Brazil: agriculture breaks records and is equivalent to Argentina's GDP
The record harvest of more than 300 million tons expected for Brazil this year demonstrates the weight that agribusiness has taken on in the Brazilian economy. Between 2002 and 2022, the country's agricultural GDP jumped from u$s 122 billion to more than u$s 500 billion, the equivalent of an entire Argentina.
According to industry analysts, Brazilian agribusiness has shown extraordinary growth in the last 40 years, especially an explosion in the last 20 years. As can be seen in Brazil's growth profile over the last 40 years, the Brazilian economy has managed to position itself strongly in productive and industrial segments based on its natural wealth.
Thus, Brazil continues to be a major producer of iron ore for the world, starting this process in the 1960s with Vale's supply agreements with Japan, and has consequently achieved a strong development of the national steel and metal-mechanic industry. On the other hand, the energy sector is also growing exponentially, anchored in the development of the offshore oil sector, with the beginning of its development after the second oil crisis in the early 80's, later becoming one of the 10 largest oil producers in the world, but also in renewable energies, both wind and solar, and now with large offshore wind and green hydrogen projects in the northeast of the country.
But the star, which has leveraged the Brazilian trade surplus and is responsible for a substantial part of the investment in Brazil, is agribusiness. The sector has been growing uninterruptedly for 40 years, developing technology and a long and complex value chain that impacts the entire Brazilian territory.
This growth, according to experts, is based on investment in research and national and state public policies to support the countryside, which have led to successive records in agricultural production. According to the National Supply Company (Conab), Brazil should break the barrier of 300 million tons of grains this year, consolidating its position as the third largest cereal producer in the world, behind only China and the United States.
In 20 years, the grain harvest increased from 120.2 million tons to 310.6 million tons, an increase of 258%. The area planted increased from 43.7 million to 76.7 million hectares, an increase of 76.5%. The numbers show that production grew three times more than the area occupied by crops thanks to investments in technology that significantly increased productivity.
The agribusiness GDP, calculated by the University of Sao Paulo, should reach u$s 500 billion this year, about 25% of the Brazilian GDP or equivalent to the GDP of an entire Argentina.
The turning point in Brazilian agriculture began with the arrival of soybeans in the south of the country, since soybeans, with a shorter cycle, made it possible to grow a winter crop such as wheat, oats or sorghum. Soybeans made the second harvest possible.
Over time, this process evolved to other regions of the country, with other climatic characteristics. In states where it does not rain in winter, such as a large part of the southeast, center west and northeast of the country, a second harvest was not possible, but this did not stop producers. In 2003, the Brazilian government launched, with the support of Embrapa (Brazilian INTA), a program to integrate the crop with livestock and forestry, allowing the planting of two crops also in regions where it does not rain in winter, basically because of the pasture, with corn, soybean or cotton crops, which are summer crops, which after the harvest provide pasture for livestock. And the evolution continued with the extension of irrigation and increased use of agrochemicals, which allowed the producer to grow up to three agricultural crops, such as soybeans, corn and beans. In this way, we observe how technological evolution, the tropicalization of soybean and other crops allowed this spectacular advance in productivity.
A unique opportunity for Argentina
Argentina must understand the growth of the Brazilian agribusiness sector as an opportunity for the Argentine business community. Agribusiness in Argentina is thriving and ultra-competitive, despite national policies and the macroeconomic environment, and is capable of generating leading companies in different segments of the agribusiness value chain.
Segments such as agricultural machinery and implements, biotechnology, applied information technology, Fintech services, as well as special crops with less development than in Argentina, such as viticulture or olive groves, represent opportunities for scalability of its business, since the entry into Brazil provides an extraordinary export platform with a greater number of agreements with third markets, public policies to support agriculture, a domestic agro-industrial market equivalent to an entire Argentina, access to an infinitely larger financial market, in a stable macroeconomic environment and mainly the diversification of Argentine risk in the medium term.
Many industry leaders in Argentina have already taken the step to internationalize by opening operations in Brazil, and many more should join in the future. This process is inexorable since Brazilian agriculture has no limits.
Source: Cronista