This is surprising. Can you expand this little more?
-I know no one believes this....the fact is that, after the collapse of cambial populism, agricultural GDP increased by 5-7%/year, while non agricultural activities essentially stagnated. Overall GDP increased by less than 2% in 1998, 1999, 2000, 2002 and 2003. As a result, the share of agriculture in GDP increased (althought I don´t have the exact numbers, I can bring more detail if you want). More interesting, all of our huge trade surplus is the result of agriculture. From Jan/Ago 2003 we had a 15 bn surplus in trade balance, and a 1 bn deficit excluding agriculture. The situation seems quite good, as agricultural commodities prices are improving due to increasing demand from China. However, this won´t probably last too much, and, when normality is restored, we will see ourselves in the uncomfortable situation of a country who is largely dependent on agricultural exports to avoid a horrible current account deficit (because our capital account is so deficitary that even with a high trade surplus we fail to have current account surplus!)
Is there no process of indigenising component manufacturing?
-It seems there is some improvement. The ERJ-190 has 50% of components locally produced. On the other hand, imports are equal to 60% of Embraer exports, which points to something close to 70% of the components being imported, as the values of the plane is probaly higher than the sum of the values of each component. I found here that in 1998, 97% of the components of our ERJ-145 (the biggest success from Embraer) are imported. http://www.ifi.unicamp.br/jornal-da-ciencia/msg00666.html I will try to get more information
What are the principal bottlenecks to growth in Brazilian economy in your view?
-A high interest rates (around 10% after discounting inflation) coupled with an horrible fiscal policy imposed by IMF. We have a budget surplus of 4,3% of GDP, but as we pay almost 10% in interests, the final result is a 5% deficit. So, while our public debt is increasing, the high surplus virtually prevents the government from doing new investment. Furthermore, the level of public spending is high for a third world country (around 35-40% GDP), which wouldn´t be a serious trouble if the government was making investment. As more than 20% of the budget is used to pay interests, we have a heavy fiscal burden on the private sector coupled with absence of any meaningful investment by the state. What is keeping the economy alive is the agriculture, but, as I said, I think the good times won´t last too much.
Is land reform still relevant to Brazilian agriculture?
-In Brazil we have one of the worst concentration of land property in the world (1% of the farms have 50% of total arable land). However, big farms are responsible by the boom of exports, while small farms supply the internal market. I have my doubts if a land reform would improve productivity, but it would break the backbone of our elite of landowners. The experience in South Korea and Taiwan suggests it is a very healthy effect even if productivity itself doesn´t improve. It also would be useful to improve the levels of unequality in our society. But I would think many times before starting an ambitious land reform program in Brazil, given the role of agriculture in decreasing our external vulnerability.
Alexandre
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