Brazilian agribusiness booms despite international tensions

The favourable market climate has allowed agribusiness to grow, even as international partners criticise Brazil’s environmental policy

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Agronegócio brasileiro está em um verdadeiro boom no governo Bolsonaro

Brazilian agribusiness thrives in 2020 despite the pandemic and frequent attacks by the leadership of the Bolsonaro government, a major buyer of the sector in China (image: Hugh Williamson / Alamy)

Throughout 2020, Brazilian agribusiness witnessed political frictions between Jair Bolsonaro’s government and important international buyers. On countless occasions, undiplomatic comments by Brazilian authorities and even the president himself, along with his environmental policy, have overshadowed trade relations. 

China, Brazil's largest trading partner in the sector, has been the target of jibes from ministers and the president's son that it has benefited from the pandemic. Meanwhile, France is threatening the back out of a trade agreement between the EU and South American regional trade bloc Mercosur by constantly criticising the sustainability of agriculture in Brazil, the group’s biggest economy. 

Governo Bolsonaro faz ataques constantes à China
Despite constant attacks coming from members of the Bolsonaro administration, China remains Brazil’s biggest trade partner (image: ZUMA Press, Inc./Alamy)

Before long, friction had tangible consequences for agribusiness. In the middle of last year, JBS, the world's largest meat processor, was removed from the portfolio of Finland’s Nordea Asset Management, which controls a fund of 220 billion euros. JBS’ lack of commitment to sustainability was cited as a decisive factor.

2020

was the best decade for Brazilian agribusiness

The crisis has led to the announcement of sustainability programmes by some large companies. All the same, momentary downturns mattered little to the sector. With extraordinary exports, the favourable market environment muffled all other noise. 2020 was the second best of the decade for Brazilian agribusiness.

"The agricultural business environment is the best in history. I've worked with soybeans for 32 years and never experienced a similar situation," says Bartolomeu Braz Pereira, president of the Brazilian Association of Soybean Producers (Aprosoja). "The president always listens to us and we are very much in tune."

The government has met the sector's expectations. We are lucky to have Minister Tereza Cristina as our representative

The figures prove that the rural sector is experiencing a bonanza. In 2020, Brazilian agriculture and livestock exported US$100.8 billion, 4.1% more than in 2019. The sector accounted for almost half (48%) of the country's overall exports.

Minister Tereza Cristina is almost unanimously popular in the sector. Since she took office at the beginning of 2019, the minister has been proactive in courting potential consumer countries through overseas trips. Since then, Brazil has opened more than 60 new markets in more than 25 countries for its agricultural products. The US began buying fresh beef, India bought chicken and South Korea bought fish.

"The government has met the sector's expectations. We are lucky to have Minister Tereza Cristina as our representative," said Teresa Vendramini, president of the Brazilian Rural Society (SRB).

Analysts say that a number of factors outside the Brazilian government's control have helped the sector, such as a strong dollar and the increase in meat imports from a China looking for alternative animal proteins due to swine fever. 

 While agreeing with the diagnosis, Pereira of Aprosoja argues that the Bolsonaro government helped to ensure a positive business environment. He points to neighbouring Argentina, which suffered a near 32% decline in soybean exports in 2020.  Its beef exports increased 8.6%, similar to Brazil's, but sales are much lower in absolute terms.

"Agro there does not take off because of the limitations imposed by the government," he argues.

Sector representatives also say EU countries’ own internal interests are the real source of complaints about Brazil’s environmental record.

Alceu Moreira vê Brasil como grande produtor mundial no setor do agronegócio.
Alceu Moreira, former president of the Agricultural Parliamentary Front, says a lot of diplomacy is needed get around statements bu high-ranked officials in the federal government (image: AGIF / Alamy)

"Brazil is a major world producer. It's only natural that farmers' competitors want to throw banana peels on the road," says Congressman Alceu Moreira, former president of the Parliamentary Agricultural Front, who remained in office until January of this year. 

Moreira admits, however, that behind the scenes, it took some serious diplomacy to get around the statements made by the federal government's interlocutors to avoid possible crises. Without giving details, he says it was necessary to go to the Chinese embassy to clarify some points. "Thinking of our commercial interests, perhaps this kind of narrative, of statement, is not the most appropriate," he ponders.

Despite diplomatic issues, Moreira argues that the strength of Brazilian agribusiness saves the country from possible trade disruptions. When it comes to foreign trade, "countries have no friends, they have interests", he says. And they include China, where concern for the food security of 1.4 billion people is a constant concern.

"No country concerned with the food security of its population can fail to consider Brazil," he said.

"Ningún país preocupado por la seguridad alimentaria de su población puede dejar de tener en cuenta a Brasil", dijo.

Burnt image

Daniele Siqueira, a market analyst at AgRural Commodities Agrícolas, confirms that neither the "noise" caused by the government, nor its environmental issues, have so far harmed Brazilian agriculture. 

"In practice, nothing has changed. In fact, criticism of environmental issues is not new to this government," she says. "I am not saying that we have no problems or that deforestation does not exist. But the fact is that we have an even more serious problem that is the mistaken image of Brazilian agriculture internally and externally.”

An expert in the grain sector, Siqueira says that Brazil has one of the most severe environmental legislation in the world, and that large producers have all but abolished harmful practices.

Desmatamento e queimadas estão associadas à expansão do agronegócio na Amazônia
Deforestation and fires in the Amazon are associated with the expansion of agribusiness (image: Claudia Weinmann / Alamy)

But official investigations, journalists, academics, and environmental organisations have increasingly linked the supply chain connections of Brazil's largest export with environmental crimes.

For Siqueira, more decisive action by the government to combat environmental crimes - which broke records in the Bolsonaro government - would be positive for agribusiness. 

"The biggest problem today is ensuring efficient surveillance in a country as big as ours," she says. "Of course, a government that is less sensitive to environmental issues, such as the current one, can foster a sense of greater freedom to cross the line.”

China: Brazil's major agri-business partner

China is the top buyer of Brazil’s agricultural products. The country buys more than half of the meat and soybeans that Brazil sells abroad, even with the bad weather the Bolsonaro clan and its inner circle has generated. 

Frictions with the Chinese resurfaced in January when it became clear that the Brazilian government faced obstacles in speeding up its Covid-19 vaccination campaign because of a lack of materials required to make the shots themselves, most of which come from China. In an attempt to solve the problem, President Bolsonaro even offered praise to China. Chinese authorities said the problem was logistical, not political. 

For Vendramini, of the Brazilian Rural Society, the need to purchase inputs to produce vaccines may strengthen relations between the two nations. 

"Brazil and China are two economies that complement each other," he says. "Brazil is the food factory and China, with the increase in the consumer middle class, needs these foods. I hope that these two economies will increasingly understand each other, for the good of Brazil and the rural producer."