Ricardo Hausmann
CAMBRIDGE – The Amazon rainforest, one of the world’s most vital natural resources, plays a crucial role in maintaining climate stability and safeguarding biodiversity. As global warming and deforestation push the Amazon toward a catastrophic tipping point, the question on everyone’s mind is how to preserve it.
The emerging consensus seems to be that the best way to protect the Amazon is to cultivate a “bioeconomy.” Over the past few years, this idea has been endorsed by conservationists and various stakeholders, including Brazil’s government, private philanthropies like the Moore Foundation, bilateral donors such as the United States Agency for International Development, multilateral lenders like the Inter-American Development Bank, and prominent organizations such as the World Economic Forum and the World Resources Institute.
The bioeconomy framework aims to foster the sustainable use of forest resources and promote the welfare of local communities. This includes, for example, harvesting non-timber forest products like Brazil nuts, açai berries, and rubber, as well as producing and marketing creams and perfumes under the Amazon 4.0 label. The hope is that further research will discover more valuable applications, enabling conservationists to counter destructive practices that contribute to deforestation, such as cattle ranching.
Although well-intentioned, this approach is likely to backfire. The bioeconomy’s potential has been overstated, and its actual impact is often misunderstood. First, despite being fashionable, açai berries and Brazil nuts represent niche markets valued at about $1 billion, or roughly 0.05% of Brazil’s GDP. Such a small market cannot sustain the Brazilian Amazon’s 30 million inhabitants.
Second, even if the market for sustainable Amazon-sourced goods were to expand, local farmers would struggle to compete with farms that mass-produce their crops through less environmentally friendly methods. Moreover, if there were a significant increase in demand for açai, specialized monoculture farms would likely emerge to meet it, which in turn would accelerate deforestation and lead to significant biodiversity loss.
Third, developing the Amazon’s bioeconomy will require infrastructure, skills, roads, housing, social services, property rights, and financial resources that are lacking in much of the region. Introducing them could increase the land’s value, thus incentivizing deforestation. Recent research by the World Bank’s Marek Hanusch finds a striking correlation between deforestation and exogenous shocks, such as exchange-rate and commodity-price fluctuations, that affect the profitability of agricultural activities. By contrast, productivity gains in non-commodity sectors tend to make land-clearing less attractive, thereby reducing deforestation.
Similarly, a 2023 study of the Colombian Amazon by Harvard’s Growth Lab highlights the connection between deforestation and road infrastructure, showing that more than 80% of deforestation occurs within 7.2 kilometers (4.5 miles) of tertiary roads. The construction of such roads frequently falls under the purview of local mayors, who often build them to improve their chances of reelection.
The Harvard study also underscores the vital importance of property rights, showing that deforestation is significantly less likely in national parks and indigenous reserves than in areas governed by the property-rights regime for so-called “national wastelands.” By providing a route to private ownership of occupied lands, this regime increases the profitability of land-grabbing and deforestation.
A better way to protect the Amazon would be to boost the productivity of the region’s urban centers and surrounding non-forested areas. Given that most people prefer the comforts of urban living to the hardships of forest life, this strategy moves individuals seeking stable and quality jobs from forested regions to the cities.
This is evident in Brazil and Colombia. Brazil’s rural population has declined by more than 15 million since the early 1970s, whereas Colombia’s has fallen by over 800,000 people since 2000. As the rural population declines, the amount of arable land per person increases. When combined with increased productivity per hectare, this demographic shift should be enough to improve the well-being of those living off the land without disturbing the forest. And yet, deforestation rates remain high, suggesting that deforestation is not driven by population pressure.
Moreover, urbanization and development are closely linked. By facilitating specialization and knowledge-sharing, cities make it easier for people with different skills to collaborate, thereby boosting productivity. For governments, it is easier to provide infrastructure, public services, and security to densely populated urban areas than to dispersed rural communities. Agricultural value chains have also largely moved to cities, where the majority of tool and agrochemical production, logistics, support services, agro-processing, and distribution now occur.
But when urban amenities are inadequate, as is the case in numerous towns and cities across the Amazon, more people are willing to relinquish the comforts of urban life. In Colombia, for example, rural residents often shy away from cities and prefer land near local processing facilities and support services.
By contrast, in regions with high deforestation rates like Colombia’s Guaviare and Caquetá, most of the population already live in urban areas. Yet, these cities need primary and secondary roads that connect them to the rest of the country. They also need expanded public housing and urban development programs, as well as strategies to boost their competitiveness. In more successful Amazonian cities, such as Manaus (Brazil) or Iquitos (Peru), the urban population has access to more attractive employment opportunities than farming. Consequently, deforestation rates in these regions are extremely low.
Complex urban production is crucial to reducing poverty. In the Amazon, it would come with the added benefit of protecting the rainforest. Developing a bioeconomy, on the other hand, would attract resources and people into the rainforest instead of driving them away. While the bioeconomy model is unlikely to create livelihoods, owing to the limited scope of local endeavors and fierce external competition, scaling it up might inadvertently make deforestation more profitable.
Ricardo Hausmann, a former minister of planning of Venezuela and former chief economist at the Inter-American Development Bank, is a professor at Harvard Kennedy School and Director of the Harvard Growth Lab. This article was distributed by Project Syndicate.
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