SOCIEDADE RURAL BRASILEIRA .... is a society with the sole purpose of fostering the development of cattle ranching, agriculture, all related industry derived from these industry as well as to support any initiative that can provide the development of new forms of agribusiness that can increase the national wealth ..... Excerpt from the minutes of the foundation of Sociedade Rural Brasileira in May 1919. 2
SOCIEDADE RURAL BRASILEIRARural advocates all interests related to the practice of agriculturalactivity in Brazil, acting the as the main political negotiator in favorof the Brazilian agribusiness.The respected position of Rural today has been gained over thepast 93 years defending and promoting public policies and theprivate sector competitiveness in agriculture and livestockmanagement.Four Ministers of Agriculture and 17 State and federal Secretariesof Agriculture have come from Rural since 1919. 3
1. Land Use and Environmental Protection2. Proteins and Grain Production3. Renewable Energy4. Challenges to an Emerging Power5. The Agribusiness is the Business of Brazil 4
Brazil combines the critical mass of its economy with compellinginvestment opportunities 6
Brazil is a established democracry with free press, political stability,cultural diversity, strong work ethics, and rapidly growing economy. • Growth: the 6th largest economy in the world • Consolidated Democracy: Political stability with 15+ years of low inflation and growth • Maturing capital markets: BMF&Bovespa is the 3rd largest stock and derivatives exchange in the world, and the largest equity options market in the world. • Infrastructure needs: Surging demand for infrastrucutre improvements across all sectors, with investments expected to leap from US$216 bi to US$ 1 trillion by 2020. • Poverty down 50%: Over the last two decades, largely to government policy, the poverty rate has halved. • Emerging BoP+: Over this past decade, 40 million have acquired disposable income. • Urbanization: In 2010, more than 86% of total population was living in urban areas. 7 Source: OECD, IMF, WFE, Bloomberg and FIA
The sheer size and the social issues of the Brazilian economycreate impactful business opportunities. • Midsized cities are leading the way in economic development • 86% of the country is urban (in the US is 80%) • Self sufficient in energy • Leading producer of renewable fuels (sugar cane ethanol) • Self sufficient in food and world’s # 3 exporter • Vigorous retail with 5yr doubling of consumer credit • Solid real estate growth, strong regulatory framework • Stable justice and democratic institutions • Free flow of duly registered investment in and out of the country 8 Source: OECD, IMF, WFE, Bloomberg and FIA
The emerging Brazilian BoP consumer has discretionary income,and wants access to essential products and services. • Housing – 8 million unit deficits • Schooling – 7.4 years on average (world avg. = 11.3 yrs) • Energy – 60% of low income households obtain illegally • Water & Sewage – 50 years away from supplying to every household • Banking System – 40% of the population not served • Internet – 55% of the population without access • Healthcare – 1.3 doctors per 1,000 hab, regional infant mortality up to 30 per 1,000 9 BoP = families of 4 living on less than US$300 per month BoP+ = families of 4 living with income less than US$900 per month
Land Use and Environmental Protection• Brazil has the largest environmental protected area of the planet. It is more than 554 million ha of forests and other forms of vegetation that adds to 65% of the country’s area. The US has approximately 50% of their territory designated as protected areas (477 million ha).• A new and up to date Federal Environmental Regulatory Policy has been introduced by the Brazilian Congress in 2012. It is not great or ideal but it will now drive the development of an even more sustainable and modern agribusiness industry in Brazil.• Brazil has 272 million ha (32%) dedicated to agriculture and cattle ranching. As the country develops and new technology is made available for both our “tropical agriculture” and livestock genetics, agriculture will advance into ranching areas to increase food production. 11
Land Use and Environmental Protection• Since 1980 grain production has increased 227% to reach 180 million tons and land usage only grew by 50% (60 million ha). Brazil has proved possible to grow agriculture production with no further deforestation of protected areas. Existing areas currently dedicated to cattle ranching can be and will be used for additional agriculture production. In the short term, productivity gains, especially in regards to protein production (cattle ranching), will be key to the success of the Brazilian agribusiness and the world’s food supply.• Nevertheless, agricultural production in Brazil is a business that requires very high capital investments in land, facilities, machinery and research and efficiencies of scale must be pursue. Therefore large producers who can make the most effective use of large, expensive machines, financial resources and technology will be favored thru the development of the Brazilian agribusiness. 12
Proteins and Grain Production• Over the past 35 years, Brazil has developed and consolidated one ofthe worlds most efficient agriculture and the only one free ofsubsidies in the world.• In 2012, Brazilian grain production should reach 180 million tons andsurpass the US, for the first time, to be the top producer of soybeansin the world.•Currently Brazil is ranked top 3 in agriculture production in the worldbeing ranked number 1 in both production and exports in sugar,soybeans, coffee and orange juice, number 2 in ethanol, tobacco andbeef and number 3 in poultry, pork and corn. In most of these productsBrazil controls a significant share of the world’s trade. 14
Proteins and Grain Production• World population should reach 9 billion people by 2050. According to FAO/UN the world will face food shortages by then unless grain production increases by 1 billion tons and proteins production by 200 million tons;• The Brazilian Government estimates that by 2050 Brazil can boost its grain production by 88% to reach 300 million tons and increase protein production by 98% reaching 53 million tons of meat.• It is not enough, Brazil must do better than that.• It has natural advantages and the potential to contribute to a bigger share of the additional demand and place itself as a leader in food production. In order to do that it will require nationwide focus and objectivity to attract high capital investments in strategic areas and talented people to overcome the challenges.
