RESTRICTED IRiEPOlRTS DESKI Report No. WH- 146a WITHIN CONE WEEKj -_ This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be! published nor may it be quoted as representing their views. F~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ INTERNATIONAL BAiNK FOR RECONSTRUCTiON AND DEVELOPMETI Ui tKENA T IONAL DEVELOPPM'ENi1 ' ASSO.CiA I iON CURRENT ECONOMIC POSITION AND PROSPECTS OF BRAZIL Volume VII Agriculture May 11, 1965 W ese rn H'e mispher e .LJepartmenL CURRENCY EQUIVALENT Curren.c- Unit - Grulzeiro (s, bol G l FLOATI1NG RATE Quotation: June 1964 US $1 = 1, 200 Cruzeiros April 1. 1965 US $1 = 1,840 Cruzeiros Af_l-.Tr'TTT 'T'TD1 Introduction 1. Brazil is one of the world's nost important agricultural nations. Although agriculture contributed only 28 per cent of the national incorr.e in 1960, over 50 per cent of the labor force was engaged in agriculture and about 90 per cent of tne exports originated in agriculture. 2. Brazil has a broad range of ecological conditions which permit production of nearly all tropical, sub-tropical and temperate crops. !iore- over, only a small part of the land area has been put under cultivation. Agricultural development started along a narrow coastal stri.p along the Atlantic seacoast and gradually spread southward to the Sao Paulo area and then into the iiiterior and to the south. In the northern part of the country covering the Amazon basin agriculture is still largely of the prim- itive shifting subsistence variety but provides a significant output of natural forest products. Agriculture is most highly developed in the South comprising the states of Sao Paulo, Parana, Santa Catarina and Rio Grande do Sul. However, there has been a rapid development of new frontier areas in Goias, i`iato Grosso and Irinas Gerais based on extensive mixed livestock and crop production. The development of agriculture in the dry zones of the Northeast has been hindered by the lack of water, poor soils and the low level of existing teclnology. 3. Agricultural production in Brazil has been growling rapidly in the postwar period. A major share of the growth can be attributed to acreage expansion onto new lands which has continued over the past decade at an annual rate of about 1 million hectares per year. At the same time substantial progress has been made in intensifying and diversifying production in the older settled areas around Sao Paulo. Development of new varieties and better methods and increased use of fertilizers, pesti- cides and farm machinery has provided spectacular increases in yield per hectare for some crops suchi as coffee, cotton, peanuts, potatoes arnd sugar cane. Some of these results are being transferred into the newer areas and into tiie Northeast, but because of differences in ecological conditions and transportation difficulties progress has been slow. ii. The develoDment of agriculture in Brazil has been centered around a series of commercial export crops - sugar, cotton, cacao and coffee. In the postwar period, coffee has been the moving force but surnlus coffee Production ani lower prices starting in the late 1950's has caused a marked diversification of the area. The growing domestic demanid for food and raw materials and stronger export demand for cotton and sugar accel- erated this process. 5. The develonment of newer lands -in the interior onenedl up as A result of the extensive highway developments of the fifties has been based largily on extensive livestock production The ld is usually developed by sharecroppers who contract to clear land and establish - 2 - pasture in return for cultivation rights on a share basis over 3 or 4 years. This temporary cultivation for clearing land accounts for a sub- stantial share of the increased acreage of crops such as corn, rice, manioc and beans. Beef production has not risen in proportion to the in- crease in develoned grazing land or to the increased number of cattle. partially because of the build-up in herds and partially because of controls on the nrie of beef- 6. Irri.gation has nnt been ex±tensively developed in Brazilj a1thrcugh substantial. public investments have been rnade in the dry zone in the Nort.heas. f'or the purpose of' fighting periodlc drourvht conditio1s-. It is estimated that sufficient water has been impounded in reservoirs to irrigate 300,000 hectares of land but only about 7,000 hectares are under irricYn+ . USAID is currently engaged in ar, overall water resource study of the North- east with n viewa +toara-rd nd veln+ipin1 arti-r-nl ,rvn for' Ti)rr4gai In the southerrn areas a large number of small irrigation facilities have been financed by, individua' farmers patiulrl in the~ rice groI.1b ' areas of Rio Grande do Sul and by truck farmers in the Sao Paulo area. In total, it is estted that about 1 m;'.lion heclares or abou 3 e cn o h cultivated land is irrigated. 7. According to the 1960 Census, there were 3,349,484 farm establish- mientLs with a gross area olf 26,,4,o,oUUV Letares roptped area,oted toflUlutUu only 29,759,785 hectares or 11 per cent of the farmland. About 5 per cent of these farms were ess tharl 10 hectaies uuu tihey culix,vateu uol y 13v per- cent of the land. Many of these farmers work as temporary seasonal laborers on larger farms and only farm on a part-time basis. The ouik of the agricultural land is owned and operated by medium and large scale commer*- cially oriente(i farmers, Farm tenancy and fragmented holdings are serious problems only in certain parts of the Northeast and the South. Large scale immigration from Europe and japan provided basic farming skills and built up a substantial middle class agriculture, particularly in the southern areas. Production Trends 8. Brazills agricultural output has been growing at an annual rate of 4.5 per cent per year during the period 1947-62. Unfavorable weather interrupted this trend in 1962/j63 and 1963/64, but good weather in the first half of 1964/65 is expected to produce bumper crops in 1964/65. 9. The agricultural production index for 1963/64 was estimated at 145 (1952/53-1954/55 - 100) as compared with 148 and 152 in 1962/63 and 1961/6?, respectively. As a result of severe frost and drought, the 1963 coffee crop was down 26 per cent below the 1961 crop and the 1964 crop is expected to be substantially lower. Rice, corn, wheat and sugar also were down from the previous year but cotton, tobacco, cassava, beans, sisal, soybeans, potatoes and cacao showed increases. (Acreages and production of the principal crops are shown in Appendices A and B.) Livestock produc- tion in 1963 and 1964 were up slightly but government price controls on meat -3- but not cattle led to black market operations and drove cattle prices too high for profitable sale of meat at controlled prices. 10. Helped by good weather in the last half of 1964, planted acreages as well as yields for 1964/65 are expected to rise sharply and produce record crops in 1965. Preliminary crop forecasts indicate an increase in planted acreage of about 1 million hectares and increased output of the order of 20 to 25 per cent above 1963/64 for crops such as corn, rice, peanuts, cotton, sugar cane and wheat. 11. Livestock production in 1965 is expected to rise sharply as a result of decontrol of beef prices and adjustment of milk prices in October 1964. The relatively short dry season of 1964 has resulted inl better than normal condition for cattle in the principal producing areas. :`ioreover, higher than normal stocks of frozen meats have been carried over througt. the dry season in anticipation of export licenses in the flush period beginning in January 1965. Smuggling has ceased since internal cattle prices have risen after decontrol of beef prices to levels comparable to those in surrounding countries. 12. Poultry, pork and fish production which had previously been relatively unprofitable because of the low beef price can be expected to expand. Broiler and egg producers were already planning to expar.d output in anticipation of larger domestic demand resulting from hieher beef orices- and lower feed costs expected as a result of the bumper corn crop. 13. Production of a number of relatively new crops have been started in various places which show nromisn of future exnansionr Production of black pepper in the area around Belem was started in 1947 and has reached a ievel of -nnol tons suifficient to supnlv Brz2i1 and to export abont 3,000 tons. Jute production has increased sixfold since 1947 and now provides all the raw jute for domestic anufacture and sotre exports to Argentina. Sisal production has increased fourfold from 1948 miaking Brazil the world's secnd producer. Proncht.on nf i cinr Trarwit)Pr toahcro wasr sftart in 1961 and is now producing 30 tons a year. 14. Production of traditional forest products such as rubber, Brazil nuts, carnauba wTax, vegetable oils eeds fi h rc: - hew nuts, mate tea, tannins, resins, vanilla beans, esEential oils and rnedicinal and insecti.- ,,- A e1 p~lants+ c~ A .~r. d,epend largely on ar-imitive m et4 n,4 + -4 ~ hods1 p of' coallect,-ion fro th forests. Export demand has stimulated establishment of processing industries for some of these-products -nd in sore cases led t,o an+ aCn a- ations. Rubber was the prime example of this but disease problems have s -a m-ted o; rube pat+ A A A>^^ n A qA_5or+ t_Ar+her ex-- J cA ;6hewF Ov aS J.; IL X ~ L W ,, tAz~ 1s ^H:soQu- vf *u v s , a- L u~ La J'st.. C1Lfl VAAU± cJtCI:ILp i fi t C. IIot where recen-t developments in the industrialization of cashews have created new interest in this traditional forest product. The production. of cashew shell liquid and preservation of the fruit are being carried out on a cuLwl-u±derL ; an plraion I.y' production 'as been started on a piLot scale. Each of these developments has a limited scope but in total they have already made a significant contribution to the balance of paymrenbs. -4- With economic .nd political difficulties in Indonesia, one of the najor suppliers of tropical type products, market conditions appear favorable for a major expansion in the output of such tropical crops. Problems 15. eBrazilian agriculture covers the range from primitive subsistence forest agriculture to the most modern types of mechanized farming. The problems range from the need for basic education and health facilities to the more sophisticated problems of market development and capital mobiliza- tion. However, the basic factor in determining whether capital and. labor could be profitably employed in agriculture in a given area has been the accessibility of the area to markets. The development of the network of highways in the fifties has been a major factor in the recent growth in agriculture. The inadequacy of coastal shipping has isolated the Northeast from the rest of the country and retarded its integration with the rest of the economy. Inadequate port facilities have limited possibilities for exporting surplus export crops. These problems in the transport field have been discussed in Chapter III of Volume I and Volume II on transport but it should be emphasized again that transport will continue to be a key factor in agricultural development. 