Brazil is Still Developing

“Brazil is the country of the future, and it always will be” is a common joke among foreigners here in Brazil’s frontier regions. It refers to the backward systems and illogical situations that most of us have to deal with daily. However, there is no doubt in anybody’s mind that when Brazil gets its infrastructure interlinked, from roads, railways and water transportation through the various large rivers and ports, that Brazil will be an even more unstoppable food/fiber/fuel-producing machine.            

To understand all of the challenges outside of logistical problems that Brazil needs to overcome to become an ag powerhouse, let’s compare Brazil and the U.S.:

1. Brazil still has large areas of cheap virgin land that can be bought and brought into production; whereas in the U.S. pretty much every acre of decent ground is already in production.
2.  Being in the tropics, most of Brazil can be farmed year ’round with irrigation. In many places farmers are able to dryland double-crop. The U.S. has areas of year ’round farming, but the main Corn Belt is a once a year deal.
3. Land in Brazil that costs even a couple thousand dollars per acre has a far greater appreciation opportunity to double or triple vs. land doubling or tripling its current value in the U.S.
4. It’s much easier to get long-term rental contracts in Brazil, with a price tied to a certain number of bushels of beans per acre vs. U.S. rental contracts that are hard to place for long term, and most have variable rate rental clauses built into them.
5. The U.S. has crop insurance, a floor that pretty much guarantees producers can cover their costs; not to mention USDA federal disaster payment options and various other mechanisms for protection. Brazil has nothing. Producers run at their own risk, and in the event of a crop failure, you lose lots of money.

6) The U.S. legal system works. Contracts and documentation are guaranteed, and you can obtain title insurance, etc., on land you buy or rent. In Brazil you have a legal system that works for those with the most money and, until you can get to a federal level, the legal system is a joke.

7) U.S. banks lend money at reasonable interest rate, and will tie most of it to an operating loan. Brazil banks lend money for around 1.5-2%/month, and it’s basically impossible to get.

8) U.S. logistics are the best in the world; Brazil’s – well, let’s just say not so good…yet.

There are a lot of positive things going on in Brazil; they still have a long way to go in a lot of aspects, and they will need to continue to become more stable if the world ag superpowers are going to be able to produce nearly 70% more food than it does today to help feed a population that is expected to reach nearly 9 billion people by 2050.