The Lord shall open unto thee his good treasure, the heaven to give the rain unto thy land in his season, and to bless all the work of thine hand: and thou shalt lend unto many nations, and thou shalt not borrow.
—Deuteronomy 28:12
In these forests the multitude of insects that bite, sting, devour, and prey upon other creatures, often with accompaniments of atrocious suffering, passes belief. The very pathetic myth of “beneficent nature” could not deceive even the least wise being if he once saw for himself the iron cruelty of life in the tropics.
—Theodore Roosevelt, on nature in Brazil, Through the Brazilian Wilderness, 1913
One of the perennial confusions in economics is that between monetary inflation and relative price increases. This was in play again with the early January 2012 announcement that in December 2011, Chinese inflation had jumped by 4.1 percent over its rate a year earlier.
On its face, that seems to represent about a 25 percent improvement over the average Chinese inflation rate of 5.4 percent in 2011. But look more closely. The same report reveals that Chinese food prices jumped 9.1 percent year on year in December. This is quite ominous for China, but very bullish for Brazil.
Here is why. In recent years, China has been the world’s largest agricultural power, producing more food than any other country. The trouble is that China’s farm output is unsustainable. Soil erosion as a consequence of overplanting, land mismanagement, and an acute shortage of water for irrigation are undermining the productivity of Chinese cropland.
Satellite photos compared to those from 40 years ago show a huge new dust bowl crossing western China and western Mongolia. Wang Tao, a leading Chinese desert scholar, has estimated that each year, 1,400 square miles of former cropland in northern China turn to desert. Grain harvests in northern China and Mongolia have shrunk by half or more in the past 20 years.
The problem is not isolated to the Mongolian border region. In China’s grain-growing plains, as well as in large parts of the grain-growing areas of India, there is not nearly enough natural rainfall for rechargeable aquifers. This means that irrigation-supported crop growth over the second half of the twentieth century has been fed by water pumped up from deep underground fossil aquifers in addition to water channeled from river systems.
In those areas of China without access to the river systems, irrigation water is pumped from underlying fossil aquifers filled over hundreds of millions of years. As these aquifers do not readily recharge when they are drained annually for irrigation, they rapidly run dry.
More than 70 percent of the world’s population, including billions living in China and India, is being supported by crops irrigated from falling water tables. As a result, thousands of square miles of former cropland are turning to desert annually. In China, overpumping in the fossil aquifers in the north is rapidly turning into desert a region responsible for half of China’s wheat production and more than one-third of its corn production.
In China as a whole, almost four-fifths of its total grain harvest comes from irrigated land. Symptomatic of the increasingly arid conditions is the drying up of multiple lakes in China. In western China, Quinhai Province, through which the main branch of the Yellow River flows, once had 4,077 freshwater lakes. But in the past two decades, more than 2,000 of those lakes there have disappeared. In Hebei Province, which surrounds Beijing, 969 of 1,052 freshwater lakes have vanished in the past 20 years.
According to Issues Online in Science and Technology:
Water tables are falling as aquifers are pumped at rates exceeding their ability to recharge. Even the water in deep-fossil aquifers, laid down millions of years ago and which can’t be recharged, is being depleted. Nearly 90 percent of all fresh water used by humans goes for irrigation. According to the United Nations Food and Agriculture Organization (FAO), just 16 percent of the world’s cropland is irrigated, but this 16 percent produces 36 percent of the global harvest.
The stripping of forest and grassland and the cultivation of sloping land have led to rapid runoff of rainwater that normally would help recharge near-surface aquifers. In many regions, inadequate drainage has increased the salt content of the soil, leading to a loss of productivity and sometimes abandonment of agriculture altogether. The once-fertile crescent of the Middle East is a striking example, and similar salinization is accelerating in the United States, China, and elsewhere. It is certainly possible and imperative to increase the efficiency of agricultural water use, but it is not clear whether this will fully compensate for water losses or increase yields of annual crops enough.
