Agro boosts GDP and reduces inequality – 07/10/2023 – Market

Biggest surprise in the 1.9% growth of GDP (Gross Domestic Product) in the first quarter of this year, agricultural production jumped 21.6% in the period, compared to the last three months of 2022.

In the new IBGE Census, the Midwest and North of Brazil, the most recent agricultural frontiers, were the only regions with a population increase greater than the national average. They grew 1.23% and 0.75%, respectively, above the 0.52% in the country.

In recent years, agribusiness has been transforming culture and cities in Brazil, raising the income of some states above average, reducing inequality and attracting a new wave of migrants looking for opportunities.

Protagonist of Rede Globo’s main soap opera, “Terra e Paixão”, and theme for new musical hits, agribusiness attracts billions of reais in investments, enhancing the industrial and service sectors.

In 16 years, the GDPs of Mato Grosso, Tocantins, Piauí and Rondônia grew at a much higher pace than that of several states —and more than double in relation to São Paulo. Today, 25% of the Brazilian GDP comes from agribusiness.

According to FGV Social, the average per capita income from work in the Midwest is the highest in the country. In terms of inequality measured by the Gini index (from 0 to 1; the lower, the better), it is the second least unequal region (0.57), only behind the South (0.54), which has been agricultural for many decades. Both are better than the Southeast (0.59), richer, North (0.61) and Northeast (0.67).

“The indicators for the Midwest and states in the North, such as Rondônia and Tocantins, which are part of the same process, have been surprising”, says Marcelo Neri, director of FGV Social.

Projections from the US Department of Agriculture consider that Brazilian agriculture should lead the increase in food production and exports until 2027, sustaining growth in these regions.

In Mato Grosso, in cities like Sorriso, Campo Novo do Parecis and Sapezal, thousands of workers from Maranhão, Bahia, Minas Gerais and other places come looking for jobs. In the state, real estate subdivisions invade farms to expand.

While in the Midwest the growth of agriculture is due to increased productivity, in the South, with land already practically occupied, the activity is verticalized, adding value.

In Cafelândia, Paraná, grain and animal protein producers manufacture private label items sold in Japan. Tilapia fillets from Paraná arrive in Manaus.

Agribusiness directly employs 20% of Brazilians — with a trend towards a decline in work on farms and an increase in agribusiness and services related to the activity. This account does not include civil construction, trade in other services, expanding around agribusiness.

The dark side of this story is that agribusiness accounted, last year, for 87% of the 2,575 people rescued in situations analogous to slavery, according to the Ministry of Labor and Employment. Since 1995, there have been more than 60 thousand rescues, concentrated in the activity, which directly employs 18 million people.

It is also a very concentrated sector. According to the 2017 Agricultural Census, 4% of the properties own 63% of the land. In contrast, 65% of rural establishments represent 9% of the minimum areas for subsistence and small production, with up to one fiscal module (which vary from 5 to 110 hectares, depending on the municipality). One hectare corresponds to 10 thousand m².

In the last decade, the revenues that irrigated Brazilian farms, and that leaked to the surrounding municipalities, jumped by almost 40%, reaching R$ 1.2 trillion this year.

According to the consultancy MB Associados, in 2023 economic activity should grow 6% in the agricultural states of the South and 5.1% in the Midwest. The advance will be 2.8% in the North; 1.4% in the Northeast and 1.2% in the Southeast. “In states in the Midwest, the weight of agriculture in GDP already reaches 50%”, says Sérgio Vale, chief economist at MB Associados.

Despite the transformative dynamism, with nearby cities growing fast, with good infrastructure and urban conservation, agribusiness remains controversial in Brazil.

For Xico Graziano, an agronomist and professor at FGV, there is a “certain prejudice on the part of left-wing elites towards agro”. “They treat it as if it were the old oligarchy. But it is a story of entrepreneurs, which nobody tells”, he says.

In this context, however, ruralists, mostly Bolsonarists, and the Ministry of the Environment and NGOs in the area exchange accusations about deforestation and the use of pesticides.

The ministry recognizes, however, that less than 2% of producers disrespect the Forestry Code. They are, according to minister Marina Silva, the “ogribusiness”.

Sector businessmen do little to separate the “wheat from the chaff”. And ruralists in Congress do not miss opportunities to change laws or empty the Environment portfolio, as recently, with the transfer of the Rural Environmental Registry (CAR, a kind of self-declared CPF for producers) to the Ministry of Management.

The most recent MapBiomas Annual Deforestation Report, which consolidates data from the national territory, reveals that, in four years (2019 to 2022), more than 303 thousand deforestation events were reported, totaling 6.6 million hectares, the equivalent of one and a half times the area of ​​the state of Rio de Janeiro. Pará and Amazonas, frontiers for land grabbers and miners, lead the clearings.

According to Ludmila Rattis, from the Instituto de Pesquisa Ambiental da Amazônia, the Amazon region concentrates territory equivalent to that of Spain in public land without destination. They are where most of the deforestation takes place.

Overall, agriculture uses only 9% of Brazilian land in two annual harvests — or three, in some cases, with irrigation. Another 26% are pastures, many of them degraded areas that can still be occupied by crops.

“In degraded lands, with poor pastures, that’s where we advance with agriculture, with enormous gains in productivity. We don’t need even one more hectare of deforestation”, says Roberto Rodrigues, former Minister of Agriculture in the Lula 1 government.

For Juliano Assunção, professor at PUC-Rio and director of the Climate Policy Initiative, it would be possible to double production, without deforesting, by spreading the technology that agriculture already has to degraded lands in municipalities with soil characteristics similar to those that already produce.

In addition to the work of pioneers who pioneered the country, part of the success of agribusiness is due to the State’s initiative for the creation of Embrapa, 50 years ago, during the military dictatorship. The state-owned company sent hundreds of technicians to various parts of the world to study and research different handling and planting techniques.

At the time, Brazil also heavily subsidized producers. Today, it is the country that, by far, least encourages rural activity, in proportion to what it harvests.

The result of this process was leaps in productivity. In the early 1990s, Brazil occupied 39 million hectares to produce 58.3 million tons of grain. Today, it uses 78 million hectares (+100% compared to 1990) and produces 316 million tons (+445%), according to the Ministry of Agriculture and Livestock.

Another data from the folder shows that, in the last two decades, the total factor productivity of Brazilian agriculture grew 3.2% per year, on average. In China, the increase was 2%; in the US, 0.5%.

Of the nearly 7 million properties listed in the Rural Environmental Registry, only 16% account for around 90% of production, mainly of grains for export, according to Fernando Camargo, of the Inter-American Institute for Cooperation on Agriculture. China and Asia, European Union, Middle East and USA are the main destinations.

Were it not for agribusiness exports, Brazil would have registered a deficit in its trade balance in almost every year in recent decades, with disastrous consequences for the macroeconomy.

Despite the superlative numbers of production and exports, the food that arrives at the table of Brazilians is mostly a product of family farming.

With 3.9 million properties, according to the 2017 Agricultural Census, family farmers represent 77% of establishments, but occupy only 23% of agricultural land. Employing around 10 million people, they form the most fragile group in the sector, including in relation to climate change.

Despite the advances, infrastructure continues to be the great vulnerability of agribusiness. “The Brazilian agro is only competent from the gate inwards. Outwards, it bears very high costs”, says Camargo.

Highly dependent on road transport, in a continental country with many roads considered bad, there is a deficiency in the rail, port and storage systems – with the capacity to store only 15% of what properties produce, compared to 54% in the USA.