Thursday, 09 December 2010 15:41

Germany sees potential in Brazil’s Amazon Fund Featured

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By Emily Kirkland, Brown University On December 7th, Brazil announced that the German Development Bank (KFW) had agreed to donate $30.6 million to the Amazon Fund. The Fund, which is managed by the Brazilian National Development Bank (BNDES), finances anti-deforestation programs in the Amazon. Germany is the second country to contribute to the fund following the Norwegian government which has committed to offering $1 billion over the next four years.
At a side event in the Brazilian Pavilion, Sergio Weguelin, BNDES, reviewed the progress made by the fund since it was established about a year ago. The fund has already given a total of $110 million to 13 different projects with most of them located around the “arc of deforestation” in Pará and Mato Grosso. BNDES is able to fund control and monitoring projects in other countries but so far all of the projects financed are located in Brazil.  Most are run by federal or state governments, with some directed by NGOs. Some focus on building up the capacity of local governments, while others offer payments for ecosystem services directly to farmers and families. Ana Luiza Landim, BNDES, said that the projects do not produce carbon credits, and that there are no plans to link the fund to a carbon market. But if projects do not meet established deforestation targets their funding can be withdrawn. At the national level, donations from both Germany and Norway are also contingent on continuously falling deforestation rates in Brazil. A steering committee convened by BNDES oversees the fund; the committee includes federal and state government agencies, indigenous groups, and representatives from the Brazilian Forum of NGOs for the Environment. Weguelin explained that BNDES had been chosen to manage the fund because of its experience in dealing with all sectors of the Brazilian economy. The bank has come under fire for some recent investments—including loans to the Brazilian cattle industry and support for the Belo Monte dam—but Weguelin argued that the bank was now focused on sustainability. He claimed that they review the environmental and social records of all potential investments, and that they would not finance companies that did not meet certain benchmarks. “It is not easy to do business there,” Weguelin said of the Amazon, and added that the Fund faces considerable challenges like resolving land tenure disputes and managing the expectations of local communities.  He added that despite the obstacles, BNDES was still determined to “discover an economy that exists hidden under the trees”, both through work with the Amazon Fund and through its profit-seeking investment arm, the Amazon Productive Activities Fund. The donations from Norway and Germany are voluntary and come with few conditions beyond securing the further reduction of deforestation rates. Brazil has an enormous degree of ownership and control over the fund, which provides an example of precisely the kind of financing for climate change activities that most developing countries are seeking here in Cancun.
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