21 Aug 2025 Brazil Devastation Bill second act – The Partial Veto by Lula is a pragmatical approach which however keeps concerns for the safeguard of the Amazon Rainforest

Posted at 00:01h in Climate change, Corporate Governance, Deforestation, ESG by

Notwithstanding the request by most international and local environmental organization for Lula to veto the full bill, the partial veto is however a pragmatical solution which was chosen by Brazil President Lula to avoid a stronger backfiring by the Congress which voted to approve the bill with a majority of 70%. And so far this partial veto can be considered as a solution which is trying to support the defense of the Amazon as well as taking into consideration the political context of this bill, as we are going to present in the following section. However, the Supreme Federal Court could act as a second line of defense, particularly where constitutional human rights are at risk as a result of environmental projects.

 

Lula sanctioned the Public Law 2159/21 – which weakens the rules for environmental licensing – with 63 vetoes on Friday August 8, the last possible day for vetting the project according to the Brazilian legislative process[1]. Although the public society had favoured a total veto, the decision was politically strategic in terms of environmental protection and supported by some environmental organizations and activists, such as SOS Mata Atlântica[2]. A full veto would face strong risk, while a partial veto keeps the dialogue open with the Congress to guarantee “environmental protection, legal certainty and economic prosperity”, according to Marina Silva[3].

If President Lula had issued a full veto, the environmental licensing Project Law would have been sent to a joint session of Congress (Senate and Chamber of Deputies) to decide on whether to override or uphold President Lula’s entire veto. To overturn a presidential veto, an absolute majority is needed in both houses:

  • 41 senators (out of 81) and 257 deputies (out of 513)

 Considering that the law already had approval with 267 votes, which is more than the bare minimum needed to override a veto. Additionally, strong center and right-leaning parties accounted for a large portion of the votes in favor. There is a considerable chance that the veto will be overridden if this group stays in agreement. When the veto is overruled, the government loses all power to change or lessen the most contentious parts of the measure, and it becomes law exactly as it was initially enacted.

In parallel to the congressional process, some legal scholars and civil society organizations have flagged that certain provisions of the revised law could be vulnerable to constitutional challenge before the Supreme Federal Court (STF)[4]. Particular concerns relate to the potential erosion of the right to prior consultation for Indigenous and traditional communities (as enshrined in ILO Convention 169) and to the automatic renewal of licenses without proper oversight. The STF has previously intervened in high-profile environmental and Indigenous rights cases, such as the recognition of the Raposa Serra do Sol Indigenous territory and the Amazon Fund ruling, and could play a decisive role again should the veto be overridden or it may reintroduce it through executive acts[5]. Bringing the legal dimension into play adds an additional layer of scrutiny that could constrain the most controversial uses of the new licensing framework.

On the other hand, a partial veto combined with political negotiation and public pressure is a more pragmatic and effective path to prevent environmental rollbacks while maintaining governability – and it was the strategy chosen.

Lula issued the veto for only the most problematic sections, preserving the technical core of the bill while blocking environmental and social setbacks. Of the nearly 400 provisions approved by Congress, 63 received vetoes. The vetoes blocked the implementation of automatic licensing, reinforced protections for sensitive areas, and upheld the requirement for environmental impact assessments in priority projects[6]. Those vetoes are going to be discussed by the Parliament and are still subject to be overrun.

The 63 vetoes were described by Acting Chief of Staff Miriam Belchior as a deliberate government decision to preserve the integrity of the environmental licensing process, ensure legal certainty for projects, protect the rights of Indigenous and traditional communities, and incorporate innovations that streamline procedures. Environment Minister Marina Silva reinforced that the strategic vetoes were essential to safeguard the licensing system and maintain Brazil’s environmental and climate commitments, including the goals of zero deforestation and cutting CO₂ emissions by 59% to 67% by 2035[7].

Embedding Brazil’s licensing reform in the context of its Nationally Determined Contributions (NDCs) under the Paris Agreement could strengthen political legitimacy and international credibility, especially ahead of COP30 in Belém. Demonstrating that vetoed provisions support Brazil’s climate targets may solidify domestic and global support for preserving robust environmental safeguards[8].

However, the revised environmental licensing law remains vulnerable due to several points. The controversial Special Environmental License (LAE) remains intact, allowing politically designated projects to be fast-tracked, raising concerns about undue political influence. The vetoed provisions must still be approved by Congress, which lacks a firm majority, leaving the possibility of legislative reversal. The Federal Public Prosecutor’s Office (MPF) concerns are unresolved and highlight deficiencies in the approved text, such as permissive licensing models and automatic renewal of permissions[9]. Additionally, the executive plans to introduce a new bill or provisional measure to replace vetoed sections, posing significant risks to environmental governance and requiring careful monitoring and public scrutiny.

