Eucalyptus monoculture in the Jequitinhonha Valley, facilitated by financing from Brazilian banks, causes major environmental impacts

14 July 2022

A new study, carried out by Fair Finance Brazil member IDEC and partners, shows how eucalyptus monoculture in the Alto Jequitinhonha is responsible for the expropriation of land and water from farmers in the region. Aperam Bioenergia, the company involved in large-scale eucalyptus production in the region, has been financed by both the National Bank for Economic and Social Development (BNDES) and Banco Votorantim.

With the support of IDEC, the Center for Alternative Agriculture Vicente Nica (CAV) established a partnership with researchers from the Federal University of Minas Gerais (UFMG), the Federal Institute of Northern Minas Gerais (INFMG), the Federal University of Jequitinhonha and Mucuri Valleys (UFVJM), the Federal Institute of Eastern Minas Gerais (IFLMG) and the Federal Institute of Southeastern Minas Gerais (IFSMG) to carry out the study "Environmental safeguards: analyzing the impacts of eucalyptus monoculture". This study analyzed the socio-environmental impacts caused by large-scale eucalyptus production in the region of the Alto Jequitinhonha plateaus, in Minas Gerais.

In the 1970s, a group of companies received public tax incentives, proposed by the military government, to implement extensive monoculture eucalyptus plantations in the region. Today, the plateaus are developed by the company Aperam Bioenergia, which produces the charcoal used in the manufacturing of stainless metal for the Aperam group.

The decrease in water recharge, the lowering of the water table, the drying up of springs, and the reduction of river flows are the main direct consequences of eucalyptus plantations. This is because the eucalyptus forests have replaced the cerrado, the native vegetation of that territory, and now occupy 61.5% of the plateaus of Alto Jequitinhonha.

The study shows that while the native biome is capable of absorbing 50% of all the rainwater to recharge the groundwater, the areas subjected to eucalyptus monocultures are capable of absorbing only 29% of rainwater to supply the groundwater recharge. This is because the species, especially when planted in monocultures, demands a lot of water. 

In addition to the loss of biodiversity, the drying up of water sources profoundly affects the communities of family farmers that traditionally occupy the region. The case study reveals that the families were expropriated from their territories by the company's occupation process, and thus were exposed to a situation of extreme water insecurity, dealing daily with the restriction of the fundamental right of access to water for domestic and productive consumption.

In the region analyzed, 52% of the families have an average consumption of 43 liters of water per inhabitant/day, while the World Health Organization (WHO) establishes 110 liters of water per inhabitant/day as the minimum amount of consumption.  The current costs of water supply are borne by the families themselves, the government, and society as a whole, who pay for water trucks to guarantee a minimum access to water, while the profit from the economic activity is taken by the company.  

The study highlights the devastating impact of eucalyptus monoculture, pointing to the need to resize the plantation's extension in order to recover the local native vegetation, contribute to the recovery of the region's water recharge and to biodiversity, and to the mitigation of the consequent social impacts suffered by the surrounding communities, whom are themselves central to the search for solutions to the socio-environmental problems created by this situation.

The research reveals the responsibility of the financial institutions that foster the development of eucalyptus monoculture, since it is up to them to demand the adoption of socio-environmental commitments and safeguards by the companies that carry out this type of activity, in order to prevent and mitigate the impacts identified in the study.

Fair Finance Guide Brazil and the results of the study

The socio-environmental violations caused by Aperam in Alto Jequitinhonha link to three themes evaluated in the Guide for Responsible Banking (GBR);  Human Rights, Forests, and Environment. In the last assessment, on a scale of zero to ten, the banks received an average score of 6 points in Environment, while in Human Rights the average performance was 3.6 and, in Forests, 2.5.

According to the study, between 2016 and 2017, the National Bank for Economic and Social Development (BNDES) was the second main financier of Aperam Bioenergy's activities, having contributed R$34,054,000.00 to the company. On its website, Aperam informs that "this company is supported by BNDES".

When we analyze the grades received by the bank in the 2018 and 2020 editions of the GBR, we see the low performance in the themes related to the study, especially the theme Forests and Environment.

The study also highlights that between the years 2016 and 2018, Banco Votorantim (BV) financed Aperam's activities, having contributed R$ 2,582,000.00 to the company. The analysis of its performance in the last two editions of the GBR also indicates low commitments. In its case, there is special emphasis on the themes of Human Rights and Forests, with average scores of less than three on a scale of zero to ten.

The banks mentioned were previously informed of the study's results on February 23, 2022, however, only the BNDES responded. The Aperam Group was also notified by means of a letter sent to the Aperam South America headquarters, on May 18, 2022. A letter was also sent to the headquarters located in Luxembourg, on May 23, 2022. At the time of publication of this study there has been no response from the company.  The links to the letters and the response from the BNDES can be found here.

The study in full can be found here (in Portuguese).