The Brazilian Amazon rainforest holds one of the world’s largest terrestrial carbon stocks and helps regulate the country’s water cycle through the flying rivers. These environmental services sustain agriculture and livestock, hydroelectric generation, river transportation, and urban water supply across Brazil. Given its environmental, economic, and social importance, the Amazon rainforest is, above all, a strategic national asset.
Yet the 28 million inhabitants of the Brazilian Amazon live with indicators of income, poverty, labor informality, and urban infrastructure that lag behind those of the rest of the country. The region faces critical development challenges: its economy remains stagnant and is characterized by low productivity, while its agricultural model is still carbon-intensive and often dependent on deforestation.
It is commonly argued that this situation stems from the absence of government presence in the region. From an economic standpoint, this explanation falls short. The federal government has a significant presence in the region through public banks, constitutional funds, subsidized credit, tax incentives, and major infrastructure investments. The issue, therefore, is not a lack of government action, but how that action is directed and how efficiently resources are used. A significant share of these resources is still directed toward frontier expansion and low-productivity activities that generate short-term returns. Moreover, government-led development initiatives often fail to strengthen territorial governance, leaving land tenure issues unresolved across the region.
This report builds on this premise and analyzes specific credit and tax expenditure instruments under the purview of the Ministry of Finance: the Constitutional Fund for Financing the North (FNO), operated by the Bank of the Amazon (Basa); the Manaus Free Trade Zone (ZFM); and the Financial Compensation for the Exploitation of Mineral Resources (CFEM).¹
¹ Other equally relevant instruments—such as investments in infrastructure, regulation, the role of the Brazilian Development Bank (BNDES), trade agreements, and innovation and research policies—are not addressed here and may be the subject of future reports.
