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Date: Sun, 2 Aug 2009 19:00:57 -0400
From: moderator@PORTSIDE.ORG
To: PORTSIDE@LISTS.PORTSIDE.ORG
Subject: Alcoa Razes Rain Forest

Alcoa Razes Rain Forest in Court Case Led by Brazil
Prosecutors
By Michael Smith and Adriana Brasileiro
Bloomberg
July 31, 2009
http://www.bloomberg.com/apps/news?pid=20601170&sid=aEmubrLsu.ro

July 31 (Bloomberg) -- For four decades, Edimar Bentes
and his family have survived by farming tiny clearings
in the jungle near their dirt-floor shack in the state
of Para in the Brazilian Amazon.

On this April afternoon, Bentes, 56, squats in the
driving rain and dips a glass into what just four years
ago was a crystal-clear stream that provided drinking
and bathing water. He frowns as the glass fills with
brown silt. A thin man with short-cropped dark hair and
a tanned, deeply wrinkled forehead, Bentes gazes around
his land.

There are no signs of the deer, armadillos and pacas he
used to hunt to feed his wife and 10 children.

For Bentes and thousands of others in the Juruti region
of Para whose livelihood depends on wildlife and plants,
everything changed in 2006. That's when New York-based
Alcoa Inc., the world's second-largest primary aluminum
producer, started to bulldoze a 56-kilometer (35-mile)
swath of the rain forest across hundreds of families'
properties to build a railway.

This cleared corridor, 100 meters (109 yards) wide, will
lead to a mine that will chew up 10,500 hectares (25,900
acres) of virgin jungle over three decades.

More than half of the mine will lie inside a forest that
by Brazilian federal law is supposed to be preserved
unharmed forever for local residents. By year's end,
Alcoa says, the railway will transport 7,000 tons a day
of bauxite, the dark red ore that's used to make
aluminum, from the mine to a port on the Amazon River.

`Want to Cry'

"It makes you want to cry when you see this stream,"
says Bentes, his bare feet sinking into the mud. He
views a wasteland of uprooted trees and brown rivulets
seeping into the water. "It reminds me of everything bad
that Alcoa did to our land."

A growing array of evidence in court documents puts
Alcoa among the multinational corporations that
prosecutors accuse of destroying or causing destruction
of the world's largest rain forest.

Brazilian federal and Para state prosecutors sued
Alcoa's Brazilian mining subsidiary in 2005 in an effort
to block the Juruti mine, saying the company had
circumvented the law by not applying for a federal
permit and instead seeking a license from the state of
Para.

After four years of legal haggling, the suit is still
pending. Alcoa, which denies any wrongdoing, has already
completed construction of the railway, port and
processing plants. It's now ready to start mining.

"The state agency has no power to give anyone full
rights to exploit land, especially in the case of a
reserve," state prosecutor Raimundo Moraes says. "Alcoa
invaded the area, undeterred. Alcoa has no shame."

`All Necessary Licenses'

In written responses to questions from Bloomberg News,
Alcoa says it "has all necessary government licenses to
implement the Juruti mining project."

The Amazon, which spans nine countries and is roughly
the size of Australia, has for centuries been the lungs
of the Earth, its plants and trees absorbing pollution
from the air. But that strength is fading. The world's
largest inhaler of carbon dioxide is shrinking -- thus
aggravating, instead of slowing, global warming.

Every week, federal prosecutors say, people acting
outside the law use bulldozers, chain saws or fire to
wipe out parts of the jungle to make way for crops,
cattle and mines.

The fires men set to clear land for ranches and farms
create 6 percent of the carbon dioxide spewed into the
air worldwide, according to the Cambridge,
Massachusetts-based Union of Concerned Scientists. That
equates to half of all the emissions from cars, trucks,
planes, trains and ships in the world.

`Amazon is the Key'

Brazil has become the planet's fourth-biggest polluter.

