January 19 2008: 5:31 PM EST
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Soylandia (pg. 3)

The change is not entirely altruistic. Ecological correctness, Maggi argues, can drive up the value of soy and other crops. Put bluntly, he wants to segment the soy market. One segment will be high-priced products branded as "Eco OK" for green-minded buyers in Europe, the U.S., and other wealthy areas where green consumerism is taking hold; the other will be low-value, nongreen commodity products destined for poorer places. The high-end, high-profit sector will be dominated by Brazil; the rest will be left to countries like the U.S.

Indeed, U.S. growers often cannot match Mato Grosso's environmental standards. In making the environment into a competitive advantage, says João S. Campari, director of the Nature Conservancy's Cuiabá office, "Mato Grosso could become a model that leads the rest of the world."

Before that happens, Soylandia has a few obstacles to overcome. The biggest one - the one immediately apparent to anyone taking the same drive that so impressed Melby - is the roads. The entire transportation infrastructure of the Amazon is in a state of near collapse. Some of the grandiose highways built by the generals in the 1970s have simply been swallowed by the forest; others spend the rainy season as muddy swamps and the dry season as gully-ridden dust sloughs. The narrow two-lane road through Lucas do Rio Verde is among Mato Grosso's most important highways: a lethal, near-continuous assault of hurtling trucks separated by inches as they crash through potholes. It's anything but a state-of-the-art supply chain: Shipping one metric ton of soybeans from, say, Lucas do Rio Verde to Shanghai typically costs $202 on average, according to an August USDA report; by contrast, shipping the same ton from Iowa would cost $77.

Fearing that bad transportation will offset Brazil's advantages - and recognizing that eco-politics have made central governments wary of large-scale Amazon projects - business has begun building its own local infrastructure. Growers throughout Soylandia have constructed feeder roads - the equivalents of U.S. state highways - to supplement weak national road networks. In 2002 the Maggi group, Petrobras, and the Amazonas state government jointly constructed a $125 million private container port in Porto Velho, a down-at-the-heels river city on the western edge of the Brazilian Amazon (barges take the containers to an international port at Itacoatiara, farther down the Amazon). And last year Brasil Ferrovias (a subsidiary of the Brazilian holding company América Latina Logística) built a 60-mile railroad from eastern Mato Grosso to the port of Alto Araguaia, on an upper Amazon tributary.

But none of these, Maggi says, will make up for the lack of roads - it's as if the entire U.S. Farmbelt had just three north-south highways. For 20 years activists have argued that roads - which almost by definition accelerate deforestation - cannot be punched through the Amazon until sensitive forest areas are secured in parks and indigenous people are protected in reserves. Today, in Maggi's view, federal and state governments throughout Soylandia have done what the green lobby asked. Now it's time to build the roads. "The environmental stuff is much more balanced than it was historically," he says. "And without this development, Brazil won't be able to compete."

For Mato Grosso, to Maggi's way of thinking, the national government must finally push through three projects, all of which have been on the table for decades. First, BR-163 must be extended to the Amazon River city of Santarém, where U.S. agri-giant Cargill has constructed a controversial deepwater port. "You can save $40 to $50 a ton by this road alone," Maggi says. (Brazilian President Luiz Inácio Lula da Silva this year earmarked $800 million to finish the highway. But in March the government temporarily shuttered the Cargill port over an environmental dispute, and activists point to speculative deforestation stimulated by the highway.) On the eastern side of the state, Maggi says, the government must complete BR-158, which connects the eastern Amazon to São Paulo, cutting through Mato Grosso along the way. Finally, it must beat back vehement green resistance and open the Paraguay River by dredging and canalization, thus connecting Cuiabá to Brazil's Atlantic ports and its trading partners in Argentina, Paraguay, and Uruguay. Maggi is convinced that all three projects will at last go through - not least because Maggi, one of Soylandia's richest people, provided critical financial and political support to Lula during a difficult reelection campaign in 2006.

