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- The process of decentralization involves a structured transfer of political power from central governments to subnational jurisdictions. This becomes particularly important in the Amazon, rich in resources but still facing chaotic development.
- Negative experiences from centuries of colonization have shown that a more democratic governance system could have avoided some of the injustices that have marked the region’s history.
- In Brazil, despite efforts to decentralize, there are several federal entities that have retained substantial administrative and regulatory powers over the natural resources of the Legal Amazon.
The citizens of the Pan Amazon have a common complaint: the politicians and bureaucrats who manage the affairs of state neither understand their needs nor care about their aspirations. This grievance, by no means unique to the Pan Amazon, is driving a political dynamic in emerging economies that is known as decentralization, which is a structured process to transfer political power from central governments to subnational jurisdictions. The goal is to increase citizen participation in decisions that directly impact their lives; in the process, it is also meant to make the provision of public services, which is the government’s primary function, more efficient.
All the Pan Amazon countries have three levels of government: national, regional and local. The relationship among jurisdictions is based on the concept of subsidiarity, in which the higher entity cedes powers and responsibilities to lower entities. Decentralization is especially important in the Pan Amazon, because the region has vast natural resources and its social evolution is manifestly chaotic. In the past, the region’s natural resources have been plundered to benefit colonial powers, corporate interests or the politically connected, usually to the detriment of the region’s Indigenous and traditional communities. A more democratic process might have avoided some of the injustices that have characterized Amazonian history. The current dynamic is complex, however, because most inhabitants are descended from recent immigrants who depend on conventional economic production systems. Among them are many dedicated environmental advocates and defenders of the rights of traditional and Indigenous people. But wealthy elites and the elected politicians are deeply compromised. They may support conservation initiatives and invest in sustainable development initiatives, while simultaneously speculating in land, pursuing non-sustainable production and promoting ill-advised infrastructure projects.
Clearly, the region’s inhabitants must be consulted on the contours of future development policies and must be intimately involved in their implementation, but the diversity of economic interests does not guarantee that decentralization will favor conservation of the Pan Amazon’s natural ecosystems.
Giant water lily (Victoria amazonica) from Brazil. Image by Rhett A. Butler. The Federal Union of Brazil
Brazil is a federal republic with a constitution that grants specific responsibilities and powers to each level of government; by definition and design, a federalized state is the most pronounced form of decentralization. The federal government played a predominant role in the early development of the Amazon, which was then a remote region with a primitive economy, weak institutions and highly dispersed population. Four of the eight states were federal territories throughout most of the twentieth century and only obtained statehood in the last half of that century: Acre in 1962, Rondônia in 1982 and Amapá and Roraima in 1990. The 1946 Constitution specified that three per cent of the national budget should be invested in the Legal Amazon, which made the region particularly dependent upon the federal government. This dependence was exacerbated by the military government, which centralised power during its twenty years of autocratic rule, during which it launched aggressive settlement and development policies in the Legal Amazon.
Power has since devolved to the regional and local governments, which now shoulder most of the responsibility for delivering basic services. Approximately twenty per cent of Brazil’s GDP is spent via state and local governments, constituting about half of total government expenditures and making it the most decentralised political economy in Latin America.[i] Moreover, the system is accompanied by a budget process that transfers wealth from the Southeast to the North and Northeast. Essentially, the federal government collects taxes and distributes funds to states and municipalities based on population, with an additional bias that favours the poorer regions of the country.
The federal tax agency (RFB) has the statutory responsibility for collecting rural property taxes (ITR) and returning 50% to the municipality of origin. The RFB will cede 100% of that amount, however, if the municipal government creates an administrative unit to assess and collect the ITR. Only the municipality of Mato Grosso has responded to this opportunity to tax its rural landholders. Data source: Pereira et al. 2019. The power of money
Most revenue transfers are earmarked for specific programmes and entitlements, which have been established by the federal government but are administered by local authorities. Local authorities no doubt appreciate the largesse of the federal government, but they also yearn for autonomous sources of revenue. Currently, the most important non-centralized source of revenue is a value-added tax (Imposto sobre Circulação de Mercadorias e Serviços – ICMS) levied on transactions involving both goods and services, of which 25 per cent is shared with the municipality where the transaction occurred. Urban property taxes are collected by municipalities and are an important source of revenue for medium and large cities.
