6. Brazil
Brazil is a competitive agricultural exporter, with low levels of support and protection to the sector. The Producer Support Estimate (PSE) fell from 7.6% of gross farm receipts in 2000-02 to 3.1% in 2020-22. PSE has been relatively low over the past decade, not surpassing 5% and below the OECD average. Domestic prices align with international markets almost fully, with a ratio of producer to border price (Nominal Protection Coefficient, NPC) of 1.025%.
Average Market Price Support (MPS) decreased from 2021 to 2022 due to higher domestic prices for certain commodities, but still accounted for more than 50% of PSE. The highest rates of positive Single Commodity Transfer (SCT) are seen for cotton, maize, and rice.
Support to producers is also provided through input payments, in particular credit at preferential rates and crop insurance. Concessional credit is available for farm marketing, working capital, and fixed capital investment. Since the late-2000s, all support based on input use – mainly credit and insurance – is conditional on environmental criteria and specific farming practices.
Support to general services (General Service Support Estimate, GSSE) fell from 3.4% of the agricultural value of production in 2000-02 to 0.7% in 2020-22. More than 90% of that goes to agricultural research and development (R&D), technology transfer, and extension services, with the rest used for infrastructure, inspection and control, and land-restructuring. However, GSSE is small relative to the sector’s size, and expenditures on R&D and extension services relative to the value of production is only just above the OECD average. The Total Support Estimate (TSE) declined from 0.7% of Gross Domestic Product (GDP) in 2000-02 to 0.5% in 2020-22, suggesting little burden on the economy.
The Ministry of Agriculture and Livestock (MAPA) annual Harvest Plan (PAP) defines maximum funding and guidelines for the main policy instruments for 2021-22. Total credit allocation under this plan was BRL 341 billion (USD 66 billion) or 36% more than under the previous plan. Working capital and commercialisation credit represent 72% of the total, with the remainder directed to investment credit. Resources available for the Programme ABC+ increased from BRL 5 billion (USD 968 million) in 2021 to BRL 6.2 billion (USD 1.2 billion) in 2022. The Programme ABC+ was adjusted to comply with the newly updated ABC+ Plan. The Programme provides financing for a variety of activities related to sustainable production, such as bio-inputs, biofertilisers, recovery of degraded areas, no tillage, etc.
Expenditures on subsidies for rural insurance premiums (PSR) reached BRL 1.11 billion (USD 215 million) in 2022. This covers approximately 7.25 million hectares (3.1% of agricultural land), benefiting more than 78 000 producers, and resulting in a total insurance coverage of BRL 43.9 billion (USD 8.5 billion).
After reviewing 30 crops and production systems in 2021, the new rules for Agricultural Climate-Risk Zoning (ZARC) were published in 2022, establishing the method for classifying soil based on water availability (AD). Soybeans is the first crop to use the new rules for the 2023-24 harvest; studies are being updated for other crops. Moreover, the programme continued to implement ZARC 4.0, which integrates various technical risk data: agro-climatic, management, water activity in soils, and indications of productivity losses.
The Ministry of Rural Development and Family Farming (MDA) was reconstituted in January 2023. This institutional adjustment means that MDA will deal with key challenges such as land reform; sustainable rural development for indigenous, black, and traditional communities; local food supply systems; agricultural sustainable development of family farms, etc. While MAPA is in charge of public policies to promote sustainable agriculture and livestock in general, and of regulating and standardising services linked to the sector. Furthermore, a new structure was established for MAPA, including the new Department of Reforestation and Recovery of Degraded Areas to promote reforestation and agroforestry systems in agricultural production units.
In 2022, some agricultural tariffs were reduced to curb food-price inflation caused by the COVID-19 pandemic and exacerbated by the war in Ukraine. Import tariffs were reduced to zero until 2023 for non-Mercosur imports, which had been at 8% for maize and soybeans, 6% for soymeal and 10% for soy oil.
Brazil has a well-developed legal framework and guidelines for adapting its agricultural sector to climate change. The Brazilian Agricultural Policy for Climate Adaptation and Low Carbon Emission (ABC+), has the national sectorial strategy to cope with climate change in agriculture. Moreover, agricultural credit – Brazil’s main form of support – is conditioned on implementation of conservation, mitigation, and adaptation practices. However, the implementation of tailored adaptation practices needs to be monitored and evaluated to ensure progress in the sustainable transformation of production systems.