16. The social problems of subsistence farmers, farm laborers and small sharecroppers are extremely complex and require long range solutions involving basic education and creation of more productive employment opportunit:ies. This will in the final analysis depend on accelerating -the overall rate of economic growth to create sufficient Social capital to cope with the problem. We shall, therefore, focus our analysis on the problems of the comumercially oriented sectors of agriculture which have provided and can be expected to Drovide the continuing stimulus for agricultural growth. 17. Inflation has been one of the dominant features of the Brazil-an economr in the postwar period. As shown below, inflationary pressures 11ivP increased sharply in recent years. Percentage Change in Prices Year Gen. Prices1/. Cotton Sugar Corn Ride Beans Coffee Cattle Beef 1961 35 46 35 39 23 -28 27 48 63 1962 4Q 39 5 69 102 76 5ho )i- 1963 72 103 128 17 103 1142 38 67 61 196O4 83. 102 90 2214 51 22 222 97 66 Agricultural ,rices on the avrg roi e by Ql l mor tha geea price but showed erratic move,Lents as a result of controls in some cases and ntn ca n'o4 u r c,,rv-Co1.,one 4, n+bv. 7 r.i,. p, 9^ A_..._ prines generally reflected export demand except in the case of rice in 1 LTeL in a le L V over pr±evlus0 yearL LIiu-Lt,tU LaY Uindiae by GP e.uul- for 1960-63 and wholesale price index for 1963-64. Agricultural price c h a g e s l a _ n w h _ _ :.e s_.a _: . _ _ric: su . _ __ II _ _ . _ I _ _ _ _ _ I _ I _ Il I _ _r 1964 where delays in export authorization resulted in excessively low nrices. Corn production hit record levels in 1962/63, as a result of good prices in 1962 and favorable weather but because of delayed exuport authorizatiiAn and subsequent transport difficulties, prices dropped sharply in real terms in 1963. This. in turn- caused reduced plantings in 1963 which comhined with poor weather caused a sharp rise in corn prices in 1964. Again, in 196L/65 the eomhination of high prie-es at planting and favorable weather is expected to produce a record corn crop. Until prices were decontrolled in October 196L,j beef prices had lagged behind the general rise in prices although black market demand has kept cattle prices more or less in line wth other prices. 18. O.ne of the major problems brought about by the inflation has been the system of price and export controls aimed at holding down consumer prices in a. effort to hold the line on wages Tn the absence of basic fiscal and monetary reforms, however, such policies could not succeed in LhU.LUd±lng, bac .LLaL,J..lain LU UIL.Ly ser.Ved uu L11inLtLdUce Uf urthle dui stortU±oUn1s> Jin the allocation of resources. 19. The effects of inflation on agricultural production have been less disruptive tnan one would expect, although the vesulting shortage of medium term credit has handicapped agricultural investment (pasture develop- ment, equipmenit purchases, etc.). Government policies generally favore(i expansion of agricultural credit over commnercial and investment credit in recent years. The availability of a substarntial volume of short term production credit at negative interest rates generally permitted farmers to meet increasing casha production costs out of borrowings which could be repaid out of the inflated proceeds of the crop. Eloreover, such prospects made it possible for farmers to finance some medium term investments wi;h short term money particularly in fields such as land clearing where cost benefit ratios are extremely favorable. However, the Banco do Brasil was having increasing difficulties in rationing out available credit. The excessive demand for subsidized credit has led to an expansion in the number of loans and a reduction in the average size of loans. 1Ioreover, as shown below, there has been a reduction in the proportion of loans on medium mnd long term, particularly for livestock development. New Loans of Banco do Brasil (CREAI) (Billion Cruzeiros) 1962 1963 General Agricultural Loans Short term 89 154 Medium & long term 34 45 Livestock Development Loans Short term 2 3 Medium & long term 28 22 -6- 20. Aside from providing basic investments in roads and railJasr End resources for agricultural credit through CREAI, one of the government's principal roles in agricultural development has been to provide resources and establish institutions for marketing, research and extension activities. This was done largely through a series of autonomous institutes and associations regulating production and marketing of specific comrnoditiEs. All of these bodies receive financial sunnort from the Federal and/or State govermnents. The Brazilian Coffee Institute is the most important and there are a E.O hocli es for rubher- sugar and alcohol. mate tea. cassava, wzheat, sisal, vegetables, wines, cacao, tobacco, meat, rice. Governinent has also established theAssoclacaoo Bsrilteira de Grediirp to e As tencia Rural (ABCAR) which coordinates programs of supervised credit and technical ass1stannce in nnnni"n+ wih state .i )rnmen+c* The Ban.co An Brasil and other banking institutions utilize the services of ABCAR to help in draw- ing up farm pn and appra-sing and s ei lons to s a A i sized farraers. The extension service under ABCAR has 403 local offices in 16 states and has contact with about 115.0pO farm I , i1i e s ef fectiv-C ness of the various agencies has varied considerably depending on the resources al a_1bl4e to them and the rlength o. +i tre they- h-av beenn r. --- tion, but on the whole they have made a significant contribution to the! m.proveme -r of4- prouctvit durir the pas -decade These activiti 4--;es h-ave 4JiL.II. k) V uillcli U UJ. jj .JUUU 11.1._ V I. L "U) .L U i r ULIC; J;d. U ~ .-.L4 ~ di. ULV .._L 4.,.L~0 Id required relatively little fixed capital investment but relatively high currentH costsUi. A riuJUlmuer of tLhe- functions could andu are be:: Ling . caIr.ied ouU effectively by private processors, suppliers and buyers. Many farmers ObUtLn ii.1ZualciUg andu cecr-uical assistance ±fIri boUUbaUco rnu±Lcurers, corn processors, brewers, cotton buyers and fertilizer distributors. Seeds are also often distributed by processors seeking an assured supply of raw materials. The mission, therefore, believes that farmer services currEntly provided by these governmental or quasi-governmental agencies should be turned over to the private sector as rapidly as the promotional aspects are successfully completed. Prospects 21. Considering that progress has been made in spite of unsound government price policies, a scarcity of medium and long term credit, End inadequate storage and marketing facilities, Brazil's prospects for expanding agricultural production are tremendous if these obstacles can be overccme. Less than 4 per cent of the land area is under cultivatlon. While highly fertile soils are limited, a considerable part of the undeveloped areas in the Amazon basin and parts of the central west could be utilized for crop and livestock production. Such developments will require a considerable amount of basic resource studies, development of transportation facilities and establishment of new settlements in the frontier areas. Under the agrarian reform program, studies have already been initiated to accelerate the settlement of frontier areas but the problems are complex and the develop- ments are necessarily long range in nature. - 7 - 22. Of much more im-ediate significanceare possibilities for acreage expansion and intensifying production in already settled areas and in area-c -alreAdy in -r tne1 vf cof on1 ement T¾cncn r inrl11AM 4-%r r v f'F undeveloped land in 19Iinas Gerais, Goias and Mato Grosso where prospects for mi;ed cropping and livestock der-1ner.+ are e m -d a areas around existing settlements in the Amazon basin and delta where pilot settlements are successfully growing jute, rice, and black peplper. Growth of output in these areas can be expected to continue at a gradually acce.leratiJn-ag pae. 23. In the settled areas from Sao Paulo southward further intensifica- tion depends in the short run on providing incentives, and an adequate supply of input1s, particularly credit on meledium an1d long terI arld fertllize-r. Government's policy as reflected in the program for action provides for elimination of price and export controls and establishmernt of an effective price support machinery based on wider private sector participation. Actions taken in the past several montns have already increased incentives for dairy and livestock production. Provisions have been made for increas- ing fertilizer im.ports and plans are moving ahead to increase dornestic fertilizer manufacturing capacity. However, in view of the government's program for combating inflation, expansion of farm credit will have to De carefully integrated with prospects for obtaining external financing. 24. The program for action includes an estimated demrand and supply projection an(i production targets for the principal agricultural comrnodities (see Appendix ErThe mission believes that with the exception of wheat the individual commodity targets are well within reach. In fact, for a number of comrmodities, targets could be exceeded by a wide margin if there were sufficient dermand. Production of commodities such as coffee, cacao and a num,ber of vegetal forest products which are produced primarily for export and corrimodities such as cotton where a sizable portion is exported should obviously be geared to export requirements. However, in the case of other products such as rice, corn, rneat and cassava vihichl have been primarily produced for the domestic market, relatively small increases -n domestic output or declines in domestic consumption could result in substantial increases in export availabilities. For example, total world trade in rice amounts to 5-6 million tons per year, of which Brazil has never suppliecL more than 150,000 tons. In 1965, including an exportable carryover of about 300,000 from the 1964 crop, export availabilities could reach the order of 1 million tons. For 1970 the the goal slated in the plan is an export of 1.4 million tons. There is little question that if current cost price relationships continue and world demand is sufficiently high these targets could be met. However, the likelihood is that such a major increase in exports will be possible only at lower prices. The mission, therefore, projects exports in 1970 at 1 million tons. Similarly, in the case of beef, present world trade of fresh, chilled ancd frozen beef amount to only about 1 million tons. Brazil could increase beef export availabilities to a level of about 500,000 tons in 1970, but such an increase would affect substantially the level of world prices. The mission, therefore, Drojects beef exoorts in 1970 at 300,000 tons at prices lower than current levels. -8- 25. It would, therefore, be useful to examine briefly current price relationships between agricultural and industrial prices within Brazil and with the rest of the world. Un to 1961; with the overvaluation of the cruzeiro, a system of multiple exchange rates and export bonuses was maintained. At present, exeent for sooffee and c-ocoa, a unified commer'cial rate applies to all exports. -ith a few exceptions such as wheat and sugar. prices of agricultural co nmodities within Brazil are now inter- nationally competitive at current exchlange rates and surpluses can be prof- itablv emrorted without subsidy. In fact, w!ith the recent year=end de-- valuation of the cruzeiro, prices of many agricultural products are nowr substantially below world market leve1Tls. TJr.strial products are ont lhe other hand, still heavily protected. A uniified exchange rate which wouild permit any substantial eort of industrial goods would, -h ereore, per-mi Brazilian agriculture to be competitive in world export markets even in the face of further drop in world prices of' agri"cul4ural co A.odites. Under these circumstances, as quantitative export restrictions on agricultural commodities are relaxed, it may' be useful to use t em'porary levies on som,e agricultural exports to ease th,e transition. A corncrete example of thiLs is beef, the do;-,estic price of ;wrhich is still well below prices currently quoted on the export market. Al complete freeing of exports without any levy would raise domestic prices sharply, give windf-la profits to specula- tors who have withheld supplies from the domestic market and stimulate excessive slaughterings which 6ould have adverse long run effects on production. 