The fires that rage across the Amazon could help
increase Earth's average surface temperature by as much
as 11.5 degrees this century, says the Intergovernmental
Panel on Climate Change, a group of scientists from 194
countries.

Global warming threatens to melt glaciers, raise sea
levels and lead to drinking water shortages, the United
Nations-sanctioned panel says.

"We are not going to reduce global warming if we don't
do something about deforestation in the Amazon," says
Doug Boucher, director of the Tropical Forest and
Climate Initiative at Concerned Scientists. "It's that
simple, and very alarming. The Amazon is a big part --
if not the key part -- of a solution to deal with global
warming."

Wal-Mart, McDonald's

To date, companies and individuals have destroyed more
than 857,000 square kilometers (331,000 square miles) of
the Amazon, an area almost the size of France and
England combined, according to the UN Environment
Programme. Cattle ranchers have caused 80 percent of the
illegal deforestation, according to Brazil's environment
ministry.

They sell steers to Brazil's three biggest beef
producers. One of them, Sao Paulo-based JBS SA, is the
world's largest; the others are Santo Andre-based
Marfrig Alimentos SA and Bertin SA of Lins.

Wal-Mart Stores Inc., the world's biggest retailer;
French supermarket chain Carrefour SA; and McDonald's
Corp. have purchased beef from those companies,
according to Brazilian internal revenue service sales
and export records.

Ford Motor Co., General Motors Co. and Daimler AG's
Mercedes-Benz have bought leather for car and truck
seats from Auburn Hills, Michigan-based Eagle Ottawa
LLC, a leather company supplied with materials from
illegally deforested ranches, the records show.

These multinationals say they're working to avoid buying
products originating in deforested land.

Cargill's Port

Alcoa is the latest company in a decade-long legacy of
global corporations that have thwarted Brazil's
environmental regulations, federal prosecutors say.

Minneapolis-based Cargill Inc., the largest privately
held company in the U.S., spent $20 million to build a
grain port on the Amazon River in 2003 that led to
farmers illegally destroying thousands of hectares of
rain forest to grow soybeans, says Felicio Pontes, a
federal prosecutor who sued to block the project.

In early February, soybeans were piled high in a storage
area at Cargill's Amazon port, waiting to be loaded onto
a ship bound for Europe. The company ships about 60,000
tons of soybeans a year grown near the town of Santarem.
Before Cargill built the port, there was no large-scale
soybean production in the area.

`Completely Obvious'

Cargill hired The Nature Conservancy, an Arlington,
Virginia-based nonprofit group, to confirm that soybean
farmers aren't clearing the Amazon around Santarem. The
group says it has certified this year that 155 of 383
farms weren't deforesting.

"It's completely obvious that Cargill's port gave an
incentive that led to deforestation," Pontes says.

Both Alcoa and Cargill, prosecutors say, have persuaded
local officials to sign off on their plans, flouting
federal law. Brazil's constitution says minerals are
national resources that should be overseen by tougher
federal agencies, says Daniel Azeredo, a federal
prosecutor in the Amazon port of Belem, who specializes
in environmental lawsuits.

"The problem is that in Brazil we have weak institutions
and laws, and companies take advantage of that," he
says. "We have laws, but they are impossible to enforce,
which gives companies complete impunity to do whatever
they want to profit."

Alcoa says it has abided by the law.

`Any and All'

"In Brazil, public attorneys tend to challenge in court
any and all major industrial and infrastructure
projects," Alcoa wrote in responses to questions from
Bloomberg News. Alcoa says it doesn't need federal
approval for its mine in Juruti.

Cargill also says it has done the right thing in Brazil.
The company won proper state approval to build its river
transport center, says Afonso Champi Jr., Cargill's
external affairs director in Brazil. He says the company
strives to guarantee the soybeans it buys don't come
from deforested land.

Alcoa, which mines and produces aluminum in 31
countries, champions itself as a responsible steward of
global resources.

"Operating in a manner that protects and promotes the
health and well-being of the environment is a core value
to Alcoa," the company says on its Web site.

