Every rural landowner must have an area, denominated as the legal reserve, which is  an area covered by native vegetation equivalent, in most cases, to 20% of the total area of the rural property. In cases where the legal reserve area does not meet the requirements then the Forest Code rules (Law No. 12,651 / 2012) for compensation must be applied. The area used for compensation must be equivalent in size to the area to be compensated, and be located in the same biome. To evaluate whether a property needs to regularize its legal reserve, its status on July 22nd, 2008 must be verified. Rural landowners who did not have at least 20% of their territory as a legal reserve by that date are now allowed to regularize the area by compensation. The Forest Code, SMA Resolution no. 46/2017 and the new registration process in the Rural Environmental Registry (CAR) allow compensation to be made directly between rural landowners.

In the CAR registration system it is possible to offset legal reserve areas in the system itself, as follows: a contract is made between the interested parties who must submit the CARs of the area with a deficit in the legal reserve and the area that will provide compensation by assigning part of its legal reserve. This contract is then submitted to the Secretariat of the Environment, which is responsible for evaluating and approving the process.

Even when the landowner decides to provide compensation by using a third party area, he/she remains responsible for maintaining the legal reserve. Therefore, it is important to check not only the current status of the legal reserve area that will be part of the compensation (conservation status of the area and documentation), but also the guarantees from the provider that the area will continue to be conserved over the years of the contract. The contract with the provider should include specific obligations on key issues, such as issuing annual territory maintenance reports and providing legal and technical advice to conduct the process. Furthermore, of course, it is vital to have trust in the legal reserve compensation provider, in order to give the landowner security and peace of mind during this long-term relationship.

Reservas Votorantim Ltda., which is a subsidiary of Votorantim S.A., was created to manage Votorantim S.A.’s environmental assets. It is managed under guidelines for good governance appropriate to Votorantim’s high level of reputation and responsibility. The Legado das Águas is one of Reservas Votorantim’s most important assets. It consists of an area of 31 thousand hectares of highly conserved native Atlantic Forest, corresponding to 1.5% of the remaining Atlantic Forest in the State of São Paulo. Of its total area, 75% is classified as highly conserved. In 2012, a protocol agreement was signed with the São Paulo State Government to formalize its status as a privately-owned protected area and that one of its purposes, among others, was to serve as a compensation area for legal reserves.

Following the signing of the protocol, the Legado das Águas structured a complete range of environmental solutions for rural landowners, including the compensation of legal reserves and the reforestation of legal reserves and Permanent Preservation Areas (APP).

The contract between the parties normally has a term of 15 years and the rural landowner pays an annual fee per hectare of land compensated. This fee includes: (i) security and monitoring of the area; (ii) technical support and the elaboration of CARs; (iii) half-yearly reports; (iv) benefits of being linked to an environmental project supported by the São Paulo State Government.

(The required legal documents and CARs of the areas can be prepared by the Legado das Águas, thus providing the landowner with support and peace of mind in relation to the bureaucratic process.)

The landowner will not have to invest in the purchase or maintenance of areas,  (administration, guards, fences, etc.), and will not be subject to the payment of rural land tax (ITR), the costs of maintaining its legal obligations and other related costs. Furthermore, if the landowner is a legal entity the amount paid in fees can be deducted as an expense for income tax purposes. The contract prepared by the Legado das Águas has clear rules and defined values, with a guarantee of renewal at the end of its maturity date, if the client wishes to do so.

Overall, the main advantage for those who opt for the Legado das Águas to compensate their legal reserve is the peace of mind from having their area managed by Reservas Votorantim Ltda, which is responsible for managing forests that have been conserved for decades by the Votorantim Group and which has made a public commitment to maintain the area. In this way, the landowner will be participating in the maintenance of an important ecological corridor, declared by UNESCO as a natural, social, environmental and cultural heritage of humanity.

In addition to using a third-party area, there are three other possibilities to compensate legal reserves: (i) conversion of 20% of the productive area to meet the legal reserve requirements; (ii) acquisition of another area for allocation to the legal reserve; (iii) acquisition of an Environmental Reserve Quota (regulation is still pending). The conversion of 20% of the productive area  into a legal reserve area reduces the productive area and reforestation will not always result in the formation of a forest corridor. If compensated in an isolated area then the legal reserve loses the richness provided by biodiversity. The acquisition of another area as a legal reserve allocation requires the owner to invest in the purchase of additional land and, in addition to compensating the existing deficit, an extra 20% must be purchased to serve as compensation for the legal reserve of the new property. Furthermore, there will be maintenance and administration costs for this new area (which will not always be close to the productive land). It should also be remembered that this new area needs to be protected against risks such as fires, invasions, hunting of animals or harvesting of juçara palm hearts, for example.