The Role of Agriculture on the Recent Brazilian Economic Growth: How Agriculture Competes for Resources

Abstract

Drawing upon the Global Trade Analysis Project (GTAP) database, and other time series data, we construct a multi‐sector Ramsey model that shows the transition growth of the Brazilian agricultural sector and its effects on growth of the industrial and service sector of the economy, with particular emphasis given to the years 1994–2010. Our results capture the importance of the agriculture's capital intensity and the sector's factor productivity on the sector's growth, the substitution of capital for labor in agriculture, and the sustaining of agriculture's share in Brazilian GDP. These features are rather unique among emerging economies, most of which have experienced a transition out of agriculture and growth in nonfarm production relative to agriculture.

The accidental agro-power: constructing comparative advantage in Brazil

“…Agriculture exports make a substantial and essential contribution to Brazil's trade balance, By fueling strong rates of economic growth, agribusiness contributed to a substantial increase in fiscal revenues in the 2000s, which was channeled directly into income transfers to the poor (Ban 2012;Barbosa-Filho 2008;Spolador and Roe 2013). The government raised the minimum wage and expanded social welfare policies through programs such as the Bolsa Familia, an income transfer to poor households, and Zero Hunger, a program to combat food insecurity and extreme poverty.…”

“…While the economic turmoil of the 1980s and early-1990s (debt crisis, acute recession, hyperinflation, capital flight) created an unfavorable climate that undermined the Brazilian state's ability to effectively pursue developmental policy goals, it was only with more favorable economic conditions in the 2000s that the state was able to pursue a strategy of "renewed developmentalism" with an ever-growing range of industrial policies to enhance competitiveness and innovation priorities (Hochstetler and Montero 2013). Through its substantial contribution to macroeconomic stability, economic growth and fiscal revenues, the massive expansion of agribusiness exports thus played a critical role in providing the foundation for Brazil's neodevelopmentalist model (Spolador and Roe 2013). By the time of its neodevelopmentalist turn, Brazil did indeed have an "inherited" comparative advantage in industrial agriculture; but, as I will demonstrate, this was new and the direct result of earlier state interventions.…”

“…The expansion of Brazilian agribusiness has involved a substantial increase in capital stock (Rada and Valdes 2012). In fact, agriculture is now the most capital intensive sector in the Brazilian economy -more so than either manufacturing or services -and Brazilian agriculture is relatively more capital-intensive than any other country, including the US (Spolador and Roe 2013). Consequently, it could be argued that industrialized agriculture in Brazil has more in common with industrial manufacturing than traditional peasant or plantation agriculture, and in this respect conforms to the expectations of neostatism about the underlying source of development being capital-formation.…”

“…It is now one of the largest and most competitive agricultural producers in the world and a serious threat to the global market dominance of the world's leading agricultural exporters, the US and EU. The rapid expansion of its agribusiness exports has contributed to fostering macroeconomic stability, fueling high rates of economic growth and boosting government revenues, which have, in turn, made possible redistributive policies that have produced significant gains in reducing poverty and inequality (Ioris Forthcoming;Spolador and Roe 2013).…”

The Accidental Agro-Power: Constructing Comparative Advantage in Brazil

“…While the economic turmoil of the 1980s and early-1990s (debt crisis, acute recession, hyperinflation, capital flight) created an unfavorable climate that undermined the Brazilian state's ability to effectively pursue developmental policy goals, it was only with more favorable economic conditions in the 2000s that the state was able to pursue a strategy of "renewed developmentalism" with an ever-growing range of industrial policies to enhance competitiveness and innovation priorities (Hochstetler and Montero 2013). Through its substantial contribution to macroeconomic stability, economic growth and fiscal revenues, the massive expansion of agribusiness exports thus played a critical role in providing the foundation for Brazil's neodevelopmentalist model (Spolador and Roe 2013). In most development thinking, agriculture has taken a backseat to industry: with industrialization seen as synonymous with development, agricultural modernization has been viewed primarily as a foundation for industrial growth (De Janvry 2010).…”