AGRARIAN REFORM
Brazil's Commitment

VI- SMALL PROPERTY AND OTHER INITIATIVES

6.1 The World of the Small Farmers
6.2 Government Programs
6.3 Other Initiatives

Throughout its history, Brazilian agrarian reform has been more of an instrument to reduce social tensions than a strategy of social-economic development. Today there is a consensus that rural development policy should include both agrarian reform and the strengthening of small property ownership and of family agriculture, as well as the creation of more employment and better income opportunities in the countryside.

Large landed property ownership has always dominated Brazil's rural areas, relegating small properties and family farming to an inferior status and, at times, causing their neglect during the formulation of public policy. Successive governments encouraged monoculture and mechanization as the "model" of "modern" and "rational" agriculture. The result was a massive exodus of small proprietors and rural workers from the countryside to the cities.

The Brazilian urban-industrial sector was incapable of creating, quickly enough, sufficient employment to absorb all those who were displaced by the rural modernization. Thus, while people in the United States left the countryside because of the attractiveness of the cities, the Brazilians left the countryside for the cities because strong forces were driving them out. Expelled from the countryside, these men and their families constituted the ranks of poorly employed, under-employed and unemployed in the outskirts of Brazil's large cities. This is how the dramatic social portrait of profound inequality, which still exists today, came into existence.

The numbers representing Brazil's abrupt urbanization process are revealing: in 1940, the Brazilian population numbered 41 million, 70% rural and 30% urban. By 1980, the population had tripled, reaching 121 million, of which 68% -- 82 million people -- lived in the cities. In just five decades, the proportions reversed dramatically: today, Brazil has more than 150 million inhabitants, 75% urban and 25% rural.

This accelerated urbanization and industrialization constitutes a rarity in the history of modern civilization, comparable only to the so-called "Asian tigers," like South Korea or Taiwan. In Europe, the industrial revolution took 150 years to complete its cycle and to alter significantly the population's lifestyle.

Brazil skipped over several phases in its rush to industrialize and to urbanize, thereby foregoing a process that is indispensable for growing more evenly and with more equality: that of decentralization and protection of the weak.

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6.1 The World of the Small Farmers

In the fight against the wealth-concentrating agricultural model and against social inequalities, and for overcoming poverty, policies supporting and strengthening small rural producers could be as relevant as agrarian reform is in democratizing landownership. The policy of resettling the landless could become ineffective if it fails to reverse the rural exodus of the small farmers; it won't be able to compete with the process of de-settlement which, in practice, is a reversal of agrarian reform.

There are 4.5 million family farmers. The majority of them are poor, but they provide a livelihood for 17.6 million people, among them share croppers and unpaid family members -- people who work on their own land or are lessees paying for the right to work the land of others.

Although family farms occupy only 25% of the total area, they utilize 80% of the personnel employed in the countryside and produce half of all Brazilian farm output. The corporate farming enterprises produce more beef, sugar cane, rice and soybeans; the small farmers produce more beans, corn, wheat, cassava, potatoes, coffee, cocoa, pork, poultry, milk, eggs, vegetables and fruits.

Excluded from rural credit mechanisms and disregarded by official agricultural policies, the small producers had been overwhelmed by corporate business expansion in the countryside, losing their lands and ceasing their production. The actions of the National Rural Credit System (Sistema Nacional de Crédito Rural - SNCR) also are a chronicle of exclusion: less than 20% of rural settlements had access to the system's highly subsidized financing. There was a large concentration even among those who received credit -- there was a period when 1% of the largest borrowers received 38% of all loans.

For two decades, loans for farming activities, a principal instrument of agricultural policy, charged negative real interest rates. In the second half of the 1970s, borrowers paid, on average, less than 50% of what they had received. In this way, the borrowers, who did not always apply the money to their farming activities, received billions of dollars in transfers.

The majority of the resources spent on other agricultural policy instruments, like minimum prices, farm insurance, storage, technical assistance and research, flowed directly or indirectly to the largest property owners. Focusing the benefits on a small number of farmers caused an increase in landownership concentration and in rural poverty.

The report that the Brazilian government took to the Copenhagen conference -- the world summit for national development -- shows that Brazil's poverty has a strong regional factor and is a markedly rural phenomenon. Almost 43% of the country's indigents are concentrated in the countryside. The rural area of one region alone -- the northeast -- contains 32% of all the poor in Brazil.

To guarantee the survival of small farmers and to modernize, train, and make family farmers more efficient and productive would improve the lives of almost 20 million people. Moreover, it would have a multiplying effect on income in the small interior cities, with positive consequences for creating local and regional employment.

During the last two years, this has been the strategy followed in formulating public policies for rural areas, as will be explained below.

