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Brazil Awarded Amazon Loggers, Labor Violators With Farm Aid

(Bloomberg) -- Brazil subsidized rural insurance for farmers who deforested protected areas, engaged in slavery-like labor or planted in indigenous lands, according to a report from a nonprofit group.

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An investigation by Repórter Brasil found that farmers benefited from a government-backed insurance program even after being sanctioned for environmental and labor violations. Most of the policies scrutinized were signed during the administration of former President Jair Bolsonaro, though violations persisted under his successor Luiz Inacio Lula da Silva.

The findings underscore the challenges of fighting deforestation in Brazil. Years of booming soybean and corn prices fueled a rapid expansion of farmland into new areas. Bolsonaro supported mining and farming activities in the jungle, causing a surge in the pace of slashing and burning in the Amazon region. From 2019 to the end of his four-year term, the annual deforestation rate jumped more than 50%, according to the National Institute for Space Research (Inpe).

A global agriculture powerhouse, Brazil in the last decade has drawn increased attention of insurers worldwide, given the growth potential in the country where less than 8% of total area planted is covered by the government-backed rural insurance program.

Among the companies cited by Repórter Brasil was a unit of Japan’s Tokio Marine Holdings Inc. In 2020, it provided policies to landowners in Mato Grosso, Brazil’s largest crop-producing state. About 70% of the property covered by the insurance was embargoed due to illegal deforestation in the Amazon.

The nonprofit research group also found that a farmer who leased an area on indigenous land in the southern state of Paraná contracted a policy with the Spanish company Mapfre SA in 2020 to insure 106 hectares (261 acres) of wheat. And in the central state of Minas Gerais two tomato farmers on the government’s slavery-like-labor blacklist got rural insurance subsidized by Brazil’s Porto Seguro SA.

“The Brazilian government subsidizes tens of thousands of policies every year. Our investigation delves into just a few problematic examples, but surely a thorough combing of all contracts could reveal monitoring failures of much greater proportions,” said the report’s coordinator André Campos.

Brazil’s Ministry of Agriculture audits 1% of all subsidized rural insurance to check “the accuracy of the information contained in the policies,” according to a document obtained by Repórter Brasil. The Ministry of Agriculture said in an email to Bloomberg that a new monitoring system is expected to be up and running by the beginning of the next crop season, in the second half of 2024.

The platform will use geo-referenced points of the insured crops to assess whether an area has any non-compliance and sweep public databases for slavery-like labor listings; embargoes imposed by environmental institutes; and activities in indigenous lands, federal conservation units and archaeological heritage areas. “This analysis will take place for all policies subsidized by the Program. The Ministry will also make it possible for qualified insurers to carry out this same consultation beforehand,” the ministry said in the email.

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Spain’s Mapfre SA and Brazil’s Porto Seguro SA were among eight insurers cited in the investigation, which analyzed cases of producers who received public aid between 2019 and 2023. Through a program known as PSR, the growers contracted polices partly paid by the Brazilian government to insure them against losses caused by hail, drought or prolonged rain.

Insurers Brasilseg, Essor and Allianz SA were also included in the investigation.

Together, the companies cited in the report accounted for 76% of insurance policies taken out under the PSR in 2022, according to the findings.

In response to the investigation, Tokio Marine, Allianz and Porto Seguro said they continue to make improvements to processes to ensure compliance.

Tokio Marine added that the insurance contracts mentioned in the report are no longer in force. Mapfre said it has done a complete review of all active rural policies in its portfolio.

Brasilseg said that at the time it underwrote the policies, it complied with all legislation and rules regarding insurance.

Essor did not respond to a request for comment.

(Adds detail on Tokio Marine unit in fifth paragraph.)

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