Brazil plan to revamp Amazon Fund irks Norway, Germany - sources

By Anthony Boadle

By Anthony Boadle

BRASILIA (Reuters) - Brazil's right-wing government has run into resistance from key donors Norway and Germany over its plans to change management of the billion-dollar Amazon Fund aimed at reducing deforestation, people familiar with the matter say.

If President Jair Bolsonaro's government unilaterally alters the governance model for the sustainable development fund, it could lead the two European nations to stop donations or even take back unused funds, the sources said, asking for anonymity given the sensitivity of talks.

Environment Minister Ricardo Salles, a climate change skeptic, two weeks ago criticized the fund's management for alleged irregularities in unspecified awards to non-governmental organizations, calling for new governance rules.

Salles suspended all operations of the fund pending review.

Norway and Germany responded that they were satisfied with the administration of the $1.28-billion fund by Brazilian state development bank BNDES and asked the minister to provide his proposed changes in writing.

"By Thursday afternoon, we had not received any written proposals nor an inspection report from the BNDES," a spokeswoman for the German embassy in Brasilia told Reuters.

The Environment Ministry did not immediately reply to a request for comment.

Norway has donated $1.2 billion and Germany has paid out $68 million, with another $100 million in the pipeline for the fund, to which the donors make annual contributions based on Brazil's performance in reducing deforestation.

The disagreement over governance has meant two projects selected last year, one for recovering the vegetation cover in the Amazon and another to improve market access for local communities' forest products, are on hold.

For the donors, the most worrying aspect is a plan by Salles to change the composition of the fund's 24-member steering committee that selects the projects to back.

Salles wants to reduce the role of civil society and remove a representative of Brazil's indigenous people, which would be unacceptable to the donors, said one source.

Brazilian environmentalists said the moves were part of the government's political project of steering resources toward private farmers and easing environmental protections.

Carlos Rittl, head of the Climate Observatory, a network of NGOs working on climate change, said the fund was carefully structured under the management of the BNDES when it was set up in 2008 to prevent political manipulation.

"By controlling the steering committee and excluding civil society, funds can be channeled to the private sector and away from the NGOs by a government that has frequently attacked those who work to protect the environment," Rittl said.


(Reporting by Anthony Boadle; Editing by Clarence Fernandez)