Pedro Arraes Pereira
Brazilian Agricultural Attaché to the EU-elect and former President of Embrapa

Francisco Reifschneider
Researcher, Embrapa;

Francisco B. Souza
International Relations Secretariat, Brazilian Ministry of Agriculture and former Secretary of International Relations, Embrapa

Roberto D. Sainz
Professor, University of California, Davis, and former Secretary of Strategy and Management, Embrapa

An understanding of the fundamental role that public policy has played and continues to play in Brazilian agriculture requires a historical context. Here we will examine this context from initial European colonization to the present.

 

1534 – 1970

Until European arrival in 1500, Brazilian agriculture is one based on extraactivism. For 10,000 years or so, Amerindians practice primitive slash and burn agriculture on communal land to supplement hunting and gathering activities. Early European colonization introduces land ownership, often by aristocrats with huge land grants from the Portuguese Crown. In the far South, gauchos in the natural grasslands create a beef cattle industry. After experimenting with various crops, they find that the easily accessible coastal

Northeast is best suited to sugarcane production. Sugar is Brazil’s main export in the 17th and 18th centuries, and is only made possible by the use of slave labor. Brazil is the main destination for slaves imported from Africa, accounting for 40% of the total number of slaves brought to the Americas before slavery is abolished in 1888. Perhaps not coincidentally, the abolition of slavery coincides with the rise of the coffee industry in mountainous regions farther inland. The mid- to late 1800s sees a great influx of other European national groups, such as Italians who initially work the coffee plantations and Germans in the South. The immigrants work initially as indentured servants but also bring their own agricultural traditions. European agricultural technologies are best suited to the more temperate zones in the South, and thus is born the Brazilian wine industry in the hillier regions of the South. Therefore, during colonial times the main public policies affecting agriculture are those related to land ownership, slavery and immigration.

Jumping ahead to the mid-20th century, we find that Brazilian agriculture continues to depend primarily on sugar and coffee, concentrated in the Southeastern part of the country. In the North, rubber and cocoa extraction are important as well. Cattle and sheep ranching in the South are well established but have only regional impact. The vast lands of the Midwest are used for extensive cattle raising but the North is largely unoccupied. In the 1960s, Brazil is food insecure, needing to import much of its fruits, vegetables, and even staple foods like rice, beans, milk and meat. To further complicate matters, there has been little or no industrial development and the national balance of payments is negative, so that the country must borrow money to buy food. Food shortages are common, and some regions such as the dry and poor Northeast are subjected to frequent famines. To try to change the situation the military government approves a new law governing agrarian reform (Estatuto da Terra), and creates new institutions to promote agricultural development. These include the Brazilian Institute of Agrarian Reform (IBRA), the National Institute for Agrarian Development (INDA), and also reorganizes the research institutions in the Ministry of Agriculture, creating a National Agriculture Research Department (DNPEA) from a plethora of institutes and specialized services and regional departments. To help implement those changes, the Government gets support from international institutions and friendly governments such as Germany and the USA, with a lot of technical assistance and training via GTZ and USAID.

1970 – 1985

Faced with chronic food shortages, economic stagnation and social and political unrest, the Brazilian government embarks upon a deliberate strategy to develop the country’s agriculture, first by a total reorganization of the agricultural public sector. In 1970, the National Institute for Colonization and Land Reform (INCRA) is created by consolidating INRA and IBRA, with the mission of maintaining a register of land titles, administering public lands and land reform. By the mid-1970´s the first wave of modernization is already bearing fruits. Those changes are under way but not yet consolidated when the

oil shock created by OPEC in 1973 increases food prices worldwide, making a terrible situation even worse. It is at this point that the military government of the time made some strategic decisions that changed the course of the country, especially its agriculture, forever.

This strategy has several aims: to

secure Brazil’s territorial sovereignty, to achieve food self sufficiency, and to expand its economic base. Accordingly, the strategy has several components. Territorial sovereignty requires occupation of the Midwest and North, where there is still armed conflict with guerrillas opposed to the military regime. The government enacts measures to grant credit on favorable terms and land deeds to farmers and ranchers who must clear the land and put it into production. Large regional development Programs financed by the

World Bank and the Inter-American Development Bank facilitate the occupation of the new areas by the building of new roads and other infrastructure. These measures are concurrent with actions to promote industrial development, such as development of hydroelectric power and construction of heavy manufacturing plants. A national aerospace industry is born with the creation of EMBRAER, which to this day exports aircraft around the world. Faced with spiraling costs for imported oil, the government also supports the national petroleum company PETROBRÁS and invests billions into development of sugarcane ethanol as an alternative fuel. It will take many years for these investments to pay off, but eventually Brazil will become energy self-sufficient through a combination of hydroelectric power, domestic oil production and renewable biofuels.

Farmers and ranchers from the South and Southwest, lured by the availability of cheap (or free) land, migrate to the Midwest and North in great numbers. They are pioneers and entrepreneurs, and bring with them a wealth of knowledge and expertise about agricultural production. Unfortunately, technologies that worked well in the temperate South do not translate well into the tropical climate and acids soils they find in the Cerrado and Amazon regions. The

Brazilian government convenes a small group of agricultural scientists to find solutions, and are convinced that 1) simply importing agricultural technologies from temperate countries will continue to fail, and 2) a long term sustained effort in agricultural research and development (ARD) for the tropics

is needed. In 1974 the National Agricultural Research Organization (EMBRAPA) is created and given a very focused mandate to solve the country’s food production problems. Several Brazilian states also replicate the model. At the time, EMBRAPA’s founders had a small pool of qualified scientists originating from DNPEA, but clearly not enough, so within the first few years of operation, Embrapa sends over 1,500 young scientists abroad to obtain Master’s and Doctoral degrees. At the same time, Embrapa embarks on strategic alliances with international partners, such as USDA-ARS in the USA, CIAT in Colombia, INRA in France, JICA in Japan, and others. Initially, Embrapa is organized according to commodities, with research centers specializing in particular products such as soybeans, rice and beans, cotton, beef cattle, dairy cattle, swine and poultry, and so on. Brazilian universities are also stimulated to expand their postgraduate programs, with new funding mechanisms (e.g., CAPES, CNPq) for stipends and research projects.