Cargill, whose products worldwide include animal feed,
salt, steel and financial services, says, "Being
socially responsible as a corporation means that we care
about the environment."

EPA Settlement

Alcoa has clashed with regulators and environmentalists
in other countries. The University of Massachusetts's
Political Economy Research Institute ranks Alcoa as the
15th-most-toxic company in the U.S.

In 2003, Alcoa agreed with the U.S. Environmental
Protection Agency and the Justice Department to pay
about $330 million to clean up air pollution at a power
plant within an aluminum factory in Rockdale, Texas -- a
plant it has since shut down.

Alcoa has received mixed notices in Australia. In 1990,
the UN Environment Programme gave the company an award
for replanting forests it had destroyed to build a
bauxite mine there. Alcoa, which generates electricity
to process aluminum, obtained the lowest score in a 2008
review of utilities by the World Wildlife Fund.

The WWF said Alcoa had failed to adopt targets to cut
greenhouse gas emissions by its coal-fired power plant
in Victoria state.

Slashed Emissions

Alcoa says it gets rapped by environmentalists because
its electrical power plants emit carbon. The company
says it should get credit for all of the pollution it's
preventing by supplying the lightweight aluminum that
makes cars and trucks more energy-efficient. Alcoa says
it has slashed its greenhouse gas emissions by 36
percent since 1990.

In Brazil, Alcoa is doing business in a political
climate that regulators say is favorable to polluters.
Luciano Evaristo, a director at Ibama, the federal
environmental agency, says forces in the government --
starting at the very top -- promote and finance
industries that feed on illegal destruction of the rain
forest.

President Luiz Inacio Lula da Silva calls himself an
environmentalist. In 2003, he introduced a plan to
protect the Amazon, creating task forces to raid areas
being deforested.

Copenhagen Conference

In December, Lula will join leaders from almost 200
other countries in Copenhagen at a UN-sponsored
conference to discuss a successor to the 1997 Kyoto
Protocol, the first major international pact on global
warming.

"At Copenhagen, we will have to reach a global agreement
that will be both just and ambitious if we want to
bequeath a viable planet to future generations," Lula
said in a July 7 speech. Lula set a goal of reducing
deforestation by 80 percent by 2020.

At the same time, Lula has authorized the building of
new roads and power plants in the Amazon and has
increased funding for ranches and factories in
deforested areas. In June, he congratulated people for
tearing down trees to create farms spurring economic
growth.

"No one can say that someone is a criminal because he
deforested," Lula told a crowd of cheering ranchers in
the Amazon city of Alta Floresta as he announced plans
to legalize almost 300,000 ranches and farms built on
illegally cleared land that once was rain forest.

`Schizophrenic Government'

"It's a completely schizophrenic government," says Paulo
Adario, who directs the Amazon campaign for nonprofit
environmental group Greenpeace. "On one hand, they are
combating deforestation. On the other, they are
financing it."

Foreigners have been cutting down Latin America's rain
forests since the 1600s, when Spanish and Portuguese
conquerors cleared jungles from Mexico to Brazil to
build ships, farms and cities. In the 1960s and 1970s,
Texaco Inc. drilled dozens of oil wells in Ecuador's
Amazon, destroying rain forest and polluting the region
with poisonous wastes.

Alcoa, which produced the first commercially available
aluminum in 1888, has 63,000 employees around the world.
The company produces enough sheeting to make 100 billion
cans of beer and soda a year.

America's largest aluminum producer sells ingots,
sheets, wheels, fasteners and building materials to
customers in the aerospace, packaging and automotive
industries.

Stock Recovery

The company reported $26.9 billion in revenue last year.
Its share price, which peaked at $47.35 in July 2007,
slid as low as $5.22 on March 6 during the global
economic meltdown. The stock value has since increased
to $11.46, as of July 30, up 1.8 percent in the year-to-
date.

