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The answer to this question, as one can imagine, is not simple and must take into account a set of factors that characterize Brazilian agriculture and its complexity, such as productive conditions, market performance, food security for the population, generation of jobs and opportunities in rural areas, the generation of international currency and the relationship between the producer and the environment.
This text does not aim to exhaust this major topic of debate and research, but it provides some indicators that allow us to build a preliminary and comparative idea regarding the level of government spending on Brazilian agriculture.
The Organization for Economic Cooperation and Development (OECD) annually publishes indicators that quantify government support for agriculture in several countries, including Brazil. Such indicators measure the value transferred from consumers and taxpayers to producers, whether individually or to the agricultural sector collectively. Among the main support modalities classified by the OECD, the following stand out:
Total Support Estimate (TSE): refers to the total annual value transferred from taxpayers and consumers to agriculture, as well as the subsidies offered to consumers of agricultural products, minus the associated budget revenues.
Producer support estimate (PSE) – refers to the value of gross transfers to agricultural producers individually, directed by agricultural policy mechanisms, such as support for marketing prices, credit and rural insurance subsidies and other subsidies to producer.
Estimate of support for general agricultural services (GSSE) – refers to the value of gross transfers to agriculture through agricultural policy instruments that benefit the sector as a whole (and not the individual producer), such as agricultural systems of research, development and innovation, health inspection and control systems and agricultural infrastructure.
Let's go to the data. Considering the period from 2000 to 2020, Brazil decreased, in real terms, the level of total support for agriculture (TSE) from US$ 19.34 billion to US$ 4.45 billion[1] (decrease of 77%). This reduction trend was followed by some countries, such as South Africa, with a drop of 65%, and, to a lesser extent, by Russia, the United States and the European Union, which presented decreases in the TSE of the order of 10%, 7% and 1%, respectively, in the same period. In the opposite direction, China considerably increased its TSE, jumping from US$ 40.91 billion in 2000 to US$ 232.38 billion in 2020, real growth of 468% in the period.
It is clear that the amount of resources used to support agriculture depends, among other factors, on the economic size of the country and the weight of agriculture in the economy. However, even if taken as a proportion of GDP, the Brazilian TSE, which represented only 0.34% in 2020, is significantly below cases such as China, where the TSE/GDP ratio is 1.59%, in the European Union (0.66% ) and the United States (0.46%).
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It is worth mentioning that, considering the average values from 2015 to 2020, the weight of Chinese agriculture in GDP is 1.6 times greater than in the case of Brazil, while the TSE/GDP ratio in China is 5.2 times higher than in Brazil. . This reasoning applies to other comparisons: while the share of Brazilian agriculture in GDP is practically 5 times higher than that of the United States, the TSE/GDP ratio in Brazil is 25% lower than that of the North American; compared to the European Union, the weight of Brazilian agriculture in GDP is 20% higher, but the TSE/GDP ratio is 44% lower.
This shows that, when compared to these countries, the Brazilian government spends little on its agriculture. But it is possible to have a slightly more detailed diagnosis on the topic, analyzing two of the main components of the TSE: the PSE and the GSSE.
With regard to direct support to rural producers (PSE), Brazil also presented a significant real reduction in the accumulated result of the last two decades, going from US$ 13.81 billion in 2000 to US$ 1.96 billion in 2020, a drop of 86% in period (OECD, 2021). When taken in relation to gross agricultural revenue (RBA), the PSE/RBA ratio, which was 9.08% in 2000, dropped to just 1.35% in 2020. By way of comparison, in the European Union, the PSE/RBA ratio was of 19.33% in 2020 and, in OECD member countries, of 18.07%, while in China, the United States and Russia the ratios were 12.17%, 11.03% and 6.68%, respectively.
The reduction in this protection for Brazilian agricultural production intensified from 2011, when the country reached a peak of US$ 21.62 billion (6.86% from the RBA) and, with the exception of 2016, this amount has decreased year after year since then, either in absolute monetary terms or as a proportion of gross revenues from agriculture.
In terms of the composition of the PSE – which is divided into: payments linked to the production of commodities; linked to the use of predetermined agricultural inputs; linked to the quantity of area, number of animals, revenues and income of the establishments; and in payments not linked to production –, between 2000 and 2011, the average share of payments linked to commodity production was 49% of the PSE, falling to 23%, on average, between 2012 and 2020. This increased the share of linked payments to the use of inputs (machines, fertilizers, correctives, pesticides, animal feed and medicines, among others) for PSE 73%, on average, between 2012 and 2020, even though the absolute total of PSE resources has significantly reduced.
These data show a redirection of the agricultural policy instruments responsible for this direct subsidy, in the sense of using the scarce resources of direct support to the producer to intervene less in the sense of “what to produce” and more in the sense of “how to produce”.
