Do forest conservation policies undermine the soybean sector in the Brazilian Amazon? Evidence from the blacklisting of municipalities

Minimizing the trade-offs between agricultural production, development and forest conservation is key to ensure that conservation policies can achieve long-term impacts. Taking the case of the Brazilian Amazon in the context of the Action Plan for the Prevention and Control of Deforestation in the Legal Amazon, we estimate the impact of the blacklisting of municipalities with high deforestation risk on soybean production (a major driver of deforestation), exports and land-use changes. Difference-in-difference regressions and generalised synthetic control method are first used to determine the impacts of the policy. The triple difference strategy is then applied to explore heterogeneity in the production and export changes across municipalities. We find that, although effective to reduce deforestation, the policy is unlikely to have undermined the soybean production and exports. On the contrary, our results suggest that the soybean sector benefited from the changes in land use following the implementation of the blacklist. However, we do not find evidence that land restriction triggered intensification of soybean production, which suggests that soybean benefited from an intra-crops reallocation.