Profit before People and Planet
How economic policies and corporate profit maximisation perpetuate the unsustainable exploitation of the Brazilian Amazon and its people.
This report was prepared as part of a collaborative initiative between Christian Aid, the Financial Transparency Coalition and Latindadd, implemented as a component of ‘the Forest Custodians’ project.
Executive summary
To contribute to bringing about transformative change in the industrial mining industry, this report demonstrates how state tax policies and corporate short-term profit maximisation are two key underlying drivers of the unsustainable exploitation of the Brazilian Amazon and its peoples by industrial bauxite mining.
Specifically, this report contributes to a better understanding of the magnitude of the problems these factors create and who benefits from them. We analysed the aluminium value chain in Brazil’s Amazon, with a particular focus on the operations of the bauxite mining company Mineração Rio do Norte (MRN) as a case study.
MRN’s mining operations in Oriximiná have caused the deforestation of extensive areas of tropical forest and serious adverse human rights and environmental impacts on Quilombola and riverine communities. According to research conducted by Brazilian civil society organisations and researchers, MRN’s mining operations have polluted watercourses, hindering the access of these communities to quality water, generating diseases and impacting on fishing activity.
Existing research has also documented that deforestation induced by MRN’s mining operations has affected access to food and natural resources that support livelihoods for these marginalised communities, such as Brazil nut harvesting.
Communities in Oriximiná have also described how the loss of forests and biodiversity have contributed to a loss of local or indigenous knowledge, which makes it harder for people to survive on their land and makes them more reliant on mining companies.
Brazil’s tax policies grant large tax exemptions throughout the aluminium value chain in Brazil’s Amazon and large aluminium producers and mining companies have effectively maximised their economic benefits resulting from these policies through several actions.
Regarding bauxite mining companies, this report shows how, through just one corporate tax exemption, MRN benefited more than the approximate combined revenues raised by the municipality of Oriximiná through taxes, fees and charges taken over a ten-year time period.
At the same time, it is unclear how much the municipality of Oriximiná has benefited economically from mining, particularly because of the lack of transparency on key elements of the tax exemptions bauxite mining companies receive; certainly, the environmental and social toll is high. The benefits of this one tax exemption to MRN are then compounded by other significant tax exemptions, building a substantial cumulative benefit for MRN.
Tax exemptions to bauxite mining companies cut directly into the budgets of the state and municipalities tasked with providing public services and investing in sustainable development.
This foregone tax revenue is felt disproportionately by Quilombola, indigenous and riverine communities, who have been custodians of the forests for centuries and who would benefit most from improved public services and environmental regulations. By so doing, these tax exemptions reinforce existing dynamics of intersectional social exclusion and serious regional inequalities in Brazil.
At the same time, these tax exemptions directly increase the profits of bauxite mining companies, presumably incentivising their operations and thus perpetuating the unsustainable exploitation of Brazil’s Amazon by this sector.
Large aluminium producers and mining companies, particularly multinational enterprises, have effectively maximised their economic benefits resulting from Brazil’s tax policies, notably by concentrating ownership within the three levels of the aluminium value chain and by adopting a trade pattern characterized by a very high percentage of transactions between related parties.
Most of the sector is under the control of just a few international aluminium producers and mining companies.
As a result of the policy decision by the Brazilian government to grant tax exemptions to all levels of the aluminium value chain and the described practices by these companies, a few international aluminium producers and mining companies have benefited from massive cumulative tax exemptions across this value chain, including the exemptions received by MRN and the other two other bauxite mining companies operating in Brazil’s Amazon.
In effect, these tax policies transfer the wealth of the Brazilian Amazon’s global commons – unique tropical forests, water supplies, mineral resources and ancestral lands collectively managed – into the hands of a few large international mining companies and aluminium producers.
Ultimately, these policies and practices trap the region in an unsustainable extractive development model, which has serious impacts for both the peoples of the Amazon, particularly the indigenous, Quilombola and riverine communities, and the Amazon biome.
What this report also examines and focuses on
- short-term profit maximisation by these companies as a structural driver of the unsustainable exploitation of Brazil’s Amazon. We demonstrate that large aluminium producers and mining companies, particularly multinational enterprises, have significant influence in, and benefit in various ways from, the operations of bauxite mining companies operating in Brazil’s Amazon.
- Norsk Hydro, Alcoa, Rio Tinto and South32 as those multinational enterprises that, in addition to having a shareholding in one or more of these mining companies, source or have sourced significant amounts of bauxite from them. Based on these findings, these large international aluminium producers and mining companies have a responsibility for the operations of bauxite mining companies in Brazil’s Amazon and should take appropriate actions to prevent and mitigate adverse human rights and environmental impacts, according to well-recognised international standards on business and human rights.
Yet, our research demonstrates that these international companies have largely failed to take appropriate actions to prevent and mitigate adverse human rights and environmental impacts related to MRN’s operations, with only Norsk Hydro reporting that it had taken partial action to address some of these concerns, neglecting to use their significant influence in MRN’s operations to effectively prevent and mitigate its adverse human rights and environmental impacts.
In fact, these companies have sourced, and continue sourcing, large amounts of bauxite from MRN that, not least because significant tax exemptions, increase their profits over the short-term, while also receiving other economic benefits from MRN’s operations. This behaviour puts short-term profit maximisation before the people and environment of the Brazilian Amazon.
This report concludes by making recommendations to relevant actors in this field.
Ultimately, Brazil’s tax policies and corporate short-term profit maximisation are two key structural factors that must be changed to protect the biodiversity of Brazil’s Amazon and the communities that have protected it for centuries.
Brazil holds 60% of the Amazon rainforest, yet the disparate forest communities who have a critical role in forest preservation are at risk. Our two-year project aims to address this issue, and bring together those communities.