Brazil Is the New America: How Brazil Offers Upward Mobility in a Collapsing World (34 page)

Paul Collier, Professor of Economics at Oxford and author of
The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done about It
, points out that “after many years of stability, world food prices have jumped 83 percent since 2005—prompting warnings of a food crisis throughout much of the world.”
19
Collier scolds the governments of OECD countries on several scores,

. . .encouraging beggar-thy-neighbor restrictions, pressure for yet larger farm subsidies, and they retreat into romanticism . . . the subsidy hunters have, unsurprisingly, turned the crisis into an opportunity; for example, Michael Barnier, the French agricultural Minister, took it as a chance to urge the European commission to reverse its incipient subsidy-slashing reforms of the common agricultural policy. And finally, the Romantics have portrayed the food crisis as demonstrating the failure of scientific commercial agriculture which they have long found distasteful. In its place they advocate the return to organic small-scale farming—counting on abandoned technologies to feed a prospective world population of nine billion.
20

Collier continues by stating that “the world needs more commercial agriculture, not less” and arguing that Brazil's model could be translated in areas where land is underused.
21

Of course, the credit for the surging productivity of Brazilian agriculture upon which the hopes of a hungry world depend does not go equally to the proprietors of all of Brazil's 5 million farms. Roughly 2.5 million of these earn less than R10,000 a year and account for just 7 percent of total Brazilian farm output. In other words, these are still the unproductive tropical farmers who by and large have not incorporated the technical innovations from Embrapa. Almost all the gains in Brazil's agricultural productivity are attributable to 1.6 million large commercial operators toward whom Embrapa's research and technical innovations are directed and who account for more than 75 percent of Brazil's farm output.

On a per crop basis, the productivity premium of what the FAO describes as Brazil's “good farmers” over the old-fashioned, tropical subsistence farmers is vast. For example, in 2004 the average yield for maize in Brazil was 3 tons per hectare. For the large commercial farmers, the yield was 10 tons per hectare. For beans, the average yield was 0.7 tons per hectare. Yields for good commercial farmers were five times higher (3.5 tons per hectare). Average wheat yields were 1.6 tons per hectare, while large commercial producers got 6 tons per hectare. The problem of low productivity among small producers who pulled down average yields for the whole country was not due to a lack of relevant agricultural technologies, but by the failure or inability of small farmers to apply them.
22

The division between Brazil's large, capital-intensive, export-oriented farms and the smaller operations of subsistence farmers has origins deep in Brazil's past.

Through the first four centuries of Brazilian history, the country's prosperity was based largely on tropical agricultural. For many years, Brazil's main export was cane sugar, produced on large plantations located within 15 miles of the coasts or along navigable rivers. Sugar plantations, harnessing slave labor, enjoyed considerable economies of scale. Larger plantations tended to be more profitable. And the economic logic underpinning sugar farming on a large scale was reinforced by the political culture of Portuguese colonialism.

Between 1534 and 1536, Portuguese King John III created a system of hereditary captaincies dividing the “official” Portuguese territory east of the Treaty of Tordesillas line along lines of latitude. Although Brazil would eventually expand far to the west of the Tordesillas line (drawn to divide Portuguese from Spanish territory by the corrupt, Spanish-born Pope Alexander VI), the initial hereditary captaincies were cautiously defined according to the Tordesillas treaty's terms.

The donataries were rich men, chosen not only because they had capital, but also because they were expected to sail thousands of miles and negotiate under challenging conditions with Indians from completely alien cultures. The hope was that the captaincies would succeed in developing Brazil at their own expense, thus saving the crown from undertaking the development outlays. Only 2 of the 15 captaincies proved profitable, based upon production and export of sugar. The more successful of these was Pernambuco, where Duarte Coelho prospered from the success of his sugarcane mills. However, other than São Vicente, the other 13 captaincies proved to be busts. The donataries either had no success dealing with the Indians or had not bothered to make the necessary investments to develop these huge tracts of land that spanned degrees of latitude and exceeded the size of European countries.

In response to the failure of the captaincies, the Portuguese crown undertook to sponsor the colonization of Brazil on its own. While the donations of crown land were downsized, they were informed by a similar perspective. The Portuguese crown wanted to accelerate the settlement and development of Brazil as rapidly as possible with the least investment on its part. At the time, Brazil was competing for capital and attention with the eastern Asian and African colonies of the Portuguese empire. With Portuguese capital stretched thin, and the powers that be nervous that French, British, Dutch, and other ships were visiting the Brazilian coast, the decision was reached to give large tracts of Brazilian land to grandees who were considered wealthy enough to develop them rapidly. This entailed the donation of crown land (
sesmarias
) in large blocks to wealthy Portuguese as well as to military personnel.

In theory, any settler could apply for these land grants, but he had to demonstrate that he had capital and access to slaves to operate the plantations.

Brazil was thus divided into gigantic tracts, called
latifundia
in the Roman style, which, although smaller than the captaincies, tended to be far larger than even the most prosperous estates of English colonists in North America. Unlike production of grain and hay that predominated in England's North Atlantic colonies, where a higher production scale provided no appreciable advantages, monocropping of sugarcane over extensive areas of land did tend to reduce production costs.
23
Large plantations also tended to be more profitable because they could better match their output to the capacity of sugarcane mills. A small sugarcane farm could not amortize the cost of building a mill. And needless to say, given the transportation conditions in sixteenth- and seventeenth-century Brazil, it was prohibitively expensive to move unprocessed sugarcane very far from the spot where it was harvested.

