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This paper argues that deforestation in the Amazon rain forest is the result of the interaction of a domestic structural factor as well as macroeconomic disequilibria in the Brazilian economy. The structural feature is the Brazilian land-tenure system, whereas the macroeconomic factors are chronic inflation, and the trade and the foreign debt of Brazil. We show that deforestation is due to circular causation; inflation leads to deforestation and land enclosures, which lead to the expulsion of peasants from the enclosed lands, with further deforestation. Furthermore, Brazilian international trade follows the demand patterns established by world markets, which put added pressures on the forests. We also argue that the extractive reserves and other extractive-based solutions are not viable in the long run. Finally, we show that the Convention on Biological Diversity is necessary but not sufficient to ensure sustainable use of …