Agribusiness sees growth during pandemic

. Jul 06, 2020
agribusiness brazil pandemic Photo: Fabio Maffei/Shutterstock

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This week, we are covering Brazil’s economic outlier: the agribusiness sector. And a trial that will be pivotal for evangelical communities engaging in politics.

Brazilian agribusiness knows no crisis

The 2020 recession is expected to be acute — perhaps the worst on record. GDP projections predict contractions ranging between 6.5 and 9 percent

. Industrial output should shrink by 7.9 percent, while services, Brazil&#8217;s biggest employing sector, is expected to have a 5.5-percent fall. One sector, however, remains strong: agribusiness. The National Agriculture Confederation, one of the most powerful lobbies in Brasília, expects the sector&#8217;s GDP to grow 2.5 percent, reaching BRL 728 billion (USD 137 billion) — which would be the highest figures on record.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/3090465" data-url="https://flo.uri.sh/visualisation/3090465/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Why it matters.</strong> Agribusiness is set to account for 24 percent of Brazil&#8217;s GDP in 2020, direct and indirectly.&nbsp;</p> <p><strong>Agribusiness by the numbers.</strong> In a year of nothing but negative news, Brazil&#8217;s rural economy brings many positive figures:</p> <ul><li>Food shipments were up 23 percent between January and April. Exports could amount to USD 102 billion, according to government projections;</li><li>Grain production is expected to set a new record at 250 million tons — which could reach 300 million tons by 2027;</li><li>While the year has been defined by layoffs, agribusiness companies are still hiring in Brazil. Meat giants JBS and BRF have reportedly opened a combined <a href="https://agrosaber.com.br/industrias-do-agro-brasileiro-prometem-mais-empregos-e-doacoes-por-todo-o-pais/">5,000 positions</a> in 2020;</li><li>Investments on inputs — with more productive seeds and modern fertilizers — have amounted to BRL 84 million for the crops harvested in 2020, a 10-percent bump from the previous cycle.</li><li>A report by consultancy firm McKinsey revealed that 70 percent of agro entrepreneurs up to 45 years old are likely to modernize their businesses further, with new sensors and machines operating through the Internet of Things.</li></ul> <p><strong>Productivity.</strong> Brazil has seen escalating gains of productivity for the past 40 years. Since 1977, planted area has increased by 1.7 times —&nbsp;while productivity (in kilos per hectare) tripled.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/3091918" data-url="https://flo.uri.sh/visualisation/3091918/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Public policy. </strong>None of that would be possible without state-owned company <a href="https://brazilian.report/business/2018/06/14/agricultural-research-embrapa/">Embrapa</a>, the Brazilian Agricultural Research Corporation. Created in 1972, during some of the hardest years of the military dictatorship, the company has been instrumental in transforming Brazil from a food importer into one of the world’s leading agricultural powers.&nbsp;</p> <ul><li>With Embrapa, Brazil began developing seeds adapted to tropical weather — instead of simply importing them from the U.S. Developing the use of microorganisms to capture nitrogen to nourish plants — thus avoiding excessive use of fertilizers — is just one example of the company’s noteworthy accomplishments.</li><li>Embrapa’s multiple advances turned the cerrado — a savanna-like biome with notoriously poor soils — into Brazil’s biggest grain-producing region.</li></ul> <p><strong>Giving agribusiness a bad name.</strong> There are two main problems with Brazilian agribusiness, however: the often excessive use of pesticides and the image crisis created by increased deforestation in the Amazon. Researchers <a href="https://www.brasildefato.com.br/2019/09/05/pecuaria-e-responsavel-por-80-do-desmatamento-na-amazonia-afirma-pesquisadora">say</a> cattle breeding is responsible for 80 percent of Amazon deforestation.</p> <ul><li>Of 981,000 fire alerts registered by Brazil&#8217;s deforestation monitoring system between July and October 2019, <a href="https://brasil.mongabay.com/2020/06/pesquisa-associa-frigorificos-e-produtores-de-soja-a-queimadas-na-amazonia/">half took place</a> in areas from where suppliers of giants such as JBS, Marfrig, Bunge, and Cargill buy inputs. In Brazil, monitoring of best practices remains very incipient — favoring unethical producers.