Brazil has the world's third-largest reserves of
bauxite. In 1979, a group led by Rio de Janeiro-based
Vale SA built a bauxite mine in Porto Trombetas, 60
kilometers from Juruti. In 1994, Alcoa joined Vale in
the venture, whose other members today include
Melbourne-based BHP Billiton Ltd. and Rio Tinto Plc of
London.

The scarred land and fouled water around Porto Trombetas
bears witness to the impact of the mine. Nearby, a lake
called Lago Batata still turns bright red from bauxite
wastes workers dumped for a decade.

The venture says it stopped polluting the lake in 1989
and now uses sealed holding ponds to contain overflow.
The consortium replanted trees on the banks of the lake,
but they're low to the ground and brittle. Ademar
Cavalcanti, the mine's environmental director, says the
cleanup will go on indefinitely.

Revived Project

Alcoa inherited its Juruti mining rights from Reynolds
Inc., which it bought in 2000. Alcoa revived the project
in 2003, as global economic growth increased demand.

Simao Jatene, the governor of Para, supported the Alcoa
project. BNDES, Brazil's national development bank,
provided the company with 1.9 billion reais ($1 billion)
of financing for construction.

In January 2005, Alcoa requested state permits to build
the $1.7 billion mine. Gabriel Guerreiro, who was then
Para's environment secretary, says the company submitted
an impact study done by an independent firm, Sao Paulo-
based CNEC Engenharia SA.

Guerreiro says his agency analyzed Alcoa's proposal and
concluded the mine would be modern and efficient.
Guerreiro says Para's mineral riches must be explored
for the good of the state's 7.1 million residents, 50
percent of whom live in poverty.

`Rich Civilization'

"Nobody is going to build a rich civilization without
using the natural resources of the tropics," he says.

Guerreiro gave Alcoa a preliminary license in June 2005
and asked for 35 improvements to the impact study. After
Alcoa made adjustments, he recommended the project be
accepted by the state environmental council, called
Coema, which approved it in August 2005.

A month later, federal and state prosecutors sued Omnia
Minerios Ltda., the Santarem-based Alcoa subsidiary
running the mine; Para's state government; and Ibama,
the federal regulator. The government's civil suit,
filed in federal court in Santarem, says Omnia Minerios
was required to seek and obtain a federal environmental
permit.

Prosecutors say Ibama failed by not taking control of
the licensing process. In court filings, Alcoa and the
two regulators each say they followed proper procedures.

Court to Court

The case against Alcoa has languished for four years as
the participants argue over which level of the Brazilian
judicial system -- federal or state -- should have
jurisdiction.

Franklin Feder, Alcoa's Sao Paulo-based president for
Latin America and the Caribbean, says Ibama advised
Alcoa to get state approval for the mine.

Marcus Luiz Barroso Barros, Ibama's president from 2003
to 2007, says no one told him about such a decision. He
says he didn't know about Alcoa's project until after
the company had applied for licensing with Para. At that
point, he decided it would be too complicated for Ibama
to get involved -- a position he now regrets.

"Now that I know more about Alcoa's mine, looking at the
significant impact it's having in the area, I'd say it's
a major project that should have been handled by the
federal agency," says Barros, 61, a physician who's now
in private practice in the Amazon city of Manaus.

Licensing Guidelines

A government advisory panel called Conama lays out
guidelines for when Ibama should get involved in
reviewing a project.

"Ibama shall be responsible for the environmental
licensing for projects and activities with a significant
environmental impact of a national or regional scope,"
Conama Resolution 237 says.

State regulators aren't as reliable as the federal
government, Barros says.

"The main problem with licensing by state agencies is
that they are often too close to projects and fall
victim more easily to political and economic pressures
than Ibama," he says. "They may be more easily
manipulated."

The state licensing of the Juruti mine was riddled with
irregularities, the prosecutors' suit says. Alcoa's
consultants limited their environmental research to two
separate one-month periods during the dry season, in a
jungle with some of the highest rainfall levels in the
world, prosecutors say.