Dust bowls and desertification are serious in many parts of the world. Depletion of the fossil aquifer under the North China plain, for example, has led to huge dust storms that choke South Koreans every year.1
Dust bowls and desertification are not just problems for South Korean air quality. Rapidly rising food prices pose a threat to stability in China, as elsewhere. Remember, per capita income in China is on par with Tunisia’s. What appeared to be a stable dictatorship in Tunisia was overthrown early in 2011 when food prices surged. China has a long history of dynasties overturned during times of dearth.
The epigraph that starts this chapter, from Deuteronomy, suggests a link between rainfall and deficit spending. In the modern context, the imperative to deplete fossil aquifers when rainfall is inadequate closely parallels the political imperative to borrow in order to finance spending when tax revenues are inadequate. In both cases, the overriding importance of achieving near-term goals—in this case, greater prosperity for farmers as well as lower food prices—trumps the threat of long-term ruin.
Note that China is not the only country that is rapidly depleting its fossil aquifers. Shortages of water for irrigation are undermining the productivity of one-third of the world’s cropland.
At least 18 countries now have food production bubbles based on the depletion of water from nonrechargeable fossil aquifers. Between 1968 and 1998, India’s food production surged due to unsustainable pumping of groundwater aquifers. Experts estimate that over 15 percent of India’s population is being fed wheat, rice, and barley irrigated with water pumped from fossil aquifers. In India’s breadbasket—the regions of Punjab and Haryana—water tables are falling three feet a year. In the western Indian state of Gujarat the water table has fallen from 50 feet below the surface to 1,300 feet below the surface in 30 years.
The situation in the Midwest of the United States is not much better. As you’ll remember if you read John Steinbeck’s The Grapes of Wrath, large sections of the United States were transformed into a dust bowl due to inadequate rainfall during the Great Depression.
This problem was “solved” not by increased precipitation but by the development of more powerful diesel and electric pumps capable of mining water from the Ogallala fossil aquifers deep below the surface.
In the words of water alarmist Lester R. Brown,
. . .the world has a huge water deficit. Using data on overpumping for China, India, Saudi Arabia, North Africa, and the United States, Sandra Postel, author of Pillar of Sand: Can the Irrigation Miracle Last?, calculates the annual depletion of aquifers at 160 billion cubic meters or 160 billion tons. Using the rule of thumb that it takes 1,000 tons of water to produce 1 ton of grain, this 160-billion-ton water deficit is equal to 160 million tons of grain or one-half the U.S. grain harvest.2
Unfortunately, current and looming water shortages are not a figment of Lester Brown’s imagination. It is particularly notable that much of America’s grain crop is irrigated with water mined from the Ogallala fossil aquifer. While Americans tend to take for granted the superiority of American farming, agricultural prosperity in the United States may prove to be as unsustainable as the federal deficit. As reported in the New York Times, “the [Ogallala] aquifer is dropping lower and lower, and some geologists fear it could dry up in as soon as 25 or 30 years. This is a major issue confronting not just those eight states but the entire country.”3
According to United Nations estimates, the population of the world will expand to 9.1 billion by the year 2050. But long before that happens, a global shortage of fresh water is likely to push food prices to destabilizing heights.
While water is potentially one of the world’s most valuable commodities, because of its importance in the cycle of life, water is not easily exported. For one thing, water is heavy. It is heavier than all but the heaviest grades of crude oil, (also known as bitumen), with an API gravity of less than 10.
Although fresh water is not suitable as a long-distance export, at least not directly, the virtual export of water is destined to be a major informing factor in the prosperity of Brazil. While the onrushing specter of water and food shortages threaten economic and political disruption in failing states across the globe, and even emerging market powerhouses India and China are threatened, one country stands alone as likely to benefit.
In 2010, The Economist detailed the advantages possessed by Brazil with renewable water as follows:
According to the UN’s 2009 World Water Assessment Report, Brazil has more than 8,000 billion cubic kilometres of renewable water each year, easily more than any other country. Brazil alone. . . has as much renewable water as the whole of Asia. . . . And again, this is not mainly because of the Amazon. Piaui is one of the country’s driest areas but still gets a third more water than America’s corn belt. . . . Brazil has almost as much farmland with more than 975 millimeters of rain each year as the whole of Africa and more than a quarter of all such land in the world.4
Speaking of the Amazon, more than 20 percent of the world’s fresh water flows through the Amazon basin alone, about 133,000 cubic meters per second. And this is only the most spectacular part of the world’s most dense hydrological system.
