São Paulo – Barack Obama conquered hearts and minds worldwide thanks to his charisma, sophistication and knowledge of the planet beyond the United States borders. In response, the world has come to expect greater attention from him. Brazil, however, must reduce its expectations concerning an eventual improvement of the agribusiness environment with the United States. Once Obama’s team is working full tilt, it will probably open the season for support to the old protectionism to local farmers. Negotiation with Brazil should only take place after the global financial crisis is gone.
“The crisis has elicited a reaction, especially in developed countries, of increasing domestic protectionism," explains Roberto Rodrigues, president of the Higher Board of Agribusiness at the Federation of Industries of the State of São Paulo (Fiesp) and former minister of Agriculture for the Lula administration. To him, there is a demand for protectionist policies in virtually every nation: whereas a loosening of the financial system was taking place before, now the world is calling for control of some sort. And the easiest way of satisfying that demand is protectionism. “Therefore, Obama should take action in the short term.” Such an impulse is driven by an old fear of governments: rising unemployment.
To the former minister, Obama’s move toward protectionism should affect nearly all of the Brazilian exporters. Some, however, should feel the weight of the protectionist hand more intensely. “Sugar, meat and ethanol are the products that we always want to place in the United States market, in addition to cotton and orange juice.”
Not even the apple of the eye of the Brazilian government – ethanol fuel – should seduce the new United States leader in the first half of his term. Tom Vilsack, chosen by Obama to head the Department of Agriculture, is an old champion of adoption of the Brazilian item by the United States, and went so far as to openly call for reduction of the tariff that the product pays in order to enter the United States market. However, sector legislation should follow the general trend of benefiting local farmers.
“Perhaps in 2012 there will be more space for Brazilian ethanol,” says Fabio Silveira, of consultancy company RC Consultores, which specialises in agribusiness. The bet on that date is not a random one. According to estimates by the consultancy firm, the United States economy will only resume growth in 2011, after experiencing a strong retraction in 2009 and 2010. Only after the ghost of the crisis is gone there should be room for bilateral negotiations and eventual tariff reductions. That is also Rodrigues’ bet – be it for ethanol, in particular, or the other items in the Brazilian export basket. “The trend is one of greater flexibility, but only in the medium- and long-terms. Obama is a pragmatic, as is secretary Vilsack,” he asserts. “They know that, sooner or later, they will have to open the United States market for Brazilian ethanol, as they are not going to be able to produce 132 billion litres of the fuel a year by 2017, and that is a goal of their government.”
Another negotiation that should remain stuck until 2011 is the Doha Round for liberalisation of global trade. “Nothing is going to happen at this initial moment of crisis,” says Rodrigues. “When the prices of agricultural products were high, I thought it was time for negotiating, because the subsidies were not justified. However, now that prices have gone down, developed countries tend to increase their protectiveness toward their farmers.”
In the face of unfavourable short-term perspectives – for 2009 and 2010 –, it is possible, however, that the price of maize undergoes a slight appreciation. Should the forecast prove right, it should be a consequence of the aid that Obama should grant to ethanol farmers in his country – there, maize is used as raw material, rather than sugarcane, as is the case in Brazil. “A large share of the United States crop is being used for biofuel production, the price of the commodity may rise," evaluates Silveira.
Other sectors that should escape negative effects by flirting with stagnation include coffee. The reason here is a particular one. “This is a situation slightly different than that of the remainder of agriculture: a final inventory level among the lowest in history, of approximately 15% of the global crop, i.e., approximately 20 million bags, rising consumption and a stagnant production, or even a decreasing one,” explains Lucio Dias, Domestic Market superintendent at the Guaxupé Regional Cooperative of Coffee Producers (Cooxupé). “Therefore, the market should keep going, or even further establish itself throughout this and the next year.”
If there is no room for great expectations, there is still some for surprises – however small. Sector institutions such as the National Confederation of Agriculture and Livestock (CNA) and the São Paulo Sugarcane Agroindustry Union (Unica) inform that they are going to await the official announcement of agricultural policies by the Obama administration so as to make their predictions for 2009. Thus, they are hoping for some good news. Fabio Silveira, of RC Consultores, also calls for caution. But the consultancy’s forecasts already indicate that, in 2009, there should be a reduction in the international prices of commodities – which should go back to levels recorded in 2003.
*Translated by Gabriel Pomerancblum