26. Production prospects are sufficiently favorable to provide a basis for exparsion of both exports and domestic consumption. In addition to the favorable possibilities for expanding exports, the rapid growth of population and the rising level of per capita income5 provide prospects of a rapidly growing domestic demand for agricultural, commodities. More- over, judging from experience in other areas of the world,, development is usually accompanied by a gradual shift in demand from cereals to higherr value products such as fats and oils, proteins, fruits and vegetables. The mission is, therefore, confident that the prospecti-ve growth in agricultural output can be absorbed without a serious deterioration in the terms of trade of agriculture if production is shifted ta. these higher value crops. Consequently, wei should like to stress agairn the importance of giving priority to the development of high value produc'ts especially the livestock sector. 27. in the long run, continuing agricultural growth will depend cn a continuiig injection of newer and better technology. This, will deper,d to a large exbent on the resources which government is able to provide for research and the proper organization of the research effort. Exist- ing technology can provide the basis for developments for the next five or ten years but rapid growth beyond that period will require high priority for agricultural research now. Development of high yielding varieties is not a one-shot proposition. The rust resistant vjheat of today may not be able to cope with new strains of rust which may evolve in a few years. An insecticide which is effective today may not be able - 9 - to cope with resistant insects which survive the initial period. Moreover. the large areas of undeveloped tropical land in Brazil and the general shortage of research knowledge about tropical agriculture make it extrerely important to expand research on tropical crops. The great diversity of ecologic2l conditions in Brazil nrovide a fertile field for develonment of new crops and improved methods for producing and using existing crops. Research on food tecnhno1ogy nnd new processing mpthods alradyr startead at Campinas should be given strong support. Public Policies and Investment Program 28. The government's program for action calls for a major shift in g overnrmet ponicies touear ,w agriculture. Tn +he past +1tn maln em.phais was on achieving rapid industrial growth and diversification. This called 1o mS e sureL s GO a-iMeda- ai tntai= ±ing .-l ow i. 1 ao:.an raw matucra. Fr .Ces SW ltt a view toward minimizing wage demands and holding down industrial costs. The new policy recognies 4that agricltur ca4e yar eeet - h overall plans for economic development and aims at eliminating unnecessary retrltin O._LAQ L agicltra produto d,mre g artecurgn resII.'r --- --r3 cJiL 4t U 1L~U ct.L Jil UUUU L.LULI .Ulu 14CI Mt, LdLI .iIU. t-LLV.AUJ4 Cr. Li private inves-tment in agriculture. iioreover, the plan provides for im- proveieli-is in marketing anditJ slt'orage facilities and ali FiL_uirL pr ±ce po-VgJ.:af1 aimed at assuring farmers a reason-1able return on their investments. It iaso includes a broad range program of agrarian reform aimed at alleviating conditions in some of the crowded areas such as in the Northeast through land redistribution but primarily aimed at brin-ging idle land into efficient use through taxation, expediting the development of frontier areas and improving prooductivity on existing farms. Agricultural Jinvestment Requirements 29. The governmentts program for action indicates that overall financing requirements for agriculture in 1965 are expected to amount to roughly Cr 611.7 billion. There is, however, no breakdown betwseen current and capital requirements and no clear distinction between government and non-government, expenditures although the surmimary table indicates a re- quirement of Cr 200 and 212 billion for public capital expenditures in agriculture for l965 and 1966, respectively. A major portion of the required financing appears to consist of the financing requirements of the private sector such as fertilizer, seed, insecticides and farm equipment. In the areas of likely public investment such as agrarian reform and irrigation, investment programs are still largely undefined and only ten- tative lump su,n allocations are available. 30. In the past, direct government investments in agriculture have not been a major factor in development. Tlhe principal government invest- ments affecting agriculture have been roads and railroads opening up new agricultural areas. Direct government investments in agriculture have been confined largely to periodic investments for reservoirs in the drought areas of the Northeast and facilities for carrying out coffee and other - lQ - comtmodity stabilization programs- The bhulk of .he paricultural investm during the past fifteen years have been in the private sector financed out of current earnings and credit from officinl sources. The availahbili-iy of vast areas of undeveloped land, the supply of cheap labor, a sizable influx of skilled farm.ers from Erope and Japan and a growing market for agriciultural commodities were key factors in the past growth. 31. In the two areas of potentially large public sector investmernts in agriculture- agrarian ref orm and irrigation in the Northeast, resources are being provided for basic surveys and project preparation but substantial investmentIs1siH wViL Lhave tuo awaiLU or,pUleti of thes stud . The Il nIIstLryL.L of Agriculture and Forestry is providing for capital expenditures of Cr 44 billion in 195 aund Cr 58 blllion in 1961 in their proposed budget. A detailed breakdoifn is not available but much of this appears to be for so-called "fo:mento? actiLvities whichn include a l arge proportio-rn of curroBnb services to farmers which are not really capital expenditures. However, including rough estimates of capital expenditure oI states and autonomous agencies, the above figures are probably reasonable approximations of public capital expenditures. The foreign excnange component is about 20 per cent. 32. The private investment requirernents of agriculture are difficult to estimate. Past data indicate 3.4 per cent and 4.9 per cent of gross fixed capital formation going into agricultural machinery and equipment. rIoreover, the shortage of medium and long term financing has left a sub.- stantial back:Log of unfilled demand for agricultural equipment. In 1961 total tractor sales are expected to be about 9,000 tractors amounting to about Cr 70 billion. Estimates for other types of agricultural equipment such as trucks, combines, plows, pumps, etc. are subject to a wider margrin of error but tlotal investments in agricultural equipment in 1964 may be estimated Li very rough terms at about Cr 160 billion. For 1965 the program estimate of Cr 200 billion appears reasonable. 33. A major part of the capital formation in agriculture consists of the development of new land. Between 1950 and 1960 cropped acreage has increased at an annual rate of about 1 million hectares per year. Prelim- inary forecasts for 1964/65 indicate a continuation of this long term trend. I'lost of the land is developed by sharecroppers who contract to clear land in return for cultivation rights on a share basis over 3 or 4 years. On the larger holdings some machinery is used sometimes by sharecroppers but most of' the work is by manual labor. There is no systematic data on this type of investment but the available evidence suggests an extremely low capital output ratio with the output of the first year frequently more than covering the costs of development, Under conditions of continuing inflation which existed throughout the period and the arbitrary adjustments in price ceilings and floors, prices at harvest were always higher than at planting time in nominal terms. Moreover, over the period the terms of trade for agriculture improved slightly. For specific commrodities, however, the farmer could not count on covering development costs through inflation since harvest prices depended on government action. The availability of - 11 - short term credit. n rnncessional terms for growing snpnifiG cnrnn.cm eliminated a major part of this risk. 34. The development of new land has been given substantial stimuLus in then past by- t Ahe., v of - r a. rail facilitle it the interior. Coffee was the mnoving force in the development of the interior of Sao Pau,,lo .d,_, P-. ;_ +th- -ly 195 0o'fts bu+ +he n subsequentmovement 1.1. J J * U.I.U W L4 4. aZ. a.i C .LA L L VI I ~ ~O.J ±3 J. 7J'J , 'Uv uLi UL OUiL C4 t4L1LiJ~I VCSLI1- into the interior was sustained by the rapid growth of domestic food and raw malt.eria l mUl, i'a- The developm[en of Br asila I d.--4I the -. _rL of national highways was an important factor in opening up vast new areas in Go ia s, 7lsato GUros-so ardIJIa eas 35. The rapid gro-w-th of agriculture into t`e J-terior and the increas- ing urbanization of maricets has not, how ever, been accoinpaniied by a corres- ponding growui L-i facilities for tranlsportlng, stor±ig and marKeting the larger output. Moreover, the conscious policy of the government to hol(d down the level of food prices to urban consumers has resulted in a coniLnu- ation of controls on exports and prices and development of various govern- mentaL, quasi-governmental ard private agencies with varying degrees of responsibiLitv for various aspects of marketing. The government has initiated a new policy to gradually eliminate most oI these controls. "his will no doubt stimulate private investment interest in transportation, storage an(i marketing of agricultural con!modities. A recent study by Wieitz Hettlesater indicates urgent requirements for investment of $600 million in storage andi marketirng facilities for grain and tuberous crops alone. Further invest-ments would appear necessary for processing, marketing and storage of meats, dairy products, fruits and sugar as well as a number of tropical comiodities such as cacao, jute, cashews, palm oil, etc. rMost of these investments would be in the private sector and are not include(d in the government's proposed investments in the agricultural sector. However, fairly substantial investments for public grain storage and handling facilities will probably be required. The head of SUf-AB estimates urgent requirement1s of about Cr 20 billion during 1965 for this purpose. This is included in the mission's estimated public capital investment requirement of Cr 44 billion for 1965. Sources of Finaicing 36. The bumper crops expected in 1964/65 should provide farmers with substantial cash resources for meeting production costs in 1965/66 and for investment purposes, provided the government's current marketing plELns are carriecd ouit smoothly. This will call for a sharp expansion of short term credits during the harvest period (February-May) to meet the expenses of the larger crop and prompt action inl moving surpluses to export markets. (Corn, rice, peanuts and cotton are expected to show particularly large grains.) 