`Comprehensive'

The researchers didn't analyze how the mine, which will
consume 505 cubic meters (133,407 gallons) of water per
hour from an Amazon River inlet, will affect fishing.
They also didn't study how heavy ship traffic would
affect fish populations near the port, prosecutors say.

"All environmental studies, conducted by qualified
specialists, were comprehensive, as demonstrated by the
fact that all necessary licenses were duly granted,"
Alcoa said in its responses to questions from Bloomberg
News.

Fatima de Sousa Paiva, a nun and community organizer
who's spent almost a decade near the Juruti mine area,
says Alcoa approached the rain forest community like
Portuguese explorers who grabbed Brazil in the 16th
century.

"Alcoa offered gifts like plastic sandals, thermoses and
bicycles," says Paiva, 48, who teaches at a local
elementary school. "To them, we were just some ignorant
Indians in the way of their plans to make billions."

In its written response, Alcoa said, "This is a
groundless allegation."

`Provide for the People'

In granting Alcoa permission to mine in the Juruti
preserve, Para officials clashed with Incra, the federal
government's land reform institute. By law, the reserve
can be used only by residents to hunt, fish and gather
nuts to sustain their families.

"The reserve allows a way to make sure the land is able
to provide for the people," the law says. All decisions
about land use must be made by residents of the
community, according to the law.

"Maybe the state wanted to play Alcoa's game by
approving an environmental licensing process that was
full of holes, but we didn't," says Luciano Brunet, who
runs Incra's office in Santarem.

Brunet says Alcoa told residents that they didn't have a
right to stop the mine because they didn't have title to
the land.

Public Land

Most of the ground in the Amazon is owned by the
government, according to Imazon, a Belem-based nonprofit
group. Incra gave descendants of Mundurucu and
Muirapinima Indians the right to use the land in 1981
without granting titles to the families. Incra certified
the land as a federal reserve in November 2005.

Brazil's laws regarding property deeds in the Amazon
have always been lax, Brunet says, because until
recently no one has challenged them.

"Those people don't own the land," says Alcoa's Tiniti
Matsumoto Jr., who has run the mine since 2005 and has
worked at Alcoa for 40 years. "That land issue is
Incra's problem, not Alcoa's."

Alcoa doesn't own the property either, prosecutor Moraes
says.

"Alcoa simply assumed it was authorized to mine an area
that is protected, where people live off the land,"
Moraes says.

Soon after Alcoa received approval from the state to
build the mine, Bricio Lima, the company's community
affairs director, went from house to house, asking
families to cede part of their land. In the end, Alcoa
secured the right of way through land where 81 families
live.

No Choice

Bentes, the farmer whose stream is now filled with brown
silt, says Lima told his family and their neighbors that
residents had no choice but to cooperate because Alcoa
had approval from the state.

Lima said Alcoa offered the family 23,000 reais, which
equals about 17 months of the median income in Brazil,
to use 2.5 hectares of their land, Bentes says. He says
he agreed to the deal because he had no choice.

"He told us the railroad would go through our land
whether we accepted the offer or not," Bentes says, as
he prepares to roast half a deer he hunted for two days
with a friend.

Alcoa wanted to pay them something, even though it
wasn't required by law, Lima says.

"There was nothing forcing us to pay any compensation,"
says Lima, who confirms Bentes's account of their
discussions.

`The Right Thing'

Brunet says his agency plans to grant land titles to
local residents, allowing them to request royalty
payments from Alcoa's mine production.

Matsumoto, 59, a Brazilian of Japanese descent, says the
company is willing to pay people who live in the reserve
part of its royalty payments to the government -- 1.5
percent of the mine's revenue -- if that's what
officials want.

"We want to be here for at least 70 years, so of course
we want to do the right thing," he says.

Alcoa is paying Conservation International, an
Arlington- based nonprofit group, $100,000 a year to
create a trust fund to finance the preservation of 10
million hectares of parks and preserves around Juruti.

Since 2005, the company has spent 10 million reais to
improve roads and build schools, water treatment units,
a health-care center and a government building in
Juruti, Alcoa says.