Brazil’s embarrassment of riches where water is concerned was highlighted in August 2011 by a presentation at the International Congress of the Society Brasiliera Geophysical in Rio de Janeiro. Researchers described a heretofore unknown “underground river,” the Rio Hamza, that flows to the Atlantic Ocean four kilometers beneath the Amazon. Some scientists disputed that the Rio Hamza is actually a river rather than a porous aquifer through which a substantial volume of water is trickling. According to Wired (UK) “a flow rate calculated to be around 3,000 cubic metres per second—which is a mere three percent of the Amazon River itself. That’s still plenty, though—more than 46 times the flow of the Thames.”5
So while the aquifers supplying other important economies, including the United States, dwindle toward the vanishing point, Brazil has 8,000 cubic kilometers (or 1,919 cubic miles in the U.S. system of enumeration) of renewable water each year.
For one thing, it suggests that Brazil’s recent prominence as a driver of world growth will continue. From 2007 through 2010, Brazil contributed 10.03 percent of total world market growth at current exchange rates—more than the United States, which added 8.2 percent (due mainly to exchange rate gains for the dollar)—and infinitely more than Europe, which subtracted 9.2 percent from the world growth. Together, China and Brazil contributed 43.4 percent of world growth from 2007 through 2010. Brazil’s lavish natural endowment of fresh water, in combination with China’s receding ability to feed itself, guarantees a deepening of the trade ties between the two countries.
As you look ahead to the middle of this century, Brazil is destined to increase its virtual exports of water in the form of grains and proteins. No other country has both in the freshwater and the spare farmland required to convert water into food at the scale that Brazil can. According to the UN’s Food and Agricultural Organization (FAO) Brazil’s total potential arable land is more than 400 million hectares, of which only about 50 million are currently in use.
This is incredibly bullish for investors in Brazilian government debt. The simple truth stated in the epigraph from Deuteronomy will be as valid in the future as it was when the Bible was written, “The Lord shall open unto thee his good treasure, the heaven to give the rain unto thy land in his season, and to bless all the work of thine hand: and thou shalt lend unto many nations, and thou shalt not borrow.” In an increasingly crowded, urbanized, and hungry world, Brazil’s terms of trade are destined to improve dramatically. Almost uniquely among all the globe’s economies, Brazil will have the capacity to export food at a scale capable of filling the deficits destined to emerge elsewhere.
The 2011 revolutions of the Arab Spring, in which four dictators whose regimes stretched back for decades were overthrown, underscores the imperative that politicians everywhere will feel to purchase Brazilian food at prices that would seem staggering in comparison to those of the old normal.
In that light, Brazil seems destined to become one of the globe’s leading creditor countries, profiting from what appears to be inflation elsewhere and ultimately lending “unto many nations.” That should make longer-term, Brazilian government debt denominated in real, and currently paying 12.5 percent potentially one of the world’s greatest investments.
A century ago, leading agronomists thought they had pinpointed the factors informing optimum conditions for farming. At that time and for generations afterward, there was a smug perception that success in agriculture was predicated upon a past history of glaciation. This, of course, implied that only countries with temperate climates could compete in farming.
A representative statement of this view was spelled out in 1914 by O. D. von Engeln, a professor of physical geography at Cornell. He wrote:
Pleistocene continental glaciation was a phenomenon centering essentially about in the North Atlantic Basin. Around the North Atlantic Basin are centered, also the leading nations of the modern world . . . it is sometimes suggested that the leadership of such nations is largely accruing from natural advantages they have derived from continental glaciation. Without question many of the natural resources of these nations are owing to the invasion of the ice.6
von Engeln went on to spell out an elaborate argument supporting the view that success in farming was predicated upon exploiting glaciated rather than nonglaciated land. Part of this view was based upon analysis of the effect of ice sheets on the deposition of minerals in the soil. According to von Engeln, glaciation improved soil quality in most cases by crushing minerals and thoroughly mixing them to form a richer topsoil for growing crops. Drawing on U.S. data for the value of farmland in 1910, he showed that variations in value between and within states reflected patterns of glaciation.
