Strengthening Brazil's Agrifood Sector: Policy Reforms for Competitiveness, Sustainability, and Inclusivity

Brazil's agrifood sector—which includes agriculture, agribusiness, and agrifood services—represents a substantial portion of the nation's economy, contributing approximately 22% to Brazil's GDP.

A new study by the World Bank, titled "Strengthening Support for Brazilian Agriculture: Policies for a Competitive, Sustainable, and Inclusive Agrifood Sector," released today, underscores the importance of fortifying public policies to sustain Brazil’s agrifood sector—an essential driver of the country's economy. The study highlights the sector's centrality to Brazil's economic growth while addressing its challenges in ensuring sustainability, equitable growth, and resilience.

Agrifood Sector: Pillar of Brazil’s Economy

Brazil's agrifood sector—which includes agriculture, agribusiness, and agrifood services—represents a substantial portion of the nation's economy, contributing approximately 22% to Brazil's GDP. More specifically, agriculture alone contributes 8.4% of GDP, 16.2% of total employment, and 40% of Brazil’s total exports. The agrifood sector played a crucial role in Brazil’s 3% GDP growth in 2023, accounting for 30% of that growth, driven by robust demand from both domestic and international markets and continuous productivity improvements that outpace global averages.

Despite these impressive statistics, the agrifood sector faces a series of obstacles. Socioeconomic issues, particularly in rural regions, undermine its long-term growth prospects. With approximately 3 million families living in extreme poverty in rural areas and 18.6% of family farmers facing severe food insecurity, the sector is constrained by high levels of inequality and limited access to crucial public services such as rural extension programs and financial support mechanisms. These structural challenges threaten the sustainability of Brazil’s agricultural practices and hinder the sector's capacity to adopt sustainable and climate-resilient farming methods.

Public Policies: A Path to Sustainability and Inclusivity

The World Bank's study highlights the need to strengthen public policies that can promote not only the sector’s competitiveness but also its environmental sustainability and inclusivity. The report outlines a set of strategic policy recommendations to ensure that Brazilian agriculture remains competitive while addressing urgent sustainability and equity issues.

A significant focus of the report is on reorienting support programs for rural producers, with an emphasis on enhancing access to credit. The World Bank advocates for prioritizing family farmers, whose inclusion is vital for both economic and social resilience, particularly as these producers often face barriers to financial services and technical assistance. The study calls for the implementation of rural credit programs that better align with the needs of family farmers, particularly in terms of climate-smart practices and environmentally sustainable production methods.

The report also emphasizes the importance of redirecting federal credit lines and expanding technical assistance to incentivize the adoption of sustainable agricultural practices. Public policies in states such as Bahia, Santa Catarina, and São Paulo have already begun experimenting with environmentally conscious support programs, where assistance is conditioned upon producers meeting specific environmental criteria. Bahia’s pioneering efforts, which have prioritized environmental sustainability over production-based support, serve as a valuable example for other states. São Paulo and Santa Catarina are following suit, adopting similar practices that focus on sustainability. These initiatives could be further expanded on a national scale to promote environmental protection across Brazil’s agrifood systems.

Diversifying Support Mechanisms for Rural Producers

Beyond traditional rural credit programs, the World Bank study stresses the importance of diversifying the tools available to rural producers. In addition to rural credit, the study advocates for the introduction of innovative policy instruments such as matching grants, partial credit guarantees (PCGs), agricultural insurance, price hedging, decoupled payments, and payments for environmental services. These mechanisms would offer more comprehensive support to producers, particularly those who are transitioning toward more sustainable practices or facing financial difficulties.

Matching grants, in particular, have been identified as a highly effective way to encourage rural producers to adopt new technologies and invest in sustainable farming practices. By offering a public-private partnership model, these grants can help bridge the funding gap for producers, enabling them to overcome financial barriers to modernization and climate resilience.

Investing in Public Agrifood Goods and Services

The World Bank also highlights the need for increased investment in public agrifood goods and services, which have proven to deliver higher economic and social returns than private investments such as rural credit. Public investments in agricultural innovation, sanitation and phytosanitary systems, and climate-resilient infrastructure are crucial to ensuring the long-term sustainability of Brazil’s agrifood sector. By shifting a portion of agrifood spending from private to public goods, the study suggests that Brazil could see a 5% increase in the per capita value added in the sector.

Stronger Coordination and Monitoring of Public Policies

One of the key recommendations of the report is the establishment of a more robust coordination and monitoring mechanism between federal and state governments to evaluate the effectiveness of public policies in the agrifood sector. Effective policy coordination is essential to ensuring that the diverse needs of Brazil’s rural producers are met, especially in light of regional disparities across the country. The Ministry of Agrarian Development and Family Agriculture, along with the Ministry of Agriculture and Livestock, should play a central role in leading these efforts at the national level, working closely with state governments to tailor support programs to local conditions and needs.

Conclusion: A Vision for the Future

In conclusion, the World Bank’s study calls for a holistic approach to strengthening Brazil’s agrifood sector, with an emphasis on sustainability, inclusivity, and competitiveness. By addressing the structural challenges faced by rural producers and diversifying the range of public support mechanisms, Brazil can position itself as a global leader in sustainable agriculture. This will not only enhance the sector’s resilience in the face of climate change but also contribute to broader goals of social equity and economic development, ensuring that the benefits of Brazil’s agrifood sector are shared more broadly across the population.

The study’s findings and recommendations serve as a roadmap for policymakers aiming to secure the future of Brazilian agriculture, balancing the needs of producers, consumers, and the environment.