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6.2 Government Programs

6.2.1 The National Program to Strengthen Family Farming (PRONAF)

Created during the current administration and subordinated to the Ministry of Agriculture and Food Supply, PRONAF provides credit at favorable interest rates to small family farmers -- owners, squatters, renters or sharecroppers -- and to production cooperatives and associations as long as they are formed by small producers. The borrowers can use these resources to cover harvest and farming expenses or to invest: machinery, equipment, new or used production goods, and other indispensable infrastructure items.

The ceiling for individual financing varies from R$5,000 for operating expenses, with a two-year repayment term, to R$15,000 for investments, with a repayment term of five years and an 18-month grace period. For cooperatives and associations, the ceiling is fixed as a function of the number of members. The money can be used for investment projects, current expenses or working capital, either directly or as advances to cooperative members.

The resources come from bank credits, from the constitutional funds of the north and northeast, and from the Worker Support Fund (Fundo de Amparo ao Trabalhador - FAT), which is directed by a council representing the government, the workers and the private sector and is coordinated by the Ministry of Labor. The Bank of Brazil and the Bank of the Northeast operate the program.

The administration of PRONAF is decentralized: the program is implemented by the municipality in partnership with the federal and state governments and producer representatives, organized in tripartite employment committees, at the state and municipal levels, with all members being equal. The Committees are responsible for monitoring the progress of the projects being financed.

In 1995, the government implemented PRONAF and spent R$36 million to benefit nearly 19,000 families, the majority in the northeast and in Rio Grande do Sul. In 1996, the program provided a total of R$649.7 million in rural loans to 333,000 families. This year, R$1.5 billion will be available to guarantee financing for 600,000 small farmers and their families.

In addition to the resources earmarked for family farmers, an additional R$ 219.5 million in the budget are allocated as follows:

- R$ 125 million to support the rural development of 994 municipalities;

- R$ 30 million to finance the extension service for small family farmers;

- R$ 64.5 million in rural credits for those previously excluded.

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6.2.2 The Job Creation and Rural Income Program (PROGER RURAL)

PROGER RURAL is a Ministry of Labor program that follows the example of PRONAF. It aims to develop the rural activities of small producers, individually and collectively. Created in 1995, it also provides resources for agro-industry, with a view to increasing production, improving productivity, generating employment and retaining people in the countryside.

The resources, provided by the Worker Support Fund (Fundo de Amparo ao Trabalhador - FAT), are loaned in accordance with the following criteria, established by the supervisory council: immediate creation of employment and income, regional decentralization, and compatibility with government policies.

The credit includes two forms of financing:

The loans have a repayment term of five years, with a grace period of up to 18 months, and a favorable interest rate. PROGER RURAL resources are approved for each year/harvest. By June, the program will define the amounts available for the 1997/98 harvest. Last year's loans totaled almost R$ 1 billion (see table below): 86% for agricultural operating expenses, 1% for cattle-operating expenses, 9% for cattle-raising investments and 4% for crop farming investments

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It is estimated that, during the 1995/96 harvest, the resources applied by PROGER RURAL guaranteed the creation and maintenance of employment for 263,612 workers.

6.2.3 The Rural Welfare Program

This is Brazil's largest agrarian and minimum income program. Even if the rural worker has never contributed to the social security system, he is entitled to its benefits. The program guarantees the retirements and pensions of nearly six million rural workers, disbursing an average monthly benefit of US$125. Extended to rural workers in 1971, Rural Retirement (Previdência Rural) paid only half of a monthly minimum salary to the worker, guaranteed partial health assistance, and denied benefits to women living in the countryside.

The Constitution of 1988 extended the program's coverage to everyone. However, this provision was not implemented until the new social security disbursement law was passed in 1992. Since 1993, the monthly benefit has been one minimum salary, comprehensive health assistance has been provided, rural working women have been included, and coverage has been increased from 4 million to 6 million people.

In 1991, Previdência Rural spent the equivalent of US$2.16 billion and paid 4 million pensions and retirements, with an average monthly benefit of US$44. In 1995, it paid out US$7.9 billion to 6.3 million people, with the average monthly benefit at US$103. Last year, the outlays were US$9 billion, to nearly 6 million workers, with the average monthly benefit at US$125.

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Until 1992, the minimum age to qualify for the benefit was 65 for a man and 60 for a woman. Taking into consideration the early age at which people go to work in the countryside, the heavy demands of their work and the shorter life expectancy for small family farmers -- the principal recipients of Rural Welfare -- the government has lowered these ages to 60 and 55, respectively.

Between 1991 and 1996, there was a significant rise in the number of men receiving social welfare in the countryside: the level of expenditures increased by more than 300%, the number of beneficiaries grew by more than 50%, and the average monthly benefit of pensions and retirements almost tripled. Moreover, the income of a married couple in the countryside doubled because both partners began receiving the benefit payments. From 1994 to 1995, the nominal minimum salary increased by 40%, which is substantial in the context of price stability.

