Minimum prices and stocks defended by Lula: formula never worked

President Luiz Inácio Lula da Silva (PT) said again this week that the government will recreate the policy of minimum prices and government purchases of agricultural products. In his speech during the launch of the National Council for Food Security (Consea), the president invoked the need for the strong hand of the State in situations of superharvests in which “sometimes, the companion is not even able to withdraw the money he invested”.

Instead of tools like rural insurance, Lula has repeatedly defended government purchases to ensure that comrades in MST settlements, for example, receive a price different from market values.

”We will guarantee that if people produce, they will not lose, because if they produce in excess, the government will buy this food for us to distribute where it needs to be distributed. And we are also going to return with the minimum price policy to guarantee that the people who plant do not suffer losses if there is a super harvest. Why is it like this in Brazil? Sometimes everyone plants, the harvest is very large, the price drops. And sometimes the partner is not even able to withdraw the money he invested”, stated Lula.

In the same line of thought, the president, when he was still a candidate, had already defended the return of Conab’s regulatory stocks: “You can stock up and, by stocking up, control the price. It will put more product on the market when the price is high”.

Government procurement programs to encourage family farming to meet the needs of public bodies, such as school lunches, are a practice adopted across the country, without major repercussions on the law of supply and demand. However, turning on the Treasury taps to perpetuate state dependence on settlers and small producers is a different story.

Stratagem to transfer resources to the MST?

Former federal deputy and former president of Incra, Xico Graziano, has been warning of the need for vigilance over this public expenditure.

“Minimum prices are unacceptable before the WTO, within established free trade agreements. Eventually they can be used for internal purchases, in specific programs, without influence on the market. They usually reward economic or, in this case, agronomic inefficiency, due to low productivity due to the poor use of technology. Socialists, or interventionists, love to use it to carry out their pranks, always speaking in the name of altruistic arguments”, says Graziano.

MBA professor at Fundação Getúlio Vargas (FGV), he warns that “probably the PT will use this artifice to, via Conab, transfer public money from the people to the MST and its cronies. And he will say that he is defending family farming”.

Lula’s declarations also clash with lessons taught, at great cost, by the recent economic history of Brazilian agriculture. Before becoming a global power in agricultural commodities, until the 1970s the country was a net food importer. Economist José Pio Martins observes that the imposition of minimum prices, and even the monopoly of government purchases, was the rule for decades in various agricultural crops.

“Everyone had to sell coffee to the government. The Instituto Brasileiro do Café (IBC) was a state agency, with an immense physical structure, full of warehouses, employees and bureaucrats”, he recalls.

Just like the IBC for coffee, there was Cetrin for wheat, the Instituto do Açúcar e do Álcool (IAA), and, finally, Cobal/Conab for the most diverse foods, such as soy, beans, corn, rice. But the practice reached a point of unsustainability in the 1990s.

Conab gigantism and tons of spoiled grains

“Imagine Conab managing 13,000 warehouses. It was the greatest tragedy. It was a shame. Beans, soybeans, corn, are products that have fungus, which can perish very quickly. Brazil began to lose millions of tons, because Conab was unable to operate its warehouses. It became a national scandal during the Collor government”, says Martins.

In the following years, Conab started to make “hands-free” interventions in the market, without operating with physical stocks. If there was a shortage of corn in the Northeast, for example, and there was surplus in Mato Grosso, the company would offer a premium (subsidy for freight) so that this product could reach pig or poultry farmers in that region.

With the technological advances in Brazilian agriculture, which is increasingly competitive globally, the company began to work more focused on surveying crops and statistics to support public policies, while also maintaining the operation of government procurement to support family farming.

According to the Minimum Price Guarantee Policy (PGPM), it is redundant, but it must be said, Conab can only form inventories when market prices are below the minimums. An unnecessary operation in the context of agricultural commodity prices in recent years.

“The government doesn’t have what to buy, it doesn’t have what to stock. Because if he buys, market prices will heat up even more. So it doesn’t make sense,” he recently told People’s Gazette Ivan Wedekin, former Secretary of Agricultural Policy at the Ministry of Agriculture.

In the past, BC movement account guaranteed money from “bottomless bag”

For economist Pio Martins, the policy of minimum prices on a large scale only existed because, for decades, until the mid-1980s, the government had a “moving account” in the name of the National Treasury that allowed issuing money without any backing.

“Banco do Brasil, and later the Central Bank, paid for everything the government spent, all the silly things it did, all the deficits. When hyperinflation exploded in 1985, with Dilson Funaro and Sarney, they concluded that that checking account was the main responsible for making money – and money in economics is anything that serves as a means of payment. And then they said: you can’t have that anymore. Why this minimum price policy, of guaranteeing 13,000 Conab warehouses with agricultural products that the government bought, only worked when there was complete freedom for the government to issue money”, he explains.

In the current reality, to make small producers self-sufficient, it would be more productive to focus efforts and investments on professionalizing property management. In the assessment of Markestrat consultant José Carlos de Lima Júnior, tools such as rural insurance, which has grown a lot in recent years, are still used by a reduced number of producers.

“At that moment, we should professionalize management, and not keep creating means so that the producer simply does not worry about seeing other mechanisms at his disposal”, he stresses.

Purchasing policy keeps producer dependent on the government

The problem, too, may lie in mistaken ideological concepts. “The economy is like a car engine. She is a mechanic. The car’s engine has a logic without which it doesn’t work. There is no left car or right car. That’s a little bit like that”, points out Pio Martins.

“Instead of working to make the low-literate producer independent, they want to make him dependent on the government, on a public policy of state protection. Dependent on the government buying the production. It is a policy to perpetuate dependency “, he laments.

Much, however, must remain in the realm of rhetoric. The assessment is that not even Lula expects that everything he says will be taken seriously, such as the supposed return of buffer stocks. “It’s that story of ‘I heard the rooster crowing, but I don’t know where’. The roosters are crowing around, but when it comes time to see, it’s difficult”, says a source who has worked at the Ministry of Agriculture.

Economist Pio Martins, in turn, is direct: “In License to Kill [filme], there was a phrase that anyone who kills someone is a criminal, you file a lawsuit. Except James Bond. Because Lula “has a license to kill”. He says what he wants. Nobody demands coherence, intelligence, intellectual level from any of Lula’s words. He keeps talking, he creates these factoids”.

The danger, he warns, is that “as the government is crazy enough”, it could be that such a factoid becomes a reality. And on a scale that is harmful to the country. As already happened.