In the case of support linked to the use of inputs, the main agricultural policy instruments are rural credit and rural insurance, which have been linked to environmental criteria and pre-established agricultural practices[2] OECD (2021). Brazil has specific programs and lines of credit associated with the promotion of sustainable agricultural practices, such as the Low Carbon Agriculture Program (ABC), which allocates credit for the recovery of degraded pastures, organic agriculture and livestock, planting forests, improving systems production and preservation of natural resources. Furthermore, the National Program for Strengthening Family Agriculture stands out as the main source of subsidies for small-scale family agricultural production, representing a front with potential for reducing socioeconomic inequalities in rural Brazil.
In relation to rural insurance, four main programs support farmers, through insurance premium subsidies and compensation to producers for production losses due to natural disasters: Rural Insurance Premium Subsidy Program (PSR); the Agricultural Activity Guarantee Program (Proagro); Proagro-Mais; and the Harvest Guarantee Program. The first two are aimed at commercial farmers and concentrate their resources in the Center-South region of the country and in the production of grains, especially soy. The last two are linked to family farming and small-scale producers.
In addition to these programs, the OECD highlights incentives for the production of biofuels – ethanol and biodiesel – and institutional food purchasing programs, such as the Food Acquisition Program (PAA), created in 2003 with the purpose of promoting access to food and stimulate family farming (MDS, 2021), and the National School Feeding Program (PNAE), which since 2009 has allocated 30% of its resources to the acquisition of family farming products (FNDE, 2021).
With regard to support for general agricultural services (GSSE), again what is seen is a systematic reduction of resources, although to a lesser extent than the case of PSE. After real and sustained growth during the commodities boom (2003 to 2011), when it jumped from US$ 2.53 billion to US$ 6.75 billion, the indicator has shown consecutive absolute drops and ended 2020 at the level of US$ 1.75 billion . Even so, the GSSE gained a share in the total support for Brazilian agriculture (TSE), but not due to increases in resources but rather due to a pure statistical effect.
Finally, it is necessary to look at the conditions present in rural Brazil and reflect on the effectiveness of these expenses. According to data from the 2017 Agricultural Census, only 20% of agricultural establishments receive technical guidance in Brazil (and only 8% receive technical guidance from government agencies). The reality worsens in the North and Northeast, where the percentages reach, respectively, 10% and 8%. In the South region, on the other hand, 49% of establishments receive technical guidance, with 15% of establishments receiving technical guidance from government bodies, the highest percentage among Brazilian regions.
Regarding education, around 15% of managers of agricultural establishments in Brazil have never attended school, a percentage that rises to 23% in the Northeast, demonstrating the regional disparities and structural deficiencies that Brazilian agriculture still faces. Access to electricity still does not exist for 16% of Brazilian agricultural establishments (830,785 establishments), a percentage that rises to 20% in the Northeast and 27% in the North.
Brazil also has 11.9 million hectares of planted pastures in poor conditions, which represents the inadequate use of agricultural areas in the country, especially in the current context and debate about the worsening of climate effects around the world.
Based on the OECD (2021) methodology and indicators regarding support for agriculture and on data from the 2017 Agricultural Census on the structural conditions of agricultural establishments in Brazil, it is possible to state that Brazil has relatively low levels of support aimed at agriculture. This aspect, together with the good performance of Brazilian agriculture in the international market – such as soybeans, sugar, oranges, corn and meat (beef, pork and chicken) – reflects the competitiveness of Brazilian agriculture.
However, it cannot be forgotten that the same Brazilian agriculture that leads production, export and productivity rankings is also the agriculture characterized by structural, regional, productive and socioeconomic disparities, which have agricultural and social policy instruments as the main way to mitigate their consequences. needs and increase the level of social well-being, whether for those who live in rural areas and depend on them to produce, or for those who consume goods and services from rural areas.
Brazil, therefore, spends relatively little on its agriculture, whether in relation to other important agribusiness players in the international market, or in relation to the characteristic needs of its agriculture and the people who make it up, or also in relation to the context and to the environmental challenges that the country faces. If even with low absolute and relative levels of support, Brazil managed to make a portion of its producers extremely competitive and today is called the “breadbasket of the world”, imagine Brazil's potential if the basic conditions of production and socioeconomic reproduction were accessible to every one of its rural producers. Unfortunately, the restriction of resources and their poor distribution have limited the role of public policies in providing opportunities and mitigating economic, social and productive disparities in rural areas. Brazil spends little and increasingly less, in absolute and relative terms, and, in some way, it can be said that it spends poorly, given the disparities present in rural areas at least since the modernization process of Brazilian agriculture, which began in the mid of the 20th century.
* By Rodrigo Peixoto da Silva, Researcher in the Macroeconomics area at Cepea
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