/IPS DEVELOPMENT BULLETIN/ BRAZIL: Mixed Fortunes For Primary Producers

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Jun 7 1997 (IPS) - Cattle farmers have seen a reversal in fortunes in the 1990’s but low prices for grain crops have left other famers complaining, agricultural experts say.

Cattle ranching, which slid from 25 percent of Brazil’s Gross National Product (GNP) in the mid-50’s to a low of 7.7 percent in 1989 climbed to 13.2 percent of GNP last year, according to researchers at the University of Sao Paulo.

Economic data showed heavy industry has been losing ground in the Brazilian economy for 10 years, while the service sector has grown. Global market forces have forced the Brazilian economy to make cuts in transportation and commerce while the informal market has mushroomed, researchers said.

Economists Carlos Caetano Bacha and Marcelo Rocha say that besides the improved prices for livestock, production levels also increased between seven and eight percent per year. They added, however, it is not clear if these trends can continue.

Another researcher from the University of Sao Paulo, Fernando Homem de Mello, alleged the sharp decline in agricultural income was due to agriculture’s de-facto designation as the linchpin of the “Real Plan” – put in place in mid-1994 to stabilize Brazil’s currency.

According to Homem de Mello’s calculations, 1995 profits fell 25 per cent from 1994 levels – a drop equal to ten billion lost dollars. Low agricultural prices have been decisive in the curtailment of inflation, which – for over a decade – had exceeded 100 per cent per year.

Homem de Mello says that Brazil’s current economic situation has been dominated by supply outstripping demand without any minimum government price supports. Furthermor, imported goods enjoy low-duty or no-duty status.

According to Homem d Mello, “this huge transfer of profits to overseas suppliers has been responsible for the impoverishment of Brazil’s agricultural sector.

As a result, Brazil’s 1996 harvest tumbled sharply. However, the Brazilian Institute of Geography and Statistics predicts that grain production will reach 78 million tons this year, registering growth of 6.7 per cent.

Lost income is an old complaint among farmers, who now have academic backing for their cause, observers noted. According to the Center for Agricultural Studies at the Getulio Vargas Foundation, production increased 32 per cent between 1980 and 1992, while market value fell 44 per cent.

Starting in 1990, market “opening” has been characterized by falling tariffs and erosion of other market support mechanisms. This situation has caused Brazilian farmers to lodge a number of new complaints.

The Brazilian government resorted to duty-free agricultural imports as an inflation-fighting tool – although the extraordinarily low prices of overseas commodities were made possible by subsidies, or unusually advantageous credit terms, agricultural experts said.

Brazilian producers have not enjoyed the low interest rats and lengthy repayment schedules that have made imports such a success in the Brazilian market. Flavio Turra, an engineer with the Cooperative Organization of Brazil’s southern Parana state, says that favorable credit terms made available to overseas competition have been responsible for the steep decline in Brazil’s cotton production.

In just a few years, Brazil has become one of the world’s chief importers of cotton.

Antonio de Salvo, president of the National Agriculture Federation, responded to queries on trade concessions that Brazil has granted to its three Mercosur partners by underlinging the fact that agriculture is the bargaining chip that is paying the cost of opening up Brazil’s markets.

De Salvo also noted that there were certain exceptions to Brazil’s general trade rules whereby Brazilian merchants who import goods from Mercosur must pay for all goods up front which partially eliminates any undue trade advantages.

Brazilian farmers, however, felt lost amid all the shifts in economic integration, experts say. For example, many have decided not to plant wheat since the market has been flooded with eight million tons of Argentine grain, enough to meet half Brazil’s needs.

Cotton, rice, garlic, onions, milk and milk products are othe goods from Argentina, Uruguay and Paraguay that have come to dominate the Brazil market. Last year, 53 per cent of all Brazilian agricultural imports came from these three Mercosur partners.

However, despite Brazil’s deficit with Mercosur, Brazilian cattle ranching and livestock is the economic sector that has experienced greatest export growth. Between 1992 and 1996, exports have grown by 53 per cent. In 1996, Brazil exported 14.5 billion dollars worth of goods, resulting in a trade surplus of 8.4 billion dollars, according to official statistics.

These figures contrast with Brazil’s overall trade deficit of 5.5 billion dollars in 1996, statistics which highlight ranching’s growing importance in Brazil’s national economy despite many negative factors.