SAO PAULO/BRASILIA (Reuters) – A judge on Brazil’s top court on Thursday overruled a law by the country’s largest soy producer that would end tax breaks for companies following an agreement not to allow soy from deforested areas of the Amazon buy (NASDAQ: ) Rainforest.
Judge Flavio Dino suspended the entry into force of the law from the western state of Mato Grosso on January 1 until the court makes a final decision.
WHY IT’S IMPORTANT
Brazil is the world’s largest soy producer and exporter, and Mato Grosso is the highest producing state.
Praised by scientists and conservationists, the “Amazon Soy Moratorium” was voluntarily signed by global commodities giants in the mid-2000s and committed to stopping purchasing soy from rainforest farms that were deforested after 2008.
Under Brazilian forestry regulations, landowners in the Amazon can clear up to 20% of their property. But a surge in deforestation in the early 2000s sparked calls for action from companies that feared a broader ban.
MOST IMPORTANT QUOTES
Dino wrote that the state law “appears to violate the free enterprise principle” because it creates an unequal environment for the companies that voluntarily choose to join the agreement.
He also said the law “shows signs of abuse of purpose as it uses tax provisions as a punitive tool.”
THE ANSWER
Mato Grosso will appeal the decision, Gov. Mauro Mendes said in a video posted to his social media accounts on Thursday.
He said if the appeal was not upheld, additional action would be taken.
“We cannot accept that domestic or foreign companies come to Brazil and make demands that are not included in Brazilian law,” he said.
ADDITIONAL CONTEXT
Earlier this month, Mato Grosso-based soybean farming lobby Aprosoja-MT formally called on Brazil’s regulator CADE to end the moratorium, saying it promotes “a purchasing cartel” and harms farmers who strictly adhere to the South American country’s forestry regulations hold.
