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Brazil Overtakes US and China in Farming Productivity

October 1st, 2009

soy_brazilWhen the topic is the agribusiness productive chain Brazil is heading the productivity ranking. From 1960 to 2005, agricultural productivity in the country grew on average 2% a year. Brazilians left behind countries like China (1.8%), India (1.5%), Argentina (1.5%), Canada (0.8%) and the United States (0.8%).

The figures are included in study “Sustainable Brazil – Perspectives for Brazil in Agroindustry”, elaborated in partnership between consultancy company Ernst & Young Brazil and FGV (Fundação Getúlio Vargas) Projetos. The work took into consideration the economic results of 100 countries, which represent 97% of the global Gross Domestic Product (GDP).

According to Fernando Garcia, technical coordinator of the project, the arrival of the country to the top of productivity is the result of hard work by the private initiative and also a government policy for the sector.

There are four pillars for sustaining growth: mechanization, capital for investment, formation of great industrial complexes and technological leadership. “Due to the global crisis, for example, the BNDES (Brazilian Development Bank) has acted fast: it made available credit for the purchase of machinery, reduced the Industrialized Product Tax (IPI) levied on the purchase of tractors and also financed imports. The Brazilian policies did not focus only on credit for the financing of production,” he said.

Another important point is the agricultural price policy of the country. “Here we have a liberal policy, which is important to stimulate investment and, consequently, sector productivity,” he said. According to Garcia, Argentina adopted a system of livestock price control, which had a catastrophic result. The sector lost stimulus and Argentine beef lost market share.

In the private initiative, some sectors deserve special mention, as is the case with the pulp, sugar and alcohol and beef cattle farming sectors. “These are sectors that have capital, that can finance technological advances, for example,” said Garcia.

Pulp companies, for example, are among those that innovated most from 2003 to 2005 – 52% having promoted organizational changes and 14% investing in innovation of products and processes. When the topic is investment in research and development, pulp companies also take the lead. The study shows that, in 2005, they spent 5.1% of revenues in research and development.

But to guarantee growth in coming years, Brazil still needs to advance in technology. “We have the Embrapa, which does excellent work, but we need more technicians there,” said Garcia. According to him, there are sectors that cannot “finance themselves” in the same way as the pulp sector, for example.

“These sectors need an adequate technical policy,” he said. In comparison with other countries, for example, the expenses of the Brazilian transformation industry (which covers food, beverages, paper, pulp, etc) with research and development, in comparison to revenues, is way below that of Europe and the United States.

In Brazil, it is just 0.6%, against 3.6% by American companies and 5.1% of Europeans. “This is one of the bottlenecks, which is added to the question of infrastructure,” said Garcia.

According to Garcia, it is important for the country to solve these questions, as it will be pressed to produce more – and in a sustainable manner in coming years. “The country is one of the only ones with good land available, different from the United States and Canada, and even from Argentina,” he remarks.

Food from Brazil is important to supply the giant China which, according to the study, should be the second main market for Brazilian agribusiness in 2030- the country is currently the seventh in the ranking. It will only lose to the United States.

Chinese imports (at 2007 prices) should be US$ 2.15 billion. It will be a guarantee of growth of Brazilian sector exports, which rose at an average of 10.2% a year from 1995 to 2005.

Another point that justifies the greater demand for food is the “new global growth”. This time it is developing nations that are growing. “There is social mobility and the first sector to grow is food,” said Garcia. Many people are going to have access to more sophisticated food products.

In developing nations, when there was growth, the pressure was on goods, like real estate, household appliances and cars, etc. Perspectives for 2030 are for growth of family income of 2.5% in Brazil and 6.2% in China, for example, against 1.1% in Japan.

The study about agribusiness is the fifth of a series developed by Ernst & Young and FGV Projetos. The paper analyzes the horizons of the Brazilian economy for the next two decades, considering strategic sectors for the development of the country.

Up to now, the series has covered the following topics: the potential of the housing market, economic growth and potential consumption, industrial competitiveness and energy.

Brazil in Anuga

Brazil should have a big presence at an important German food fair. Dozens of Brazilian companies will participate in the Anuga fair, one of the largest in the food and beverage sector in the world, to take place in Cologne, Germany, from October 10th to 14th. The Brazilian stand, organized by the Brazilian Export and Investment Promotion Agency (Apex-Brasil), should include 120 companies.

Brazilian companies are going to occupy a record area at the fair, 2,200 square meters. In 2007, Anuga received 163,000 visitors from 174 countries. Products like fruit, nuts, dairy, wine, sweets, chocolate, meats, special coffees and organics should be among the items presented at the fair.

Amidst 6,000 exhibitors from 95 countries, it is worth recalling that Brazil is the main global exporter of coffee, beef and poultry, orange juice and sugar, as well as being the second main exporter of soy and having the largest cattle herd in the world.

According to the Apex-Brasil, Brazilian participation in Anuga is aimed at expanding business opportunities mainly for value-added industrialized products. Several medium and small companies were selected to exhibit in the Brazilian pavilion.

With a diversified portfolio of agricultural products, Brazil exported 1,500 agribusiness sector products last year to over 200 markets in Europe, the Americas, Asia, Africa and the Middle East.


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