Interest Groups in Brazilian Agricultural Policy: Doing Business in Brazil in a Risky Environment. Risk Assessment by Businessmen Investing in Brazil

Lead: Agricultural policy making in Brazil takes places in an environment of a rent seeking society, with all kinds of lobbies, mainly from input industries. Agroindustry reacts creating their own lobbies. An important part in this game is played by government bureaucracy.

Executive Summary

For several decades, government in Brazil adopted policies designed to implement the import substitution model for induced industrialization that ended up discriminating the agricultural sector, through export taxation, overvaluation of the domestic currency, direct taxation on food items, and indirect taxation through sales of government stocks.   However, a few other specific policies, such as credit subsidies, benefited some groups of commercial farmers.  This has been the case since the early 60's, when the agricultural sector has shown that taxation was causing output reduction. 

The military administrations built enormous discretionary power to discriminate policies, sectors, and groups in the society, due to a controlled Congress, a strong hierarchical structure which controlled all bureaucracy, and a capable tecno-bureaucracy, which enjoyed enormous power over regulation, without any technical auditing by the Congress.  This discretionary power favored specific groups in the process of dispute for the benefits of the policies.  The interest groups forwarded their interest directly in the Executive, mainly in the institutions in charge of formulating and implementing agricultural policy.  The pressure groups exerted their activities not in the Congress, in a clear and transparent way, but in the Executive, thus resulting an agricultural policy not clear and transparent, like any other public policy, but a closed process with only a few actors.

Industrial groups related to the processing and industrialization (and exporting) of raw materials had their own organizations to protect their interests.  The industrial interest groups were organized by commodities with strong lobbying power in the Executive.  The most important ones were for cotton (Confederação Nacional da Indústria Têxtil - CNIT), for soybeans (Associação Brasileira da Indústria de Óleos Vegetais - ABIOVE), and their major concern was the prices of raw materials, cotton lint and soybeans.  Other commodity groups -- though not studied in this research -- also lobbied in the Executive, such as the cases of coffee, sugar and cocoa. 

Some other organizations from processing industries were also important actors in this lobbying process.  The most important cases are the Brazilian Food Industry Association (Associação Brasileira da Indústria de Alimentos - ABIA), the strong regional syndicates of wheat millers (Rio de Janeiro, São Paulo, Rio Grande do Sul and Northeast), the associations of fed mix and rations producers, etc..  Finally, other institutions in the overall agribusiness organized interest were the Brazilian Association of Meat Exporters (Associação Brasileira dos Exportadores de Carne - ABIEC), Brazilian Association of Poultry Exporters (Associação Brasileira dos Exportadores de Frango - ABEF), Brazilian Association for Diffusion of Fertilizers (Associação Brasileira para a Difusão dos Adubos - ANDEF), and so on.

Price and export controls were the central concern of these groups.  Their major objective was to keep the raw material in the domestic market and manipulate prices, with the infant industry argument and the argument of the need to retain the "value added" in the domestic market.

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