China leads the list of main soy consumers worldwide, but relies heavily on other countries, especially in Latin America. In 2017, the Asian country consumed 63 percent of the world’s soy production. According to a May 2019 report from London-based nongovernmental organization (NGO) Carbon Disclosure Project (CDP), the loans Chinese banks granted Asian companies involved in the soy supply chain cause deforestation by way of their financial operations, which endangers biodiversity.
In recent years, logging operations to grow illegal crops throughout the region have increased environmental degradation. As a result, military and institutional defense forces of the hemisphere joined efforts to support environmental authorities in protecting and preserving biodiversity in their areas of influence. The British NGO also joined this endeavor, analyzing changes in the habitat so that Latin American governments and investors can make better-informed decisions.
CDP states that only eight of the 35 Chinese financial institutions studied between 2013-2017 have policies that consider the environmental impact of financial decisions that cause deforestation. CDP adds that with the growing Chinese soy demand, soy production in South America is expected to increase. The Bank of China, the Industrial and Commercial Bank of China, and the Agricultural Bank of China are the three main institutions granting loans to the soy supply chain.
“This will lead to larger, faster deforestation, posing more regulatory and operational risks for the soy sector and related financial institutions in China,” CDP says. Eighty percent of soy imported by China is used to produce oil and food for cattle, says Argentine daily La Voz.
Argentina, Bolivia, Brazil, and Paraguay are the main soy producers in Latin America. Together, they represent more than half of soy production worldwide, the University of Navarra in Spain said in its article “Soy, South America’s other strategic raw material.” The study highlights that global production of the grain will exceed 500 million tons in 2050, and much of this demand will be met by South America.
“Soy crops have a decisive role in deforestation and the loss of sensitive habitats in critical areas, including the Amazon, the Cerrado in Brazil, and the Gran Chaco in Argentina and Paraguay,” said the 2018 Annual Report from the platform Trase, a tool developed by the Stockholm Institute for the Environment that monitors the commodity chain at the international level. Trase emphasizes that “deforestation may cause irreversible damage to biodiversity and degrade water security.”
Environmental NGO Greenpeace said that in 2018, Argentina lost 113,000 hectares of forests, 41,000 of which were in restricted areas. “Deforestation is connected not only to soy, but also to its demand,” the organization said.
Chinese imports of the grain cultivated in Brazil are linked to the deforestation of 223,000 hectares between 2013 and 2017, says the website The Brazilian Report. Forest reduction will increase as China resorts to Brazil to meet its demands. In turn, Brazil will have to deforest 25 to 57 times the total area estimated to meet the Asian demand for 2013 to 2017, CDP states.
“The soy and livestock industries are destroying the Cerrado; they destroy the environment, worsen climate change, and displace and attack indigenous communities that have lived in the area for hundreds of years,” Rómulo Batista, member of Greenpeace Brazil, told the press. “The Cerrado is the world’s richest savanna in terms of wildlife.”
“These companies are destroying the future of our children because they’re leading us to climate and ecological collapse,” said Anna Jones, Global Project lead for Forests at Greenpeace UK.
The CDP report concludes that Chinese banks must identify and estimate the amount of financing connected to deforestation triggered by soy production. It also calls for financial institutions to implement four phases: understand the risks of deforestation; analyze the risk of deforestation; develop policies for forest risk management; and collaborate with companies to verify the enforcement of forest policies.