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Time for Brazil to Be More Than Just the World’s Farm

Brazilian corn According to Celso Grisi, director at the Foundation Institute for Administration (FIA), Brazil has a plurisectorial industry, which is great. Grisi believes that the country should focus on its exports even more. There is room for that.  "But we are still a commodity-based country. Whenever I think of commodities, I think of the value we could add if we exported the end product."

And he goes on to say: "We are the leading producer and exporter of oranges in the world. However, no one knows a Brazilian brand of orange juice in foreign countries. The same applies to coffee, to sugar. And what is the problem with having a commodity-based economy? When prices go up, we win, but if they fall, then we lose a lot. It is great to be Brazil, the farm. But we can and should be much more than just that."

Safe and Volatile

To economist Julio Almeida, when it comes to foreign investment in Brazil, "we are doing fine. Finer than ever before." In 2007, foreign direct investment totaled to US$ 33.7 billion, a record high. And it should be no different in 2008. Prior to 2007, the sum was lower than US$ 25 billion.

"This is the type of scenario that will only change if we go back to recession, high inflation and low growth rates. But this is not what is taking place. The GDP should grow approximately 5% this year, maintaining roughly the same growth rate as last year. Should we go back to growth rates of 2% to 3%, then direct investment might decrease," he says.

With regard to withdrawals of capital from the stock market (US$ 4.5 billion in June), Almeida claims: "such capital is volatile by nature, and is always difficult to foretell. Anyway, with the maturing of the São Paulo Stock Exchange (Bovespa) and of the Brazilian stock market as a whole, the trend will be for more investment to be attracted in the long run."

Minas Gerais, Chinese Style

Despite high interest rates, a heightened tax burden and depreciated exchange rates, the economy of the state of Minas Gerais is growing at a China-like pace.

A survey conducted by the Federation of Industries of the State of Minas Gerais (Fiemg) reveals that, for 11 consecutive quarters, the state's industry has grown at an average rate of 9.2%. The Fiemg calculates that revenues by the industry of Minas should end this year with 15% expansion over last year.

Compared with the accumulated result for the first six months of 2007, revenues in the first half of 2008 were 19.81% higher. This is the best first-half result in the history of the industry of Minas ever since the Real Plan (a set of measures for stabilizing the Brazilian economy) was implemented, in 1994.

The state's industrial park performed above the national average in every aspect in the first half this year. In terms of revenues, the industry of Minas posted a result 2.4% higher than the average. Using the same basis for comparison, employment level improved 10.7% in Minas, as against 5.9% in the whole of Brazil. Wage mass in the state increased 7.44%, as against a 5.6% expansion in the national average.

Inside Out

Global warming should prompt a significant change in the map of Brazilian agriculture, leading to a reduction in farming lands and losses of approximately 7.4 billion reais (US$ 4.5 billion) as of 2020, and of 14 billion reais (US$ 8.6 billion) as of 2070. The figures were taken from the survey "Global Warming and Future Scenarios for Brazilian Agriculture," which assesses the impact of rising temperatures on agriculture in 2020, 2050 and 2070.

The survey evaluated the following products: cotton, rice, bean, coffee, sugarcane, sunflower, cassava, corn and soy. It was coordinated by Hilton Silveira Pinto, of the center of Meteorological and Climatic Research Applied to Agriculture (Cepagri) of the University of Campinas (Unicamp), and Eduardo Delgado Assad, of Embrapa Agricultural Computing. The survey also counted on the collaboration of 19 researchers and was supported by the Embassy of the United Kingdom in Brazil.

The survey was conducted using climate risk zoning technology, a public policy on which the entire Brazilian agricultural credit structure is based, as it informs the risk level in more than 5,000 municipalities across Brazil for the most common agricultural products in the country.

Rural Credit

Funds applied using rural credit during the 2007/2008 crop exceeded the 58 billion reais (US$ 35.9 billion) allocated to business farming by the Brazilian government. Contracts totaled 65 billion reais (US$ 40.2 billion), 12.2% more than forecasted. The outlook for Brazilian and global agribusiness led financial agents to offer more credit and farmers to seek more financing.

Anba

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  • RoyRodgers

    Brazil needs to change it’s tax system and it’s labor law system
    As long as Brazil keeps it’s current tax and labor laws it cannot compete with the rest of the world in anything except commodities

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