Brazil: short-term response to higher food prices

Transcription

1 1 Brazil: short-term response to higher food prices Caio Galvão de França Ministry of Agrarian Development of Brazil GLOBAL FORUM ON AGRICULTURE ORGANIZATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT June

2 2 Plan of Presentation 1. Brazil 2008: better conditions to tackle crises 2. Brazil s response: 3 moments and one special feature 3. A few results: decrease of inflation, no agro-food inflation 4. Agenda for the future: more family farming and food security 2

3 1. Brazil 2008: better conditions to tackle crises Brazil was better prepared, thanks to: The economy s dynamism Lower external vulnerability Internal mass market Social protection network Possibility of rapid expansion in the internal food production: set of rural development policies 3

4 4 1. Brazil 2008: better conditions to tackle crises 1.1 The economy s dynamism The GDP s sustainable growth Quarterly variation in relation to the same quarter of the previous year - % 5,4 7,8 5,3 4,5 4,4 4,7 4,7 5,3 5,8 5,4 6,1 6,1 6,2 6,8 3,3 2,8 3,0 3,5 2,2 4 0,8 1,3 Source: Brazilian Institute for Geography and Statistics, IBGE. Elaborated by: MF/SPE.

5 1. Brazil 2008: better conditions to tackle crises 1.1 The economy s dynamism Inflation stabilized 5 Sources: IBGE e BCB */ Focus: 30/04/09. Elaborated by: MF/SPE

6 1. Brazil 2008: better conditions to tackle crises 1.1 The economy s dynamism Investments by the Federal Government and Petrobras (%GDP) - Growth Acceleration Plan 3,5 3,0 2,5 Petrobras Federal Government Petrobrás Governo Federal PAC 2,0 1,7 1,5 1,3 6 1,0 0,5 0,8 0,8 0,8 0,9 0,8 0,6 0,7 0,9 Sources: MF/STN & MP/DEST. 1,2 */ Projections. Elaborated by: MF/SPE

7 7 1. Brazil 2008: better conditions to tackle crises 1.2 Lower external vulnerability Expressive foreign reserves US$ 201 billion Better composition of the internal debt Lower exposition of the financial system Floating exchange rate More diversified foreign trade 7

8 8 1. Brazil 2008: better conditions to tackle crises 1.3 Internal mass market in expansion Poverty reduction Reduction of inequalities Continued increase of the minimum wage 8

9 1. Brazil 2008: better conditions to tackle crises 1.3 Internal mass market in expansion Poverty reduction % População Poor population Pobre % Indigentes % % Pobres % Poor New goal 2015: poverty reduction to ¼ Fonte: IPEA 9 Indigent: ¼ minimum wage per month. Poor: ½ minimum wage per month

10 1. Brazil 2008: better conditions to tackle crises 1.3 Internal mass market in expansion Reduction of inequalities 0,61 0,6 0,59 0,58 0,57 0,599 0,600 0,600 0,598 0,592 0,593 0,587 0,581 0,569 0,566 0,593 in ,552 in 2007 Yearly average reduction rate 1,2% 0,56 0,55 0,559 0,552 0,54 0,53 0,

11 11 1. Brazil 2008: better conditions to tackle crises 1.3 Internal mass market in expansion Minimum wage advancement yearly average in R$ of February Present R$ 465 US$ Source: IPEADATA */ Average of the last 12 months until Feb/09 Elaborated by: MF/SPE

12 12 1. Brazil 2008: better conditions to tackle crises 1.4 Social protection net Nr of families (thousands) Total expenditure (% of GDP) % of GDP Bolsa Família (Family stipend) Milhares 12 9 Quantidade de Famílias 8,7 11,0 11,0 10,6 11,0 0,32% Gasto Total (em % do PIB) 0,34% 0,37% 0,37% % do PIB 0,40% 0,30% 11 million families 0,37% of GDP 6 6,6 0,20% 0,27% 0,20% ,10% */ Accumulated in 12 months until Feb/09 Source: MF/STN e MDS. Elaborated by: MF/SPE