1985 – Present

The return to democracy in 1985 occurs during a period of economic near-collapse in Brazil, with

hyper-inflation running over 1,200% in 1989. By then the investments in ARD have started to pay off, with the development of soil amendments to correct for nutrient-poor acid soils, and introduction of tropically adapted soybeans, pasture grasses, and other crops. Further innovations, however, are hampered by the dire economic situation on the one hand, and weak protections for intellectual property (IP) on the other. In the mid-1990s,several new policies and laws set the stage for what can only be termed an explosive expansion of Brazilian agriculture. The Plano Real of 1994 creates a new currency and stabilizes the exchange rate, bringing inflation under control in a painful but necessary way. Brazil was placed on the US Commerce Department’s Priority Watch List in 1988 for failing to protect intellectual property rights. The Uruguay Round of GATT (General Agreement on Tariffs and Trade) results in the creation of the World Trade Organization and the TRIPS (Trade-Related Aspects of Intellectual Property Rights) Accord in 1994. In 1996, Brazil enacts a new and more muscular Industrial Property Code in accordance with the provisions of TRIPS. Unlike previous laws, the new Code allows for patents related to food, chemicals, biotechnology, and foreign patents are recognized. This is followed in 1997 by the new Cultivar Protection Law, and by the Innovation Law in 2004. Stronger IP protection coupled with a more stable economy and expanding agriculture, induces multinational and domestic companies to invest in the Brazilian market. Companies such as Monsanto, Syngenta, Pioneer, BASF and others introduce new cultivars and chemicals, both imported as well as locally developed in their own research facilities in Brazil.

By the late 1980s, the original goals of territorial sovereignty and food security have been largely achieved, but at a cost. Large-scale deforestation, loss of wildlife habitat and endangered species, soil erosion and water and air pollution now become important concerns. In 1989, a new Law creates the Brazilian Institute for the Environment and Renewable Natural Resources (IBAMA). IBAMA is responsible for formulating and enforcing environmental protection policies in Brazil. Among their many activities is the enforcement of the Forestry Code. The Forestry Code of 1965 established that landowners must retain 20% of their property in native vegetation (legal reserve) nationally (50% in the Legal Amazon). A revision in 1996 expands the legal reserve in the Amazon region to 80%. In 2001 the Code is revised again to establish legal reserves of 35% in the Cerrado region. The most recent Code, from 2012, maintains the regional legal reserves, but expands the riparian exclusion zones. This series of Code revisions has the effect of placing many landowners, who were required by the government to clear land in order to obtain titles, into non-compliance, subject to fines, frozen credit, and even dispossession.

International environmental concerns also impact Brazilian policy and agriculture, specifically climate change. Starting with the Kyoto treaty and culminating in the Copenhagen accords in 2009, Brazil makes a firm commitment to reduce greenhouse gas emissions by almost 40% by 2020, 64% of which through reduced deforestation but also improved energy efficiency (20%) and improved agronomic practices (16%). New lines of very favorable credit are established aimed specifically at Low Carbon Agriculture, financing things like zero till cropping, integrated crop-livestock forestry projects, recovery of degraded pastures, and biological nitrogen fixation practices.

The new Constitution of 1988 allows redistribution of unproductive farms to landless peasants or creation of ecological reserves, with indemnization due to previous landowners. INCRA is tasked with analysis and evaluation of each case, and results are mixed. For each case of successful reforms, there are others in which peasants abandon or sell the lands they receive in the process. Government policies promote smallholder production by, for example, special lines of credit and preferential purchases for school lunch programs. Non-compliance with more stringent environmental and labor regulations combined with the possibility of invasion by landless peasants and disappropriation by INCRA create insecurities among landowners. In obedience to the law of unintended consequences, medium size farms tend to disappear in favor of larger and more consolidated landholdings.

Future

Brazilian agriculture continues to expand, if not in occupied area then certainly in terms of productivity and global impact. Agricultural exports account for around $95 billion in net revenues, compared to around $45 billion in the national balance of trade. Public policies continue to favor investments in infrastructure, legal protection, human resources and ARD. This is complemented by a vigorous private sector, ranging from agricultural producers to domestic companies and multinational corporations.

However, as Brazil has become a big player, some problems have started to appear. First, current infrastructure and logistics are inadequate to accommodate the rapid increase in exports. Historically, Brazilian ports, roads and railways were developed to serve the south and southeast regions, while production is now concentrated in the Midwest. Second, this increase has also overtaxed support services provided by the government, such as the inspection services by the Ministry of Agriculture. A third issue could be the most difficult to navigate – market access. Traditionally access to agricultural markets is highly protected and regulated, and as Brazil increases production access will be more and more difficult.

Conclusions

The rapid development of Brazilian agriculture was the result of a deliberate government strategy aimed at securing Brazil’s territorial sovereignty, achieving food self-sufficiency, and expanding its economic base. Its success was based on public policies to encourage land occupation, protect intellectual property, and invest in science and technology. More recent policies aim to enhance the sustainability of agricultural production. The importance of a legal framework to promote private investment to complement public investments cannot be overstated.