BRAZIL'S QUARTERLY ENVIRONMENTAL UPDATE

UNCLAS SECTION 01 OF 03 BRASILIA 001053

SIPDIS

STATE FOR OES/ENV AND WHA/BSC

E.O. 12958: N/A
TAGS: SENV SOCI TNGD TRGY KSCA BR
SUBJECT: BRAZIL'S QUARTERLY ENVIRONMENTAL UPDATE

CORRECTED VERSION - PLEASE SEE PARA 9


1. Summary: The following is a summary of events relating
to the Brazilian environmental situation from January to
March, 2005. End Summary

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Transposing the Sao Francisco River
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2. Transposing the waters of the Sao Francisco River, also
known as the Old Chico, and diverting them to the semi-arid,
drought prone regions of the NE is a promise that dates back
to the times of the Emperor Pedro II. Now, in the waning
days of President Lula's first term, this grand undertaking
looks to come to fruition. In the wake of the project are
social tensions and looming questions about the
environmental sustainability of the project. This was more
than evident in the end of January when Ibama (Brazil's
Environmental Enforcement Agency) tried to hold a series of
eight town-hall style meetings, one for each state involved
in the transposition. Of these, only four were realized,
while the others were cancelled as a result of protests by
NGOs, environmental groups and disaffected citizens.


3. The project proposes two canals, connecting the Sao
Francisco River Basin to various watersheds, one to the East
taking water to Pernambuco and Paraiba, and the other to the
North towards Ceara and Rio Grande de Norte.


4. From the environmental perspective, the primary question
is whether or not the Old Chico has the flow capacity to
support the NE states while maintaining its own downstream
tributaries and the populations who have been the
traditional recipients of the river's water supply. The
project will divert 26 cubic meters of water per second,
which the government posits will cause little damage to the
river. Critics claim that the project will dry out the
River's dwindling reserves. Other contentious factors
involve the risk to the flora and fauna of the riparian
ecosystem, the potential harm to energy generation at
downriver hydroelectric sites and, in the four states
receiving water, the question of who will actually receive
the diverted water. Current estimates portend that the new
water supplies will reach 45 percent of the population while
detractors assert that the majority will be used in
agricultural projects by the landed elite.


5. While the project was debated for many years, it was
finally approved, via environmental licensing by Ibama, in
February. Work is set to begin in May 2005. To this end,
the GOB has allotted USDOL 600 million for the project this
year in addition to preliminarily budget appropriations for
2006 and 2007, in order to cover the expected USDOL 4.5
billion price-tag.

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Satellites Monitor the Paraiba do Sul
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6. Brazil is continuing its trend of using high-tech
satellite systems to perform up to the minute environmental
monitoring. On March 29, INPE (the National Institute for
Space Research) launched the first of seven monitoring
platforms planned to monitor the River Paraiba do Sul. The
other six are expected to be operational by the end of this
year.


7. The sensors will monitor chemical and organic pollutants
in the river, oxygen content, flow, acidity, temperature,
salinity, and water levels in addition to indicating rain
volumes, the potential for flooding and extreme cases of
clandestine dumping. Until now, the river was tested and
monitored twice annually. The new system will allow for
updates every three hours, by routing information through
SCD satellites as well as the China-Brazil satellite CBERS.
The information will then be routed to INPE bases where it
will be analyzed and made available for the public via the
internet.

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New Water Tax
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8. In commemoration of world water week, Brazil has launched
a number of measures aimed at improving environmental
sanitation and improved water resource management. Starting
on March 21, 2005 the National Water Resource Council
(CNRH),an organ linked to the Ministry of Environment (MMA)
approved a resolution allowing for the collection of a tax
for the use of water. At present Brazil's water system is
governed by 100 committees who oversea regional hydrographic
basins. Each committee will be responsible for setting up a
system of tariffs whereby all sectors of society from
industrial to private will pay a tax for using water. The
revenues produced will be reinvested into infrastructure and
environmental sanitation as well as water treatment, solid
waste management, garbage and street cleaning.

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Nuclear Fuel
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9. On January 25, Brazil tested a new nuclear fuel, 16 NGF
(New Generation Fuel),in South Korea's Kori II reactor. It
was the first test of the 16 NGF, produced by a partnership
between Brazilian scientists, Westinghouse and South Korean
KNFC. According to media reports, the new fuel should
provide a 10 percent increase in production potential,
capable of supplying a 200,000 person city with energy.
Moreover, it should require significantly less raw material.
Authorities reportedly plan to begin using 16 NGF in
Brazil's Angra I reactor in 2007, following a retrofit of
the reactor's generators.

