Client alert on ESG, Environmental, and Public and Regulatory Law: Ministry of Environment and Climate Change launches first public notice on forest concession in the Atlantic Rainforest

The Ministry of Environment and Climate Change (“MMA”), alongside the Brazilian Forestry Service (“SFB”), and the Brazilian National Bank for Economic and Social Development (“BNDES”), launched the unprecedented public notice for federal forest concession for commercial purposes in the Atlantic Rainforest biome.

This is a bidding proceeding involving three national forests in the South region of the country, aiming to promote forest recovery, planting of native species, and job generation. In addition, it is the first forest concession held by the SFB outside of the Amazon region.

The National Forests of Irati, in Paraná, as well as Chapecó and Três Barras, in Santa Catarina, totaling 6,843.43 hectares, are subject to the bidding under discussion. Each Management Unit will be bid autonomously, resulting in the signing of the respective forest concession contract, whose term will extend for up to 35 years.

Within this period, the concessionaire will be able to exploit timber and non-timber forest products resulting from the partial harvesting of exotic species, replacing them with native forest plantations for commercial purposes. The economic activities allowed in the bidding concessions are relating to:

1. Timber products, or wood logs from the currently planted genus of Pinus and Eucalyptus, and the species Araucaria angustifolia, from future plantations of native species and from other exotic species that remain, so as to eradicate them from the Forest Management Unit.
2. Non-timber or non-wood forest products, such as leaves, roots, bark, fruits, seeds, oils, latex, resins, etc. Products from protected species can only be traded if their exploitation is not legally prohibited.
3. Carbon credits, which for the first time were provided for in a public notice. However, they can only be exploited once the necessary regulations are published.
4. Other services, but only upon the approval of a specific project by the SFB, such as activities relating to the qualification of forest activities. Tourism activities, however, are prohibited.

The bid notice allows for the participation in the bidding of legal entities, including companies, associations of local communities, private pension entities, financial institutions, ordinary partnerships and investment funds, incorporated under the Brazilian laws, with headquarters and management in Brazil, alone or in consortium.  Thus, foreign companies will not be able to participate in the bidding directly through a foreign entity.

According to the Public Forest Management Law (Law No. 11,284/2006), the same concessionaire can only participate in up to two possible concession contracts within the same bidding process. It may, however, bid in all the bidding proceedings if it expresses its preference order for the adjudication. In addition, the same law establishes that consortium companies in a particular bid are barred from participating in the same offering, whether through another consortium or individually.

It is worth highlighting that the concession of the Forest Management Units only transfers the right to carry out management activities. The ownership of the tendered areas is and will remain under the federal government’s power.

Finally, the compliance with the contracts will be monitored by a several agencies at different levels. The SFB will monitor compliance with the obligations assumed by the concessionaire under the contract and may terminate it in the event of non-compliance. The manager of the conservation unit, the Chico Mendes Institute for Biodiversity Conservation (“ICMBio”), will carry out inspection activities, and every three years, independent forestry audits will be carried out by institutions accredited by the National Institute of Metrology, Standardization, and Industrial Quality (“Inmetro”).

For more information on our ESG practice, click here.

Demarest’s Environmental, ESG, and Public and Regulatory Law teams are available to provide further information and clarify any doubts that may be necessary.