37. In the past about 90 per cent of the agricultural credit provided by the banking system was channelled through CREAI, the rural credit department of the Banco do Brasil. In recent years the volume of loans - 12 - made by CRPEI has amournted to about $350 to $400 million per year, repre- senting about 10 per cent of the gross national product originating in agriculture. Regional develonment banks. state banks. commercial banks and cooperatives provided another $35 to $40 million. Other sources of financing suih a processors fnrm supnly dealersv merchants and lancllo:rds provided an unaknown amount of credit. About 80 per cent of the credits sunnlied bhy the Banro do Brasil ancl practically all of the credriitst from other sources are on short term. 38. The government has recently taken two steps to increase the supply of short te.-rm nrircult+.u1rnl creIdit. +th the heiln of the ITSATTa neT nagrncy, the CNCR (The National Agency for Coordination of Rural Credit), has been established wiLth a view toward developing a coordinated agricultural credit program actd providing a channel for external financing of agricultural credit pr+oEgrarns. The agency has received an 4rn+iti al allocation of Cr 50 billior which it expects to use for rediscounting short terni fertil- -,i qo 1 n n n ¾' -. cn m m cs ^nn .1n h.,rI c T n r1 AA+-ti n r r nn + n . + l Q- A< _ ranQ .¶rn YnnE io + X %4.J. hjo IL. . . t v E V'. L VXn j.Ja± U VJ.L Uk IA. 2 WO W2 V '.., 2. VWFV> of commercial banks were freed for agricultural loans in 1963. As a result, n nym v., i rI .'A4+, -l4n-14, I -, -na ____v.n- c l' b + k- n.-, n - -,r. mrUmercial Clnk creditsL to agricu,lture hLave inr e durn t past Uyea, A major increase in short ter.n credits will be required to finance the harvesting and marketing of the record crops expected in. 196 /61. C) 14) g UV± 4 oras 3D~~I LThe .monetar-y p'lan flor comilbati,ng JLM-la Io provides fr1ices in lending by CRPAI of about 30 per cernt in 1965 as compared to expected price inceas o about 35 pe cet ilwvr cosiern the jJWiOAiJ. in resources which should be available from other banks through ClIChi, the overaill credit position for agriculture in 1965 should be somewhat better than in 1963 and 1964. With an increasing proportion of the short term lending to be assumed by private banks CREP1 should be able to meet a so.niewhat larger share of the requirements for medium and long term de- velopment funds in 1960. iHowever, given the iarge backlog of unfilled investment demand, there is considerable scope for external financing, particularly i:n the years after 1965. The mission estimates that about Cr 50 billion of the Cr 200 billion private investment requirement can be financed out of funds already budgeted for CR1AI. An additional Cr 150 billion will have to be financed perhaps one-half out of the farmers' ouna resources and one-half from external sources. External resources of the order of $50 million will be needed to meet this requirement over a two-year periodi. Summary of Recommendations 40. The mission endorses the governmentts policy for decontrol of product prices and liberalization of export controls. Most agricultural commodities can be produced competitively at existing exchange rates and export outlets should provide an effective floor for prices. In view of the large crops expected in 196h/65, immediate steps should be taken to implement this policy. - 13 - hi. The higher beef Drices resulting from the recent decontrol of meat prices and planned liberalization of meat exports can be expected to reduce domestic beef consumotion. orovide incentives for increased out- put and provide a sizable export surplus. Increased poultry and fish production shoould helm, maintain dietarv standards. Considerable exoansion of beef output is possible even in the short run through more intensive ma nagement of Ryiqti ng herds- annri innrasd fnttpni ng of sters hbefore slaughter. For the longer run, a program for financing livestock develop- mepnt. is urapn+.1ir neerdeod nnd- shouWld hb givrn npri-oritv in +.he agoy'r-mprtft credit program. (See Annex 2.) 42. Prospects for improved levels of agricultural financing are -esonabl-e in 19A6c 5, pvarticularly in oiew of the bup-er crops exected. The government should exercise special care to provide sufficient credit Ifo r 1harvesting and m arket-ing andu to it-ake measures to exedt th make lng and exports of expected surpluses such as corn, rice, cotton and peanuts. iJ sLe,±G huLiere is a dC11ner,u ttullav GI aUL)U)L.JU.L.J Oi1O. V L d.IL sb i s o LtUr- aIl. credit will be tied up in inventories. 43. There is a special need for augmenting the supply of medium aid l6ong wern,, fundse. Thei; goverur.1i±tL, shuuou udraw up ,U adequate pguuPrui fuor medium and long term agricultural credit. This will probably r equire externai f inad-ucing of the order of du leasu $0u milionu per yuear. irvin- cipal outlets for credit would be for livestock development, purchase of J. arm macnh`iery and equipment, and establisnment of perenrial crops. 44. The public investment program as of now is largely undefined and consists of a large number of relatively small scattered facilities. Studies currently underway should be completed as rapidly as possible with a view toward developing programs for better utilization of irriga-tion possibilities in the Northeast and colonization of frontier areas. 45. Facilities for transporting, processing, storage and marketing, of agricultural commodities have not kep pace with growtha in agricultural output. The government should give high priority to investments in this field. A mnajor part of the investments will be in the private sector. Provisions for external financing of the order of $100 million per year will probably be necessary for the next five years. Part of this invest- rment would be in the industrial sector. About half is needed for construction of storage facilities. 46. The mission believes that the governmentts program for land reform is realistic. (See Annex 4.) The major emphasis on a broad scale attack on problems of raising productivity and development of new land is in line with Brazil's resource situation. Land tenure problems and fragmented holdings appear to be serious impediments to production only in certain limited areas. The government presently plans to carry out pilot redistribution projects in such areas. The bumper crops of the current year should allow the government time to carry out necessary surveys anci studies to provide a reasonable basis for a successful program. -.14 - L7 Thle mission wnas well imprepsed by the aualitv of agricliltural research on a number of commodities, particularly in Sao Paulo and Rio Grande do Siil We feel, however_ that, tre is n urgent nreed for emPnnd- ing and intensifying the research work to cover other important crops suc1nh as hbeans, oilsoered ndl frelrl ond to expedite-vnii+.e fa h . tnsfernY of knowledge to areas with different ecological conditions. This will call for consider- able strengthening of researchn staions- in -area on+tcsi of Sao Paaulo R Th govrru.en shouldA g-ve~r highc, prort to the p~rob'emsc of m!nkina farm input items readily available at reasonable prices. In addition tD larger imports of ite mQs such as fertilizer and retcide;s ton meet+ Shor+ term requirements establishment of efficient local manufcicture of these i+-ama Aa~czal'irnc h-i~l rr- ,y-xv-+, ii a* +-im v'r+i' 'A11Yi operating well below capacity at high unit costs. A liberalized program for fin'nmcing tracto- r sal-es wo,unld Aromcit-e -nc -A -domesrtic sales, an-' may help in reduction of unit costs (see para. 43). 49. To date, fisheries development has been held back largely by markle-t L-J considerations. Lecen il-.L se in b1.1 -L prices shUU.Ld Ihlp expand domestic consumnption but there is an urgent need for improvemernt o.f market ir.g .L±g.acil,iti. [EIossiblities I'r t dUCLLLIft ULLIoLr UUtleut such as fish meal and canned and frozen products should be explored with a view tUwaru eciouuragxing pr-Lvate ±invtr1eLtmu. 90. Prospects for any significant increase in domestic wvheat production are poor (see Annex 1, pe 2) and Brazil should plan on continuing imports through PL 480 and from other source. 4CREAGE OF PRUNC1P1t.1 CROPS (Mil:Lion hectares) Crops 194k 1953 l1524Z 1995 19262 0 1961 1Q62 Beans 1,420,000 1,995,000 2,199,000 2,229,000 2,257,000 ;2,323,000 2,126,0o0 2,379,000 2,,560,o00 2,581,000 !,716,000 Coccoa 2681,000 340,0100 35;3,00o 368,000 376,000 387,000 461,0o0o 465,000 471,000 474,000 465s,000 Coffee 2,382,000 2,919,0100 3,0C05,OOCI 3,266,000 3,412,000 3,672,M00 4,079,000 4,297,000 4,420,000 4,3134,000 4, 463,000 Corrn 4,056,000 5,120,000 5,528,000' 5,623,000 5,998,000 6,095,000 5,790,000 6,139,00o 6,k81, 000 6,886,0011 7,43,000 Cotton 2,722,000 2,587,000 2,487,00CI 2,617,000 2,663,000 2,771,000 2,707,000 2,746,000 2,930,1000 3,224,000 3,458,000 Potatoes 116,000 163,000 165,000 179,000 185,000 190,000 192,000 188,000 199,000 191,00D 196,000 Rice 1,497>,000 2,072,000 2,425,000 2,512,000 2,555,000 2,490,000 2,515,000 2,683,000 2,966,o00 3,174,000 3,350,000 Sug,ar Canc 656,000 991,000 1,027,000 1,073,000 1,124,000 1,172,000 1,208,000 1,29:1,000 1,340,000 1,367,000 1467,000 Tob;cco 141,000 168,000 184,000 196,000 180,0Q0 179,000 181,000 191,000 213,000 227,000 232,0(0 Wbheat 3051,000 910,000 1,081,00C! 1,196,oOa 886,ooo 1,154,000 1,446,000 1,186,000 1,141,000 1,022,000 743,000 AiDnendix B YIELDS OF PPTNC]-PAL CPO S (Tons per hectare) rops 1945 1953, 1951! 1955 1956 1957 1958 1959 :196o 1961 1962 Beans .70 .70 .70 .66 .61 .68 .68 .65 .68 .68 .63 Cocoa .45 .40 .46 .43 .43 .43 .36 .38 .35 .33 .30 Coffee .35 .38 . 35 .42 .29 .38 .h2 .41 .41 .50 .39 Corn 1.18 1.17 1.z23 1.19 1.17 1.27 1. 