Brazil’s Nationally Determined Contribution (NDC) does not set sector-specific greenhouse-gas (GHG) emission-reduction targets. However, since 2010, the country started incorporating agricultural, forestry, and land-use policies that contribute to climate-change mitigation and adaptation. Sector-specific targets could accelerate the low-carbon transition of agriculture, forestry, and other land use (AFOLU) sector, and provide mitigation goals for measuring progress – particularly given that AFOLU contributes 43% of national GHG emissions.
Brazil is one of the most biodiverse countries in the world, but this biodiversity could be at risk, notably from land-clearing for agriculture. Agricultural policy instruments, particularly related to land-use change involving deforestation such as the Forest Code, must be legally binding and better enforced.
Agricultural credit at preferential interest rates represents a main source of agricultural support in Brazil. A reform of the credit system could consider decreasing concessional loans for working capital to commercial farms. Moreover, simplified regulations and procedures could facilitate access by rural borrowers increasing credit access to small-scale and medium size farms.
Credit programmes that provide incentives for sustainable agriculture could be expanded. Increasing the share of supported credit for technological packages that focus on innovation, modernisation, climate-change mitigation and adaptation, and increased productivity can reach more farmers and accelerate the transition to an environmentally sustainable sector.
Insurance-subsidy programmes need further improvement of monitoring and evaluation to determine their impact and ensuring efficient use of public funds, while confirming that they do not crowd out market solutions.
Insurance and credit support are conditional on environmental criteria and zoning rules that promote environmental improvements such as preservation of forests and native vegetation. The impact of environmental conditionality set by the Environmental Rural Registry (CAR), ZARC, and the Forest Code should continue being assessed with respect to outcomes such as targets related to deforestation and GHG emissions. Better law enforcement is needed to halt deforestation rates. This should remain the basis for improving policy design for environmental conditionality, along with specific programmes such as the ABC and initiatives against deforestation.
Budgetary support to GSSE is mostly invested in R&D, technology transfers, and extension services. But these public outlays represent less than 1% of the value of agricultural production. It is important to increase Brazil’s significant research and extension capacity to match sector growth, notably through the Brazilian Agricultural Research Corporation (EMBRAPA), by focusing on sustainability as much as on productivity growth, and increasing the diffusion and creation of innovation networks for medium- and small-scale farmers.
Overview of policy trends
Before the 1990s, Brazil had a history of government intervention in the agricultural sector. Price interventions were first introduced in the 1940s amid food security concerns (OECD, 2015[1]; OECD, 2005[2]), and starting in the 1950s, Brazil adopted an import-substitution industrialisation strategy with wide-ranging controls over supply and prices in the agro-food sector. Prices were both supported for producers and subsidised to consumers.
The National Agency for Food Supplies (SUNAB) regulated distribution of basic foodstuffs and set prices and profit margins for all levels of the food chain, including low prices for consumers. SUNAB also controlled agro-food imports and exports. At the producer level, a general price support system existed for rice, maize, soybeans, beans, cassava, and cotton. Another government agency, the Company for Production Financing (CFP), carried out direct purchases of these commodities at minimum guaranteed prices. Marketing boards were created for wheat, sugar, and coffee. They set overall production volumes, administered marketing quotas, and controlled prices and trade.
These policies continued until the late 1980s, when the government undertook a general restructuring of the economy. Trade was liberalised, state owned enterprises privatised, domestic markets deregulated, and a customs union established with other South American countries (Mercosur). Agricultural policies were no exception to this move towards openness and less state intervention. State enterprises related to agriculture were dismantled or their functions reduced. Agricultural import tariffs were substantially reduced. Export licensing for primary agricultural products was removed. Brazilian producers faced fewer controls and obtained freer access to world commodity and input markets.
Since the mid-2000s, policy has emphasised support to smallholders and setting minimum prices for staples produced in the poorest regions of the country. Purchases of staple foods to be distributed to poor populations has been enhanced, and mandatory sugar cane ethanol fuel-blending continue to be imposed. The National Programme for the Production and Use of Biodiesel was established in 2005 and the blending of biodiesel with mineral diesel became mandatory in 2008. Currently, the blend percentage varies between 6% and 15%. Biodiesel is sold through public auctions, where preference is given to manufacturers that support family farming. In addition to prioritising the acquisition of raw materials from family farms, technical assistance by the government is targeted to these farms (Table 6.2).