</li></ul> <hr class="wp-block-separator"/> <h2>A push against Evangelicals&#8217; political power</h2> <figure class="wp-block-image size-large"><img src="https://brazilian.report/wp-content/uploads/2020/07/49130412198_e96cc2b1e5_c.jpg" alt="evangelical preachers jair bolsonaro" class="wp-image-43933" srcset="https://brazilian.report/wp-content/uploads/2020/07/49130412198_e96cc2b1e5_c.jpg 799w, https://brazilian.report/wp-content/uploads/2020/07/49130412198_e96cc2b1e5_c-300x200.jpg 300w, https://brazilian.report/wp-content/uploads/2020/07/49130412198_e96cc2b1e5_c-768x512.jpg 768w, https://brazilian.report/wp-content/uploads/2020/07/49130412198_e96cc2b1e5_c-610x407.jpg 610w" sizes="(max-width: 799px) 100vw, 799px" /><figcaption>Evangelicals are an important support group for President Jair Bolsonaro. Photo: Carolina Antunes/PR</figcaption></figure> <p>The Superior Electoral Court debates the possibility of listing &#8220;abuse of religious power&#8221; as an electoral crime that could cost elected officials their term. Existing laws prohibit general &#8220;abuses of authority&#8221; but Supreme Court Justice Edson Fachin wants a specific rule policing religious leaders, starting in the 2020 municipal elections.</p> <p><strong>Context.</strong> The debate started when the court received the case of Valdirene Tavares, a city councilor in Luziânia, a city in the central-western state of Goiás. Ms. Tavares was removed from office for allegedly using her status as an Evangelical pastor to whip votes from her congregation in 2016.</p> <ul><li>Justice Fachin ruled in favor of her acquittal due to a lack of condemning evidence, but wants this process to become a paramount case, setting a precedent for future elections.</li></ul> <p><strong>Why it matters.</strong> Evangelical leaders have become a political force to be reckoned with in Brazil. Their followers comprise one-quarter of the Brazilian population&nbsp;and could become a majority within a couple of decades. And evangelical preachers have become powerful kingmakers.</p> <p><strong>The trial.</strong> So far, only one other Supreme Court Justice, Alexandre de Moraes, has voted on the matter — and he went against Mr. Fachin.</p> <p><strong>Opposition.</strong> Conservative sectors have fiercely opposed Justice Fachin&#8217;s move, claiming it goes against religious freedoms. Some have called an attempt to remove Christian communities from public life in Brazil. They also claim the law allows the mixture between religion and politics — as Brazil can have openly religious parties, which is prohibited in countries such as France or Mexico.</p> <hr class="wp-block-separator"/> <h2>Markets</h2> <p>Environmental solutions provider Ambipar is accepting reserves for its initial public offering until July 8. The company deals with waste management and biological crises and has grown during the pandemic. The IPO could raise up to BRL 1.27 billion, with the firm expected to use 70 percent of the money for acquisitions. If Ambipar manages to price its stock above the upper range of BRL 24.75, its market cap would be 64 times larger than its earnings, a ratio analysts say is too big.&nbsp;</p> <p class="has-text-align-center"><strong><em>Natália Scalzaretto</em></strong></p> <hr class="wp-block-separator"/> <h2>Who lost more money during the pandemic</h2> <p>The pandemic caused a drop in earnings for almost all social strata in Brazil. Predictably, however, the crisis was harsher on workers who were already in a more precarious situation. While college-educated workers saw an average drop of 15 percent of their usual earnings, those without a high-school diploma lost as much as 25 percent of their income.</p> <div class="flourish-embed flourish-scatter" data-src="visualisation/3091097" data-url="https://flo.uri.sh/visualisation/3091097/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <hr class="wp-block-separator"/> <h2>Looking ahead</h2> <ul><li><strong>Corruption.</strong> On Sunday, newspaper Folha de S.Paulo reported on shady practices within Jair Bolsonaro&#8217;s office during his time as a congressman. There were at least 350 changes to his staff, including suspiciously abrupt firings and re-hirings —&nbsp;telltale signs of money-laundering schemes the likes for which his son, Senator Flávio Bolsonaro, is under investigation.