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Joaquim Bento de Souza Ferreira Filho University of São Paulo, Brazil . Luis A. Ribera

Agricultural Policy in Latin America: The Case of Deforestation Control and Agricultural Supply in Brazil. Joaquim Bento de Souza Ferreira Filho University of São Paulo, Brazil . Luis A. Ribera Texas A&M University. Background.

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Joaquim Bento de Souza Ferreira Filho University of São Paulo, Brazil . Luis A. Ribera

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  1. Agricultural Policy in Latin America: The Case of Deforestation Control and Agricultural Supply in Brazil Joaquim Bento de Souza Ferreira Filho University of São Paulo, Brazil. Luis A. Ribera Texas A&M University

  2. Background • Foodproduction in LatinAmericahasbeenbetterthanthe world average: • Four times larger in 2007/2009 comparedto 1961/1963. • Foodproductsgrewat 3% per year, populationat 1.99% per year (FAO). • Agricultural areaandproductivityincreased: • Agricultural output per hectare accelerated from an annual increase of 1.76% in the 1960s to 3.48% in the 2000s • Agricultural land increased from 577.9 million ha in the 1961-63 to 713.2 million ha in 2006-08 • Most of it correspondstoBrazil (1961-1975).

  3. Background • Brazilian agriculture has been growing at average year rates of 2.1% since 1990: • Area of crops: from 53 Mha in 1990 to 69.1 Mha in 2012 • Pastures area: 160 Mha in 2006. • This increase generated concerns about deforestation: about 47.8% of all humid tropical forest clearing between 2000 to 2004 occurred in Brazil (Hansen et al. 2008). • Agriculture and change in use of land and forests accounted for about 58% of total GHG emissions in Brazil in 2005

  4. Brazil´sshare in world productionandexports

  5. Prospects • FAO (2002): the expansion of agriculture globally in the past half century demanded 67 million ha (Mha) of extra arable land, a result of 107 Mha increase in the developing world and a 40 Mha fall in developed countries. • …”in the coming 30 years developing countries will need an extra 120 million ha for crops, an overall increase of 12.5 percent” • …”more than half the land that could be opened up is in just seven countries of tropical Latin America and sub-Saharan Africa”

  6. Background • Brazil is one of the few countries in the world that still has a vast stock of natural forests suitable for conversion to agricultural land. • This is in opposition to the present efforts of the Brazilian government to control deforestation. • Expansion of agricultural area: one of the most important policy issue for the future of the Brazilian agriculture. • PSA estimates are low: 4.6% in 2012. • OBJECTIVE: Discuss whether Brazil be able to keep its trajectory in the global agricultural market with the reduction in land supply in the country.

  7. Annual crops area (1,000 ha) and rate of deforestation (1,000ha/year) evolution in Brazil For howlongwillagriculturebeabletoexpandwiththefall in landsupply?

  8. Background • Productivity gains also important in agricultural growth

  9. Methodology: CGE model calibrated for year 2005 • Annual recursive dynamic, inter-regional, bottom-up: • Stock-flow relation between investment and capital stock, which assumes a 1-year gestation lag; • Positive relation between investment and the rate of profit; • Relation between wage growth and regional labor supply. • 15 aggregated regions inside Brazil • 38 production sectors. • 10 types of workers (wage classes) • 10 household types (income classes) • ILUC module: tracks land use change by state and by biome.

  10. Land use module • Four land types: Crops, Pastures, Forestry, Unused. • Crop land fixed by state in each year: relocation among industries by CET rule. • Transitionmatrix: • Summary of manydifferentfactorsaffectingdeforestation. • Drives land use betweenyears • PRIORS: Natural forest->pastures->crops

  11. Simulation: 2015-2025 Frontierstates • Baselineassumption:deforestation occurs only in states with natural land stocks (frontier states). Arch of deforestation

  12. Transition matrix on land use change: 1996-2005 (Agricultural Censuses)

  13. Modelbaselineandscenariosimulation • BASELINE: • The first step: update the model´s database to year 2012 through historical simulation • 2013 on: 2.5% per year GDP increaseuntil 2025 • Modelgenerates a path of deforestationprojectedbythetransitionmatrix. • POLICY SIM: complete halt of deforestation in Brazilstarting in 2015. • DIFFERENCE: value of deforestation (new land) toagriculturalsupply.

  14. Model Results. Selected Macroeconomic (Real) Aggregates. Percentage Change, Accumulated in 2025. Shadow value of deforestation

  15. Model Results. Land Use Evolution by Broad Categories. Ordinary Change, Million Hectares Accumulated In 2025. Forestsspared

  16. Final remarks • Deforestation cannot be advocated based on economic growth considerations in the Brazilian case • Existence of a large intensive frontier in the form of pasturelands. • Lowshadowvalue of deforetation: • 0.16% of GDP accumulated in 2025. • Regional differencescanbeimportant: • Regional compensatory policies mayberequired. • No reason to believe that this fall in deforestation in the country can compromise the Brazilian agricultural supply capacity in the foreseeable future.

  17. Thank you. • Email: jbsferre@usp.br

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