Brazil: Memorandum - Environmental (26/04/2013)

New Forestry Code Establishes Protections for Native Forests

The new Forestry Code (Federal Law No. 12.651/2012) significantly modifies the laws governing specially protected areas, such as "Permanent Preservation Areas" and "Legal Reserves". Furthermore, it harmonizes the legal regime applicable to areas of consolidated use, creates a new "Rural Environmental Registry" ("Cadastro Ambiental Rural" - "CAR"), abolishes the requirement to register "Legal Reserves" in the Real Estate Registry, and restricts access to rural credit 

2012 was a year of important changes for the environmental legal regime in Brazil. On May 28th, the new Brazilian Forestry Code took effect. While the new Code brings welcome certainty to a number of areas, uncertainties still persist. 

The new Forestry Code is the result of contentious debates between rural interests and environmentalists. After a lengthy legislative process in Brazil?s House of Representatives and Senate, President Dilma Roussef vetoed a portion of the bill, changing the vetoed points through Provisional Measure No. 571/2012, which was later converted into Federal Law No. 12.727/2012. 

Based upon the new Forestry Code, permanent preservation areas are now calculated in a different way, and restricted areas are now smaller. Another innovation brought by the new law is greater inclusion of permanent preservation areas within legal reserve areas ("legal reserves"), which varies among 20%, 35%, and 80% of the real estate in question, depending upon where the biome is located.  

Regarding legal reserves, certain types of undertakings are exempt from being classified as legal reserves, such as hydropower facilities and the construction and expansion of roads and railways. Moreover, the areas where legal reserves may be  augmented were increased, as the new law establishes that such areas can be expanded using any other areas located within the same biome. 

The reclassification of rural areas into urban areas by municipal laws does not exempt them, automatically, from the obligation to be maintained - exemption occurs only at the time of the registration of the land division. Moreover, legal reserves of former rural areas may be transformed into allotted green areas or commercial undertakings, or used for infrastructure projects. 

The new Forestry Code authorizes the federal executive branch to create incentives for environmental protection and environmental remediation by charging for environmental services, and allowing environmentally sensitive lands to be deducted from the calculation base of the Rural Property Tax ("ITR"), among other mechanisms.

Moreover, by no later than March 28, 2014, the federal government, states, federal district, and municipalities must initiate the "Environmental Regularization Program" ("PRA"), which seeks to implement the new Forestry Code. Since the enactment of the new Forestry Code and the implementation of the PRA in each state and federal district, owners or possessors of rural areas may not be fined for infractions related to irregular deforestation of permanent preservation areas, legal reserves, or other restricted areas that occurred before July 22, 2008. In order to benefit from such treatment, interested parties must participate in the program and comply with its terms.  

Regarding the Rural Environmental Registry, it is a public registry for environmental information pertaining to rural properties - legal reserves no longer need to be registered with the Real Estate Registry. Enrollment with the Rural Environmental Registry may be requested within one year of the date that it is implemented.

However, between the date upon which the new Forestry Code was enacted and the date of registry with the Rural Environmental Registry, owners or possessors of rural areas may register a legal reserve with the Real Estate Registry, free of charge. Registry with the Rural Environmental Registry is mandatory for all rural properties and must be effectuated within one year of the Rural Environmental Registry?s implementation. 

Certain Brazilian states (Amazonas, Bahia, Mato Grosso, Pará, Rondônia, and Acre) had registries that were similar to the Rural Environmental Registry that pre-dated the new Forestry Code, and now need to be adapted. In the State of São Paulo, the state environmental agency and the federal government signed a technical cooperation agreement on February 20, 2013, to implement the Rural Environmental Registry. 

Another important point in the new Forestry Code is the prohibition against obtaining credit from official financial institutions with respect to any property not registered with the Rural Environmental Registry by May 28, 2017. 

The new Forestry Code has been subject to criticism. On the one hand, environmentalists believe that the flexibility brought by the new Code is harmful to environmental preservation. On the other hand, rural interests advocate maintaining the law, for the necessary improvement of agribusiness activities in Brazil.  

The general view is that the new Forestry Code is an evolutionary progression given that the old code, which was enacted in 1965, had many gaps.  

Nonetheless, disagreements over the new Forestry Code remain. The Code is currently being reviewed by Brazil?s Supreme Federal Court, which is assessing the constitutionality of certain articles pertaining to the Rural Environmental Registry, legal reserves, and amnesty granted to owners and possessors of rural areas that deforested land prior to July 22, 2008.  

If the articles under review are declared unconstitutional, the Supreme Federal Court may restrict the effects of its decision, for example, it will only take effect after a certain period. 

Despite the fact that certain portions of the Code are currently the subject of litigation, the law remains in full force and effect, and is noteworthy for its creation of the Rural Environmental Registry and legal reserve areas. Until the uncertainties are resolved, however, the new law must be analyzed on a case-by-case basis in order to accurately assess potential risks. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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