Since the end of last year, the government has reduced the bureaucracy and the requirements for receipt of the benefit payments. Responding to CONTAG (Confederação Nacional dos Trabalhadores da Agricultura) demands, the government simplified and accelerated the process: it substituted an interview for the submission of a series of documents. This change permitted, in just a few months, the retirement of 400,000 new workers who, under the old procedure, would not have received the benefit.

In 1993, the impact that the changes in Rural Welfare had on the income of the most humble small farming families, in the poorest states in Brazil, was impressive. Even in the richest states, like Rio Grande do Sul, where income from agricultural production is high, the impact was not negligible, as shown in the following table:

TABLE 22

In the small Brazilian municipalities, especially in the north, northeast and central-west, rural retirement is stimulating the economy, developing the micro-regions, and guaranteeing employment and income. In some localities, 21% of the population receives the benefit payments.

The expansion of this program has diminished rural poverty as a percentage of Brazil's general poverty level. Moreover, these benefits increase the rural family's total income, which adds viability to family farming.

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6.3. Other Initiatives

In the Triângulo Mineiro region, a municipality, a bank employee, landowners and farmers undertook a pioneer experiment and proved that, even without expropriating land or altering the landownership structure, it is possible to form partnerships that profoundly improve the economic situation of the entire community and the lives of the landless farmers. In 1985, the now-prosperous city of Uberaba, in Minas Gerais, had the same serious problem that affects most of Brazil's agricultural sector: a low level of land utilization and a great potential to attract capable professional farmers. There were 200,000 idle hectares in the region -- almost double the size of the municipality of Rio de Janeiro.

A local employee of the Bank of Brazil's Agricultural Credit Department (Carteira de Crédito Agrícola), in conjunction with the municipal government and the rural landowners, proposed a simple, viable and innovative solution to resolve the problem: to create the first Sharecropper and Rural Leasing Exchange in Brazil (Bolsa de Parceria e Arrendamento Rural do Brasil). The initiative was a success. In the following harvest -- 1986/87 -- through the exchange's intermediation, 72 leasing contracts were signed to cultivate more than 21,000 hectares. They accomplished all this without any government bureaucracy.

The contracts had a term of five years and were renewable. The lessee's payment varied from 5% of his annual income, as of the second harvest, to 15% for the last two harvest years. Access to the land was granted with the knowledge of the municipality and was financed with normal bank credit. Professional farmers from Minas Gerais, São Paulo, Goiás and even Japan, along with farmers from Rio Grande do Sul and Santa Catarina -- who have German and Italian traditions -- formed the pioneer group of lessees.

After 10 years of sharecropping, the banker's idea, with the cooperation of the mayor and the landowners, and with the work of the farmers, has moved Uberaba -- which had been the world capital of zebu cattle -- to a first-place ranking in grain production among the municipal areas of the state of Minas Gerais and to a position of prominence on Brazil's rural scene. Similar initiatives are beginning to emerge in other regions of the country.

6.3.1 Community Farms

In 1995 in the state of Goiás, the Social Assistance Secretariat of the Ministry of Social Welfare -- again in partnership with the municipalities, landowners and poor farmers -- created the pilot project of the Community Farms Program (Programa de Lavouras Comunitárias). This program is also very simple:

The harvest is shared: 80% goes to the families that work the land, 10% to the region's assistance agencies, and 10% is reserved as seed for the next planting. The harvest of 1995/96 was good. With 182 municipalities involved, there were 412,000 sacks harvested (each weighing 60 kilos), 21,400 hectares of planted area, and 124,500 people benefited. Last year, this system of Community Farms was extended to five more states: Rondônia, Tocantins, Mato Grosso, Mato Grosso do Sul and Sergipe.

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The objectives of the Community Farms are to improve the nutrition of the poorest family farmers and to stimulate community involvement, collective work and the formation of organized groups that facilitate government actions. In the medium term, the program plans to create local work alternatives for the most destitute families, thereby reducing the rural exodus.

6.3.2 Small Rural Towns

The government of the state of Paraná, in partnership with the municipalities, is also innovating. It is buying land around the medium-sized cities and transforming them into urban lots to be distributed to the so-called bóias-frias -- migrant workers who follow the harvest cycle.

Called rural towns, these lots of one-half hectare are associated with a school, a health center and complete urban infrastructure: potable water, basic sanitation and public lighting. With better living conditions, the migrant worker tends to stay on the lot and has an incentive to produce vegetables, both for his own consumption and for sale in the local market.

Such policies to urbanize rural zones have had good results and have had an immediate positive impact on the quality of life of these people. At the same time, they inhibit migrations to the slums of the large urban centers.

