Topics Topics
Image: International Markets & Trade

Basic Information



Related Reports

Macroeconomic reforms
Agricultural research
Structural changes

Brazil is a large country with a land area larger than the continental United States. Brazil's population of 193.7 million in 2010 is the largest in Latin America and is expected to grow by an additional 20 million over the coming decade. Brazil, the seventh-largest economy in the world, is Latin America's biggest economy, producing 38 percent of the continent's gross domestic product according to the World Bank. Brazil is categorized by the World Bank as upper middle income country with per capita gross national income of $9,390 in 2010. The average masks a disparity between the very rich and very poor. The richest 10 percent of the population receive 43 percent of total income while the poorest 50 percent receive less than 10 percent (World Bank). Twenty-two percent of the Brazilian population lives in poverty, and rural poverty is especially prevalent. While most countries have their own definition of poverty, in Brazil, the poor are those earning a monthly per capita household income of less than half the minimum wage (in 2010, Brazil's minimum wage was $290 per month or R$510).

Brazil is a large agribusiness producer and major food supplier to international markets. Agriculture plays an important role in the economy. The agrifood sector (production agriculture plus associated processing and marketing activities) accounted for almost 28 percent of the country's GDP in 2009. The sector employed over 16.4 million people that year, or 17.5 percent of the country's labor force. The growth in Brazil's agricultural sector has been mostly attributable to economywide trade and regulatory reforms, including privatization, opening up to external financial capital, and regulation of the financial sector. The value of Brazil's agricultural exports reached $62.4 billion in 2010, more than a quarter of total exports. Improved economic performance, growing per capita income, and a more balanced income distribution-combined with continued population growth-are expected to continue expanding the quantity and quality of food products demanded by Brazilian consumers.

Brazil Key Statistics

Population, 2010 (million persons 1/
193.7
Estimated population growth (annual percentage increase, 2010-20) 2/
1.04
Gross domestic product (GDP), 2009 (US$ billion) 2/
1,594
GDP from agriculture, 2009 (US$ billion) 2/
66
Gross national income per capita, 2009 (US$) 1/
9,390
Employment in agriculture, 2006 (% of total employment)
19
Land area
Total (million hectares) 3/
329.9
Permanent crops
11.6
Temporary crops
48.2
Natural pastures
57.3
Planted pastures
101.4
Florests
94.0
Planted florests
4.5
Degraded pastureland
12.9
Agricultural exports, 2010 (US$ billion) 4/
62.4
Agricultural imports, 2010 (US$ billion) 4/
8.6
1/ World Bank, World Development Indicators database http://ddp-ext.worldbank.org/ext/ddpreports, June 2010
2/ Banco Central do Brasil http://www.bcb.gov.br
3/ Instituto Brasileiro de Geografia e Estatistica (IBGE) http://www.ibge.gov.br
4/ Global Trade Information Services

Brazil is endowed with a large arable area with regional differences in climate, topography, soil, and natural vegetation. The spatial distribution of agricultural production in Brazil is divided into five regions (Southeast, South, Center-West, North, and Northeast) defined by State boundaries and similar characteristics regarding climate, topography, soil, natural vegetation, and agricultural land use (fig. 1). Improvements in technology and productivity and an expansion of cultivated area have allowed the country to increase agricultural production more than fivefold during the past 30 years.

The domestic agrifood industry has undergone a process of rapid modernization, aided by policy changes and capital inflows and accompanied by transfers of new technology and the development of supply chains. These changes have resulted in further reductions in production costs and greater efficiency, which in turn have increased exports. (For information on Brazil's exports and imports, see the Trade chapter.) Yet, despite its successes, Brazil's farm sector is still far from reaching its potential, largely due to poor government budgetary management that has led to periods of high and hyper inflation and to dramatic exchange rate devaluations.

Macroeconomic Reforms Foster Agricultural Competitiveness

Brazil for several decades pursued a highly protectionist, import-substituting industrialization policy that discriminated against agriculture. Beginning in the late 1980s, Brazil began to pursue more open trade and development policies, which gained pace from 1990 on. Agricultural trade liberalization was complemented by investment in agricultural research.

The most significant economic factor affecting agricultural output in Brazil since the mid-1990s was introduction of the successful "Real Economic Stabilization Plan." Before 1994, Brazil experienced inflation levels often well above 1,000 percent a year. To halt inflation, a new currency, the Real, was introduced in 1994, which was initially pegged to the U.S. dollar and later followed a "crawling peg" policy of nominal depreciation of the Real against the dollar. The "Real Plan" stabilized the economy, reducing inflation to around 5 percent per year and set off a domestic demand boom that lasted 5 years. In early 1999, Brazil adopted a floating exchange rate. The Real depreciated considerably, making Brazil an attractive low-cost supplier of food and agricultural products.

The resulting economic and political stability during the 1990s-along with rising incomes, privatization, and elimination of remaining barriers to foreign direct investment (FDI)-facilitated the entry of multinational companies into Brazil. Since then, FDI in Brazil's agrifood sector has been significant, second only to China among developing countries. According to the World Bank, Brazil receives 33 percent of all FDI in Latin America. The single most important source of FDI in agriculture has been the United States (20 percent of the total) due to the geographic proximity and their complementary cropping seasons.