Brazil’s support to agricultural producers included market price support and input subsidies in the 2000s, up to 10% of gross farm receipts. Market price support has gradually disappeared and is dominated by subsidised credit and insurance subsidies. In recent years, total support in Brazil is mostly in the form of budgetary support, in particular for producers’ inputs and for the provision of general services. Brazil provides a relatively low aggregate level of support and protection to agriculture, reflecting its position as a competitive exporter and price maker for a range of commodities (Figure 6.4).
Main policy instruments
The annual Agricultural and Livestock Plan (PAP) administered by the Ministry of Agriculture and Livestock (MAPA) defines the key parameters of agricultural policy (MAPA, 2022[3]). Family farming policy is managed by the newly reinstated Ministry of Rural Development and Family Farming (MDA). Innovation, R&D services are provided by the Brazilian Agricultural Research Corporation (EMBRAPA), created in 1973. Extension services are provided by the National Agency for Technical Assistance and Rural Extension (ANATER) that has agencies in each state.
Agricultural policy has been stable over the past decade, with a focus on:
risk management programmes including subsidised insurance programmes (since 2005)
limited use of minimum and reference prices and marketing interventions (e.g. government purchases of food)
agricultural land zoning with environmental compliance and promotion of biofuels.
While price support is low overall, minimum guaranteed prices are used regionally. These cover a broad range of crops and a few livestock products such as cow and goat milk and honey. Minimum prices are set by the National Monetary Council (CMN) based on domestic and international prices, and the evolution of production costs in different locations. These are implemented through several price support mechanisms on the domestic market, including premiums to commercial buyers who pay minimum fixed prices to producers, and public and private options contracts backed by a private risk premium option. In addition, producers receive reduced-interest marketing loans, which enable them to withhold the sale of a product in anticipation of a higher market price. The National Food Supply Company (CONAB) operates these programmes on behalf of MAPA. Several programmes offer deficiency payments calculated as the difference between the market price and the minimum (reference) price (e.g. the Rural Equity Prize programme called PEPRO, and the Product Reward Prize programme known as PEP).
One of the main agricultural policy instruments is credit at preferential interest rates provided to large, medium, small-scale, and family farms. It is designed in co-operation between the Central Bank, the Treasury, the Secretariat of Economic Policy (Ministry of the Economy) and the MAPA. Most rural credit is allocated under the National Rural Credit System (SNCR) and provided at preferential interest rates with differentiated conditions for family farmers (PRONAF), small and medium size farmers (PRONAMP) and commercial farms. The main sources of preferential rural credit are Compulsory Resources or lending quotas, equivalent to around 25% of sight deposits in commercial banks and 59% of Rural Saving deposits, Constitutional Funds and loans from the National Bank for Economic and Social Development (BNDES).
Agricultural credit is provided as short-term credit for commercialisation and working capital and long-term credit for investments on fixed capital formation. Long-term credit is provided through the Programme ABC+ used on investments on adaptation and mitigation, Moderfrota used for machinery and equipment, the PRONAF and PRONAMP with their investment component, and Inovagro. Additional sources of rural credit are the Coffee Fund (FUNCAFÉ) and the Agribusiness Credit Notes called LCAs (Letras de Crédito do Agronegócio).
Two agricultural insurance programmes target commercial farmers. The rural insurance premium programme (PSR) provides insurance premium subsidies to a diverse range of producers including commercial producers who establish contracts with insurance companies listed by the government, and the general agriculture insurance programme (PROAGRO) offers farmers partial compensation for investment losses on working capital loans. Most resources from this programme are allocated to the southern region for grain crops, mainly soybeans. Small-scale family farms can benefit from the PROAGRO-Mais or family farming insurance (SEAF) and the crop guarantee programme in the north-east of the country (Garantía Safra, GS).
