The Restructuring of South American Soy and Beef Production and Trade Under Changing Environmental Regulations

Chapada dos Guimarães, Brazil. Photo by Joao Tzanno via Unsplash.

In response to the extensive loss of forests caused by soy and cattle expansion in South America, national governments have increased their legal restrictions on deforestation and passed new legislation to further their enforcement of conservation efforts. A potential concern is that the new laws, which are geographically restricted, will generate spillover agricultural activity and deforestation in unprotected regions.

In a journal article featured in World Development, Yann le Polain de Waroux, Rachael Garrett, Jordan Graesser, Christoph Nolte, Cristopher White and Eric F. Lambin use panel data on soy development, beef production and trade in agricultural frontiers of South America to test the efficacy of these new laws. Specifically, the authors examine how changes in deforestation regulations in South America have altered agriculture expansion and exports in this region and weighed their influence on the overall effectiveness of deforestation regulations.

The authors find that, while there is little of the purported cross-border leakage of soy or beef products, there is a redistribution of beef consumption and trade patterns. In several markets, it seems that importers are buying less from exporters that operate in areas with strict deforestation and agriculture rules. Exporters, to sell their growing surpluses, have instead begun to cater to the domestic markets. In some cases, this creates a loophole in the conservation regulations and weakens the effect of the legislation.

These results point to the potential role of substitution effects between local and international consumer markets and between different actors, which would diminish the overall effectiveness of deforestation regulations. The authors call on policy changes to reduce loopholes in both private and public regulations that allow for a restructuring of marketing channels to accommodate continued deforestation.

Read the paper