13 2. Brazil s response 2.1 First set of measures Increase in general and food inflation 13 Brazil First signs of increase in food prices were evident in the first semester of 2008: Food inflation rose from 0.44% in Sep/07 to 1.52% in Jan/08 and 2.11% in Jun/08 Food: 25% of general inflation General inflation rose from 0.18% in Sep/07 to 0.54% in Jan/08 and 0.74% in Jun/08 13

14 14 2. Brazil s response 2.1 First set of measures Responses to inflation restrictions to consumption and increase in food production General response Higher interest rate: from 11.25% in Mar/08 to 13.75% in Sep/08 Sectorial response Lower taxes, restrictions to consumer credit, tax revision 14 Response in agriculture Two harvest plans (agricultural and livestok) 2008/09: lower interest rates, higher credit and higher minimum prices

15 15 2. Brazil s response 2.1 First set of measures Response to inflation restrictions to consumption and increase in food production Harvest Plan comercial farming R$ 65 billion in credit R$ 55 billion for circulating capital and R$ 10 billion for investment Harvest Plan family farming R$ 13 billion (controled interest rates) - R$ 7 billion for circulating capital and R$ 6 billion for investment Increase in minimum prices (trade guarantee): maize, beans, wheat and cassava 15

16 16 2. Brazil s response 2.1 First set of measures More food production by family farming Introduction of the More Food Program R$ 397 million for Technical Assistance: network expansion from 20 to 30 thousand technicians in the field Line of credit of up to R$ 100 thousand with interest rate of 2% per year Agreement with industries of tractors, motorcultivators, agricultural and add-on implements for price reductions 16 Goal: increase food production in 18 million tons (2½ months of consumption)

17 17 2. Brazil s response 2.2 Second set of measures Answer to the international crisis: warming up the economy General Reduction of interest rate: from 13.75% in Sep/08 to 9.25% in Jun/09 Increase in consumer credit Anticyclical measures Housing program Tax reduction (IPI) as a stimulus to industries of vehicules and white goods (appliances) 17

18 18 2. Brazil s response 2.2 Second set of measures Answer to climatic issues Agricultural Draughts and floods: help to affected farmers familiy farmers R$ 1,1 billion Family Farming Insurance and Crop Garantee Programme Emergency credit special line Contract deadline extension Maize sale for animal feed 18

19 19 2. Brazil s response 2.3 New answers General - uninterrupted interest rate reduction and investment maintenance Agricultural More credit, more investment, more production Law: minimum of 30% of the School Food Program resources to be used in purchases of food from family farming R$ 600 million in New Harvest Plans 2009/2010 R$ 92,5 billion for entrepreneurial farming R$ 15 billion for family farming - Increase the number of potential credit-takers - Higher minimum prices - More comprehensive insurance (resources and products) - Strengthening cooperativism - Incentive to sustainable production

20 20 2. Brazil s response 2.3 New answers Fight unemployment and guarantee investments Expansion of public banks scope of action Housing program Under discussion i) Credit Guarantee Fund for small and medium enterprises Banco do Brasil, BNDES ii) New lines of credit for the capital goods industry machinery and equipment iii) Agricultural Credit Guarantee Fund 20

21 21 3. Some results 3.1. Reduction of the economic activity back from the bottom GDP quarterly variation in relation to the same quarter of the previous year (%) 8,0 7,0 6,0 5,0 4,0 3,0 2,0 1,0 0,0-1,0-2,0-3,0 7,8 6,8 5,8 6,1 6,1 6,2 5,4 5,3 5,3 5,4 4,5 4,4 4,7 4,7 2,7 3,3 3,5 2,8 3,0 2,2 0,9 0,8 0,3 1,3-1,8 I.03 I.04 I.05 I.06 I.07 I.08 I.09 Projection GDP ,5 to 1% GDP Last 4 quarters 3,1% 21 Source: IBGE. Elaborated by: MF/SPE.