27 1.26 1.30 1.31 1.30 Cotton .41 .41. .46 .47 .45 .42 .42 .51 .55 .56 .55 Potatoes 5.14 5.00 4.93 5.,03 5.41 5.2'7 5.30 5.45 5.60 5.65 5.78 Rice 1.43 1.48 1.39 1.49 L.37 1.64- 1.52 1.53 1.62 1.7,0 1.66 Sugar Cane 38.00 38.69 39.23 38.16 39.12 40.69 41.41 41.45 42.48 43.45 42.64 Tobacoo .79 .78 .80 .,76 .80 .78 .79 .79 .76 7491 b!heat .74 .85 .81 ,,092 .97 .68 .41 .52 .62 .'3 .95 ppendix C PRODUCTTON OF PRTNC1PAI CROPS (Tons) Crops 1945 .L953 1954 1955 1956 1957' 1958 1959 1960 1961 1962 Beans :L,022,000 1,:387,000 1,544,000 1,475,c0o 1,379,000 1,582,000 1,454,000 1,550,000 1,731,0°0 1,745,000 1,709,000 Cocoa 120,000 1L3?,O0O 161,000 158,000 161,00r, 165,000 1.64,000 179,000 163,000 156,000 140,000 Cofffee 835,000 1,111,000 1,037,000 1,370,000 97B9,000 1,409,000 1,i96,0o0 1,7518,Oo 1,797,Coo 2,152,0C0 1,716,000 Corn 4,847,000 5,9384,000 6,789,000 6,690,0O0 6,9q9,000o 7,763,,0C0 7,370,00Cl 7,787,000 8,672,0o00 9,0o6,00c 9,582,000 Cotton :L,149,000 1,68,0o00 1,135,000 1,,2Z7,(00 1,194,0OQ5 1,1771,000 1,143,000 1,399,000 1,609,000 1,818,00Cl 1,902,000 Potatoes 223,000 815,000 815,000 898,000 1,003,000 999,1000 1,017,000 1,025,000 1,113,000 1,080,0(Cl 1,134,000 Rice 2,147,000 3,072,000 3,367,000 3,,737,000 3,489,000 4,151,,000 3,829,0(0 4,101],000 4,795,000 5,392,000 5,557,000 Sugar Cane 25,179,000 38,337,000 40,302,000 440,946,000 43,976,000 47,703,000 50,(19,0()0 53,512,000 56,927,000 59,377,00( 62,535,000 Tobacco 113,000 132,000 147,000 148,000 1144,000) 140,000 -144,000 15:L,000 161,)00 167,0M0 187,000 Wheat 233,000 772,000 871,000 1,101,000 855,000 781,000 539,000 611,too 713Mooo 955,000 706,000 j4 cc c; Il _: 0 c) \ (\ r- NC\j - C\ h 4: r1 rn C\J r--l C) cO cH~ $-1 -d $4 r1a 9 2 r c/ X O i t cc a- c'r1NCo \4 txr\ gj a~C) C] ) CO\'z (J r- r- -4 +)Cd SNJ W)~~~C 0) r;} ~ ~ ~ ~ ~ ('1 4 Cffi 0h~ ) C) D \ C \ C _ \ ('2) Cq E [ ) . C.) 4 -4) C) u) Q\ c-\ A: 0O+ 4 S Hi~~~~~~~C (12 1f \ HLE (NC CD-c C) E-l t ~~~* . . . - 9 . U1) C) -: CJU r - CN 0) C!~~~ 0NCNHCt C CQ0\ CIO _ ~~~~~~~~I rO rd LO OCE (1 o C ) ^ ( -P3 4-3 ~ ~ ~ ~ - t Q C) r1 0 0 C) <) S S r1 +> L C)) ~- C _-- 0 C) t H C)C) C o +3O O 0) C) H C) O ) N 4-P 0 0:3 E--i C) 4-P C) 0 0, ) CIp OC). O ) CD 2 OC) r r ) -Hq 0 C)Or ..-H U Appendix E PROJECTION OF SUPPLY AND DEW1AND OF FRI2I.A L ACrRICULTURAL CoOMMODITIES Potential suroluses and deficits as contained in PJan 1964/1.970 Unit 1964 1970 Supply Demand Balance SUpplDy Demand Balancie C;rops Sugar 1000 -tons" ?2.000 52.000 20.000 100.000 68.000 32.000 Rice 1000 tons 6.300 5.800 5C00 9.2C)0 8.00( 1.200 Potatoes 1000 tons 1.260 1.220 40 1.550 1.70( 9.200 Beans 1000 tons 1.720 1.780 -60 2.0j50 2.200 --150 Oranges million fruits 9.800 9.100 700 12.900 12'.500 400 Cassava 1000 tons 20.700 20.200 500 27. 200 26.300 900 Corn 1000 'tons 10.400 10.8900 -400 14.100 1'j.500 -1,.400 Wheat 1000 tons 400 3.000 _2.600 700 4.000 _3,300 Livestock Products Lard 1000 tons :120 150 -30 120 19() -70 Beef 1000 tons 1.300 1.500 62c0 1.350O 2. 10) -.750 Pork 1000 tons 330 330 _ 430 480 %5O Milk million liters 6.000 6.ooo 7.500 8.40() _900 Eggs million dozens 650 600 c50 850 830( -30 Fish 1000 'tons 400 400 60 8)0 52() 280 Other mealt 1000 tons 200 200 - 300 360 -60 A,pDendix F APPFARENT F.RI'TILIZEf? CONSUWFTION, BRAZIL, 1950-19163 (tons of elements) Year NITROGEN (N)- PH(OSPt4ATrES;(P O ) POThSSTtT` (K20 ) ] 2 52 Domestic Domestic Production Imports Total Production Imports Total - Total 1950 751. 13,436 1.4,187 5,999 44,837 50,836 23,523 1951 760 17,801 18,561 6,450 6'7,119 73,569 28, 709 1952 830 9,1775 10,605 8,4L44 383,479 46,923 15,347 1953 93C 19, 649 2. , 579 8,533 56, 28-3 64, 816 31,226 1954 1,276 16,486 17,762 12,080 65,309 77,389 28,348 1955 1,2231 21, 728 22, 9 51 23, 8412 64, 73 3 88,575 49,523 1956 1,388 28,850 30, 2]38 23,553 7(,006 93,550 41,632 1957 1,194 27,'364 28,5,58 41,380 77,309 118,689 60,189 1958 2,578 38,812 41, 390 53,478 89,871 143,349 65,082 1959 1C ,679 34,1.06 44, 785 68 ,486 55,519 124,005 57,425 1960 15l,726) 51,)34 66,760 77,'427 54,164 131,591 106,146 1961 12',021 43,(043 55,064 69,'766 4'9,000) 118,766 70,?27 1962 12 ,627 39,940 52,567 61,'10 59,127 121,037 71,249 1963 13,448 51,952 65,400 42,650 95,750 138,400 88,650 TThe total K20 consumption is imported. Appendix G LIVESTOCK NUMBERS (Thousands of head) Year Cattle Horses Asses Ml.ules Pigs Sheep Goats Poultry 1948 5C,08,9 6c,98 1, 529 3,094 22,979 13,390 7,888 1949 51,937 6,902 1,5'36 2095 24,152 13,549 8,249 - 1950 52, 65,5 6, 937 1,5'72 3!,101 26,(59 14,251 8,526 - 1951 53,513I 6,S994 1, 593 3,181 27,801 15,891 S,840 1952 55,854 7,111 1,61.1 3,215 30, 916 16,264 8,822 123,106 1953 57, 62 6 7, C)59 1,612 3,133 32,'721 16,300 8,915 134,2155 1954 60,700 7,316 1,675 31,245 35,2796 17,459 9,414 14399C6 1955 6,3,608 7,5'64 1,774 3I,390 38,606 18,484 9,879 154,209 1956 661,695; 7, 935 1,8t76 3I,576 41,4-16 18,867 10,339 160,352 1957 6r:, 548 8,128 1,967 3,760 44,190 20,164 10,640 165,95';8 1958 71,42C0 8,185 1,94S6 31917 45,262 19,921 10,194 169,102 1959 72', 829 8,'333 2,0 31 4,047 46,8423 18,995 10,644 175,401 1960 73,962 , 73 2,175 4,086 47, (944 18, V162 11,195 184,1 f3 Appendix H LOANS OUTSTrKD\IifG Cr$ 1.000 Index 31-12-62 31-12-63 1962=100 Agricul-ture -/l10o.06L.o53 16L.6L7.898 158 Livestock 39.708,977 50.672.9L1 128 Cooneratives 6122.260 11 055.619 181 Fedralr~ Covernm.ent - Law 1.506 3.814.895 154.82.903 )4C6 Federal Government - Wheat 304 3.451.535 11.354 Federal Govermnent - Rational:ization of Coffee 2 .361.)03 7.71.0 LII 325 Federal Government - Coffee Eradication - 845.057 - Industry 37.783.874 53.820.3h1 142 Industrial Development - 126.058 - For Investments and Funds 21 370.187 468..94 126 Others 708.849 671.672 169 194.934.802 3086.982.629 159 Credits in course of payments 984.h07 888.257 90 195.919.209 309.870.886 158 _/ Inclusive of agriculture and stock raising. 2/ In the column of 1963 the balance refers only to investments. AnT A7TT mtA TNG Anh' A A rGmnOPTTING rTrO 1'5 e Cen n,STC2TTC! Df. OLJI UUI.- r iiJU'ILLJU AL2d ±UUUIW±P4I U LU .Ly_U ULj.Lj-NU0. (Heet~ares) Nt -U4 Artificial State & Zone Pastures Percentage Pastures Percentage Total North 2,344,566 96.4 87,846 3.6 2,432,412 !Rondonia 2,533 63.9 432 36.1 3,965 Acre 98,818 95.7 4,391 .3 103j209 Amazonas 5 ,168 60.0 37,411 40.0 93,579 i-n m ?rNl- 4i- noc 7 -1 1,7A Rio Branco 506,69Q 9.7.1 0.3 7 . 17I Para 1,555,600 97.4 41,346 2.6 1,596,9h6 Amapa 124,7L9 97.8 2,790 2.2 127,539 Northeast i.1,586,175 96.8 380,3L46 3.2 11,966,521 Maranhao 3,454,444 98.8 40,820 1.2 3, 95,264 Piaui 2,045,263 97.3 55,711 2.7 2,100,974 Ceara 2,317,805 96.9 74,251 3.1 2,392,056 Rio Grande do Norte 1,291,923 98.3 22,816 1I7 1,31",739 Paraiba 1,307,)408 97.4 35,271 2.6 1,342,679 Perriambuco 934,652 91.4 88,338 8.6 1,022,990 Alagoas 234,680 78.8 63,139 21.2 297,819 East 2/ -2,595,908 75.5 7,336,403 24.5 29,932,311 Sergipe 236,947 58.5 167,841 41.5 404,788 Bahia 2,260,945 49.1 2,343,590 50.9 4,604,535 Minas Gerais 18,714,580 81.6 4,212,563 18.4 22,927,143 Espirito Santo 265,428 83.4 318,357 16.6 583,785 Rio de Janeiro _X,088,102 81.0 254,946 19.0 1,343,048 Distrito Federal ¸/ 5,491 93.2 399 6.8 5,890 Sul 22,959,001 84.0 4,381,265 16.0 27,340,266 Sao Paulo 4,952,565 57.3 3,695,370 42.7 8,647,935 Parana 1,967,767 87.5 280,815 12.5 2,248,582 Santa Catarina 1,686,120 92.3 141,452 7.7 1,827,572 Rio Grande do Sul 14,352,549 98.2 263,628 1.8 14,616,177 Central West 33,174,333 92.2 2,787,200 7.8 35,961,533 Mato Gr sso 19,656,276 96.5 722,536 3.5 20,378,812 flcOi~2/ 13.518,057 86.8 2,o64,664 13.2 15,582,721 TOTAL Y 92,659,983 86.1 14,973,060 13.9 107,633,043 / Including 63,122 hectares of the Serra dos Aimeres, an area which is claimed by both the States nf Minas nernis And Esnirito Santo. 2/ Now the State of Guanabara. T-, i-clungv +the esnct- Di s+.-ri +.n -rnl Aerendix J PRODUCTION OF CAICASS AEAii', TOTkL 4ND PIP HF41 (OF STroCK, 1948-60 (Tbhousands of tons) Beef Pork M/'uttori Goat's flesh Poultry Average Average 'verage ^verage "cvera-e yield per yield per yield per -yield per yield ner animal animal animal animal animal Thou- slaugh- Thou- slaugh- Thou- slaugh- Thou- s:Laug"h- Thou- slaugh- sands tered sands tered sa,nds tered sands tered sands tered of (kilo- of (kilo- of (kilo- of (kilo_ of (kilo- Total Year tons grammes) tons -rammes) tons grammes) tons grammes) tons grammes) weight 194L3 1,P)O.6 180.2 324. 6 63.7 19.3 14. 9 12.6 10.0 3.9 1.0 1,411.0 1949 1,093.3 18,1.6 ,322.4 63.6 17.9 15.( 12.8 9.9 4.4 1-.1 1,45io.8 1950 1,074.4 180.1 -'44. 63.7 20 .3 15. S 12.0 9.9 4.1 1.1 1,4r5'5.4 1951 1,135.5 17'6.0o 3185. 64.4 18.3 14.9c 12.9 9.9 4.5 1.1 1,556.7 1952 1,098.7 18,3.0 380.2 61.9 25.1 15.9 12.9 P. 4 3.8 1.2 1,520.6 1953 1,118.5 179.1 393.-8 63.4 26.3 15.3 13.6 9.8 4.1 1,1 1,556.3 1954 1,151.9 186.7 408.44 64.5 2'3.2 15.3 13.6 9.9 6.5 1.3 1,6603.5 1955 1,131.8 187.? 1405.4 62.6 2L4.3 15. 6 14.4 9.8 4.8 1.1 1,580.6 1956 1,277.2 194.3 437.1 A4.0 22.0 14. 8 15.0 9.9 5.3 1.1 1,756.7 1957 1,318.6 187.5 485.4 67.7 22.1 15. 6 15.6 .10.5 ;5.3 1.1 1,846.9 1958 1,473.4 187.5 496.9 66.4 23.3 15.6 17.2 11.1 5.8 1.0 2,016.6 1959 1,458.9 187.4 466.5 65.6 22 .7 15.7 16.3 11.1 5.6 1.2 1,970.1 1960 1,359.2 188.6 474.0C 66.8 22.1 15.5 17.0 11.2 5.8 1.1 1,878.2 I Including butter and bacon. 2/ Meat and processed products. AlI'ThiE 1 Page 1 CtR'OP NOTES 1. Cereals The principal cereals grown in Brazil are rice, maize and wheat, which in 1962 accounted for 42.5 per cent of the land under cultivation. a. Rice One-third of Brazil's rice production cornes from the State of Rio Grande do Sul. It is irrigated rice, mainly of the Japonicu type. Yields in that state are the highest in the country, beinig over 3,000 kg/ha on about 300,OCO hia in 1962. Rice production in Rio Grande do Sul can be increased through better irrigation, mechanization, and the use of the improved seed varieties produced by the Institute of Agriculti.ral t.esearch of the South (I1'EAS). Better irrigation will lead to increased use of fertilizers, which so far have been used in small amounts because of uncertain supplies of water at critical periods of production. IJpland rice is cultivated all over Brazil, the yields being about 1200 kg/ha. As is well knomn, the upland rice varieties are not as responsive to fertilizers as wet rice. Yields can be increased by using inmroved seed nrodluced at -the Campinas Agricultural Research Institute and the n'grricultnral R esearch Institiute of Central J!est, (TPEiCQ'C) 1rginon 1iKoreover, rice is often planted on newly cleared land bef'ore eStabli shment of' new pasturesP air! in 1n no term rota4ti on 17ifth pastures, the acreage can be expected to increase with increaSed cBpvul cnnmPnt. (if 7st.irrelaf - 'Pw-tThe wet. arease rof -'iarnrhaoir nld Pri,, have shoi>m sharp increases in acreage over the past decade an(d f'ur1.ther increases can be exoected as the Ar,iazor. delta is deve'onped. T)t.nl ac-_reageT uindriy -rlce has inereasedr fyrom 2 )1L mill iron li- in 1945 to 4.5 million ha in 1962. Total output rose from 2.1 million tons to 5.1 million tons during the same period and reached a high of 6 million tons in 1963. The 1964 croD was doiy sljightl f-romn +the 3A cr-op but+. produced an eort rsurplus of the order of 350,000 tons. Export availabilities for 1965 is expee+ed + -o rech about 1 mlilion tons, including nv,r,,nr_es fror'! the previous crop. b. MaiZ e MIaize is a very important crop in Brazil, but farmers c:uuLivaL e iU in a slipsnUU riamlnler aniU for tius reason vields are low. The use of already tested hybrid seeds plus a reduc- tion iji the distance between plants and appropriate use of kli4LX 1 Page 2 fertilizer can produce an appreciable increase in yields. A considerable increase in production can therefore be obtained in areas in wlhich there is sufficient experience of these pro- duction factors, as is the case in the State of Sao faulo. The States of Sao laulo, Parana, Santa Catarina, lio Grande clo Sul and liinas Gerais produce more than 70 per cent of all maize produced in Brazil. The yields are from 520 kg/ha in Rio Branco to 1810 kg/haL in Santa Catarina. The yields are within the same range in the principal maize producing states. The yields of maize can be increased by using suitable hybrid