While Lula vetoed the most extreme version of the Special Environmental License (LAE), which would have granted all licenses in a single step, the underlying framework for fast-tracking remains in the law[10]. The LAE can still be used to accelerate the approval of high-impact projects such as hydropower plants, mining operations, oil and gas exploration, and large infrastructure like highways and ports. Many of those intersect with Indigenous lands, conservation units, and ecologically sensitive biomes like the Amazon and Atlantic Forest. By streamlining the process, these projects risk bypassing essential environmental impact assessments, technical reviews, and public consultations that are critical to preventing irreversible damage. Moreover, the vague criteria for what qualifies as a “strategic” project leave room for political discretion, increasing the potential for lobbying and corruption, particularly at the state level. Keeping LAE in place, even in a weakened form, preserves a legal shortcut that undermines environmental governance and creates a serious point of fragility in the new licensing law.

An alternative to relying on provisional legislation might be to establish a technical or regulatory framework through executive decrees that clarify specific criteria for environmental licensing. This approach could help preserve critical safeguards, such as detailed procedural guidelines and environmental review thresholds, while avoiding the political volatility and legal uncertainty of reopening the main bill. Such regulatory instruments can streamline licensing in high-priority areas while maintaining consistency with the formal legal framework[11].

From this point, the government can engage with centrist parties like MDB, PSD, and União Brasil to support the partial veto. Additionally, it can leverage allies in the Senate (where the bill still awaits a vote) to negotiate improvements. Another important aspect, which is already ongoing, is the mobilization of civil society and media to pressure lawmakers to uphold the vetoes.

The LAE raises direct concerns about Brazil standing in terms of climate and deforestation risks resulting from the weakening of its environmental regulations. Projects in Brazil will be considered riskier as a result of lower environmental and human rights safeguards. The higher ESG risk will determine higher reputational risks and a higher cost of capital. Among the major indicators of ESG risks are to be underlined: environmental pollution, climate change, biodiversity, local community impacts, indigenous people rights and human rights potential breaches in general as well as licence to operate with FPIC (Free Prior and Informed Consent).

Looser environmental licensing standards can negatively impact Brazil’s ESG rating. Investors and rating agencies such as Bloomberg, MSCI, and Refinitiv evaluate companies and countries across key themes, including emissions, environmental innovation, land use, human rights, and transparency. The inclusion of “ Controversies” layers in ESG scoring model amplifies reputational risk for companies operating under unclear or weakened environmental governance[12].

For companies in sectors like mining, infrastructure, and agribusiness, the LAE’s weakening of environmental protections ESG scores, reduced investor interest, and higher financing costs, especially if projects affect indigenous lands or bypass free, prior, and informed consent (FPIC).

In practical terms, Brazil’s environmental rollback not only threatens Amazon and its communities but also risks legitimizing the exploitative intent that can thrive under weakened regulatory safeguards, highlighting how the erosion of environmental and social protections consolidates practices that prioritize profit over rights, sustainability, and justice, and compromising Brazil’s standing in global sustainability indices.

In conclusion, while President Lula’s partial veto can be seen as the most pragmatic political strategy to avoid backlash from Congress, the Environmental Licensing Law (LAE) embedded in the bill remains a serious threat. Its potential to weaken environmental safeguards, amplify climate and human rights risks, and compromise Brazil’s ESG standing underscores that the struggle is far from over. The political landscape around the “Deforestation Bill” is still unfolding, and the outcome, shaped by both Congressional dynamics and potential legal challenges before the Supreme Federal Court, will ultimately determine whether Brazil pursues its ambitions  as a global climate leader or undermines it in favor of short-term interests.

For further information see the previous SVI article on Brazil’s Devastation Bill of 24/07/2025 as well as the following references:

[1] https://www.camara.leg.br/noticias/1186832-lula-sanciona-novo-licenciamento-ambiental-com-63-vetos/

[2] https://www.sosma.org.br/noticias/vetos-de-lula-ao-pl-do-licenciamento-ambiental

[3] https://www.ft.com/content/0915b0a1-4094-4514-b41a-691479bc83cd

[4] https://www.theguardian.com/world/2022/nov/04/brazil-supreme-court-ruling-to-reactivate-amazon-fund-gives-hope-in-fight-to-save-rainforest

[5] https://www.hrw.org/news/2021/08/24/brazil-reject-anti-indigenous-rights-bill

[6] https://g1.globo.com/politica/noticia/2025/08/08/lula-sanciona-com-vetos-projeto-que-enfraquece-regras-de-licenciamento-ambiental.ghtml

[7] https://www.camara.leg.br/noticias/1186832-lula-sanciona-novo-licenciamento-ambiental-com-63-vetos/

[8] https://insideclimatenews.org/news/30072025/un-human-rights-council-brazil-environmental-review-law/

[9] https://www.mpf.mp.br/pgr/noticias-pgr2/2025/mpf-sugere-veto-a-trechos-da-nova-lei-de-licenciamento-ambiental-por-risco-de-retrocesso

[10] https://www.socioambiental.org/noticias-socioambientais/lula-veta-pontos-importantes-do-pl-da-devastacao-mas-nova-lei-segue-com

[11] https://internationallaw.blog/2025/06/30/brazils-new-environmental-licensing-framework-for-agriculture-progress-or-pitfall/

[12] https://cdn-blob.investsmart.com.au/documents/Refinitiv%20scoring%20methodology.pdf

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