Extracting Value, Exporting Risk: Profit Repatriation and Brazil’s Deforestation Dynamics

Intact forests are critical for biodiversity conservation, but large forest ecosystems, such as the Amazon, are increasingly threatened by the rapid expansion of agriculture. Between 2014 and 2023, total financial flows to agriculture firms responsible for land-use change in the Brazilian Amazon amounted ~US$450 billion. Concerns about systemic financial risk arising from biodiversity loss have motivated a framework for greening the financial system. However, recent studies argue that doing so would require transcending finance-based regulatory levers and addressing global imbalances between countries due to geographical transfers of value, in particular profit repatriation. Such transfers constitute both a source of systemic risk for emerging economies, like Brazil, that could propagate through balance sheets to core financial hubs, and a structural impediment for the ‘greening’ of the financial system. Between 2005 and 2020 Transnational Corporations (TNCs) repatriated an average of US $1 trillion per year, equal to 4.2 % of global Foreign Direct Investment (FDI) stock and 1.4 % of world GDP. In many net‑exporting countries, repatriated profits exceed the inward FDI stock.

This study investigates how profit repatriation and FDI positions of TNCs potentially hinder policy interventions and deepens Brazil’s financial vulnerability and global financial systemic risk. We show empirically the correlation between TNCs FDI in the Brazilian soy sector, profit repatriation, and spatially explicit soy-related land-use change. We merge data from the Brazilian Central Bank with corporation’s balance sheets to measure their investment positions in the soy sector as well as their profit repatriations. Moreover, to account for the biodiversity impact of these companies, we link their financial inflows and outflows with their induced deforestation related to soy using subnational supply-use accounts and the Food and Agriculture Biomass Input-Output model (FABIO). We find that close to 60% of all profits repatriated from Brazil had Europe as main destination, and the Netherlands and Luxemburg account for close to 50% of these flows. This detailed connection and balance of FDI, repatriated profits and land-use change of companies can contribute to identify policy coordination and explore a shift from the current risk management approach to a multilateral risk governance approach to greening the financial system.