South America Calling

Agriculture has long been the cornerstone of the Brazilian economy, providing vital export dollars to balance foreign accounts and bolstering growth.

But this year it promises to become a key driver amid disappointing performance in other areas.

The farm sector will account for over one percentage point of the 2.4% growth forecast for the Brazilian economy in 2013, according to Fabio Silveira, research director at GO Associados, a local consultancy.

Farm growth is being led by grain production. Brazil will be the world's No. 1 soybean producer for the second consecutive year in 2013-14, according to the U.S. Department of Agriculture.

The international investment community has become disillusioned with Brazil over the past 18 months due to the economy's stubborn sluggishness.

The service sector, which expanded rapidly in the years up to 2011 leading The Economist to announce that Brazil had taken off, is not growing significantly and industry has been slow to react from the five-year battering it took due to the strength of the Brazilian real.

In contrast, agricultural GDP will grow 5% to an estimated R$1.04 trillion ($473 billion) in 2013, responding for 23% of the whole economy, according to the National Agriculture and Ranching Confederation (CNA).

Larger harvests are boosting the processing and support industries.

Unexpectedly strong tractor demand in the first eight months of 2013 has prompted Brazil's Automotive Industry Association (ANFAVEA) to predict a 7% increase in sales to around 60,000 in 2013.

It's a similar story in the area of fertilizers.

The Brazilian Fertilizer Distributors Association (ANDA) predicted a 3% increase in demand to 30.5 million metric tons this year, but demand rose 5.5% between January and August.

Data like this increases the visibility of the farm industry among economists and in the corridors of power, where the farm lobby has become more effective of late but where agriculture has little voice within the executive.

Agriculture is one of the few areas in which Brazil has a competitive advantage, and the government appears, very slowly, to be coming to the conclusion that giving the industry greater support may actually benefit the economy as a whole.

(AG)

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