Brazil Table of Contents

When examining the behavior of the agricultural sector in the postwar years, it is possible to identify two distinct periods: horizontal (geographical) expansion from 1949 to 1969 and conservative modernization, from 1970 to the present. In the immediate postwar years, Brazilian agriculture included an export sector that relied heavily on coffee but also on cotton, sugar, and a few minor commodities, and a semisubsistence sector that produced for the domestic market. At the time, the country's population, its per capita income, and its urban sector did not yet impose a large demand on the agricultural sector. With import-substitution industrialization, however, the situation changed drastically. This particular industrialization strategy required that the agricultural sector generate most of the economy's foreign exchange, produce growing outputs of food and some industrial inputs, and transfer resources for import-substitution industrialization. The transfer mechanism was a tax on the foreign exchange earned by coffee exports and the persistent implicit taxation of agriculture. The virtual exclusion of many agricultural products from the world market was caused by the highly overvalued cruzeiro, which resulted from this strategy. Consequently, the cheap domestic food policy that prevailed depressed prices in favor of the urban-industrial sector.

Paradoxically, the overall performance of agriculture during the horizontal expansion period was adequate. Agricultural GDP increased 4.2 percent a year between 1949 and 1969, a considerably higher growth rate than that of the population; between 1950 and 1959, food production increased 5.4 percent a year, and the production of exportables rose 4.1 percent annually. A major factor in this performance was horizontal expansion, that is, the incorporation of new land, especially along the agricultural frontier, made possible by an aggressive policy of road construction (see Frontier Expansion That Shaped Brazil, ch. 1). Moreover, the disincentives of the import-substitution industrialization policies were circumvented by maintaining ample access to land at concessionary terms for the landowning elite and for commercial farmers, reproducing a pattern established early in the colonial period.

By the late 1960s, it was clear that horizontal growth of agriculture was reaching its limits rapidly and that increases in productivity would be essential for a continued expansion of production. Moreover, the growth strategy of the military regime required a fast expansion of exports, including agricultural commodities. Thus, the government implemented a conservative modernization strategy consisting of technical change for a restricted number of subsectors and incentives for the formation of agribusiness complexes.

Technical change involved the development and adaptation of green-revolution technologies, geared mainly toward large agricultural operations that had important roles for mechanization and chemical inputs. Regarding the agribusiness complexes, the government provided strong incentives for the creation and expansion of processing industries and for the development and modernization of agricultural input industries. Moreover, the agricultural phase of the soymeal and oil, instant coffee, processed beef, poultry, orange juice, and sugar and alcohol agribusiness complexes received subsidized credit, guaranteed prices, and tax exemptions and subsidies when exported. Traditional, unprocessed, agricultural products, however, were subjected to heavy taxation and to price and other controls. As in the import-substitution industrialization phase, the production of cheap food was required, but only recently have government policies begun specifically to address this need.

Products benefiting from agricultural modernization responded well to the conservative modernization strategy. Their production methods underwent considerable technical change, and their production and yields increased markedly. Traditional products, however, failed to modernize and tended to perform poorly. They had scant access to credit and to the price-support policy. Moreover, they were frequently subjected to price controls, to a maze of regulations and export restrictions and quotas, and to competition from subsidized imports when they failed to supply the domestic market adequately.

At the beginning of the 1990s, the main crops in the modern segment were cocoa, cotton, rice, sugarcane, oranges, corn, soybeans, and wheat; those in the traditional segment included beans, manioc (cassava), bananas, peanuts, and coffee (see table 9, Appendix). Brazil is also one of the largest exporters of guavas, lemons, mangoes, passion fruit, tangerines, and tobacco. Crop production between 1970 and 1990 shows that the components of the modern segment grew considerably, both in production and in yield, while those of the traditional segment stagnated or declined. The growth in export crops allowed Brazil to become one of the world's largest soybean producers and to earn needed foreign exchange. It also allowed the substitution of sugarcane alcohol for imported oil.

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Source: U.S. Library of Congress