Rural credit and subsidies insurance programmes must comply with environmental criteria defined by the Environmental Rural Registry (CAR), a mandatory digital registration. Working capital credit is conditional on agricultural zoning of climatic risks (Agricultural Risk Zoning, ZARC), which links agricultural support to farming practices and activities adapted for the environmental sustainability of each geographical zone. Compliance with zoning is also required to access both PRS and PROAGRO programmes. Rural environmental registration of geo-referenced information on rural property, including property perimeters, location of Permanent Preservation Areas, Legal Reserves, Restricted Use Areas, and areas of agricultural production is compulsory across the country since 2012.
Brazil’s central initiative on adaptation and mitigation in agriculture is the National Low Carbon Agriculture Plan (ABC+ Plan), which seeks to disseminate technologies that mitigate GHG emissions in agricultural production and promote adaptation to climate change. A key programme under this ABC Plan, with a strong environmental component on mitigation, is the Low Carbon Agricultural Programme (ABC Programme), providing credit to farmers for activities that reduce GHG emissions; as well as promote adaptation to climate change. Brazilian agricultural policies related to climate change mitigation are embedded in the country’s agricultural policy instruments such as credit, insurance and zoning. For example, credit provided by PRONAF such as PRONAF-Agroecologia, PRONAF-Bioeconomia, FNE Verde, FNO Verde and FCO Verde, incorporate mitigation and adaptation features.
The ABC Programme is subdivided into the following subprogrammes: a) Recovery of degraded pastures (ABC Recovery); b) Implementation and improvement of organic agricultural production systems (ABC Organic); c) Implementation and improvement of no-tillage systems in straw (ABC No-Till); d) Implement and improve crop-livestock, crop-forest, livestock-forest or crop-livestock-forest integration systems and agroforestry systems (ABC Integration); e) Implementation, maintenance and improvement of commercial forest management, including those destined for industrial use or charcoal production (ABC Florestas); f) adequacy or regularisation of rural properties concerning environmental legislation (ABC Ambiental); g) implementation, maintenance and improvement of waste treatment systems and waste from animal production for energy generation and composting (ABC Waste Treatment); h) plantation, improvement and maintenance of oil palm forests, primarily in degraded productive areas (ABC Dendê); i) encouraging the use of biological nitrogen fixation (BNF) (ABC Fixation); j) adoption of conservation practices for the use, management.
Climate change adaptation policies in agriculture
Brazilian agricultural policies related to climate-change adaptation (and mitigation) are mainstreamed into core agricultural policy instruments such as credit, insurance, and the land-management tool of zoning.
The 2009 National Policy on Climate Change (NPCC) formalised Brazil’s voluntary commitment on GHG emissions to the United Nations Framework Convention on Climate Change (UNFCCC). As part of the 2010 NPCC, the Sectorial Low Carbon Emission and Adaptation to Climate Change Agriculture Plan (ABC Plan) was developed to reduce GHG emissions and adapt agriculture to climate change.
The ABC Plan was updated in 2022 and published the Brazilian Agricultural Policy for Climate Adaptation and Low Carbon Emission (ABC+ Plan). Its overarching objective is to promote adaptation to climate change and reduce GHG emissions in Brazilian agriculture by increasing the efficiency and resilience of production systems and integrated landscape management (MAPA, 2022[4]). It has the following specific objectives:
support the adoption and conservation of sustainable agricultural production systems that increase productivity, income, and resilience while controlling GHG emissions
improve the transfer and dissemination of technologies, training, and technical assistance for production systems, practices, products, and sustainable processes (SPS-ABC) within the agricultural sector
promote and support applied research for SPS-ABC, SPS-ABC-development or -improvement, focusing on increasing resilience, productivity and income, and controlling GHG emissions
create and strengthen mechanisms to recognise and appreciate farmers who adopt SPS-ABC
expand and diversify sources for financing initiatives linked to SPS-ABC
improve the ABC+ Plan’s information-management system to measure, report, and verify SPS-ABC, and monitor and evaluate its portfolio of actions and results
promote agriculture that is integrated with the landscape to encourage farms’ environmental compliance and sustainable production in farming areas
Actions of the ABC+ Plan are divided between three new concepts: (1) an Integrated Landscape Approach (ILA) focused on increasing the resilience of agricultural production systems; (2) synergy between GHG mitigation and adaptation; and (3) adoption and maintenance of SPS-ABC (Table 6.3).