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Animal Trafficking
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10. A shipment of exotic indigenous artifacts, feathers from
endangered birds and a variety of teeth from Brazilian
animals was captured in Campo Grande on February 2nd. The
value of the shipment was estimated at USDOL 600,000 and was
destined for the United States where it was meant to be
sold, via a criminal consortium, to collectors, millionaires
and museums interested in Brazilian art. The shipment
originated in the Amazon and came by river, jumping along a
route of indigenous villages. It was the largest ever
shipment apprehended by Brazilian authorities.

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The Atlantic Rainforest
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11. At one time, the Atlantic Rain Forest ran along the
entire Brazilian coast, spanning 17 states and covering more
than 1.3 million km2. At present, only 7 percent of the
forest still remains, concentrated more in the Southern
Regions of the country, highly fragmented, highly fragile
and very endangered. Often overshadowed by the immenseness
and mystery associated with the Amazon Rain Forest, the Mata
Atlantica, some say, is even richer in biodiversity.
Accordingly, the Ministry of Environment announced on March
18, the transfer of resources for the creation of federal,
state, municipal and private conservation units, the
implantation of ecological corridors, reforestation research
and the promotion of ecotourism in Sao Paulo's Ribeira
Valley. The actual funding and resources will be allocated
through the Ministry of Mines and Energy and the German
Cooperation Bank (KfW),but will be administered by NGOs.
These organizations can form partnerships with governments,
research and institutional centers.

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Biodiesel/Renewable Energy
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12. In January the GOB adopted a national biodiesel
initiative. The measure calls for a voluntary 2 percent
biodiesel mixture through 2007. Starting in 2008 a two
percent mixture will be mandatory until 2013 when a five
percent mixture will become mandatory. In response to this
measure, Brazil opened its first biodiesel factory in the
Cassia, Minas Gerais on March 24. The factory, Soyminas,
will have the capacity to produce 12 million liters of
biodiesel per year. In addition to decreasing Brazil's
dependence on foreign oil sources, biodiesel is an
environmentally friendly alternative to conventional diesel
and, according to the MCT, will decrease carbon monoxide
emissions by up to 40 percent.

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The Green Package
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13. Over the past year the GOB has instituted a variety of
measures to combat the surge of deforestation in the Amazon
Basin. The most recent of these measures was introduced to
Congress in March 2005 by order of a Presidential decree.
Expectations are that the bill will be voted on by mid-year.
The most important aspect of the legislation, would allow
the government to grant concessions in public forests,
primarily in the Amazon region. Of the 75 percent of land
considered public domain in the Amazon, about 45 percent
remains unprotected. The government hopes that concession
based management will discourage slash-and-burn activities
and other destructive logging practices.

14. According to the bill, a region of public land would be
divided into thirty small, medium and large concessions
blocks. The government would then, based on land surveys,
determine the most suitable form of sustainable forest
management for the area. In the case of managed forestry, a
concession grantee would be allowed to take five to six
trees per hectare over a year followed by a thirty year
moratorium on activities in the area. Other endeavors would
include rubber tapping, fruit collection and wood-oil
extraction. Further discouraging consolidation and land
grabbing, no private-sector entity would be allowed to work
more than one concession in a single region. When awarding
the concessions, the government would take into account the
environmental as well as the social impacts of the plans
vying for the grants.


15. Among the proponents of the plan are the logging
companies, many of whom have been forced to suspend their
operations over the last few years as questions of the
validity of land titles arose. The plan will allow managed
logging companies a chance to get back into business. Among
others, the bill also has the support of the PFCA (Group of
Certified Amazon Forest Producers),an association of nine
companies who practice managed forestry in accordance with
international standards set by the FSC (Forest Stewardship
Council). According to the president of the PFCA a
concessions based system of management would also make
logging more financially attractive because leasing land is
cheaper than buying it. Revenues garnered through the
leasing of lands would further support governmental
conservation activities. The additional funds would
actually be used to monitor and verify the systems of
concessions.


16. The bill also has its detractors. Many are asking how
this bill would be different from previous protective
legislation. While the bill is good in theory it is
extremely difficult to execute. According to Paulo Adario,
Greenpeace Brazil's coordinator, "the government has a
horrible track record of providing such safeguards,
especially in the Amazon. The Ministry of Environment (MMA)
Forest Coordinator, Tasso Azevedo, however, countered that
enforcement would involve state as well as the Brazil's
Environmental Enforcement Agency authorities and have access
to greater financial resources as a result of concessions
royalties.


17. Still others find fault with the bill for its potential
effect on national sovereignty; always a sensitive issue
with respect to the Amazon. Some believe that giving equal
opportunity to international firms will favor the expansion
of, for example, Asiatic logging companies into Brazil's
Amazon territory. The counterargument is that even if
international firms manage an area, they will not own it.
Primary ownership will always remain with the GOB.

DANILOVICH