seeds and improved methods of cultivation, where the lack of water is not a lirniting factor. The improved methods of cultivation include shorter distances in sowing, the use of fertilizers, better rotation systems and elimlination of intercropping. Hybrid maize alone does not seem to insure increasing yields. This was shown by the 36 hybrid variety trials carried on in 21 places spread all over Brazil. Thze yields w.jere only 12 per cent higher than local varieties. iiaize production can be significantly increased by hybrid corn in coiIbination with fertilizer and hettpr practices as already demonstrated by many progressive farmers in Brazil. Acreage under corn increased from h million acres in 1945 to 7.3 million acres in1962. Output rose from J.8 million tons to 9.6 million tons during the same period. A record crop of 10.2 lri1lion tons winas p- roduced in 1906i3 as a r,es ult of favorable prices and good weather, but dropped to 9.9 million tons in 196Q as a result of lower yprices. A record crop is expected in 1965 as a result of high prices at planting and favorable t.s o _ -- + ---or)b TIs J + coul re c mA; 1 Ah in i oqn h1m;11; i)Brazl. has onULy a sm.all area i n tULhie soLu 'LI hernost parjd which is suitable for wheat production. However, because of the large UtdUl- cLU UdaIdIIU cUdL jproLspetiVe riLs li'purIt require- ments, the government has given priority to increasing domestic -wheat production. Support prices were miaintailned well above international prices and special allocations of low interest loans were provliea. At the same time, aomestic whneat production has been steadilyr declining since 1956/57, reaching a new low in 1963/64, when production was less than 200,0U0 tons. Official production figures have been inflated as a result of advantages accruing to wheat producers. ANIJEX 1 Page 3 The lack of suitable rust resistart varieties and relatively unfavorable climatic conditionis have been the major technical obst;acles. Oni the other hand, much of the best wlheat growing area is better suited to livestock production. The mission, therefore, believes that the govern,ent's target for wheat production is too optimistic and that wrheat iinports are likely to continue at present high levele. 2. Roots and Tubers Mianioc, white p)otatoes, and sweet potatoes are the principal crops in this group in Brazil. For the last ten years the seven Brazilian states wihichi produce half of Brazil Is total inanioc output. have recnrded aver2ge yields of 16 tons per hectare. It would, therefore, see,! that a satisfactory tech- no'oglcn-al l ev el has b nreace. IT+ consis +s in +he use of irnproved varieties resistant to insects and diseases, the adoption of rmore rational Adist-ances, a-:, +the choice o tfhe +i 4e for plan in.- base on --r-p-Jat tests. However, yields have shown no significant increase and the growth of ou upu tu has resuLted fro I. Ull -L.LlL iii] pJLcLi LseU acreaLge. Ill UUU LI00 in 1947 to 1.1h million ha in 1961. Yields can be increased substantial'y wth' the use of fertilizerJJ s aUs idLlu a-d in Sao Paulo, wue y- i the order of 32 tons per hectare have already been obtained on some commercial plantations. IManioc can be produced on reiatively poor soiis and is very drought resistant. It also produces rnore calories per hectare than almost any other cro). Prospects are that production of mnanioc wiii continue to expand intu new areas and that yields in areas close to marke-ts can be increased through fertilizer use. There is a shortage of modern facilities for processing manioc into starch and flow. A detailed discussion of this problem is presented in the report on storage by iJeitz-hettelsater hngineers. The potato crop can be expanded in areas where the Sao Paulo experience in the use of varieties and fertilizers can be put to good use. However, yields have been limited by the advance of the disease Pseudomonas solanaceum and nematoids (Meladozyne spp.), against which there are not as yet any resistant varieties in Brazil. The lack of storage for seed potatoes has been a factor in this problem since seed produced in the winter is less affected than the summner crop but cannot be carried over. Up to the present time the sweet potato does not appear to have received very much attention from Brazilian agricultural research; workers and, as a result, any substantial increase in output wjould seem unlikely. AN'lNEX 1 Page 4 3. Legumes Brazil's most important legume is beans, of which it is the world!s largest producer and one of the largest per capita consumers. Beans are cultivated in association with other crops, especially maize, and receive very little attention from farmers. Although programs for the improvement of this legume have been undertaken at the Agricultural :institute of the Central \Jest of the Campinas Agricultural RMesearch Institute, there appears to be little likelihood of any improvement in this crop, the output of which will ce?rtainly continue to expand in the years ahead as a result of an increase in the area under cultivation. 4. Industrial Crops The most important industrial crops in Brazil are cotton, peanutls, sugar cane, tobacco, jute and castor beans. EL Cotton Tn the n.st; t.pr vers there has been a mnrked expansion in cotton production as the result of an increase in the area sow tn tohis crop and in the yieln= In Brazil as a whole, the :ield increased by 24.4 per cen+. i! the nprinro 19Q53-1955Qr to 1Q60-19, buiJiivt in the States of Sao Paulo and Parana the increase was in the order of 78 per cert.* This latter increase ls of great significance, if we bear in mind that these two states account, for hallf the total production.. The increased yield in the States of Sao Pa1ilo andr Parana, expressed in terms of seed cotton per hectare, -as acco ---rpni --ed by -n - - ase in p_rcentg o urnof lint which rose from 30 to 35 per cent, ani in staple 'length, whi;ch increased from 22 lo -30-32 man,. 'lie States J.I1 Uli1 L-1L Li~ ..LIL %. L. ± i rL u u )L .)L w. ~ ULdIt of Sao Paulo and Parana can expand the production of cotton without ncreasing cultivated area, silply by improving still further the technology they are nlow using. Mil±e thL'ie average production is LiU3 Kg/ha, up to 5000 kg/ha are being obtained on commercial planta- tionos. The immediate step should be the iarge-scaie dissemination of the new varieties which are already in existence, but which are not yet widely culzivatea, and mechanization. Ahi'iTEX 1 'age 5 The establishment of modern facilities for process- ing cottonseed oil cake wvould be an important step towards better utilization of b--products and provide an important source of protein for human and animal food. In the Northeast, w'hlere tree cotton is cultivated, the increased production and distribution of improved seed could raise yrields substantially. However, since tree cotton is replanted only once in ten years or so, this will be a slow process. b. Peanuts The State of Sao Paulo accounts for more than 95 per cent of Brazilts total peanut production. In the period 1948 to 1963, the area planted increased by 100 per cent and production bY 319 per cent. Tihe average production, which was 983 kg/ha in the period 1948-53, rose to 1153 kg/ha in 1960-62 after having reached 1367 kg/ha in the period 1958-60. Peanuts are one of the crops in the rotation of manured crops, principally cotton. There are excellent prospects for the development of this crop in rotation with cotton as a result of imnrovemaents developed in the past few years. ,. Sugar Cane The cultivation of sugar cane has been- considerab:Ly expanded and can continue -o be expanrded in the future. Between 1953 and 1962 tihe cultivated area in the ;whole of Brazil increased by 4f' per c-ent and rproduction by 63 per cent. The States of Sao Paulo,, Rio de Janeiro and Minas Gerais produced 75 per cent of Brazil 's total output. Cor.sidering that sugar cane is usually~ not iria-e in Brazil, yields in Sao Paulo (55 t/ha)-and in Parana (AA +t/ha) 'kn h con;sidere h; oh R..+ +he -r; ca A b e x *t.., s' -vs ,, *Ax, X~t | IJ..L5f. -'U U v- I w J 4I4L t,l L'ws. ; increased tremendously by careful use Of improved materiall and lferti-lize rs, asC snown1 by theU pIouto onL U1U1 one of the farms visited, where in the first cut 217 t/ha were obta`neud on th-,-e 2',900L. ha unde cultiatlon 0 J V10UL IILL,i~4 700 Lla urIIUer cltU± CU±V.LULI. Apart fromi tlle use of the accumulated know-how, very extensive areas of the country, especially in the Central Plateau and in Pare, are extrenel, suitable for the cultivation of sugar cane. ANMEX 1 Page 6 In the Northeast, sugar cane production is limited by lack of water, poor varieties and inefficient transport to factories. In the extreme South low temperatures prevent any significant, development. Expansion of the sugar cane crop depends on financing and the establishment of efficient sugar factories. In many parts of the Northeast the factories are small and inefficient ancl draw their cane supply from a large number of scattered producers resulting in low sugar recovery from the cane. The use of stalks for feed for stall fed cattle in combination with molasses and honey has been tried with success and could be greatly expanded to help overcome the problem of the dry season shortage of fodder. d. Tobacco Brazil is a large producer of tobacco both for internal consumption and for export. Tobacco for internal consumption is mairly nroduced in dio Grande do Sul and Santa Catarina and that for export in Bania. Tobaccos for internal consumptioni are used for the manu- factlure c'f cigarettes. f'frrq shouId bH mah e to further its expansion because of the increase in internal consumption due t.n to.ho incr-nste in rnniil n±.i ny ifv, ort tobacco- is used fo-r th+e r,anuffnactur+e of cigars, and these are exported mainly to Europe. Brazil imports wraLpper tobacco from Indonesia. But in 19. +fl Fho .,,ierAic o 1 rmrpran rst 11; ar; a + .tpe ttob+nAcc production unit in Cruz das Almas and at present it is ITlie tobjuacco appears tuo bue of' exce'l'lent1 qualltvy because of the high technological standard of the production of leaf an it-s prepara ti Oil The prospects of BDraz' becoming in the very near future an important supplier of wrapper tobacco to the Unit ed Sbates are very good. Tie United States used to impor-t wrapper tobacco mainly from Indonesia, but from 1959 onwards it began to import it from Cuba at the rate of about 323 tons a year. The economic blockade of Cuba thus opens up the possibility of Brazil entering thid trade. ANME[ 1 Page 7 Brazil, therefore, needs to increase immediately its wrapper tobacco productioii tenfold. This calls f or the establishment of about 400 ha of tobacco fields and the neces- sary drying sheds and ovens. In a project formulated by the Agro-Commercial Fumageira of Cruz das Almas the investment to be made over a period of 2 or 3 years is estimated at betweer 4 and 5 million dollars,. Three hundred tons of wrapper tobacco at US 'v15 per kg F.0.B,. would be worth US $4.5 million. e. Jute Up to 1952 Brazil used to import jute and spent about Xi8.6 million per year for that purpose. The development of this crop, whllich started in 1930, made Brazil independent of imports by 1960 and an exporting country by 1961. The expansion of this crop is facilitated by the excellent climatic and soil conditions in the lowlands of Amazonia and by thae use of improved varieties produced by the AgriculturaL Research Institute of the North (IPEAN). The increase iL production between 1947 and the present tirne was as follows: 10,000 tons in 19L7-51; 21,000 tons in 195:2-56; 31,000 tons in 1959; 32,000 tons in 1960; 38,000 tonls in 1961; 48.000 tons in 1962; and L7.000 tons in 1963. The estimated production in 1964 is 60,000 tons and the 1964 sowings incdicate that production will rise to 75,000 tons hy 19965 In addition to jute (Gorchoruscapsularis), a natural fiber known as malva (dongo jute = urena lobata), which is rnixced with iutejis also being rdevelonped: mrocnrtion in 196) is expected to reach 15,000 tons and in 1965 25,000 tons. The national consumption of finished jute products increased by 59 9 per cent between 1Q961 ad 1958, I-byr 25 cent between 1955 and 1958, and by 51.8 per cent between 1 QC"" nr 1 Q( Ap pa-re+. cornsmt, w)rn hic lT I 1 n i, 1 wsoi T 62 noo0 tons, will be 100,000 tons in 1970. From 1965 onwards the production of jute and congo jute wi]l togthe ibe. atn onas 10,00tns, -uan be increased very substantially. In Brazil jute is produced only in Para and in Amazonia,, TiM-elocalI----- procssin capcit is at -resent 1200 tn -ons. Factories under construction will bring capacity up to 21,000 torisz by lthe midlet U.o 1965) 1d2U C7,0UU tlon Uy LIth eIIU Uen LoYUJ. ANNEX 1 P'age 8 Sao PIaulo is another center of the jute industry but the equipment in use is obsolete and will soon have to be replaced. 