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Three Years of the Real Plan
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Three Years of the Real Plan
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Agriculture contributes decisively to the creation of productive employment, reducing migrations, generating sustainable income, and lessening social and regional inequalities. Aware of this fact, the federal government has adopted various measures to stimulate the sector, strengthening family farming, refining financial and commercial instruments, improving the infrastructure conditions, providing scientific and technological support, and assisting the sector's entry into the international market. The following are some of the principal measures taken in the last three years and their results.
Brazil is establishing a new level of production.
National Program to Strengthen Family Farming (Programa Nacional de Fortalecimento da Agricultura Familiar - PRONAF)
The National Program to Strengthen Family Farming seeks to assist family farming and to stem the rural exodus by decreasing rural poverty, by creating productive employment and by improving rural income. In 1995, PRONAF expenditures were R$36 million, benefiting 19,000 families; in 1996, R$650 million were spent, benefiting 333,000 families, a significant increase. For 1997, expenditures should reach R$1.5 billion, benefiting 600,000 families. The cost of the Program's loans has fallen significantly, from 11.7% to 2.0%.
One aspect that stands out in this area is the securitization of rural debt, benefiting nearly 350,000 farmers, the vast majority of whom have small- and medium-sized operations. This measure, involving resources on the order of R$7 billion, was essential to end the crisis affecting this sector.
With regard to financing, the federal government adopted several measures seeking to increase the flows of resources into agribusiness activities. The "63 caipira," created to expand external financing, attracted US$5.3 billion for the sector in 1996. The government sought also to increase financing with domestic resources by raising from 17% to 25% the percentage of their deposits that banks must lend to the sector. Moreover, the credit operations involving Rural Producer Notes and Rural Promissory Notes ("Notas do Produtor Rural" and "Duplicata Rural") had their rates reduced to zero. In the case of PROAGRO, the tax on financial operations (IOF) was reduced by 57%, on average.
In the tax area, the sales tax (ICMS) on exports was eliminated, representing a potential income gain of 13% for basic products and 6% for semi-finished goods. Recently, the PIS/COFINS refund was expanded, representing a cost reduction of up to 5.3% for agro-industrial exporters.
New instruments were created also to facilitate the commercialization of agricultural products, and notably the contract options for corn, rice, cotton and wheat. These instruments function like a price guarantee, through payment of a premium, while avoiding the need to sell the products to the government.
Each harvest year the federal government, through the Ministry of Agriculture, further improves its support instruments for the Brazilian producer. The 1997-98 Harvest Plan, for example, contains some important modifications.
First of all, the government issued an early announcement of its new regulations, making it possible for farmers to formulate and implement their plans.
The government also responded to some of the rural producers' principal complaints. Interest rates of 9.5% per year were stipulated for the 1997-98 harvest, compared to annual rates of 12% for the prior year's harvest (in the case of PRONAF, the rates were reduced from 9% to 6.5%). Moreover, financing resources were increased by 60%, totaling R$8.5 billion (in the case of PRONAF, the available resources increased by more than 100%, reaching the level of R$1.65 billion).
Regarding infrastructure improvements, it is worth mentioning the efficiency gains achieved through the privatization of the railroads, as well as the expansion of new river shipping routes through the Madeira, Tocantins-Araguaia, Paraguai-Paraná and São Francisco waterways, creating opportunities for new investments. We are dealing with a change in the logistics of transportation, promoting the restructuring of economic activities throughout the entire country and establishing the Central-West region as a new center of agricultural production.
The average annual grain production in the first three years of the Real Plan reached nearly 78 million tons, which represents an increase of 10% over the average during the three years prior to the Real's implementation. Thus, despite the poor harvest in 1996, an annual production level of approximately 80 million tons has been established.
Increased rural production was fundamental in maintaining domestic supply, contributing to the price stability of the basket of basic food items. Moreover, the agricultural sector was able to produce a surplus for export. In the first three years of the Real Plan the annual export value was, on average, US$11 billion compared with US$9 billion during the 1991-93 period -- an increase of some 22%.
The data below, in addition to demonstrating the productive capacity of Brazil's farmers, confirm the appropriateness of government policies.
