Deforestation in the Brazilian Amazon dropped nearly 46 per cent from August 2008 to July 2009 -- the biggest annual decline in two decades, the government said Thursday.

Analysis of satellite imagery by the National Institute for Space Research shows an estimated 7,008 square kilometres of forest were cleared during the 12-month period, the lowest rate since the government started monitoring deforestation in 1988.

"The new deforestation data represents an extraordinary and significant reduction for Brazil," President Luiz Inacio Lula da Silva said in a statement.

The numbers have been falling since 2004, when they reached a peak of 27,000 square kilometers cleared in one year, according to the space research institute.

The government credited its aggressive monitoring and enforcement measures for the drop, as well as its promotion of sustainable activities in the Amazon region, an area in northern Brazil the size of the U.S. west of the Mississippi River.

But Paulo Gustavo, environmental policy director of Conservation International, said a major factor is the drop in world prices for beef, soy and other products that drive people to clear land for agriculture in the rainforest.

"The police control has improved a little, there has been success in controlling deforestation," Gustavo said. "But the main factor is the drop in commodity prices, which are the main factor in speeding up or slowing deforestation."

Satellite images from the space research institute have allowed government inspectors to increase enforcement, the government said.

The Brazilian Environment Institute reported confiscating about 230,000 cubic metres of wood, 414 trucks and tractors and 502,000 hectares of land linked to illegal deforestation activities from August 2008 to July 2009. The government has also issued $1.6 billion in fines, the statement said.

Amazon deforestation causes 75 per cent of Brazil's greenhouse gas emissions, according to the National Inventory of Greenhouse Gases.