22 22 3. Some results 3.2. Recovery of industrial activity Industrial production index seasonally adjusted (Jan/07 = 100) 111, PIM -indústria General industry geral 95, ,5 85 4o tri de dez 06 fev 07 abr 07 jun 07 ago 07 out 07 dez 07 fev 08 abr 08 jun 08 ago 08 out 08 dez 08 fev 09 abr (*) includes vehicles, motorcycles, parts and construction material Source: IBGE. Elaborated by: MF/SPE

23 Inflação (anual %) Ministry of Agrarian Development - Brazil 3. Some results 3.3. Convergence of food and general inflation Annual General IPCA and IPCA for food and beverages (%) Food crises May 2008 IPCA 5,2% IPCA-A 6,44% IPCA IPCA-A JAN FEV MAR ABR MAI JUN JUL AGO SET OUT NOV DEZ JAN FEV MAR ABR MAI 23 Fonte: IBGE Elaboração: MDA

24 Inflação (%) Ministry of Agrarian Development - Brazil Some results 3.3. Convergence of food and general inflation Variation of the General IPCA and of the IPCA for food and beverages (%) 2,5 2 1,5 Food crises May 2008 IPCA 0,47% IPCA-A 0,44% Alimentação Food and beverages e bebidas Geral General 0,5 0,47 0, ,5 MAR ABR MAI JUN JUL AGO SET OUT NOV DEZ JAN FEV MAR ABR MAI Source: IBGE. Elaborated by: MDA

25 25 3. Some results 3.4. Reduction of inflation back to the core goal ,9 7,7 12,5 9,3 Variation of the General IPCA in 12 months (%) 7,6 IPCA (%) 6 4 6,0 5,7 3,1 4,5 5,9 4,33 4, * 2010* */ Focus Market expectancies (5/6/2009). Sources: IBGE e BCB Elaborated by: MF/SPE

26 Preço pago pelo Consumidor Ministry of Agrarian Development - Brazil 3. Some results 3.5. No food inflation The beans price drops Preços do Feijão ao Consumidor R$ 7,00 Food crises R$ 6,00 R$ 5,00 R$ 4,00 R$ 3,00 2,82 2,68 São Paulo Rio de Janeiro Belo Horizonte Price/kg June SP 2008 R$ 6,50 R$ 2, R$ 2,68 R$ 1,00 R$ 0,00 mai/08 jun/08 jul/08 ago/08 set/08 out/08 nov/08 dez/08 jan/09 fev/09 mar/09 abr/09 mai/09 Fonte: DIEESE 26

27 3. Some results 3.6 No food inflation Increase in food stocks 2008: 1.5 million tons 2009: 5.9 million tons Increase: 293% Source: Conab/MAPA stocks from purchases from family farming, AGG, options contract 27

28 3. Some results 3.7 Stimulus to productive investments Copom s decisions regarding interest rates Selic Tax Reduction of interest rates Food crises Financial crises April 08 11,75% Sept 08 13,75% 8 6 Jun 09 9,25% Fonte: BCB Elaboração: MDA

29 3. Some results 3.8 Reduction and diversification of agro exports 2009 January to May Drop of 11,5% Total : US$ 24,1 Acceleration of exports diversification Growth 13,2% to Asia 11,4% to the Middle East 10,7% to Africa Asia s participation in the total grew from 23,2% to 29,6% 29

30 3. Some results 3.5 More Food Program 12 thousand tractors mil tratores (up to 78 cv) = more than the number of tractors financed by Pronaf in 14 years Share of 78cv tractors in the sector s total production % % 61% of the total tractors produced were financed by the Program 30 Nationalization of components

31 31 4. Agenda for the future 4.1 Elements of the Brazilian experience Short term response integrated to anticyclical economic policies and oriented to national develoment. The crisis impacts were diminished by the existence of a social protection network and the countriy s more stable economic condition. The existence of a network of institutions and rural development and food security public policies as well as diferentiated policies towards family farming made possible the increase in food production. 31

32 32 4. Agenda for the future 4.2 More favorable environment regarding long term answers Joint governmental action aiming at: - market regulation, - tuning up anticyclical policies and - fighting hunger and poverty Value family farming regarding food production and national development Increase family farming s economic insertion and participation 32 Strengthen public institutions dedicated to rural development financial, research, technical assistance and agricultural extension

33 4. Agenda for the future 4.2 More favorable environment regarding long term answers Participation and social dialogue in the construction and implementation of public policies Create and consolidate instruments and food security and nutritional institutional and legal mechanisms Maintain social protection networks and measures to promote the rural populations economic autonomy 33