Renewable Energy• The discussion of the advantages and disadvantages of the use of arable areas forenergy production is always complex and the arguments are reasonable on both sides.The fact is that at some point well be pitchforks to change our energy matrix from fossilsources for other sources, but at the same time we have a pressing need to producemore food for a growing demand.• In Brazil this debate is even more difficult because it involves a mature and importantactivity of the Brazilian economy. The role of renewable energy in the Brazilian energymatrix in 2011 was 44%, being that the sugar sector represented 17% of final energyconsumption;• The area used for ethanol is less than 5% (13 million ha) of the total arable land andvery little to justify the debate, especially considering that 50% of the production isintended for the production of sugar.• However the ethanol program is adrift and need to have a definition of its role inBrazils energy matrix. Without a clear view of what is set for it, a strong regulatoryframework, investments will not come. 17
Challenges to an Emerging Power• A research showed that Brazilian farmers use better inputs (seeds, fertilizers, pesticides, labor, feed, etc.) to produce more in less area. From this fact, we observed that our problems start “out of the gate”, the famous "Brazil cost". From there, our products get more expensive by the high tax burden, lack of transport infrastructure, ports, blackout, etc...• Between sowing, harvest, storage, transportation, domestic consumption and export losses, it is estimated that between 10% to 15% of what is produced is lost• The Brazilian agribusiness suffers annual losses of approximately US$ 4 billion due to poor logistics infrastructure. In total, the country, that invests only 0.3% of its GDP in the industry, loses about US$ 80 billion.• The situation is so precarious that the Ministry of Transportation estimates that it will take about US$ 300 billion and 13 years (2025) to address the bottlenecks of the Brazilian infrastructure.
Challenges to an Emerging Power Of the total soya transported in Brazil, 11% circulates through waterways, 36% by rail and 53% by road. In the United States, a country with geographical dimensions similar to Brazil, 60% of soybean transportation is done by waterways, railways by 35% and only 5% by road. Furthermore, the average distance from Brazilian producing areas to the ports is 1000 to 1100 km, very different from Argentina, where the maximum path is 300 miles. Also according to ANEC, from 2003 to 2009, the transport costs have risen, on average, 147% in Brazil, 35% in Argentina and 16% in the United States.• Conclusion: there is a clear disconnect between the productive performance of the Brazilian Agribusiness and the objective actions of its public officials when it comes to infrastructure. 20
Agribusiness is the Business of Brazil The traditional GDP calculation no longer represent the importance of agriculture in Brazil since it limits the agribusiness influence to other industries and disregards any wealth generated by the service sector and their interconnectivity.• If considered the whole chain of wealth associated to the agribusiness, the absolute value would reach US$ 917 million (22% of Brazil’s GDP) MANUFACTURING 6,32% SUPPLIES DISTRUBUTION 6,64% 2,63% 22,15%
Agribusiness is the Business of Brazil• Despite the recognition that the Brazilian agribusiness is modern, has incorporated technology and generates large trade surpluses, still carries negative perception among our urban society (i.e. current criticisms of Brazilian exports)• Brazilian exports supposedly comprised of a heavy percentage of “primary products” is a clear misperception.• Brazil has a distinguished comparative advantages by the wide availability of natural resources combined with high technology to supply the world products (food, fiber and energy) that have huge demand and should focus on taking advantage of it.
Agribusiness is the Business of Brazil The Brazilian agribusiness today is based on a capital-intensive model with a complex and sophisticated relationship with all different industries of the Brazilian economy. The division of the economy into primary, secondary and tertiary sectors made sense in the past. The idea of "deindustrialization" has no place in today’s Brazilian agribusiness where its agent meets the same standards of production and management of those from the secondary and tertiary sectors. Agribusiness involves farming but also upstream and downstream manufacturing and services. If the world desperately needs food and energy, Brazil should urgently initiate an organized process of strategic planning to define how to meet this demand in a competitive and sustainable way. This is not just a market opportunity for Brazil, it is a matter of WORLD SECURITY and a deciding moment for Brazil to step in as a GLOBAL LEADER. 26