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Brazil: Economy and Agriculture360°CONTEXT

Background

Brazil began life as a Portuguese colony and was consequently subjected to an imperial mercantile policy. This made it an economy that produced sugar, gold and, later, coffee. African enslaved labor and then mass European immigration provided Brazil with its labor force. Until the 1930s, the Brazilian economy relied on the production of primary products that were exported to the rest of the world. The 1930 revolution led to a dictatorship that had to face the Great Depression. As coffee prices plummeted, Brazil had to diversify its economy. From 1945, Brazil, adopted a policy of import-substitution industrialization in the same way as many other Asian and African economies scarred by colonization.

The 1964 coup saw the ouster of President João Goulart and led to the establishment of a military regime that would last 21 years. The coup led to the adoption of market friendly policies and consequently to spectacular growth that was only derailed by the oil shock of 1973. Brazil continued to grow rapidly after 1973 but it ran up a huge current-account deficit that was financed by foreign debt. When the bubble burst in 1981, Brazil went through a decade of stagflation. Inflation was around 100% in the mid 1980s. It then grew to more than 1000% thereafter and reached a record 5000% in 1993. It was only the Plano Real ("Real Plan"), instituted in the spring 1994, by Finance Minister Cardoso who went on to be elected President later that year, that successfully tackled inflation. The era of growth that began under Cardoso continued under his successor, Lula, and has made Brazil the country with the sixth-largest GDP in the world. Brazil has emerged as a major driver of economic growth and its GDP will be ranked fifth in the world by the end of 2012.

Over the last 35 years, agriculture has perhaps been the most spectacular sector for the economy. Brazil has transformed itself from a food importer into the world’s largest net exporter. In 2001, Brazilian agricultural exports totaled $16bn. By 2010, exports climbed to $62bn and exceeded $80bn in 2011. This represents an increase of 400% over 10 years. Brazil is the first tropical country to join the big farm-exporting ranks. It has invested heavily in agricultural research. Embrapa, the Brazilian Agricultural Research Corporation, has done a sterling job and its scientists are world leaders in many fields. New varieties of soybeans, historically a temperate crop, have been created that can grow in Brazil’s savannah, the cerrado. Apart from the historic crop of coffee, Brazil now grows corn, rice, wheat, sugarcane, oranges and, of course, soybean, not to mention its massive production of beef and poultry.

Why is Brazilian agriculture relevant?

Brazilian agriculture is relevant for three key reasons. First, agriculture adds a big fillip to Brazil’s economic growth. It also creates jobs in a country with wide income disparities, where employment generation acquires an even greater significance. Second, Brazil holds the promise of becoming what Hank Pellissier terms the “future farm of the planet.” This assumes significance in the light of continuing human population growth. Third, rapid agricultural growth is imposing its own strains, social and environmental, and continued agricultural success will depend on how Brazil deals with its growing pains.