blackstone also forwarded a statement that it
credited to Hidrovias, which also emphasized the support of the IFC:
Hidrovias has always worked within the highest Environmental, Social and
Governance (ESG) standards, constantly evaluated by audits from
international multilateral agencies, such as the World Bank IFC
(International Finance Corporation). In addition, Hidrovias maintains all
the environmental licenses required by the competent authorities.
The IFC has financed some of the worlds most environmentally destructive
projects, so its endorsement in itself is not particularly persuasive. But
even on its own terms, the IFCs study of the Blackstone project calls the
projects sustainability into question. Transporting soy or grain by
waterway is indeed a less carbon-intensive method of transport, the IFC
correctly noted in its report. But, it went on, that assessment doesnt take
into account the reality that the construction of the Miritituba port,
close to still-intact areas of the Amazon forest, is likely to lower
transport costs for farmers and thereby accelerate conversion of natural
habitats into agricultural areas, particularly for soy production.
The project is OK, the bank argued, because Hidrovias and its clients can be
trusted to be responsible, and that the Miritituba port is being
purpose-built to handle soy traded only by responsible traders who are
sensitive to the preservation of natural habitats. The bank assured that
100% of the companys transport capacity in the North System is contracted
to large trading companies, which observe high levels of governance and
abide by the Amazon Soy Moratorium. The Moratorium, which prohibits
purchasing soy produced on illegally deforested lands, was originally
negotiated in 2006 between the big traders, Greenpeace, and Brazilian
authorities. It has been renewed on a yearly basis since then.
The moratorium, however, is only as strong as the governments ability to
monitor it. Proving that soy was grown on illegally deforested lands is
highly difficult, as land-grabbers move quickly to clear forest and sell the
newly cleared land to ranchers or agribusiness operators who quickly put it
into cultivation and later claim that they had no way of knowing it was
illegally deforested. The scheme also presumes that the government is
interested in regulating agribusiness; the Bolsonaro administration has been
quite explicit that it is not interested in doing so, putting top
agribusiness officials in key posts, while defunding regulatory agencies.
And even if it were somehow true that all of the soy shipped from the
Hidrovias port met all the requirements of the moratorium, commodity markets
are fluid. A new port for the big traders eases congestion and lowers
transportation costs elsewhere for smaller traders, thereby encouraging more
development and more cultivation. (The IFC noted that Hidrovias promised to
watch its soy clients closely: HDB will establish and maintain internal
procedures to review clients compliance with all provisions of Amazon Soy
Moratorium or any other relevant legal requirements aimed at preventing
trade in soy produced in illegally deforested areas. If the purpose of the
port or the mix of HDBs clients changes, the company will advise IFC of
such changes and may be required to undertake further due diligence to
ensure that these do not lead to undesirable indirect impacts.)
The final justification the IFC made for the project comes down to
incrementalism. Other development is also happening, the bank noted, so this
single port can only cause so much harm. It concluded that the ports
incremental contribution to the overall reduction of transport costs is
judged to be marginal, given the myriad other factors (paving of B.R.-163,
installation of other ports in Miritituba district, etc.) that are
contributing to development in the region. Bolsonaro has plans to pave
significantly more roads in the Amazon that have otherwise been impassable
much of the year, a project made feasible by international financing.
Of course, Hidrovias is also involved in paving B.R.-163 and other
development projects in the region. Those projects, such as the paving of
the highway, have additional indirect though entirely predictable
consequences, as they spur side roads that make previously
difficult-to-reach areas of the Amazon accessible for mining, logging, or
further deforestation.
A Blackstone spokesperson noted that the fund only owns 9.3 percent of
Hidrovias. But that ignores the 55.8 percent of Hidrovias that is owned by
Pátria Investimentos. On Hidroviass website, Pátria is described as a
company in partnership with Blackstone, and it is known in the financial
industry to be a Blackstone company. A November 2018 article in Private
Equity News about Bolsonaros election was headlined: Blackstones Pátria:
Brazilian Democracy is Not in Danger.
It quoted the companys chief economist assuring the public that descent
into authoritarianism is exceedingly unlikely. That prediction has not
borne out terribly well, but Blackstone appears to remain a strong supporter
of Bolsonaro. The Brazilian president traveled to New York in May to be
honored at a gala, which was sponsored by Refinitiv a company
majority-owned by Blackstone.
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