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The aim of this study is to investigate the direct and indirect impacts of sugarcane expansion on deforestation in the Brazilian Amazon from 2001 to 2008. The analysis is based on the multi-output production theory where the annual agricultural acreage represents the Production Possibility Frontier. It assumes that agricultural area is limited and any agricultural expansion occurs over traditional agricultural areas displacing some crops and pushing them to the agricultural frontier, where forests will be cleared. The econometric analysis was carried out using a panel data model where the counties are the cross section unity. The output supply for São Paulo state and the agricultural frontier states (Mato Grosso, Rondônia, Maranhão and Tocantins) in the Center-West region are estimated separately, considering the acreage as proxy of the output and the crop prices of sugarcane, soybean, corn, beans, cotton and the total annual acreage as the independent variables. The impact of crop prices and the annual agricultural crop expansion over the deforestation acreage are also estimated. Our best estimates reveal that it is not possible to establish a direct connection between sugarcane area expansion and Amazon deforestation, and while the indirect effects are very small, sugarcane also expanded over pastures and perennial crops, leading to an overall increase in annual crop area.


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