Deforestation in the Paraguayan Chaco: how can banks manage risks from financing the cattle sector?

The Paraguayan Chaco is a part of the second largest forest area in South America, the Gran Chaco. This tropical dry forest, which is rich in unique biodiversity and stores vast amounts of carbon, has become a deforestation hotspot, due to expanding cattle ranching and increasing international demand for beef. Carbon emissions from land-use change in the Chaco have been shown to be comparable to other areas such as the Amazon Biome and tropical forest in Southeast Asia.

This briefing explains the risks that financial institutions can be exposed to through financing cattle in Paraguay, contextualised against rapid deforestation in the region. It details the full range of risks and provides key policy expectations.

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