'iowvever, the planned processing capacity ,,ill not be able to handle all the raw material available. Argentina imports 60,000 tons of manufactured jute products and 15,000 tons of raw jute. In accordance with the agreement, Brazilian products enjoy a 51 per cent reduction in the Argentine import tariffs. Brazil can, therefore, sell its jute to Argentina at competitive prices. The deficit in the trade balance between Brazil and Argentina is by and large equal to the value of Brazil's wheat imports: US $3t42 million. The value of the jute irnmported by iargentina exceeds this ainount. Brazil could easily adjust il;s trade balance with that country if it were to supply it with thfe jute it nepds The pronect for the factory whiich has just been installed withl modern equipment - Companhia Amazonia Textile de Ariiagem IICATO- estimates the investment necessary for processing all the fiber Brazil will be producing by 1970 at US :465 mil]ion. The annual gross product rwo-uld be of about the s+ame order- of magnitude. iho technical difficulties stand in the way of expanding thi.s crop ar:d indus ux -lz and co,u,.ercial. Cexprinc appears tc;1C IPEuS be excellent. f. Castor Beans Brazil produces one-third of the world's production of castoru qeai_. Littl care i- gi venl tuo± cultvatUUio since the plant is extremely rustic. A judicious price policy and marketing may coiisiderably increase productioni. The use of improved dwarf varieties is the immediate step to be taken, as soon as the trials for the evaluation of hybrids produced by crossing the dwarf strain IAC - 38 with the "cimaron" strain now underway at the Campinas Agricultural Research Institute are completed. 5. Perennial Crops a. Coffee In 1961 Brazil produced 36 million sacks of coffee, but was only able to place 24 million, 18 for export and 6 for internal consumption, so there was a surplus of 12 million. A1i1TEX 1 Page 9 It was decided to uproot 2 billion low-yielding coffee trees and it was estimated on the basis of 6 sacks per thousand trees that production would be reduced by 12 million sacks. Furthermore, one-quarter of the uprooted area l^Jas to be replanted withi 500 million trees in order to produce 30 millio. sacks by 1970 and be in a position to meet the expected dermand of 26.5 million. This is the program of GERCA. The number of coffee trees uprooted in accordance with tijs )rogram was about 700 million from some 700 thousand hectares in August, 196h. But it is estimrrated that a further 700 million trees were uprooted by the farmers themselves out;side of the GE`1tCAIs program. The replanting npan is niot being fo_lowed but as far as can be seen it stil-l holds good. indeed, in 1961, a consider- abhl p nonrtion of the coffe orchards cornsi steci of' trees that were extremqely old and whose yield was very small or nil. Tn extensive areas in thep i30n-rth of Pnrna the t.ree 1id been killed by the recent frosts. A survey made in 1958 of 33 coffee orchards in the State of Sao Paulo, cover-ing 2 million trees on 2.3 thous-and h-ecta-les P I, , t - - -Ec~,, . 0 `--n~11 n a, f 0- -- - - V r- icn A 1,n. ,,n showed that 20.3 per cent of the trees were miore than 50 years olA la 2) A'3 w7ere 4r th 0 Ar ol A Te p Ar __ vL- | U lsu C-1#j_ txIJK- WCiltl ', 1s 1,V uL'llas ,; JUCI. c v | U. -ic pus .iC- centage of old trees must be much higher in the older coffee Crw I i:,g aUrea, wlhie thUi LUL11O f newt1 orclh ard0 s ddUU notU reach the level attained in Sao Paulo during the 50's. The percentage of low-yielding or uIproducAtive trees in areas aff'ected by the frost was probably higher. it is presumed 4-_1| D5 AA, yb J_ |v8A_ 'I 1 t 4 4-4A Ti _ thata large part of thie uprooted coffee plantations were producing less than the increase in production of the new areas whLicLL Lin acco±untUed for 1. pe cent4 oJf1 Uth oitU l nUdi LUUd.± dAiU were planted with high-yielding varieties of coffee trees which are ioW 'LrI0 6 Uo 12 years old. ithe percentage of co±lee tre!es in this age group is imuch h-igher in the State of Parana wlere a large nurimber of trees affected by the frost were uprooted. It should be noted that in this state the number of coffee trees increased tenfold betweeni 1950 and 1962. The policy of the government for the next o to 10 years production is to continue production at roughly the same levels as in recent years, i.e. 25-30 million bags annually. Th-e internal pJrice of coffee will be manipulated ith this end in view. On the export side, Brazil hopes to maintain coffee prices at a level of about 3 cents per lb F.O.B. and export about 20.5 million bags in 1970. AiNNEX 1 Page 10 b. Cocoa The State of Bahia produces 95 per cent of Brazil's cocoa, which iE one-third of tle world output. There has been a continuous reduction in the cultivated area which is presum- ably due to abandonment, and the yields fell on the average from 430 kg/ha in the period 1953-55 to 327 kg/ha in 1960-62, that is, by 24 per cent. Cocoa plantations are in the throes of decay; the trees ares old, often very old; excessively shaded; high number of unproductive plants; low or very high density of plants per hectare; incidence of disease and pests; and, finally, exhausted soils. Increase in productivity depends on the establishment of new plantations witl improved material, which is not yet available to Brazil; the use of fertilizers together with shade control, wlhich still carnot be done under Brazilian coIn- ditions; and, finally, the control of insects and diseases, which can be immediately initiated. Diseases and pests amnPaigns can he lnanched inrm-ediately an(d it is believed that the control of blackpod and of insect ni-, R many of wh ch have been irenti f id - n inncreas production. However, it, would appear that the sector in which rapid and considerable improvement can be effected is that of the fermenting and drying of cocoa beans, which is today carried out; under- very poor conditions. 1igh percentages ofl unflermented beans smelling of smoke impair the (uality of Brazilian cocoa whJ.ch i- c c nq.uot at .-\ri rics beh1 n,.r +those fot, Gh.n-a -,an F rinH ~~~~~1 V o '.SY v v L M' 4A s a JM t cocoa. Fermenting can be improved by perfecting the traditiona:L process. In addition, the process which is being developed in Itabura with promising results is of great interest. Drying has to be done by controllable dryers using eqULjJiptILU aVai.LabU.Le CU i, ULIa Wits "ULtjJe L r-,arket. 'l-e immiediate establishment of pilot drying centers is highly recvlufwiended, as is th-e formulation of a project for the establishment of drying centers with a capacity sufficient to cope with the Braziiian cocoa production. Pre-investment required in the next two years for the first phase is estimated at ;2 million. APNNEX 1 Page 11 c. Sisal Brazil is the world's second producer of sisal. The cultivated area increased from 67,000 to 160,000 ha, and production from 43,600 to 194,300 tons in the period 1948-52 to 1962. Sisal is one of the few crops whose contribution to the economic development of the northeastern part of Brazil could be certain, and its cultivation can be immediately expanded if appropriate funds are assigned to it. i4ew production units should take the form of continuous plantations established around industrial units which will ensure a hig-h technical level of mechanical stripping of fibers. The establishment of settlements based on sisal plantations and processing appear to be quite feasible in connection with- the land settlement plans under the Agrarian Reform Program. The investment required for each settlement would be of the order of US Sh million. Settlements of this tvpe could be established in the States of Rio Grande do iAorte, Paraiba, Pernambuco and Bahia. 6= Fruit Tre_ The most importan.t fruit trees in Brazil are bannas, oranlges, coconuts and cashew nuts. a. Bananas Brazil is by far the largest producers of bananas in the orld, anci presumably on,ly a small part of +he banban produced are used. The establishment of factories to produce nectar, essence, frlour, dried b-anWna, etc., could `be o1f economic and social importance in the poor states of the -;4 1 - _ k - - 4I -. - - A SA - E S4 L - - ' vI - A ± . -:I "VIa VIAUCa;, W1Vll; U .lJClICIiC P.' WU1A."W1 U-V1 ;-L aLL. k CLU.y V G 11GLLr . The project for a factory to be installed in Ribeira, on the coast of Sao Paulo, cou.Lu serve as a model. The only exports at present are to Argentina. Unless better varieties suit- able for exports can be developed, there is relatively little scope for export expansions. b. Oranges The technical obstacles in the way of expanding the cultivatiorn of oranges w^lere rernoved by the exceilent work done by the Campinas >.gricultural Research Institute. AlilEX 1 Page 12 Brazil cultivates about 150,000 ha of oranges and produces 50,000 million cases of oranges, of which only 6 million are exported. Oranage processing plants are urgently needed. Processing in the State of Sao Pa-lo in proceeding at a satisfactory pace. But elsewhere the expansion of the cropJ is waiting on the establishmnent of procesEing plarts. The areas in which the crop could be raipidly expanded if process- iZng was available are, for exaruple, the Taquari region in hiia) Grande do Oul an(i the Gruz das Almas region in lReconcavo Bahiano. c. Cashew iJuts According to official statistics, there are 53.L thousand hectares under cashew nut trees in northeastern Brazil. hlegistered p.roduction is 2.5 billion fruits. roughly 300,000 tons, which corresponds to a cashew nut production of about 30.000 tvonq- Rowfvpr- acr.ording to st,atistics for 1962. onlv about 12,000 tons of cashew nuts came on the market, which sneapns that ahout, 18- 000 tons of c.qheTw nIuts werp oornri]mr hv faarmers. The fruit of the cashew tree is a more valuable raw materi,'ial