Brazil Supreme Court Upholds State Laws That Undermine Amazon Soy Moratorium

Brazil’s Supreme Court delivered a split ruling on Wednesday that upheld state laws stripping tax incentives from companies participating in the Amazon soy moratorium, while simultaneously affirming the voluntary pact’s constitutionality.

The 6-3 decision dealt a significant blow to the future of the 20-year-old agreement.

The court ruled that states like Mato Grosso and Rondônia may deny tax benefits to farmers and traders who comply with the moratorium’s stricter environmental standards.

However, the justices also declared the private-sector agreement itself legal and ordered the dismissal of all antitrust cases pending against it before Brazil’s competition regulator, CADE.

Justice Flávio Dino, whose vote carried the majority, stated that while private companies are free to adopt more restrictive purchasing policies, states have the constitutional authority to set conditions for granting tax incentives.

“The soy moratorium exists and tomorrow can continue to exist. Nothing prevents private actors from agreeing on buying and selling relations, according to their business policies,” Dino said.

Justice Edson Fachin, the court’s president, dissented on the state laws, arguing that “the tax system cannot be used to penalize those who adopt more protective practices”.

Justices Dias Toffoli, André Mendonça, and Luiz Fux also dissented in part, contending the moratorium’s legality should have been reviewed by CADE rather than the court.

In January, major grain traders withdrew from the moratorium after top soy-producing states passed laws revoking tax breaks for participating companies.

The agreement, launched in 2006, had banned purchases of soy grown on Amazon land cleared after July 2008—a standard stricter than Brazil’s Forest Code, which allows clearing of up to 20% of forested property.

Greenpeace Brazil legal coordinator Angela Barbarulo called the court’s recognition of the moratorium’s constitutionality “enormously important,” but warned the ruling was undercut by endorsing state laws that penalize higher environmental standards.

“There is an apparent contradiction between recognizing the environmental importance of the soy moratorium while simultaneously validating state laws that can weaken its effectiveness,” she said.

A study published in Science in July estimated the pact’s unraveling could drive up to 1.4 million hectares of additional deforestation over the next decade—an area the size of Portugal.

The Brazilian Association of Vegetable Oil Industries (ABIOVE) said the decision ends years of legal uncertainty, but referred to the moratorium in the past tense, suggesting the ruling is unlikely to revive the agreement.