Deforestation Control and Agricultural Supply in Brazil

Brazil has dramatically increased its agricultural area under cultivation, in the process becoming a major food exporter at the cost of natural forests. A new challenge is to meet the food demands of an expanding world population in the face of pessimistic climate change scenarios and the increasing scarcity of land. Can Brazil help meet rising world food demand while conserving its tropical rainforests? To address this question we simulate outcomes using a large dynamic multiregional computable general equilibrium model of Brazil to model land use over 20 years in 90 zones and 14 agricultural sectors. The model features a land-use change module based on a transition matrix obtained from satellite imagery. We analyze two scenarios of deforestation reduction, both linked to actual policy proposals. Model results indicate several mechanisms that allow food output to increase without expanding land supply. In particular, we stress the role of Brazil's vast, low-yield pasture area as a source of future cropland. Thus, we find that controlling deforestation leads to rather small decreases in food output-which could be neutralized by tiny exogenous productivity improvements. We conclude that the decrease in deforestation will not significantly compromise Brazilian agricultural supply capacity in the foreseeable future.