7. Tax havens provide the financial secrecy allowing BlackRock to drain natural resources in developing countries

As debt vultures build their nest on paradise archipelagos, BlackRock finds a spot of white sand next to them to collect dividends from Northern corporations exploiting natural resources in developing countries. The logic is fairly straightforward. A company that reduces its taxes by electing domicile in a tax haven is able to send more money to its investors. But tax havens also provide financial secrecy and a cooperative legal environment, so that corporations and investors needn’t worry about reputational damage in the countries where operations are conducted.  

In the data I studied, the groups responsible for deforestation that received BlackRock investments are traders of beef, soy and palm oil. The largest of these companies are part of a club known as the ABCD club (Cargill, Archer-Daniels-Midland, Bunge and Dreyfus), characterized by their dominance over the trade of grain and food commodities throughout the world. Grain traders are among the oldest multinational companies, heirs of the first building blocks of capitalism from the times of Europe’s colonial empires. In spite of this, their names are not really famous. To put it mildly, these companies prefer discretion. 

The largest member of the ABCD club, Cargill, is not listed on stock markets, a fact that baffles experts because of the size of the group. Cargill has been governed by the heirs of the same family since its foundation in 1865. In 2022, the company recorded $6.68 billion in profit, the most in its history, because it profited from the food price volatility due to the war in Ukraine and the covid pandemic. According to a Bloomberg columnist, if Cargill was listed on stock markets, its market capitalization would be larger than BlackRock’s.   

Not having a public listing preserves the company from reporting to the authorities on its operations, while it has been accused in multiple cases of environmental and human rights abuse. Similar issues are frequently reported about other members of the ABCD.

Other affiliates of the ABCD club adopted the offshore approach to corporate secrecy. Bunge (purple in the barchart below), for instance, is headquartered in Bermuda (BM), while it conducts its forest risk operations in the Amazon region and Indonesia. From its Bermudian domicile, Bunge is able to issue stock shares that institutional investors like BlackRock can dip in, while maintaining a comfortable distance from tax collectors and regulators. 

The case of Archer Daniels Midland (ADM, orange in the barchart) is a good reminder that the United States (US) is a tax haven in its own right. Many of the states that constitute the union create tax incentives to compete over corporate domiciles and emulate the state of Delaware, Joe Biden’s home state. Delaware, where ADM is domiciled, is the leading state in terms of number of corporate domiciles and corporate legal environment. To the specific interest of ADM, the Extractive Industries Transparency Initiative, signed by the USA, doesn’t include forest-risk commodities like soy and palm oil.

The other large company with a Bermudian (BM) domicile is quite interesting. Jardine Matheson (brown in the barchart) is a Scottish group whose roots are intertwined with the history of Hong Kong. Because its activities are diverse and not centered on food commodities, Jardines is not considered part of the ABCD club, but its controlling positions in Indonesian agribusiness have put the group at the same level of negative forest impact. The founders of Jardines started their fortune in the opium trade, after the British Navy forced China to open its markets to the midnight oil in 1842. The conflict became known as the opium war, and eventually led to the creation of Hong Kong as an independent state under British rule. Jardines expanded to become a corporate giant in Asia, while maintaining a British leadership with close ties to the United Kingdom’s ruling institutions. In the years prior to the Handover of Hong Kong by the UK to China in 1997, Jardines moved its corporate domicile from Hong Kong to Bermuda, a measure commented at the time as a way to remove the group from the increasingly pressing hands of Chinese authorities. This may be true, but electing Bermuda as a domicile also made the Jardines group virtually unacountable for the social and ecological impact of its operations.

The trade of Bunge, ADM and Jardines in agricultural commodities doesn’t only have a destructive effect on the forest and ecology of the countries at risk (not to mention the planet), they also have a sinister impact on politics. 

In Brazil, the agricultural sector coalesced politically in the ruralista faction, which became the platform for Jair Bolsonaro’s brand of right-wing populism. Under Bolsonaro, the institutions meant to protect the forests and regulate agricultural expansion were stripped of power, forest fires soared, and indigenous defenders were persecuted or murdered on a regular basis. While groups like Bunge and ADM are sometimes convicted for ecological crimes or tax evasion, they remain largely unscathed by the violence caused by agricultural production in the Amazon region. Most of the man-made forest fires and latent warfare against indigenous populations are committed by independent farmers who sell their production to the traders, not the traders themselves. 

In 2021, forest fires in the Amazon reached such a scale that the forest emitted more carbon than it could absorb, with an excess of one billion tonnes of CO2, the equivalent of the annual emissions of Japan.  

While cattle farming is the first driver of deforestation in the Amazon, Brazilian environmental investigators estimated that BlackRock held $408 million in Brazil’s top three meatpackers in 2020. Most of the money went to the largest of them, JBS, which recorded spectacular profit that year in the middle of record demand for food commodities driven by the covid lockdown, record forest fires and Bolsonaro’s open contempt for environmental regulation. According to the same investigation, Wesley Batista, the president of JBS and heir of the founding family, owns a controlling majority of the group through a holding based in the Cayman Islands.     

Levels of capital flight, an indicator of corporate profit shifting to tax havens, are consistently high in Brazil across academic research. (See Ahmed et al., Coppola et al.).

In Indonesia, the influence of Jardines has been perceived in the Omnibus law signed by president Joko Widodo in 2020. The omnibus law was a voluminous reform presented by the political majority as a leap towards progress, but widely rejected by students, labor unions and environmental NGOs. Among other grievances, the Omnibus law was criticized for reducing labor protections and dismantling measures meant to preserve the primary forest from agribusiness. A significant part of the population revolted against the Omnibus law during protests that shook the country for more than a year. During that time the singular voice of Joko Supriyono, chairman of the Indonesian Palm Oil Producers Association, stood out in support of the law. Joko Supriyono was the vice president director of Astra, the country’s second largest palm oil producer and subsidiary of Jardines, which would gain substantially from the implementation of the new labor regulation and the removal of legal barriers against deforestation. BlackRock itself holds about $350 million in Astra International and a small direct participation in Astra Agro Lestari. Among other malpractices, Astra has been accused of land grabbing.

This article is the seventh in a series: Sink logic: how BlackRock and tax havens worsen the climate and debt crisis