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Exchange Rates, Soybean Supply Response, and Deforestation in South America

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  • Richards, Peter D.

Abstract

The advancement of South America’s agro-pastoral frontier has been widely linked to losses in biodiversity and tropical forests, with particular impacts on the Brazilian cerrado, the Atlantic Forest, and the Amazon. Here I consider an important, yet largely overlooked, driver of South America’s soybean expansion, namely the devaluation of local currencies against the US dollar in the late 1990s and early 2000s. Much interest has emerged in recent years over the environmental implications of soybean production in Brazil, with evidence of both direct incursions into moist tropical forest by soybean producers and of potential indirect effects, via the displacement of existing ranching operations. In this research I utilize historical trends in soybean prices, exchange rates, and cropland dedicated to soybean production in Bolivia, Paraguay, and Brazil to estimate the impact of currency devaluations on area of production. The results suggest that approximately 80,000km2, or 31 percent of the current extent of soybean production in these countries, emerged as a supply area response to the devaluation of local currencies in the late 1990s. The results also indicate that the more recent depreciation of the dollar and appreciation of the Brazilian real have counteracted a recent rise in global soybean prices, in the process sparing an estimated nearly 90,000 km2 from new cropland, 40,000 km2 of this in the Amazon alone.

Suggested Citation

  • Richards, Peter D., 2012. "Exchange Rates, Soybean Supply Response, and Deforestation in South America," Graduate Research Masters Degree Plan B Papers 138606, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  • Handle: RePEc:ags:midagr:138606
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    Cited by:

    1. Mann, Michael L. & Kaufmann, Robert K. & Bauer, Dana Marie & Gopal, Sucharita & Nomack, Mallory & Womack, Jesse Y. & Sullivan, Kerry & Soares-Filho, Britaldo S., 2014. "Pasture conversion and competitive cattle rents in the Amazon," Ecological Economics, Elsevier, vol. 97(C), pages 182-190.
    2. Bowman, Maria S., 2016. "Impact of foot-and-mouth disease status on deforestation in Brazilian Amazon and cerrado municipalities between 2000 and 2010," Journal of Environmental Economics and Management, Elsevier, vol. 75(C), pages 25-40.
    3. Silva, Felipe & Fulginiti, Lilyan E. & Perrin, Richard K., 2016. "Did technical change in agricultural production decrease the emission of pollutants on the Amazon Forest during 1990-2009?," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 230092, Southern Agricultural Economics Association.
    4. Silva, Felipe & Perrin, Richard K. & Fulginiti, Lilyan E., 2016. "Tradeoffs between forests and farming in the Legal Amazon Region of Brazil," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 230040, Southern Agricultural Economics Association.
    5. repec:eee:ecolec:v:144:y:2018:i:c:p:278-291 is not listed on IDEAS

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    Keywords

    Soybeans; Amazon; Exchange Rates; Environmental Economics and Policy; International Development; Land Economics/Use; Political Economy;

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