Multinational firms in Brazil have also contributed to production increases by granting credit to producers to buy inputs (fertilizers, seeds, and chemicals), alleviating some of the difficulties that Brazilian producers have in obtaining credit from commercial banks.

Agricultural Research and Expanding the Agricultural Frontier and Production

During the 1980s and 1990s, the role for agriculture was to meet domestic demand while creating and promoting new export sectors. Agricultural policy sought to disseminate new technologies and set up new industries to supply inputs and machinery for production agriculture. Government investment in research was the single most important factor for the rapid technological development of the farm sector. Agricultural research was conducted by several public and private Brazilian research institutions and universities, but it was EMBRAPA (Empresa Brasileira de Pesquisa Agropecuária), the agricultural research agency linked to the Ministry of Agriculture and Food Supply, that played the key role in developing and disseminating new agricultural technologies.

Created in 1973, EMBRAPA's primary task was applied research on cereals, animal production, fruits, and vegetables to generate and transfer new technologies, genetic materials, and production practices that increase production. Since its creation and throughout the1980s, the main focus was regional adaptive research-the adaptation of agricultural systems to new production frontiers, particularly the semi-arid and acidic soils of theCerrados. TheCerradoconsists largely of savannahs and grasslands, and has topography, climate, and soils that encouraged farmers from Southeastern Brazil to invest in soybean, corn, cotton, and sugarcane cultivation and large cattle raising operations. These large scale, technologically intensive, and mechanized operations lowered production costs and helped Brazil to expand its productive capacity. Later EMBRAPA expanded its efforts to high-yielding and disease-resistant crop varieties, seed development for rice, beans, wheat, and potatoes, and improved grass varieties to match new livestock breeding programs.

The investments in agricultural research resulted in productivity advances for crops and animal products. Crop yields increased across the board, with the greatest gains for cotton, corn, soybeans, wheat, and sugarcane. Cotton yields grew seven-fold between 1970 and 2006; corn yields tripled between 1970 and 2006, soybean and wheat yields doubled between 1970 and 2006, and sugarcane yields increased one and a half times between 1970 and 2006. Yields of beef, pork, and poultry meat also increased significantly.

This period of investment by EMBRAPA, which coincided with the nation's plan to develop intensive agriculture systems in the agricultural frontier, has yielded impressive results. In 2010, the Center-West accounted for 75 percent of the cotton, 55 percent of the soybeans, 36 percent of the corn, and 20 percent of the sugarcane produced in the country.

In addition to expanding export markets, a principal factor fueling growth and modernization in the crop sector was Brazil's expanding poultry and hog industries. While output of edible beans and rice, major food staples, expanded roughly at the rate of population growth, soybean and corn production grew much more rapidly. Corn was once considered a Brazilian subsistence crop, but rising demand for meat and eggs associated with higher consumer incomes led to an expansion of the mixed feed industry to supply Brazil's fast growing poultry and hog industries.

During the early 1990s, the Government continued the process of reducing intervention in agricultural markets by completing the privatization of state enterprises initiated a decade earlier. All importable commodities-once subject to stock management by State-owned companies-were freed from government intervention as the marketing boards for wheat, milk, coffee, and sugar were eliminated. The establishment of minimum prices for producers, with floor prices for most crops, replaced the role of previously existing marketing boards.

Structural Changes in Brazil's Agricultural Sector

Brazil has made great strides in moving from traditional to modern, large-scale agriculture, especially for grain, oilseed, and meat production. The Brazilian Institute of Geography and Statistics-(Instituto Brasileiro de Geografia e Estatística, IBGE) reports the number of farms in Brazil at 5.2 million. The number of small subsistence farms with less than 10 hectares (1 hectare = 2.47 acres) is still quite large, accounting for close to half of the total. Farms larger than 1,000 hectares represent only 1 percent of all farms, but 45 percent of the area farmed.

Chart data   

Technology is increasingly important in defining the size of the farm unit. Grains and livestock products are typically produced on large scale farms, whereas staple commodities are produced on small family farms. This pattern poses new questions for government policies. The Brazilian government is increasingly concentrating its support on small subsistence farms and is committed to a broad land reform program. Financial resources available for commercial farmers are typically less than a third of the resources allocated for subsistence farming.

In Brazil, financing for agriculture comes from three sources: about one-third is from government agricultural credit disbursed through the National System of Rural Credit (known as SNCR); agricultural processors (about 17 percent); and commercial banks or other government agencies (the remaining one-half of the credit). This is a change from pre-1994 reforms when the Government provided the bulk of the credit needs. Investment credit provided by the Government at subsidized rates and allocated annually in the Brazilian Agricultural Plan accounts for roughly 25 percent of the total and has been directed towards the financing of crop, livestock, agricultural infrastructure, and capital equipment investments (including machinery for planting, harvesting, and livestock products), and pastureland expansion (including pasture development and recuperation of degraded pasturelands). (For information on Brazil's domestic support and credit programs for agriculture, see the Policy chapter.)

Last updated: Wednesday, May 30, 2012

For more information contact: Constanza Valdes

Share or Save this Page

Text Only Options

Top of page


Text Only Options

Open the original version of this page.

Usablenet Assistive is a UsableNet product. Usablenet Assistive Main Page.