Brazil court suspends law cutting tax breaks for firms with deforestation soy commitment

SAO PAULO/BRASILIA (Reuters) - A justice on Brazil's top court on Thursday suspended a law from the country's top soy-producing state that would end tax breaks for firms following an agreement to not purchase soy from deforested areas of the Amazon rainforest.

Justice Flavio Dino suspended the law from the western state of Mato Grosso from going into effect on Jan. 1 until a final decision is made by the court.

WHY IT'S IMPORTANT

Brazil is the world's largest soy producer and exporter, and Mato Grosso is the top-producing state.

The "Amazon soy moratorium" agreement, praised by scientists and conservationists, was voluntarily signed by global commodity giants in the mid-2000s, which pledged to stop buying soy from farms in the rainforest that were deforested after 2008.

Under Brazil's forestry rules, Amazon landowners can clear up to 20% of their property. But an early 2000s deforestation surge sparked calls for action by companies that feared a wider ban.

KEY QUOTES

Dino wrote that the state law "seems to violate the principle of free enterprise" as it creates an uneven environment for the companies that voluntarily decide to adhere to the agreement.

He also said the law "presents signs of misuse of purpose, as it uses tax rules as an punitive instrument."

THE RESPONSE

Mato Grosso will appeal the decision, Governor Mauro Mendes said in a video published on his social media accounts on Thursday.

He said if the appeal is not accepted, additional measures will be taken.

"We can't accept that companies, national or foreign ones, come to Brazil and make demands that are not in the Brazilian law," he said.

ADDITIONAL CONTEXT

Earlier this month, soybean farm lobby Aprosoja-MT, based in Mato Grosso, formally asked Brazil watchdog CADE to end the moratorium, saying it fostered "a purchasing cartel" and harmed farmers who strictly comply with the South American nation's forestry code.

(Reporting by Lisandra Paraguassu in Brasilia; additional reporting and writing by Andre Romani in Sao Paulo; Editing by Leslie Adler)