Thursday, June 17, 2010

July 17 - US Embassy, Brasilia

This afternoon I met at the US Embassy with members of the Foreign Agricultural Service - the Agricultural Attaches and Assistant Secretary of Economics.

Our meeting started with a discussion I have heard many times since arriving in Brazil, the challenge of infrastructure and the limits and economic hardships it places on producers. Brazilian agricultural is growing rapidly with a 9% increase in Q1 of 2010 alone. Though this pace is not expected to continue, the transport problem will. It is estimate that approximately $1 billion USD is lost annually because of lack of transport or increased cost. The cost of transportation is estimated at 50% of value of the crop.

The Secretary felt the GDP investment should be around 4% to meet with the current needs. The other transportation challenge lies in the "Green Belt" an area comprised of the Southern Amazon, State, Federal and Indian Preservation lands that transportation cannot cross through and must travel around. Work is under way for a East to West rail (5-10 years); the current North to South rail is owned by a mining company and has limited use and expansion capabilities. Many farmers are excited about the completion of the BR163- a route that should greatly reduce costs. The current model for transportation is a multi transport approach - truck to barge to train; truck to train to truck...... The additional stress of this type of transport is the lack of cold storage. Therefore, many crops risk being destroyed. Transportation will be the main hindrance in the rate of agricultural growth.

Soy has experienced rapid growth with investment by large buyers - ABCD - Archer Daniels Midland, Bunge, Cargill, Dreyfus. With pressure from Greenpeace, Brazilian soy has implemented the Soja Plus program. The programme will add to a separate initiative in Brazil (Soy Morotorium) that prohibits the sale of soy produced on newly deforested land in the Amazon rainforest in the far north. Nearly all Brazil's soy is grown in the southern half of the country.
Soja Plus/Soy Plus
Soy farming has been indirectly blamed for deforestation by spreading over pasture land and pushing ranchers north into the Amazon region, but government figures show the planted area has been stable since around 2003.

As an additional incentive to growers considering switching to the costlier farming methods Soja Plus requires, banks keen to promote environmentally and socially sustainable business may consider offering cut-cost loans.

The entities that developed the label include Abiove, the soy and corn producers' association in the state of Mato Grosso and the industry-funded Ares Institute for Responsible Agribusiness.
The plan will also contribute to entities' strategic aim of avoiding loss of foreign custom were buyers to impose sustainability criteria of their own for Brazilian soy imports.

Antoher challenge facing agriculture is around certification. The biggest issue with the certification is that there are many that exist and there is not one clear standard making it especially hard for small farmers to comply and survive. The FAS would like to see one standard that can be agreed to.

In a country where 80% of the population lives in the coastal area and 5% of the population have 80% of the weather, reaching the rural areas is critical for social change. The Brazilian government has a program called Bolsa Familia.
Bolsa Família, roughly translated as "Family Stipend" or "Family Grant" is a part of the Brazilian governmental welfare program Fome Zero (Zero Hunger). Bolsa Família provides financial aid to poor and indigent Brazilian families on condition that their children attend school and are vaccinated. The program attempts to both reduce short-term poverty by direct cash transfers and fight long-term poverty by increasing human capital among the poor through conditional cash transfers. It appears to benefit the younger generation the most though supporting family members also improve their life quality.

The program is a centerpiece of President Luiz Inácio Lula da Silva's social policy. Bolsa Familia is currently the largest conditional cash transfer program in the world, though the Mexican program Oportunidades was the first nation-wide program of this kind.[4]

The Bolsa Familia program has been mentioned as one factor contributing to the reduction of poverty in Brazil, which fell 27.7% during Lula's first term in government.About 12 million Brazilian families receive funds from Bolsa Família.

Given all the activity and opportunity in Brazil, there is alot of foreign investment occurring especially given that foreign investors can be land owners without Brazilian partners. Many industries are still young - like ethanol. The presence of Brazilian agriculture is tremendous and will continue to grow but at what rate will depend on continued investment.

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