Private Capital Flows and the Environment: Lessons from Latin America

Agriculture dominates the economies of many developing countries, including those in much of Latin America. International investors have been an important part of the Latin American agricultural sector as a result of its high productivity and access to export markets.

In order to shed some light on the relationship between foreign direct investment and environmental performance in the agricultural sector, three case studies were undertaken: pulp and paper ( Brazil); soybeans ( Brazil); ¹ and bananas ( Costa Rica). ²

The Brazilian cases considered two land-extensive, industrial monocrops -- soybeans and pulp and paper. They are responsible for a growing share of Brazilian GDP, particularly from export revenues. Soybeans, meal and oil together, account for 9 percent of Brazil's exports, the largest of any sector and second only to the United States in production. Approximately 22 million tons of soybean products are produced each year on 11 million hectares of land -- 26 percent of all cropland in Brazil. The pulp and paper sector makes up 1 percent of the country's GDP and is fifth on the export list, accounting for 8.5 percent of exports in 1994. Brazilian products constitute 50 percent of the eucalyptus-based cellulose market worldwide. While Brazil is a net exporter of pulp and paper (US$1.8 billion in trade revenues), it still imports about US$1 billion of newsprint and printing stock. Plantations of eucalyptus and pine are maintained on more than 4 million hectares. ³

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