Agribusiness responsible for bulk of offshore companies set up by Bolivian firms, Panama Papers investigation finds

A new Panama Papers investigation has revealed that the Bolivian agribusiness sector, long plagued by illegalities, has made extensive use of offshore accounts to avoid paying taxes.

Twenty Bolivian agribusinesses set up offshore companies between 1994 and 2015, outstripping any other sector of the country’s economy.

Analysis by Earthsight shows that the use of offshore companies was accompanied by a dramatic rise in illegal deforestation in the department of Santa Cruz, where all twenty of the firms were based. The use of secrecy jurisdictions, while not in itself illegal, may have exacerbated the expansion of illegal agriculture by reducing tax burdens and increasing the profitability of the sector.

Growth in the use of offshore firms was triggered by two circumstances: the election of self-described socialist Evo Morales; and rising commodity prices, especially soy.

According to data from Bolivia’s Economy Ministry, soybean prices first peaked at $554 per ton in 2007, then peaked again at $623 per ton in 2012. This mirrors the years during which the largest number of offshore companies were created.

Not only were agribusinesses earning more money during this period, but they were facing intensified pressure to pay their taxes. Following the election of Morales in 2006, Bolivia’s tax authorities began auditing the past affairs of companies, resulting in a 24% increase in tax receipts in 2008. Between 2010 and 2011, receipts grew by a further 34%.

Earthsight’s own analysis reveals that a rapid rise in illegal deforestation accompanied the increased use of offshore companies by Bolivian agribusiness.

According to the Bolivian forest enforcement agency ABT, 118,000 hectares (ha) were cleared illegally in 2012, 158,000ha in 2013, and a further 118,000ha in 2014. During that three-year period, 85% of all deforestation in Bolivia was illegal. 70% of the illegal deforestation took place in the department of Santa Cruz.

2016 witnessed a four-fold spike in the number of land fires recorded by the agency, commonly used to clear land for cattle and crops.

More recently, a 2017 investigation by US NGO Mighty Earth documented several instances of deforestation for industrial soy planting in Santa Cruz, finding “massive, out-of-control fires raging through the landscape.”

The Panama Papers investigation, conducted by the International Consortium of Investigative Journalists in conjunction with Bolivian newspapers El Deber and Los Tiempos, found that 127 offshore companies were set up by Bolivian related companies between 1994 and 2015. 93% were established after Morales came to power in 2006. After agribusiness, 18 were dedicated to importing goods, 15 to mining, and 11 to insurance and banking.

Offshore companies serve to hide the owner of a company, or to transfer its operations to a territory with better fiscal advantages, principally lower taxes. Details of companies and individuals using the arrangement were revealed in a massive leak of documents relating to clients of the law firm Mossack Fonseca in 2015, which came to be known as the Panama Papers.