Replanting Trees

In 2008, the company commissioned a poll of 600 people
in the region, finding that 61 percent said the mine
project had improved their lives. Two-thirds of those
questioned didn't live close to the mine, Alcoa says.

Matsumoto says Alcoa will replant every tree it
destroys. It will send forestry engineers and biologists
ahead of the excavators to catalog plants and animals in
all of the jungle Alcoa cuts down.

"When we start planting trees at the mine, we want to
make it richer than the original forest," Matsumoto
says.

Patricia Elias, a forestry expert for the Union of
Concerned Scientists, says Matsumoto's goal is
impossible to achieve.

"It would take centuries for trees to grow to their
original density and height -- and it would never be
better than virgin forest," she says. "It's of greater
value in combating climate change to avoid deforestation
in the first place."

`Just Doesn't Work'

Andre Clewell, a botanist in Ellenton, Florida, who is a
consultant on restoration of mines, says it's difficult
to quickly restore tropical trees.

"You can try to grow 200-year-old trees in 50 years, but
it just doesn't work," Clewell, 75, says. "And some of
it never comes back."

About 160 kilometers from the Juruti mine, green fields
of soybeans stretch to the horizon near Santarem,
flanked by narrow stands of the rain forest that once
covered all of the area. Scorched trees lie on the
ground at the far end of Edno Cortezia's farm, where
workers set fire to the forest to make way for crops.

Cortezia says he's growing soybeans where the jungle
once stood because Cargill built a port 30 kilometers
away at the confluence of the Amazon and Tapajos rivers.

"We came here because of the port," Cortezia says.
Cargill's Champi says the company will remove Cortezia
as a supplier if it can confirm the deforestation.

Pot-Holed Highways

Before Cargill built its port, there were no soybean
farms near Santarem, says Marcus Bistene, chief of
enforcement at Ibama's Santarem office. Pontes, the
federal prosecutor, says Cargill bypassed federal
environmental law to build a port without properly
studying how it would affect the Amazon.

In the mid-1990s, Cargill, the world's largest
agricultural company by revenue, was looking for an
alternative to trucking grains down pot-holed highways
from the fields of Mato Grosso state in western Brazil
to the ports of Santos and Paranagua, 2,000 kilometers
south.

They set their sights on a highway through the heart of
the soybean belt from the Amazon to Santarem, Champi
says. At the time, Cortezia farmed land in the state of
Mato Grosso, near the southern border of the Amazon. He
says Cargill officials came to town, urging farmers to
move to Santarem, where it would be less expensive to
grow soybeans.

This season, he's harvesting soybeans on his farm near
Santarem that he plans to sell to Cargill.

EPA Brushes

Cargill has 160,000 employees in 67 countries and
reported $120 billion in revenue in 2008. Founded in
1855 by William Cargill, it's still primarily family
owned. It has been in Brazil since 1965, when it started
producing and selling hybrid corn seeds. Within two
decades, Cargill grew into Brazil's top trader and
exporter of soybeans and oilseed.

Like Alcoa, Cargill has had brushes with environmental
regulators.

In the U.S., the EPA has cited the company for polluting
rivers and killing fish populations. In 2005, Cargill
signed an agreement with the EPA and the Justice
Department settling charges that the company had
underestimated air pollution at corn and soybean
processing plants in 13 states.

Cargill agreed to spend $130 million to reduce pollution
at 27 plants, pay a fine of $1.6 million and finance
$3.5 million in environmental programs.

`Long History'

Cargill standards for protecting the environment are
stricter than the EPA's in some cases, spokeswoman Lori
Johnson says.

"Cargill has a long history of voluntarily reducing its
emissions and other environmental impacts," Johnson
says.

In 2000, Pontes filed suit in federal court to halt
construction of Cargill's port, arguing that the company
hadn't done a proper environmental study. Cargill
contested the suit, saying it had approval from Para's
environmental agency.