Brazil also has programmes and policies to support climate-change adaptation over a range of time horizons:
Measures to buffer the short-term impact of shocks include early-warning systems, monitoring, seasonal forecasts, emergency-preparedness planning, and support for recovery after climate-change related events, such as the PROAGRO and PSR climate disaster-insurance programmes.
Measures to address medium-term adaptation include new production practices as those financed by the ABC+, shifting planting dates according to ZARC, which considers among other things water availability for different type of soils, adjusting crop mix, decision-support tools, extension and outreach programmes, developing inter-cropping systems (ILPF), monitoring production systems with the GEO-ABC platform, among others.
Measures to address long-term adaptation include moving production affected by changing climate to new regions (for example adaptation of soybean production from subtropical to tropical areas), developing new value chains like pulses cultivation, investing in major infrastructure, developing new governance structures, collaborative planning, and multi/transdisciplinary research. The ABC+ credit programme plays an important role in long-term initiatives, as it finances the acquisition and use of new agricultural technologies.
Domestic policy developments in 2022-23
Each year, MAPA releases its annual Harvest Plan that defines the maximum resources and guidelines for main policy instruments: 1) rural credit; 2) agricultural insurance; 3) commercialisation support; 4) the zoning programme; and 5) the minimum and reference prices for each production year. While the new government that took office in 2023 continued implementing the Harvest Plan 2022/23, new emphasis has been given to small-scale agriculture, sustainability, conservation, and environmental protection.
For the 2022/23 harvest plan, the total credit allocation was BRL 341 billion (USD 66 billion), an increase of 36% compared to the 2021/22 harvest plan. Working capital and commercialisation credit represent 72% of the total with the remainder directed to investment credit. This total credit allocation is divided between small-scale farmers who receive 16% (PRONAF), medium-size producers who receive 13% (PRONAMP), and other producers who receive 71%. Preferential interest rates increased by between 1.5 and 4.5 percentage points depending on the type of credit provided to farmers.
The available resources for the Programme ABC+ increased from BRL 5 billion (USD 968 million) in 2022 to BRL 6.1 billion (USD 1.2 billion) in 2023; moreover, the Programme ABC+ had to be adjusted to comply with the newly updated ABC+ Plan. Some activities financed under the Programme ABC+ are biomass-based inputs and organic fertilisers, renewable energy systems, power generation from biogas and bio-methane, restoring degraded areas and pastures, implementing integrated crop-livestock-forestry systems, adopting conservation practices, managing, and protecting natural resources, organic agriculture, among many others. These measures are driven by concessional loans provided through the Programme ABC+. Moreover, of the total resources of the Harvest Plan, 47% are directed to financing sustainable production systems.
In 2022 expenditures on rural insurance subsidies (PSR) reached BRL 1.11 billion (USD 215 million). This subsidy covers approximately 7.25 million hectares (3.1% of total agricultural land), benefiting 78 574 producers, and resulting in a total insurance coverage of BRL 43.9 billion (USD 8.5 billion). The Minimum Price Policy (PGPM) for the 2022/23 harvest identified 27 regional and national products including main grains, as well as 17 local products for the domestic market.
A new rule document for the Agricultural Risk Zoning (ZARC) was published in 2022, establishing the method for classifying soil, based on water availability (AD). Soybeans is the first crop to use the new rules for the 2023/24 harvest; studies are being updated for other crops. Moreover, the ZARC continued to implement “ZARC 4.0” that integrates various technical risk data: agro-climatic, management, soils and indications of productivity losses. MAPA, EMBRAPA and the Central Bank agreed to jointly provide funds for research on the ZARC programme, with the objective of expanding harvested areas and production systems in the country through new zoning. These funds also aim at modernising the information collection and methods to determine the most suitable planting periods, and minimising the risks related to adverse climatic events. By 2022, 30 crops and production systems were researched by the ZARC.
The 2022 Agro Law 2 aims at the simplification of the registration of guarantees for rural credit operations. An additional Decree in July 2022 sets mandatory procedures for the traceability of products of plant origin for agents of the supply chains, including control measures for food safety and quality.