</li><li><strong>Justice.</strong> Prosecutor General Augusto Aras will have to decide whether or not to request an investigation into Flávio Bolsonaro&#8217;s lawyer, Frederico Wassef, who had been harboring Fabrício Queiroz, a former fixer of the Bolsonaros suspected of operating a money-laundering scheme within Mr. Bolsonaro&#8217;s office (and under his auspices). The new case revolves around a BRL 5-million contract Mr. Wassef had with Campinas Airport for &#8220;legal and strategic counseling.&#8221; However, there is reportedly no evidence that any service was made. Law firms have become a go-to <a href="https://brazilian.report/newsletters/brazil-daily/2020/06/11/impeachment-process-against-rio-governor-wilson-witzel/">front for kickbacks</a> —&nbsp;and investigators believe this might be the case with Mr. Wassef&#8217;s contract. Once a docile prosecutor, Mr. Aras is becoming increasingly independent from the government, fearing a rebellion from the prosecutors below him.</li><li><strong>Education.</strong> Businessman Renato Feder, who serves as state education secretary in the state of Paraná, was announced as Brazil&#8217;s next Education Minister. His name, however, sparked fury among the president&#8217;s most radical supporters —&nbsp;and he turned the invitation down, saying on Twitter that he will stay in Paraná. Mr. Feder becomes the second man in a row to be named to the Education Ministry and not make it to the swearing-in ceremony. The president is expected to pick a new name this week.</li></ul> <hr class="wp-block-separator"/> <h2>In case you missed it</h2> <ul><li><strong>5G, after all.</strong> Despite the constant delays in Brazil&#8217;s public auction of 5G frequencies, the country will soon have its <a href="https://brazilian.report/newsletters/brazil-daily/2020/07/03/brazil-to-have-first-5g-network-before-delayed-auction/">first commercial 5G provider</a>. Telecom giant Claro — in partnership with Motorola, Ericsson, and Qualcomm — used a technology called DDS (Dynamic Spectrum Sharing), which allows the deployment of both 4G and 5G on the same frequency band, allowing Claro to use already-regulated bands to implement 5G.</li><li><strong>Elections. </strong>Congress <a href="https://brazilian.report/newsletters/brazil-daily/2020/07/02/coronavirus-forces-brazil-to-postpone-october-elections/">moved Brazil’s 2020 municipal elections</a> from October to November due to the coronavirus pandemic. While a sensible move, there is little indication that the pandemic will be tamed by that time, given the constantly rising infection curve in Brazil. Infections tripled over the month of June, while deaths doubled. </li><li><strong>Meat.</strong> China&#8217;s General Administration of Customs suspended imports from six Brazilian meat-processing plants over the past week, over concerns of Covid-19 contamination. Last week, China asked for information about Brazilian slaughterhouses that have registered outbreaks of coronavirus infections. By June 16, at least 47 abattoirs in 17 states had been <a href="https://brazilian.report/business/2020/05/30/role-meat-plants-coronavirus-spread-brazil-countryside/">shut down by the Agriculture Ministry</a> due to the coronavirus. The looming crisis could have massive repercussions across the globe — as Brazil is the <a href="https://brazilian.report/business/2018/11/05/embassy-jerusalem-halal-meat-exports/">world’s largest meat exporter</a>.</li><li><strong>Fake news.</strong> The Senate approved a <a href="https://brazilian.report/power/2020/06/22/fake-news-bill-treats-all-brazilian-netizens-as-potential-criminals/">fake news bill</a> on Tuesday that is deemed “highly problematic” by freedom of speech advocates. While senators struck down many of the draconian articles inserted by the bill’s rapporteur, Senator Angelo Coronel, some remained in place. Namely, the requirement for social media platforms to store so-called ‘forwarding chains,’ a sort of flow chart that would allow law enforcement to trace the exact path of a piece of information shared at least five times. Also, in the case of a complaint against a user, platforms must demand proof of the suspected user’s identity. The bill now goes to the lower house.

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