South America Calling

Center-West Farms Prop Up Brazil's Economy

By Alastair Stewart , South America Correspondent

If it weren't for the grain farmers of Mato Grosso and the rest of the cerrado, Brazil's dismal economic performance in 2012 would have been even worse.

Brazil's economy grew an estimated 0.8% to 1% in 2012, well behind its fellow BRICS members (Russia, India, China and South Africa) and its South American neighbors. The poor performance left many questioning whether Brazil really deserved its billing as one of the emerging markets that will drive the global economy over the next decade. Foreign investment also has slipped.

But without growth of 3.3% in the agricultural center-west region, of which Mato Grosso is a central part, GDP growth would have been even lower, according to data compiled by Tendencias, a local consultancy.

Last year was a great year for the soybean and corn farmers in Mato Grosso and surrounding areas, who enjoyed bumper crops and bumper prices due to the losses in the U.S. In contrast, the industrial southeast grew just 0.5% last year following an end to the surge in consumer spending that had underpinned the economy over the past couple of years,

The center-west accounts for just over 9% of Brazil's economy, according to Tendencias.

Agriculture's positive impact would have been greater were it not for the drought in the south, a region that grew just 0.2% last year.

Brazil was seen as a coming force in the world economy and grew 7.5% in 2010. But performance has since dropped off despite numerous government initiatives aimed at stimulating the economy.

That is a big problem for the incumbent president, Dilma Rousseff, and may force governors to look closer at structural reforms to labor, tax and social security, which would give the economy a much-needed productivity boost.

(ES)

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