Public Policies and Agricultural Investment in Brazil
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- i - Food and Agriculture Organization of the United Nations Policy Assistance Support Service (TCSP) Public Policies and Agricultural Investment in Brazil. (Final Report) By Carlos Augusto M. Santana Senior Agricultural Economist, EMBRAPA & José Rente Nascimento Senior International Consultant Brasilia – Brazil August, 2012 - ii - Disclaimer: The conclusions and recommendations presented here are those of the authors and do not represent the official policy of the Food and Agriculture Organization of the United Nations or the Government of Brazil. © 2012 Food and Agriculture Organization of the United Nations Viale delle Terme di Caracalla 00153 Rome, Italy - iii - Contents List of Boxes ............................................................................................................... iv List of Figures ............................................................................................................. iv List of Tables ............................................................................................................... v Units…………………… ......................................................................................... viii EXECUTIVE SUMMARY .......................................................................................................... IX I. INTRODUCTION ............................................................................................................. 1 II. FARMERS´ INVESTMENTS IN AGRICULTURE: FRAMEWORK FOR ANALYSIS ..................... 3 2.1 - What influences investments in agriculture ........................................................ 3 2.2 - Impacts of public policies and actions on agricultural investment ..................... 7 III. EVOLUTION OF POLICIES AFFECTING AGRICULTURAL INVESTMENTS ........................... 11 3.1 - Import-substitution Industrialization (ISI): 1960-1980 ..................................... 11 3.2 - Transition decades: 1980-2000 ......................................................................... 26 3.3 - Economic stability and growth: 2000-2010 ...................................................... 36 IV. PUBLIC POLICIES AND AGRICULTURAL INVESTMENTS IN BRAZIL ................................ 59 4.1 - Investments in agricultural land and in cultivated area with crops ................... 60 4.2 - Investments in planted area with pasture and in beef cattle raising .................. 69 4.3 - Investments in fertilizer use .............................................................................. 72 4.4 - Investments on irrigation ................................................................................... 75 4.5 - Investments in farm tractors .............................................................................. 77 V. PUBLIC POLICIES AND FARMERS’ INVESTMENT IN THE BRAZILIAN SAVANNAH: A SUCCESSFUL EXAMPLE. ............................................................................................... 79 VI. IMPLICATIONS OF POLICY INDUCED INVESTMENTS TO AGRICULTURE PERFORMANCE, FOOD SECURITY AND POVERTY ALLEVIATION ............................................................. 87 6.1- Evolution of agricultural production and trade .................................................. 87 6.2- Concentration of production by main classes of producers ............................... 90 6.3- Spatial dynamics of agricultural production and cattle raising .......................... 93 6.4- Geographic concentration of crops and cattle stock........................................... 98 6.5- Agricultural productivity .................................................................................. 100 6.6- Food security and poverty ................................................................................ 101 - iv - VII. LESSONS LEARNED FROM BRAZIL´S EXPERIENCE ...................................................... 105 VIII. BIBLIOGRAPHY ......................................................................................................... 111 List of Boxes Box 1- Guaranteed Minimum Price Policy (PGPM) ........................................................ 32 Box 2- The importance and role of foreign direct investment in agriculture ................... 35 Box 3 - Criteria for defining the beneficiary groups of PRONAF, 2009-2010 ................ 46 Box 4 - The use of zero-tillage in Brazil. .......................................................................... 54 List of Figures Figure 1 - Factors affecting investment in agriculture ........................................................ 4 Figure 2 – Brazil: total credit provided to farmers and cooperatives by purpose of expenditure, 1969-2009 (in constant value of 2009) ........................................................ 14 Figure 3 - EMBRAPA's Annual Budget, 1974-82 ........................................................... 22 Figure 4 - Brazil: sugarcane production, 1960-2009 ........................................................ 25 Figure 5 - Brazil: yearly inflation rate, 1960-2010 ........................................................... 27 Figure 6 - Commodity price and preferential credit support in Brazil ............................. 37 Figure 7 - Brazil: share of the National Rural Credit System in the estimated aggregate borrowings of the agricultural sector in 2003 ................................................................... 39 Figure 8 - Operational flow of Agribusiness Credit Note (CRA), Certificate of Agribusiness Credit Rights (CDCA) and Certificate of Agribusiness Receivable (CRA) 40 Figure 9 - Brazil: credit provided by the SNCR by credit type, 1970-2009 ..................... 41 Figure 10 - Brazil: credit provided by the SNCR by region, 2009 ................................... 41 Figure 11 - Brazil: sale of wheel tractors, 1961-2010 ...................................................... 42 Figure 12 - Brazil: sale of combines, 1976-2010 .............................................................. 43 Figure 13 - PRONAF compliance criteria, 2000-2008 ..................................................... 45 Figure 14 - PRONAF: Total credit provided by year, 1999-2011 .................................... 46 Figure 15 - PRONAF: total funds provided by credit type, 1999-2011 ........................... 47 Figure 16 - EMBRAPA´s annual budget, 1974-2010 ....................................................... 51 Figure 17 - EMBRAPA: total number of researchers, 2000-2010 ................................... 52 Figure 18 - EMBRAPA: number of research projects carried out during the 2002-2010 period (on-going and new projects) .................................................................................. 52 Figure 19 - Brazil: total international trade and agricultural exports and imports in the period 1989-2011 .............................................................................................................. 57 Figure 20 - Brazil: land purchased for agricultural purposes, 1970-2006 (2006 Reais) ... 60 Figure 21 - Brazil: harvested area with annual and perennial crops, 1973-2010 ............. 61 Figure 22- Brazil: harvested area with soybeans, 1960-2010 ........................................... 64 Figure 23 - Brazil: annual production and harvested area with coffee, 1960-2010 .......... 67 Figure 24 - Brazil: production and harvested area with rice, 1960-2010 ......................... 69 Figure 25 - Brazil: area planted with pasture, 1970-2006 ................................................ 70 Figure 26 - Brazil: Heads of cattle purchased by domestic farmers 1975-2006 ............... 71 - v - Figure 27 - Brazil: total consumption of fertilizers, 1960-2008 (Nitrogen, phosphorus and potassium) ......................................................................................................................... 74 Figure 28 - Irrigated area in Brazil, 1970-2006 ................................................................ 76 Figure 29 - Map locating Brazil’s Cerrado biome and state borders ............................... 79 Figure 30 - Factors affecting agriculture competitiveness in developing countries ......... 81 Figure 31 - Factors that contributed to the agriculture based development of the Cerrado ........................................................................................................................................... 83 Figure 32 - Soybean gravity centres ................................................................................. 95 Figure 33 - Rice gravity centres ........................................................................................ 96 Figure 34 - Sugar cane gravity centres ............................................................................. 97 Figure 35 - Livestock gravity centres ............................................................................... 98 Figure 36 - Real monthly price index for a food basket in the city of Sao Paulo, January 1975 to November 2011.................................................................................................. 102 Figure 37 - Share of Brazilian population leaving with less than USD 1.25 per day, 1990- 2008 (values in percentage) ............................................................................................ 103 Figure 38 - Brazil: evolution of soybean cultivation, 1960-1999 ................................... 109 List of Tables Table 1 - Distribution of the agricultural credit provided to group of producers and purpose of the loan (producers + cooperatives) ...............................................................