As the case was pending, Cargill finished the port in
2003. In March 2007, a Brazilian federal judge shut down
the port until the company did a comprehensive
environmental study. Cargill won a reversal of that
decision on appeal.

In 2006, Greenpeace reported it had traced soybeans from
the port to illegally deforested land. Since then,
Cargill has refused to buy soybeans grown on newly
deforested land, Champi says. Three days ago, Cargill
and other grain exporter in Brazil extended until July
2010 a commitment not to buy soybeans from farms that
were cleared from the Amazon since 2006.

74 Million Cows

Ranchers, more than anyone else, have illegally
flattened thousands of square kilometers of publicly
owned rain forest to create pastures for cattle, Pontes
says. More than 74 million cows graze in the Amazon
today, covering a combined area larger than Spain.

Ranchers are proud of what they have done to improve the
local economy. Ataides Gomes de Oliveira, a foreman on
the Itacaiunas ranch near Xinguara, walks among a
wasteland of scorched logs and splintered stumps. He
stops as cattle appear amid the ragged ferns and
saplings.

"There are 6,000 cows here, where there used to be
unproductive jungle," he says. Sao Paulo-based
Agropecuaria Santa Barbara Xinguara SA, which owns
Itacaiunas, says it's not responsible for managing the
ranch and has never illegally cleared jungle.

McDonald's gets some of the beef for its Big Macs from a
meatpacker supplied by ranches cleared from the Amazon,
cattle sales permits show.

Deforesting Fines

McDonald's supplier of hamburger patties in Brazil,
Braslo Produtos de Carne Ltda. in Sao Paulo, has bought
beef from its parent, Marfrig Alimentos. Four ranchers
that supply Marfrig have been fined a total of 13.5
million reais for illegally clearing the rain forest,
public records show.

Marfrig has never bought "regularly" from ranches that
don't follow Brazil's environmental law, says Ricardo
Florence, director of planning and investor relations.
The company demands its suppliers follow all laws. It
won't buy from suppliers that Ibama has placed on a list
of "embargoed" ranches cited for illegal deforestation,
Florence says.

The ranchers who were fined aren't on that list, so
Marfrig has no way of knowing their background on
deforestation, he says.

"The Marfrig Group does not buy from suppliers that
contribute to deforestation of the Amazon," Florence
says.

McDonald's Policy

Oak Brook, Illinois-based McDonald's, which has had a
policy of not buying beef from deforested land since
1989, says it relies on its suppliers to follow the law.

"Every McDonald's beef supplier has signed and affirmed
its compliance with this policy," says Bob Langert,
McDonald's vice president of corporate social
responsibility. "They are aware that McDonald's will
immediately cease accepting raw materials from any
facility that is found to source cattle for McDonald's
from within the Amazon."

Marfrig complies with McDonald's policy, Florence says.

JBS, the world's biggest meat company, has purchased
cattle from fined ranchers. JBS owns Swift & Co. and
part of Smithfield Foods Inc. in the U.S. and has nine
plants in the Amazon. Kraft Foods Inc.'s division in
Italy and a unit of H.J. Heinz Co. have bought beef from
JBS, according to sales and export records.

The number of slaughterhouses in the Amazon has tripled
to 87 since 2004, as international meat exporters
expanded into the rain forest, prosecutors say.

`It's the Meatpackers'

"If you want to know who is financing the deforestation,
it's the meatpackers," Ibama director Evaristo says.

Angela Garcia, director of environmental affairs at JBS,
says the company counts on government enforcement
records to ensure cattle come from land that wasn't
illegally deforested.

"We're not in enforcement," she says. "We don't have the
resources. I hope the ranches are complying with the
law, but I cannot say whether they are."

Evaristo says virtually all Amazon ranchers built
pastures on land that was illegally deforested.

"These are people who operate with 100 percent
illegality," he says. "They steal public land, destroy
the rain forest, plant grass and let the cows graze
until they're fat enough to sell."

