Brazil Supreme Court ends soy moratorium's tax benefits

Brazil’s Supreme Court on Wednesday upheld state laws that deny tax incentives to farmers who participated in the Amazon soy moratorium. The decision effectively dismantles the voluntary pact that for nearly two decades helped curb deforestation linked to the world’s largest soybean crop. The court also ruled the moratorium itself constitutional.

Growers who respected the ban on purchasing soy from land cleared after July 2008 now lose state tax breaks in top soy-producing states like Mato Grosso, Para and Rondonia. Major grain traders withdrew from the pact in January after those states passed bills revoking tax benefits for participating companies.

“There is an apparent contradiction between recognizing the environmental importance of the soy moratorium while simultaneously validating state laws that can weaken its effectiveness,” said Angela Barbarulo, legal coordinator at Greenpeace Brazil. “When it comes to protecting the Amazon, we should not allow state legislation to create loopholes or incentives that undermine environmental commitments built collectively.”

The moratorium was launched in 2006 as a response to pressure from environmental groups and international buyers. It was a voluntary commitment, not a law. Soy producers long argued the pact hurt business because it was stricter than Brazilian environmental law. Under national rules, farmers in the Amazon must preserve 80% of their land and may legally clear the remaining 20%. The moratorium banned any deforestation, even when permitted by law.

A study published in July in the journal Science found the moratorium reduced deforestation in risk areas by 35% in its first decade without hurting productivity. The same study projected the pact’s end could drive up to 1.4 million hectares – 3.5 million acres – of deforestation in the next decade. That is an area roughly the size of Portugal left vulnerable to legal clearing.

Brazil produced 171.5 million metric tons of soybeans in the 2024-25 season, according to the U.S. Department of Agriculture. China remains the largest buyer. The country accounts for roughly 40% of global soybean output.

The Brazilian Association of Vegetable Oil Industries, known as ABIOVE, said the ruling ends years of legal uncertainty over the pact. The trade group referred to the moratorium in the past tense, signaling Wednesday’s decision is unlikely to revive it. ABIOVE said it hoped the ruling would “open a new phase of dialogue among different parts of the supply chain, with a focus on legal certainty, competitiveness and sustainability.”

The Mato Grosso Soy Producers Association, which opposed the moratorium, said the ruling reinforced the authority of state governments to push back against private-sector measures that impose environmental restrictions stricter than federal law. The association pledged to continue fighting any future agreements that recreate the moratorium’s restrictions.

After deforestation rates climbed to record levels under former President Jair Bolsonaro’s 2019–2022 term, they have fallen again under President Luiz Inácio Lula da Silva, reaching the lowest levels in a decade. The study projected the pact’s end could reverse part of that progress, driving deforestation higher in the coming years.