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Investor Presentaiton

Presentation The incorporation of new areas is one strategy Brazilian agribusiness employs to increase its production capacity. The problem is that this expansion has occurred through deforestation, regardless of legality. Between 1985 and 2020, since the systematic monitoring of land use began in Brazil, the country has lost 82 million hectares (Mha) of native vegetation. Over the same period, the area occupied by agriculture and animal husbandry increased 81 Mha¹. The biomes most affected in absolute numbers by this expansion were the Amazon and the Cerrado, with native vegetation losses totalling 44 Mha and 27 Mha respectively, and equivalent area increases for agricultural use². In spite of the evidence, many agribusiness agents refute their connection to deforestation and the encroaching agricultural frontier because "they do not have a chainsaw in their hands". Is this a reasonable claim? What are the economic effects of new areas constantly appearing on the country's land market? What happens to the price of this asset and the price of agricultural products? How does Brazilian agribusiness benefit from deforestation? These are some of the questions this Escolhas Institute study addresses, employing new econometric and spatial analysis techniques in order to isolate how deforestation has affected land prices and agricultural product prices differently to other variables. * US$ 1 = R$ 5,04 (Source: Brazilian Central Bank, 03/03/2022). MAIN RESULTS * THE DEFORESTATION THAT OCCURRED BETWEEN 2011 AND 2014 DEPRECIATED THE VALUE OF BRAZILIAN LAND IN 2017 BY AN EQUIVALENT OF US$ 27.1 BILLION (5% OR AN AVERAGE REDUCTION OF US$ 77.57 PER HECTARE), COMPARED TO WHAT WOULD HAVE BEEN OBTAINED IN THE ABSENCE OF DEFORESTATION. IN 2017, THE DEPRECIATION RATE HIT US$ 16.5 BILLION, OR 25% OF LAND VALUE IN THE MUNICIPALITIES WHERE THE EXPANSION OF THE AGRICULTURAL FRONTIER OCCURRED, EQUIVALENT TO US$ 195 PER HECTARE. DEFORESTATION ALSO WEAKENED AGRICULTURAL PRODUCT PRICES. IN THE CASE OF SOYBEANS, THERE WAS A US$ 0.6 (-4.5%) REDUCTION IN THE AVERAGE BAG (60KG) PRICE A US$ 1.32 BILLION CUT IN THE COUNTRY'S GROSS SOYBEAN PRODUCTION VALUE FOR 2017. 93.5% (5,218) OF BRAZILIAN MUNICIPALITIES SUFFERED A DEVALUATION IN LAND PRICES DUE TO DEFORESTATION. HOWEVER, HALF (50%) OF THE OBSERVED DEPRECIATION WAS CONCENTRATED IN 61 MUNICIPALITIES (1.15%). 1 Projeto Mapbiomas. Collection 6.0 of the Annual Series of Land Cover and Land Use Maps of Brazil. Infographics. Available in English at: https://mapbiomas.org/en/infograficos-1?cama_set_language=en, accessed on 8 February 2022. 2 See previous reference. HOW DOES BRAZILIAN AGRIBUSINESS BENEFIT FROM DEFORESTATION? LO 5
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