Preface

It was February 2013, in the middle of the summer season in Brazil, when most Brazilians take some time off to go to the beach. In particular, the paulistanos – the residents of the largest city in the country, São Paulo – love to escape the city in the weekends and drive about 100 km down Serra do Mar to the coast. But the roads were more clogged than usual. A strike in the Port of Santos resulted in a long line of trucks blocking access to the beaches. Most of these trucks were carrying agricultural commodities and food products to be exported to world markets. The paulistanos were furious they could not get to the beach. At the same time, I was working with producer groups in Mato Grosso, about 2,000 km to the northwest of the port. They were concerned about the delays the strike was causing. The Chinese – the major importers of soybeans from Brazil – were cancelling orders as a result of the delays and were sourcing product from competitors. One of the farmers complained to me that they had been calling the attention of the Brazilian government to the logistical nightmare of moving farm commodities from the cerrado region to the ports in the southeast, but nothing had been done about it. “At least now they will pay attention to our problem and invest in transportation infrastructure to move grains from Mato Grosso to the ports in the northern and northeastern region and avoid clogging the already congested infrastructure in the south. This will not happen because it makes economic sense; it is just to make sure the paulistanos can get to the beach.” This incident highlights the big disconnect that exists between politicians, urbanites, and farmers in Brazil.

In April 2014, the Economist published an article titled “The 50-year snooze: Brazilian workers are gloriously unproductive. For the economy to grow, they must snap out of the stupor.” The data about productivity in Brazil are appallingly bad. The article goes on to say that “apart from a brief spurt in the 1960s and 1970s, output per worker has either slipped or stagnated over the past half century, in contrast to most other big emerging economies. Total factor productivity, which gauges the efficiency with which both capital and labor are used, is lower now than it was in 1960. If the economy is to grow any faster than its current pace of 2% or so a year, Brazilians will need to become more productive.” In other words, the low productivity of the Brazilian economy is the major constraint for the country’s development.

But there is one sector of the Brazilian economy that is a world leader in productivity gains in the last 40 years – agriculture. As a result of total factor productivity gains of 3.0% per year since the 1970s, Brazil has become the largest net food exporter in the world. But the majority of Brazilians – including many well-known economists – are not aware of this success story. In fact, many Brazilians still believe that agriculture is a backward and inefficient sector of the economy with large, unproductive farms (latifúndios) coexisting with millions of poor smallholders. Interestingly enough, many outside Brazil are aware of the agricultural transformation that the country has gone through in the last four decades and believe that Brazilian agriculture offers a solution to food security and rural poverty issues in Africa. Natural conditions – soil and climate, in particular – are similar and thus the tropical agricultural technologies developed by Brazilian researchers can help increase farm productivity in the African savannahs. But agricultural development is a complex process, which requires entrepreneurship and organization to come to fruition.

This book analyzes how Brazilian agriculture has changed since the 1970s and how the country became a top-five producer of 36 agricultural commodities globally. Chapter 1 describes the evolution of Brazilian agriculture since 1970, focusing on production growth, the increased use of modern farm inputs, productivity gains, and the economic effects of what is largely a success story. Chapter 2 discusses the enabling conditions of such production and productivity gains, including natural resource availability, the development of agricultural technologies adapted to tropical conditions, and changes in agricultural policy. These enabling conditions are necessary but not sufficient for productivity gains to occur, which begs the question of how Brazilian farmers overcame many challenges to adopt technology, increase production, and gain international competitiveness.

The aim of this book is to call attention to two oft-neglected factors associated with agricultural development – entrepreneurship and value chain organization. Starting in Chapter 3, we analyze how different value chain configurations provided technology and credit to Brazilian farmers and linked them to domestic and global markets. Chapter 3 focuses on the organization of agricultural value chains in the southern region where cooperatives and contract farming arrangements play a prominent role in linking farmers to markets. Chapter 4 analyzes productivity gains and increased competitiveness of the sugarcane and orange juice sectors in the southeastern region and highlights the role of vertically integrated agribusiness and producer organizations in value chain organization. Chapter 5 describes how the cerrado has been developed since the 1970s and has become a breadbasket. The chapter explains the role of public–private partnerships in developing technologies adapted to the cerrado conditions and how private colonization firms and agricultural cooperatives played a crucial role in settling pioneers and provided them with the technologies and services necessary to farm in the agricultural frontier. The chapter provides examples of how pioneers were able to survive several economic crises and become commercial producers in the frontier, with a focus on entrepreneurship, economies of scale, and the emergence of new-generation cooperatives. Chapter 6 summarizes the main findings of the book and emphasizes the roles of entrepreneurship and value chain organization in agricultural development. It also provides some perspectives on progress being made to ameliorate environmental and social concerns associated with agricultural development in Brazil.

This book is based on many case studies, vignettes, and stories to show with micro-analytic detail how farm and agribusiness entrepreneurs overcame many challenges to build world class organizations and effective supply chains that provided the basis for productivity gains and increased international competitiveness. These case studies, vignettes, and stories were developed from personal interviews conducted in 2014 with farmers, agribusiness managers, industry leaders, policymakers, and experts.

I would like to thank the following individuals who agreed to share their knowledge and wisdom with me:

I would also...