Aracruz

Sustainability Report 2004

Relationship with stakeholders

Conflicts

In 2004, there were several confrontations over attempts to occupy some of Aracruz’s properties.

Occupations by Agrarian Reform Movements: In April and December, members of the Land Liberation Movement (MLT) and the Landless Peasants Movement (MST) occupied two of the Company’s properties in Bahia. In both cases, Aracruz obtained a court order and the occupiers left the areas peacefully.; These occupations are part of a larger effort to pressure the government to speed agrarian reform in Brazil. In 2004, there were hundreds of occupations of properties, of which ten belonged to forestry industry companies.; Learn more: The question of land tenure.
Occupation by members of an indigenous community: In October, members of an indigenous community occupied a property owned by the Company in the municipality of Aracruz (ES) in a protest concerning the decision of the Company to prohibit the collection of forest residues. The decision was the result of various problems involving this activity, which, although not specifically rooted in the indigenous communities, nevertheless wound up affecting them.; Aracruz obtained a court order and the Indians left the occupied areas peacefully. Subsequently, specific discussions were held on the issues, and several agreements were reached on actions supported by Aracruz in addition to others already put into effect.; Learn more: Plantation residues.

The question of land tenure
The question of land tenure is at the center of political discussion in Brazil. Originating in the formation of the Brazilian state and in the process of colonization, this issue is presented today erroneously as if it could be reduced to two simple options: Those who defend the family farm as a producer for the domestic and local markets, and those who defend modern agribusiness.

The advocates of family farming for the domestic market believe that our agriculture should be devoted primarily to the production of products for home consumption and sale in local and domestic markets, produced on small land holdings subject to agrarian reform. They argue that this model generates more jobs and that hunger cannot be eradicated if there is not sufficient production of agricultural produce, and blame the rural exodus – and the swelling of urban centers and its consequences – on large scale industrial farming.

Those who favor agribusiness point to the fact that Brazilian agriculture is highly competitive because of favorable climate and technological breakthroughs. In 2004, agribusiness exports – led by soybeans, meat and forest products – hit US$40 billion, bringing progress to the countryside, propelling the country’s growth and generating 18 million jobs, which represents 30% of the economically active population of the nation.

According to the Ministry of Agriculture, Brazil exploits less than one-third of its cultivatable area and it is still possible to incorporate more than 150 million hectares of agricultural production.

Supporters of the agribusiness model also argue that a significant portion of the human settlements established in recent years have not had practical results and many were abandoned by their first occupants after a short time, which runs counter to the original concept of land reform.

We believe that there are other factors that must be considered in this discussion. The process of migration to the cities is historical and one that has occurred in other countries as well. The problem does not lie in the quantity of food produced but rather in the lack of money to buy food. To overcome this problem, Brazil needs more economic development and better distribution of wealth.

To promote agrarian reform, Brazil has sought to use such mechanisms as the National Institute for Agrarian Reform (INCRA) as well as specific legislation. Among the principal criteria, the Constitution establishes that only those lands classified as unproductive are eligible for expropriation and redistribution.

Although the discussions have not been directed exclusively against forest plantation companies, these companies have become involved in the issue as a result of the adoption of ideas opposing cultivation of forests by groups fighting for agrarian reform. In 2004, forest product exports reached US$4 billion.

Forestry companies own five million hectares, or 3.2% of Brazil’s tillable land. All these areas are considered productive under the criteria of the legislation.

Aracruz believes that in a country the size of Brazil, modern agribusiness – whether based on families or not – can be developed without harming other rural activities. Thousands of rural farm families, often organized in cooperatives, are integrated effectively in Brazil’s agribusiness production chain, producing both for the domestic market as well as for export. This is the case of the farmers who participate in Aracruz’s Forestry Partners Program, who have found in the cultivation of eucalyptus an alternative source of rural income.
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Plantation residues
Forest residues consist of the parts of the trees that are not used in the production of pulp, such as the tips of branches that, as they decompose, contribute to maintaining soil fertility. For some time, Aracruz has used these residues for its social assistance program, making donations to businesses and cooperatives.

Due to the current shortage of wood in Brazil resulting from improved control of illegal logging by authorities and the insufficient expansion of forest plantations to meet demand, the price of wood and wood by-products (such as charcoal) has risen substantially. In turn, this has led to an increase in the demand for forest residues; for its part, Aracruz boosted its donations to community associations.

Unfortunately, Aracruz also began to experience a number of problems deriving from the increased scale of these donations, such as: some of the receiving bodies did not meet the basic requirements of tax and labor legislation, which involved Aracruz in lawsuits as a co-defendant (requiring a payment of approximately US$150,000 and the risk of payment of an additional US$220,000); the failure of recipients of residue donations to use individual safety equipment and adopt safety practices, increasing the risk of accidents; the occupation of unauthorized areas to collect residues and a substantial increase in the number of fires; the use of large quantities of residues to produce charcoal, made in rudimentary ovens under poor working conditions and frequently with the use of child labor; and information provided to Aracruz by law enforcement authorities regarding the involvement of organized crime in some of the residue collection activities and the production and sale of charcoal, motivated by the high price of the product.

Given the dimension and seriousness of these problems and without the legal authority to control them, the Company decided to suspend the general donation of residues and has explained the decision to the parties receiving the benefit. Although not all of the groups receiving these donations were involved with these problems, the size of the potential liabilities and current and future risks of the activities left the Company with no other choice.
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