As suggested earlier, the large-scale economies of sugarcane farming underpinned a highly unequal land tenure system that tended to be self-reinforcing. To quote from the FAO's summary history of the development of agriculture in Brazil, “in this way, the territory of Brazil was divided into immense properties, with very little land remaining without an owner in the areas where the Europeans lived, mainly along the coast.”
24
The limited scope for small farmers led to accommodation of the small population of free whites, ex-slaves, and mestizos as sharecroppers occupying small strips of land on large estates for subsistence production and food for the local market. And perhaps more significantly, small farmers pioneered the Brazilian tradition of squatting on unoccupied land along the sparsely populated frontier. The very high transportation costs due to Brazil's challenging topography discussed earlier kept the frontier close to the coast for a long time. In fact, by the beginning of the eighteenth century, 200 years after Brazil's discovery, the country had a total population of only 300,000.

Obviously, with the monocropping of sugarcane predominating on the large plantations, someone had to produce the food required for consumption by the landlord class, the slaves, priests, the military, and the other government functionaries. But the Portuguese legal system as imposed in Brazil did not provide a framework of property rights to protect small holdings. With rare exceptions, up to 1822, when Brazil became independent, the increase in the number of small properties in Brazil was due to squatting and illegal ownership, as property could not be acquired except by donation personally from the Portuguese monarch.

This history is important because it informed a very different trajectory for Brazilian landholdings in the middle of the nineteenth century than that in the United States. In the United States, the Homestead Act of 1862 made land grants to small farmers who promised to cultivate the land. This encouraged an influx of migrants from Europe seeking the opportunity to own land, which was typically planted in grain. In Brazil, by contrast, farming in the plantation system produced high-value crops for export, which generally offered few prospects for participation by smallholders.

The
sesmarias
system of allocating property through royal land grants was abolished when Brazil became independent in 1822. But strangely, no new process for allocating legal title to property was put in place for the next 28 years. In effect, there was no regularized process for allocating land titles for almost three decades in Brazil. The only method to acquire new land was by squatting—taking physical possession. This enabled some small holders to stake tentative claims on the sparsely populated frontier. But the main beneficiaries of the 30-year anarchy in Brazil's land title system were the owners of the latifundia, the great estates. As economic historians Lee Alston, Gary Libecap, and Bernardo Mueller observed, the owners of the large estates “had the capital and other resources to occupy and defend additional land claims.”
25

By the mid-nineteenth century, the relative importance of sugar had declined in Brazil. It then comprised just 26.7 percent of Brazil's exports, while coffee had surged to more than 41 percent, (on the way to becoming approximately 70 percent of exports). After three decades in which Brazil really had no legal process for establishing property rights in its vast reserves of unused land the dramatic growth in world demand for coffee precipitated a crisis. The proximate problem was that small producers could compete in coffee production, which did not require high fixed capital investments. Therefore, it suddenly became a matter of urgent importance for the large holders to call a halt to the acquisition of unused land (of which Brazil had plenty) by squatting. The potential competition from small holders threatened to undermine profitability.

The fact that the international slave trade had been suspended and slavery was in its twilight created an additional problem that the owners of the large plantations sought to resolve. They wanted to attract free labor by increased immigration from Europe, and at the same time, make sure that the new immigrant laborers would hang around to work on the plantations rather than settling on the abundant, unused land and farm it for themselves.

Hence, the Land Law of 1850. The law legalized informal squatter claims prior to 1850, while conditioning formalization upon payment of a substantial tax. It also revalidated the
sesmarias'
land titles. At the same time, the law forbade further acquisitions by squatting. It stipulated that thereafter, unused land in Brazil could only be acquired by purchase. Thomas E. Skidmore rightly observed, “the chief purpose of the law was to promote the large plantation system.”
26

Brazil's very different approach to land tenure was at least partially dictated by its tropical climate and the relatively high-scale economies involved in the production of sugar during the early centuries of settlement. The fact that for the first 322 years of Brazil's history land titles could only be acquired under the
sesmarias
system in a personal grant from the king of Portugal significantly limited the emergence of a middle class in Brazil. This was particularly true because farming was the principal means to acquire wealth in the centuries when Brazil's main exports were tropical commodities.

As
The Economist
put it,

The increase in Brazil's farm production has been stunning. Between 1996 and 2006 the total value of the country's crops rose from 23 billion reias ($23 billion) to 108 billion reias, or 365 percent. Brazil increased its beef exports tenfold in a decade, overtaking Australia as the world's largest exporter. It has the world's largest cattle herd after India's. It is also the world's largest exporter of poultry, sugar cane and ethanol. . . . Since 1990 its soyabean output has risen from barely 15m tonnes to over 60m. Brazil accounts for about a third of the world soyabean exports, second only to America. In 1994 Brazil's soyabean exports were one-seventh of America's; now they are six-sevenths. Moreover, Brazil supplies a quarter of the world soyabean trade on just 6 percent of the country's arable land.
27

In the next chapter, we explore an emerging advantage closely associated with the Brazilian economy: its role as an energy superpower in the era of peak oil. While the advanced temperate zone economies are hard-pressed to prosper as the price of BTUs soars, Brazil is leveraging its unmatched agricultural capabilities to become a leader in biofuels, as well as a nation rich in oil.

1
Peter C. Kahn, Thomas Molnar, Gengyun G. Zhang, and C. Reed Funk, “Investing in Perennial Crops to Sustainably Feed the World,”
Issues
online, Summer 2011,
www.issues.org/27.4/kahn.html
.

2
Lester R. Brown, “Population Growth Sentencing Millions to Hydrological Poverty,” The Policy Institute, June 21, 2000,
www.earth-policy.org/plan_b_updates/2000/alert4
.

3
Katherine Q. Seelye, “Aquifer's Depletion Poses Sweeping Threat,” Green (blog), May 4, 2011,
http://green.blogs.nytimes.com/2011/05/04/aquifers-depletion-poses-sweeping-threat
.