Feed the Future
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Policy Tools to Transform Agriculture: the Brazil Experience

Agricultural transformation is a complex objective that occurs through a number of complementary and coordinated technical and policy initiatives that foster sustained environmental, economic and social development. Enabling environment reforms, which address both formal and informal rules and regulations, are a key element of a successful agricultural transformation anywhere in the world. Despite the need for additional action, Brazil is a dramatic example of how enabling environment reforms can transform a country’s agricultural sector to achieve remarkable growth.

Brazil currently ranks as the third largest world agricultural exporter in the world. The diversified, US $100 billion per annum [1] Brazilian agricultural export basket includes coffee (responsible for approximately one-third of global production), soybeans (the number two global producer and largest exporter), beef (hosting the largest commercial cattle herd in the world), sugarcane (the largest producer and exporter in the world), cocoa (the number six producer in the world), ethanol (the world’s largest exporter) and frozen chicken (the world’s largest exporter), among other goods. High productivity has become the norm. Brazil’s total factor productivity (TFP) [2] for agriculture grew from a minuscule 0.17 percent annually in the early 1960s to 3.15 percent in 2012, one of the fastest TFP growth rates in the world.

What accounts for this remarkable growth? In addition to increased public investment in agricultural research (the country is a world leader in agricultural techniques, such as replacing nitrogen fertilizers for biological fixation), Brazil also carried out complementary agronomic activities, such as correcting the level of acidity in the central part of the country (cerrados) with USAID support. Brazil also implemented coordinated, pro-growth agricultural public policies to steer the country away from a past marked by interventionist and protectionist measures.

The transformation of Brazilian agriculture since the 1960s included the implementation of enabling environment reforms, many of which are practical examples that can be shared with other developing countries. These reforms focused on:

  • Deregulation
  • Elimination of subsidies
  • Elimination of trade barriers
  • Inclusion of environmental and sustainability criteria into farm support programs
  • Availability of credit for seeds, fertilizers, agrochemicals and machinery equipment

In the case of sugarcane, deregulation included the elimination of a complex framework that lasted until the late 1990s and worked to the detriment of the private sector. Main points:

  • Producer prices were set by the government
  • Producers in the northeast part of the country were the only ones allowed to export
  • The government enjoyed a monopoly on purchasing and distributing final products, including alcohol (methanol) produced from sugarcane in Brazil and used to power motor vehicles

As a result of eliminating this complex framework, sugarcane production increased from 89 million to 696 million metric tons in the period between 1976 and 2010. During the same time period, ethanol production increased from 0.60 billion litters in 1976 to 25.56 billion liters in 2010. [3]

Challenges certainly exist along Brazil’s path to developing a fully resilient and sustainable agricultural sector. Those include, among others, the need for significantly improving the country’s transportation and logistics infrastructure, updating its existing legislation and reducing non-tariff barriers, and the pressing need to increase the number of Brazil’s Free Trade Agreements with other countries. These topics will be addressed in a future blog.

Sources:

[1] Brazilian Ministry of Agriculture

[2] Total Factor Productivity (TFP) for agriculture: TFP takes into account all the land, labor, capital, and material resources used in farm production, comparing them with the total amount of crop and livestock output. It measures the efficiency with which inputs of capital as well as labor are used for agricultural production.

[3] Pereira et al. Agriculture & Food Security, 2012

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