than the false fruit if it werpe com letel-r proces-ed from the cashew nut apart from the kernel comnes cashew shell 1.u55d .hJc4UL Js u. s.ed X .L 4for many p urpose -J-Lc 1-t -V ' ,- 'tU \1 11 X c UGC U1 !'Icilly v4 ILL pU I p s t u z J -G 1a 1 oV '1 the USA and out of' the exhausted huslks hard board can be rnae ..;itL ULIut u sing% cu,y adJhes.i±Ve m1ak-i-ivg tLhe r cheaper. Cashew nut tree plantations are being established on a pi.lot scale at a low initial cost because of the value of ± ; s..LJ.Ar 'J U ;_14_4 1U. ±1 UI 4zUL U.LZL;I ~. U1_ *1... ELXG; UVU~,V,o Ul ouuai ed in t 1 le "L aind WC d 11 E"c Liy6 XI J~" V CO Z . i f 1' ItJ~vk~'J L) because of the high cost of processing with primit:ive hand methods and the fa.ilure to ut-'.lize by-prodlucts, there has been little incentive to develop this crop. The recent development of' new processes for cracking nuts mnechanically ainu extraction of the cashew sheLi liquid opens up considerable possibilities for expansion of cashews. The establishiment of a complete plani with a capacity for 15,000 tons of cashew nuts calls for an investmlent estimated at Us $34 milliorl. Thle gross procduct is estimated at roughly US 7 millioin. d. Pepper In Brazil the cultivation of pepper has increased rapidly so that it nowj satisfies its owln needs and e.xports a considerable AiNs rTX 1 Page 13 amourt. In 1961 and 1962 exports amounted to about 3,000 tons valued at 'i2 million. to :3 million. Present production is in the order of 6,000 tons and can be rapidly increased desplite the existence of a disease which has caused some damage. In the period of 1956-62 the United States imported 17.2 thousand tons of pepper on the average and during that periocd Brazil increased its exports to the United States from 49.8 tons to 815.4 tons. Indonesia is the principal US supplier, but if that supply were to cease Brazil can become, together with India, one of the principal suppliers of this spice. In addition, world production of pepper is today belowJ what it was in 1939. If the target for increased pepper production is set at 10,000 tons (the USA consumption is around 17,200 tons), it will be necessar-y to plant a further 5,000 ha; that calls for an investment of about $7.5 to $10 million in 2 or 3 years. The corresponding output will be about US $9 million. The extracting of pepper essence and pepper oil appears to have a great future. Essence, the extraction rate of which is 1 per cent, at present fetches US $49 a kilogram. and oil, the extraction rate of which is 10 per cent, US 1i16 a kilogrcm. AN11EX 2 rage i LvV iESTOCK Brazil has tihe ttiiAd largest cattle population in the world officially estimated in 1961 at 76 million head of cattle, 50 million head of hogs and 31 1-millioil head of sheep anrd goats. Cattle production has been growing at a curiulative rate of 3.4 per cent per year but production of inieat has been growing at about 3.1 per cent per year up to 1960. However, between 1958 and 1963, tihere has been no increase. These official estirnates of both population and mneat production are subject to cossiderable error since accurate populatio-n counts are not possible under the extensive breeding conditions existing in a large part of the principal catt'le areas and more than half of the slaughter- ing is done in small municipal abattoirs without sanitary inspectiori. i"ioreover, in recent years because of the low controlled prices for beef, substantial black market operatiors have developed and substantial numbers have beer! srmuggled into surrounding countries. Apart frorn some hiighwly efficient stock farms and a rapidly developing poultry industries, Brazil's livestock industry operates at a low Level of efficiency. The reproduction rate of cattle is only about 50 per cent anid there is a high inortality rate, particularly at weaning time. The slaughter rate is only about 10 to 11 per cent and cattle are usually not ready for slaughter until tihey are five or six years. However, the beef cattle industry in the Central Wiest has been growirng rap idly. The urincinal oroblems have been: (1) SeIsonal feet shortages during the winter dry searon due to defective grazing systems, inadeQuate fencing of pastures, the prevalence of badly managed natural grassland, single crop pastures, deficient weed control, lack of interest and incentive in nroducing forage crons and an insufficient supply of feed supplements, hay, ensilage and concentrated hv--prnduct.s.q (2) Diseases,s pnP.t.c qnr1 t.nn ntoher with lack o f rnineral sup-plements and inadequate feed result in reduced meat yield; (3) The poor condritions under which cattle are transp-orted from breeding grounds to winter feeding and fattening areas to slaughterhouses giye rise to considerable through deELth, loss of weight and deterioration in the quality of t.h "!'P ANNEX 2 Page 2 (4) Controlled beef prices have not kept pace with inflation in recernt years providii:g li-tle incentive for investment in improve;tents. (5) The shortage of medium and long term credit has limnited investments. (6) The low beef price has limited the scope for ijore rapid development of the poultry, hog and fishing industries. The recent decontrol of beef prices and the freeing of beef exports should bring about a sharp increase in beef production. The shlort mild dry season of 1964 has meant lower mortality, less weight loss and better condition of cattle than in a normal year. i4oreover, better beef prices and export demand will make fattening operations more profitable and will encourage more intensive management of existing herds. A livestock development program should be carried out to ipnrove the productivity of the industry. Brazil has the necessary cattle, sufficient technical knowledge and management capacity, extensive areas of grazing lnids and a reasonably well developed meat packing industry. 1low that more adequate price incelntives have been provided; the shnrtage of medium and long term financing on reasonable terms is the principal remaining obstaci e ANi'EX 3 F Z.dT IIIZZ7 Bi USE Brazil's fertilizer consumption increased rapidly during the fifties. The use of nitrogen and potassium increased almqost fivefold and the use of phosphates more than doubled. However, since 1960, fertilizer use has shown no significant increase. About 95 per cent of the farr.lers do not use commercial fertilizer. Enough fertilizer is used toD adequately fertilize only eight per cent of Brazil's culti- vated land and virtually no fertilizer is applied to the vast areas of pasture. About 90 per cent of the fertilizer was used in four states, Sao Paulo, Parana. Santa Catarina and Rio Grande do Sul. The high cost of transport has been a major factor retarding the development of the fertilizer industry. Althoug1h phosphates are available in the Fortheast. nort congestion and high carao handling charges made it imore expensive to ship from Recife to Santos than from the Unite(d States or Africa to Santos. Fertilizer nrices have increases at a faster ratR thnn crop prices in recent years. This can be explained in part by the shortage of foreign exchange LO)hich limited i,nports and in part by the high cost of financing sales on cormmercial terms. Ai recently concluded agreement with USAID provides for finnnnncr ngf ~15 million mn"orti n of etlz r durincg 19659 anrd 1966. Counterpart funds are to be used in part for establishment of fertilizer pl nfets . ANNEX 4 rage i AGRARIA R ORiM The recently passed legislation for agrarian reform provides a broad framework for land redistribution, control of land tenure condi- tions and taxation of land. It also creates a Nlational Agrarian Reform Fund to finance the program and the Brazilian Institute of Agrarian Reform (IBRA) to promote and execute the program of land redistribution in areas of existing settlements. Government also plans to establish a National Institute of Agricultural Development (INDA) to promote and execute settlement programs in the frontier areas. Both agencies are still in the formative stage with the Superintendency of Agrarian Reform (SUPRA) responsible for drawing up detailed plans and budgets. At the time the mission was in Brazil the new land law had not yet been passed by the Congress and SUPRA had not drawn up detailed plans. A tentative budget had been drawn up to initiate six pilot redistribution projects in the Northeast which would cost about Cr 20 billion and a further Cr 29 billion was provided for basic studies and development of new areas. A lump sum estimate of Cr 300 billion for land reform in 1966 was mentioned by SUPRA but this is subject to substantial revision based on studies nlanned in 1965. USAID is oroviding a sizable group of specialists in soil surveys, cartography, land marnagement, cadastral work. land tenure and land settlement. thronuh direct hire and contract arrangements to assist the Brazilian agencies. The government has made it clear in its program for action that it initends to carry out its progranm of land redistribution in the most congested areas on a selective basis and ijill not resort to large secal-e ex,---Jratio-s which -lg h.t disru pt curr1e n-nt roductlonr. A rgrs sive tax on land holdings depending on size of holdings and productive potential wil4l W te F Li-.- L1 thr p m Lof bringingisl JA LaEI-A min lore efficient use. Settlement of nlew areas will be given high priority and rovernm?.ent assistanrce will be p r-ov +ac eerf atei- n+.oh npr'csCs In this connection, programs for farmer services and agricultural extension i-;n the Ifrontier wareas - aJil e s ub s t anYItia; "lly s t rer.g-1-th en ed . ' t. L Ii U j..LJ. CAA |L ; LL U _ i . . Ls ; hi. I.ie,h.in i As ± 1v: ItI_Li, ±i: 1 IU t ±L;V C:; Li.lid u1i: 6 V US lAUl1 V i .L bUIJ ± 3. Di Lt 1A h O evaluation of the agrarian problem. Brazil's overall resource position .dhU ius potentials fior grow-tLI UULI ULIC LU tht e long I Li1 i sII oVLUUi.Loi L ino to split up existing farms for redistribution to farm laborers and small armiiers but L rather lo proinliote gro-til Lin± UU I Vion.U. lT:e pr. LIIU±pal objective is to provide sufficient flexibility to permit the poor man WIllt abu± ±±lly uu moluve Up the scale fromn unskilled far,. la±borer to. skhillled laborer to tenant to farmer or industrial worker. The government's agrarian reform programri provldes thlLs LlexlU±Llty. It ais at gi-viiig imnediate relief to the mass of underpaid farm laborers through recently enacted minimum wage legislation. In the more congested areas, oppor- ANNEX 4 tunities for obtaining land are to be provided through pilot land redistribution programs or through midgration to frontier areas. M4oreover, the proposed taxes on land should promote more intensive use of currently underexploited lands and provide additional emplo,,rmenlt opportunities. It is too early to judge whether the prograrn will achieve its objectives since much depends on the manner in which the program is administered. The legislation is broad enough in scope to allow considerable changes in emphasis as the program proceeds. This, in turn, will depend on social and political reactions to the initial actions. However, as the mission now understands the governmentis intentions, we believe that the program is realistic and will contribute to the achievement of the economic growith targets of the government.