The ICMS–Ecológico is a tax distribution policy adopted by several state governments that links allocation of the ICMS to conservation policies. Federal law requires states to transfer 25 per cent of ICMS revenue to municipalities, but allows some leeway in how they distribute those funds among the municipalities. Those that have selected the ICMS–Ecológico option can distribute some funds using a formula that rewards municipalities with relatively large swathes of protected areas, Indigenous lands or forest reserves within private properties.
One unusual attribute of the Brazilian tax system is the rural property tax (Imposto Territorial Rural – ITR). The 1988 Constitution delegates the of the ITR to the federal tax agency (Receita Federal do Brasil – RFB), but stipulates that fifty per cent should be returned to the municipality of origin. A subsequent modification allows the RFB to return 100 per cent of those revenues if the municipality agrees to act as tax collector. Surprisingly, only 240 of 814 Amazonian municipalities are participating in the programme, and 132 of them are in Mato Grosso. Although this revenue stream is not currently large, it represents the greatest potential source of independent revenues for Amazonian municipalities. More importantly, it has enormous potential as a fiscal policy tool for changing land use practices by providing potential tax breaks for rural properties that comply with the Forest Code.
The priorities of state governments are reflected in their project proposals submitted to SUDAM. Top: number of projects stratified by type and category (274 total). Bottom: cost of projects stratified by type and category (R$ 34 billion). Data source: SUDAM 2020. Exceptions to the rule
In spite of Brazil’s commitment to decentralization, there are several federal entities that have retained substantial administrative and regulatory powers over the natural resources of the Legal Amazon. These include two quasi-autonomous agencies that oversee federal protected areas (Instituto Chico Mendes de Conservação da Biodiversidade – ICMBio) and Indigenous lands (Fundação Nacional dos Povos Indígenas – FUNAI), who together manage approximately 41 per cent of the surface area of the Legal Amazon. They often are allied with the environmental protection agency (Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveis – IBAMA) and the federal prosecutor’s office (Ministério Público Federal – MPF) in disputes over the advisability or feasibility of infrastructure and mineral development projects.
Another federal agency with administrative and regulatory powers that supersede state authority is the Instituto Nacional de Colonização e Reforma Agrária (INCRA), which oversees the expropriation of underutilized properties for redistribution to the rural poor. Among its regulatory functions, the agency also certifies rural land titles and is responsible for compiling a national database of rural properties. Its inability to complete these two tasks – after more than fifty years of effort – has vastly complicated the orderly development of the Legal Amazon. Land tenure uncertainty is directly responsible for the crime of land grabbing (grilagem) and is considered by some analysts to be largest single driver of deforestation.
In 2020, the Bolsonaro administration initiated a policy to decentralize INCRA’s field operations by delegating some of its administrative tasks to municipalities. The programme, Titula Brasil, has been embraced by hundreds of municipalities to establish Núcleos Municipais de Regularização Fundiária (NMRF) to help landholders compile the portfolio of documents required by INCRA. The programme, which remains in place despite the change in administrations, has yet to accelerate tenure regularization, partly because the federal agency’s regional offices retain control over title certification. In a repetition of history, INCRA has once again has failed to allocate the financial resources and trained personnel required to resolve this issue, which lies at the core of Amazonian development.
Banner image: Deforestation in Corumbiara in the state of Rondonia. Credit: Rhett A. Butler.
“A Perfect Storm in the Amazon” is a book by Timothy Killeen and contains the author’s viewpoints and analysis. The second edition was published by The White Horse in 2021, under the terms of a Creative Commons license (CC BY 4.0).
To read earlier chapters of the book, find Chapter One here, Chapter Two here, Chapter Three here, Chapter Four here, Chapter Five here and Chapter Six here.
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