In January 2023, the Ministry of Rural Development and Family Farming (MDA) was reinstated. Key competences of MDA are: 1) sustainable rural development aimed at family farms and other traditional communities; 2) agricultural policy for family farms covering production, credit, insurance, promotion and productive inclusion; 3) conservation and management of natural resources linked to family farms ; 4) biodiversity, conservation, protection and use of the genetic resources of interest to family farms; and 5) production and dissemination of information on agricultural and livestock systems, including socio-biodiversity products. Also in January 2023, a new structure of MAPA was established, including the creation of the Department of Reforestation and Recovery of Degraded Areas. The new Department oversees promoting reforestation and the agroforestry systems in agricultural production units.
Domestic policy responses to Russia’s war of aggression in Ukraine
The country has been incentivising the use of biomass-based inputs and organic fertilisers, to reduce the dependency on the world market of chemical fertilisers. The bio-input portfolio is wide and includes inoculants, plant growth promoters, ingredients for plant and animal nutrition, plant extracts, pest, parasites and diseases control agents.
Trade policy developments in 2022-23
Trade policy responses to Russia’s war of aggression in Ukraine
In 2022, some agricultural tariffs were reduced to curb food price inflation caused by COVID-19 and exacerbated by the war in Ukraine. Import tariffs for non-Mercosur imports, which had been at 8% for maize and soybeans, 6% for soymeal and 10% for soy oil, were temporarily reduced to zero.
Brazil is one of the ten biggest economies of the world, and it is the largest country in Latin America in terms of area and population. It has abundant land and water resources and is a major agricultural producer and exporter. The share of agriculture in Brazil’s GDP increased from 5.5% in 2000 to 6.9% in 2021, while its share in employment decreased from 16.3% to 9.7% during the same period. These shares remain higher than in most other countries covered in this report. Agro-food exports have grown in importance for Brazil, representing 37% of its total exports in 2021. Arable land accounts for 24% of Brazilian agricultural land.
Brazil is among the world’s leaders in the production of soybeans, poultry, beef, cotton, corn, and orange juice, being the third biggest exporter of agro-food products after the European Union and the United States. Around two-thirds of the total value of agricultural production are crop products, and one-third livestock products. The main product in Brazilian exports is soybeans in grain, meal, and oil.
After the recession in 2015 and 2016, Brazilian GDP grew moderately at just below 2% between 2017 and 2019. The economy shrank by 4% in 2020 during the COVID-19 and rebounded in 2021 reaching a 4.4% growth rate. However, in 2022 the economy witnessed a deceleration growing 2.8%. At the same time, unemployment decreased to 9.3% in 2022 from 13.2% in 2021; but inflation increased to reach 9.3% in 2022.
Agro-food exports in Brazil have exceeded USD 80 billion per year since 2017, generating an annual agro-food trade surplus of more than USD 100 billion in 2021. Around 53% of Brazilian agro-food exports are primary products for industry (including soybeans), and more than 58% of the country’s imports are processed products.
Between 2011 and 2020, Brazilian agricultural production increased at an annual rate of 3.1%, above the world average. Increases in production were driven by Total Factor Productivity (TFP) growth of 2% per year, again well above the global average, while increased use of intermediary inputs was offset by the declining use of primary factors in agricultural production.
Agriculture accounted for 43% of GHG emissions in 2021, which is below the level observed in 2000, but still high compared to the OECD average. The use of energy by the agricultural sector has increased up to 5.6% of total use in 2021, also above the OECD average. The larger share of the agricultural sector in the Brazilian economy and the importance of pasture-based livestock contribute to these outcomes. Even though the agriculture’s share of water abstractions remained high at 61%, water stress is low (0.8). Nutrient surpluses in Brazil have increased since 2000, and the phosphorous balance is more than five times the OECD average.
References
[4] MAPA (2022), Brazilian agricultural policy for climate adaptation and low carbon emission.
[3] MAPA (2022), Plano Safra 2022/2023.
[1] OECD (2015), Innovation, Agricultural Productivity and Sustainability in Brazil, OECD Food and Agricultural Reviews, OECD Publishing, Paris, https://doi.org/10.1787/9789264237056-en.
[2] OECD (2005), OECD Review of Agricultural Policies: Brazil 2005, OECD Review of Agricultural Policies, OECD Publishing, Paris, https://doi.org/10.1787/9789264012554-en.