Even if the roads are built, U.S. farmers will still be able to sell their soy, says Richard Brock, president of the agricultural consulting firm Brock Associates, in Milwaukee. This year the U.S. soy harvest is projected to be 73.5 million tons, about 54 million tons of which will be used domestically. Meanwhile, China alone is expected to import 48.5 million tons of soy. "South America is providing goods for a void that we are unable to fill," Brock says. "U.S. growers will not suddenly accumulate stockpiles of unsold soybeans." Brock is similarly skeptical of Maggi's plan to create a higher-value, green version of soy. "If they do develop it, it will also be developed by the U.S.," he asserts.

True enough, says Texas A&M's Klinefelter, but this logic implicitly condemns the U.S. to the role of "supplier of last resort - the high-cost, low-grade producer you buy from when you can't buy the good stuff you want. That's not a good position to be in."

For U.S. agriculture to thrive in an era of unprecedented competition, Klinefelter says, it will have to undergo some wrenching changes. "Look at California," he says. "As real estate values have exploded and water has become more constrained, California has had to move away from commodity agriculture." The state still farms rice and cotton, both of which are heavily subsidized, but production is shifting rapidly to more valuable crops like grapes, berries, stone fruits, melons, nuts, and tomatoes. And the production is increasingly organic. Sold to the affluent, these new crops generate profits big enough to offset the state's environmental regulations and rising prices for land, labor, and water.

A classic example of this upscaling of commodities, Klinefelter says, is the bagged-salad industry. Fifteen years ago few stores sold packaged salads; lettuce was available only in heads. Today salad-in-a-bag is a $7 billion industry, the single biggest-selling fresh product in U.S. grocery stores, according to the United Fresh Produce Association. Born of high tech as surely as the iPod, packaged salad is cooled in the field, trimmed on an assembly line, triple-washed and air dried, then sealed into "equilibrium modified-atmosphere" packaging - which contains altered levels of nitrogen, carbon dioxide, and oxygen to keep the leaves looking fresh - and then quickly trucked or flown to the rest of the country. "Brazil can't do this like we can," Klinefelter says. "Growing specialized versions of food on a large scale is something that we have an advantage in," because the U.S. still has a better infrastructure and a more educated workforce.

Unfortunately, he says, U.S. agriculture is so highly subsidized that the industry is slower to move than it would be "if the market was pure - our farm programs keep excess resources in agriculture and in some cases maintain operations that are not as efficient." That delay could be dangerous. "We've had a lot of cases in which U.S. industries thought they were on top of the world," Klinefelter says, "and then suddenly they weren't."

Soylandia's hyper-responsive agro-industrial technology treadmill, its global market segmentation, its rising use of biofuels - all this gives the place a highly 21st-century feel, an aura of ascendance. Bolstering this impression, says Mayor Franz of Lucas do Rio Verde, is its population of "young, rural entrepreneurs, the offspring of the early colonists and capitalists from elsewhere in Brazil, many barely in their 40s, who are trying to make their fortune."

A few Americans, like Corzine and Melby, are attempting to take advantage of the opportunities in Soylandia - learning the language, accustoming themselves to Soylandia's cuisine, and coping with the isolation of what is in effect pioneer life. But most of them don't stay long, Franz says. "They come down here and start missing their cable TV and their Internet, and they don't come back."

"The Americans are very welcome," he adds. "But we'll also build up this place without them."

Susanna Hecht is professor of regional and international development at UCLA's School of Public Affairs. She is the author of more than a dozen books, including The Fate of the Forest: Developers, Destroyers, and Defenders of the Amazon. Charles Mann is the author of 1491: New Revelations of the Americas Before Columbus. His most recent article for Fortune, about post-Katrina New Orleans, ran in August 2006.

RESEARCH ASSOCIATE Joan L. Levinstein contributed to this article. To top of page

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