In Sao Felix do Xingu, the municipality in the Amazon
with the most cattle, only one ranch out of hundreds has
a license. On June 1, Ibama and federal prosecutors
filed suit against 21 cattle ranches, accusing them of
illegally deforesting 150,000 hectares of rain forest.

Stopped Buying Beef

Prosecutors say that meatpacker Bertin sold beef from
cattle that had been raised on illegal ranches to 41 of
its customers --including Carrefour and Wal-Mart.
Prosecutors sent a letter to all Bertin customers
recommending they stop buying meat that comes from
deforested land.

By June 19, Carrefour, Wal-Mart and 33 other buyers had
told Azeredo that they had stopped buying from Bertin
and other meatpackers named in the lawsuit.

Bertin says it stopped buying from 14 ranches named in
the suit and signed an agreement with prosecutors to
develop tighter controls to ensure cattle suppliers
follow the law.

"We've suspended cattle purchases from deforested
ranches and will help ranchers stop deforesting the
Amazon and replant areas that have been devastated,"
Bertin spokeswoman Simone Soares says.

`A Matter of Cost'

Bentonville, Arkansas-based Wal-Mart says it wants to
buy only beef raised on ranches that follow the law. The
company had suspected that ranchers were destroying the
Amazon, says Daniela De Fiori, Wal-Mart's vice president
for sustainability in Brazil.

"The truth is, Brazil's retail sectors rely on these
companies," De Fiori says. "And it's a matter of cost."

On July 17, Wal-Mart launched a global initiative to
urge all of its suppliers to assess and label the
environmental impact of all their products, going back
to the source of raw materials.

Spokespeople for Carrefour, Heinz, Kraft and car
companies Ford, GM and Mercedes say they have policies
against buying products from deforested land and
requiring suppliers to assure them they follow the law.

Leather producer Eagle Ottawa, which is a unit of
Whitehall, Michigan-based Everett Smith Group Ltd., says
it's satisfied with Bertin's agreement with prosecutors
to stop buying from illegally deforested ranches.

Shrinking Amazon

In Juruti, where Alcoa has its bauxite mine, the jungle
is dotted with mahogany, Brazil nut trees and marble-
textured angelin-pedra trees. These hardwoods can grow
to almost 50 meters.

Under the thick canopy of that timber are giant ferns
and palms. This Amazonian vegetation, which has long
absorbed the world's carbon dioxide, is now shrinking at
a rate of 163 square kilometers a week, exacerbating the
global warming that threatens to wreak havoc worldwide.

Lima, Alcoa's community relations manager, a heavyset
man with thinning hair, drives a pickup truck on the
freshly cleared land for the mine. The rain forest gives
way to a 700- meter-wide muddy pit that steams in the
sun after a cloudburst.

Jungle topsoil and clay have been stripped away,
exposing bauxite 15 meters down. Dump trucks are lined
up, waiting for work to begin.

Lima points to the pit, saying that beginning in late
August, excavators will fill trucks with 90-ton hauls of
bauxite once mining starts. Bulldozers will move ahead,
clearing the rain forest to make way for heavy machinery
to advance in a mining trench 50 meters wide.

Train Sits Empty

In a clearing a few kilometers away, conveyor belts lead
to a tower where clay and other waste material will be
washed from the ore. Not far from the pit, a train sits
empty, ready to be loaded with bauxite.

Alcoa has already torn down 900 hectares of rain forest,
Lima says. Within 30 years, the mine will consume more
than 10 times that much jungle, according to the
company.

Bentes and his family show where Alcoa workers strip the
rain forest.

"We don't know many things, and we are very simple
people," Bentes says, adding that he does understand the
value of economic development in Brazil. "But they
should find a way to do that without destroying the rain
forest," he says. "That is not right."

Editor: Jonathan Neumann, Gail Roche

To contact the reporters on this story: Michael Smith in
Santiago at Mssmith@bloomberg.net or Adriana Brasileiro
in Rio de Janeiro at abrasileiro@bloomberg.net.

_____________________________________________

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