Debt forces cut of Brazil rainforest project

Debt and the IMF have forced Brazil to effectively abandon a key project to save the Amazon rainforest.

Brazil is the world's biggest debtor, owing nearly $180 billion. Last year there was a huge outflow of speculative capital, and the IMF lent Brazil more than $40 billion so it could pay its debts and provide the money demanded by speculators wanting to withdraw capital.

But the IMF loan was conditional on a stringent austerity programme, with sharp cuts in government spending. Social services for the poor and environmental programmes have been particular targets.

At the 1992 Earth Summit in Rio de Janeiro, rich nations agreed to provide 90% of the funding for a $250 million project to survey the Amazon rainforest. This is a first step in protecting it from destruction by loggers, farmers and miners, and to instead exploiting the commercial potential of its biodiversity.

But now Brazil has been forced to withdraw its tiny 10% contribution as part of the IMF imposed cuts. And the donors seem likely to withdraw their share if Brazil does not pay its part, even if the IMF has imposed the cuts.

"It is a far more irrational and perverse consequence of the IMF agreement than even the harshest critics of the IMF could have imagined," commented Stephan Schwartzman, a senior scientist at the Washington-based Environmental Defence Fund, quoted in the London Guardian (2 January 1999).

Meanwhile, it is still not clear if even the IMF loan will be enough to allow Brazil to keep up payments. The Financial Times (6 January 1999) reports that one result of the austerity measures is that individual Brazilian states are now strapped for cash, and are refusing to pay their debts to the central government.

• A good history of the Brazilian debt is given in an interview with Marcus Arruda in the November 1992 issue of Multinational Monitor, which can be found on: http://www.essential.org/monitor/hyper/issues/1992a/11/mm1192_09.html