6.3.3 Ecological Tourism

In Mato Grosso's Pantanal region -- the planet's largest ecosystem -- ecological tourism is contributing to reduce the exodus from the countryside, to preserve the environment and, at the same time, to guarantee a good financial return. Begun recently, tourism employs five times more farm labor than does conventional farming activity. Nearly 30 rural properties in the state of Mato Grosso do Sul have undertaken ecotourism development programs. The outlook is for a rapid expansion of those activities, which have great economic potential for the region and do not threaten the equilibrium of the ecosystem.

Ecotourism in the Amazon is an older phenomenon. The Amazon has been part of the international ecotourism circuit for years. It has grown and become sophisticated as it responds to the requirements of the tourists with the most purchasing power. Tourist activities in the rainforest have added more and better employment and income opportunities for the people who live along the Amazon river.

6.3.4 The Peoples of the Rainforest

The opening of the domestic Brazilian market threatens to end a principal income source of Amazônia's traditional peoples -- native rubber extraction. Rubber imported from Southeast Asia sells in Brazil for US$1.60 per kilo, while domestic rubber costs US$2.60.

Custodians of the forest, the rubber gatherers and other small extractors are abandoning the woods and going to the cities in order to survive. If these traditional Amazônia people leave the forest, illegal woodcutters, domestic and foreign, will enter more easily, felling trees and selling the highly valued lumber.

To contain the region's rural exodus and to preserve the forest resources, the government decided in March 1997 that it will be the guarantor of the traditional forest peoples, giving them access to a special line of credit, valued at R$24 million, of the Program for the Support of the Development of Amazônia (Programa de Apoio ao Desenvolvimento da Amazônia - PRODEX). Created in 1996, the PRODEX directs its resources to the 80,000 families in Amazônia that earn their livelihoods from extractive activities, processing and selling products such as rubber, cashews, babassu, cabbage-palm and fish. In addition to resources for investments, the workers of Amazônia will have money for food and housing.

Less for economic reasons than for environmental security, the government will impede the collapse caused by imported rubber by making up the price differential between domestic and Asian rubber. Today, Brazil produces 4,000 tons of rubber annually and the rubber extractors' compensation will be approximately R$4 million annually. The resources will come from PROCERA, the special credit for agrarian reform, and from PRONAF, the incentive program for family agriculture.

In March of this year, the government created the 450,000 hectare Extractive Reserve of Médio Juruá -- the first in the state of Amazônia. These are the costs that Brazilian society must pay to maintain the Amazon rainforest and the rubber gatherers within it, containing the devastation inflicted by the lumber companies and other predators.

Combined with last year's legislation that increased from 50% to 80% the amount of forest to be preserved, obligatorily, on each rural property in northern Amazônia, the foregoing measures constitute the beginning of a true ecological agrarian reform for the Amazon region.

6.3.5 The Child-Citizen Program

Since last year, the Social Assistance Secretariat of the Ministry of Social Welfare, with the support of other ministries, public institutions and non-governmental organizations, has begun to confront the old problem of child labor in rural areas. This is not a simple task. It is still part of the rural culture to have many children to help with the work and to increase family income. Children also obviate the need to hire workers -- a luxury that small farmers cannot afford -- enabling the family to keep all the income it earns.

The northeastern state of Paraíba, for example, is the national champion of large families -- 43% of rural couples have more than six children, and 53% of small Paraíba farmers believe that survival in the countryside depends on the size of the family. In all of Brazil, almost 60% of family farms use their children to help with the work.

However, the situation is changing. Since 1990, the birthrate in rural Brazil has been declining significantly, though it is still higher than in urban areas. Nevertheless, the effects of this trend will not begin to impact the rural labor market until the next decade.

To eradicate immediately child labor in rural areas, and especially in degrading or dangerous circumstances, the government created in 1996 the program called the Child-Citizen Fund (Bolsa Criança Cidadã). The families of the children selected by the program -- all within the age group of seven to fourteen years -- receive a supplement to their monthly income of up to R$50 per child. The only requirement to receive this financial assistance is that the children quit working and attend school regularly.

-Moreover, the program seeks to stimulate regular full-time school attendance by the students. It provides the schools that receive these children additional human and material resources in order to guarantee transportation, food, and recreation activities. By the end of 1997, after its implementation in the states of Paraná, Paraíba, Rio Grande do Norte, Alagoas, Sergipe and Rondônia, the Child-Citizen Fund will have taken nearly 50,000 boys and girls from work in the countryside, principally from charcoal kilns, sisal plantations, and cane and maté fields, and sent them to school. Currently, almost 30,000 children are benefiting from the program, as shown in the following table.

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CONTENTS

VII- PREPARATION AND INTEGRATION OF PROGRAMS