For example, a map on page 249 of volume 46 of the Bulletin of the American Geographical Society shows the relative value of farmland by counties in Indiana, with land in the glaciated counties worth up to 10 times more than land in the more southerly, nonglaciated counties. Von Engeln spelled out his thesis according to the lights of the day:
Geographical factors other than glaciation, moreover, may be determinant in this general grouping of modern, virile peoples around the North Atlantic, and historical considerations may not be wholly set aside. Moreover, it must not be forgotten that France, Italy, New Zealand and Australia, to name examples without the glaciated regions, are also in the van of modern progress.7
Of course, von Engeln erred in stating that France, Italy, and New Zealand and Australia were without glaciated regions. According to U.S. Geological Survey Professional Paper 1386–E.–1, “Glaciers of Europe,” France has 350 square kilometers of glaciated territory and Italy 608 square kilometers under glacier. While only a small area of Australia in the vicinity of Mount Kosciuszko was glaciated in the past, the whole of the Southern Alps in New Zealand were covered by a sheet of ice. Presumably, von Engeln meant to say that these “virile nations” did not feed themselves on formerly glaciated lands.
Putting aside the somewhat sloppy iteration of the facts, the implications of this line of analysis were not overtly bullish for Brazilian agriculture. Just about the only limited potential that could have been envisioned for Brazil joining the van of modern progress where farming is concerned was confined to the potential for growing wheat and other cereal crops in the temperate climate in the south of Brazil, below the Tropic of Capricorn (23° 27′ S. latitude), which crosses Brazil at the latitude of the city of São Paulo. This is the South region, known for its cattle-raising gaucho culture. Uncharacteristically of Brazil, it is subject to frosts and snowfall during the austral winter, from June through September.
Azorean settlers who came to Rio Grande do Sul after 1752 introduced wheat farming there, and it remained the main export of the state until well into the nineteenth century. Today, approximately 90 percent of Brazil’s 5.3 million metric tons of wheat is produced in the states of Parana and Rio Grande do Sul. The three southernmost (and coldest) states of Brazil, Parana, Santa Catarina, and Rio Grande do Sul, comprise 576,409 square kilometers—an area larger than France, but only 6 percent of Brazil’s total territory of 8,514,877 square kilometers.
The received opinion of experts until the very end of the twentieth century was that farming in the tropics was a losing proposition. In part, this was a simple matter of precedent. Before the emergence of Brazil as, in the words of The Economist, “the first tropical food-giant,” the leading farming locales were all temperate producers.8 Even at the turn of the millennium, it was difficult for skeptics to see that Brazilian farm production was destined to increase in the dramatic way it has. Agronomists, thoughtful observers, and official bodies relying upon production statistics compiled through the mid-1990s would have had to look very closely to see a reason to alter the conventional wisdom indicating that temperate farming was approximately 50 percent more productive than farming in the tropics.
A part of this difference, as von Engeln implied, was attributable to soil conditions. In addition to lacking the advantages of glacial deposition, tropical soils are notoriously fragile and subject to rapid leeching of organic compounds. Unlike soils in temperate zones where winter frosts contribute to the buildup of richer topsoils over time, tropical soils tend to be rapidly depleted of nutrients.
Another factor that has tended to weigh against the productivity of farming in the tropics is the rich array of pests and parasites that contribute to post-harvest food losses. Christopher Wheatley and fellow experts at the International Center for Tropical Agriculture, known as CIAT (after its Spanish initials), estimate tropical harvest losses of food grains, “from mishandling, spoilage and pest infestation at 25 percent; this means that one-quarter of what is produced never reaches the consumer for whom it was grown, and the effort and money required to produce it are lost forever.”9 Meanwhile, fruit, vegetables, and root crops tend to suffer even greater losses. “Some authorities put losses of sweet potatoes, plantain, tomatoes, bananas and citrus fruit sometimes as high as 50 percent, or half of what is grown.”10
Economist Jeffrey D. Sachs analyzed the enhanced vulnerability to spoilage in the tropics in his December 2000 paper, “Tropical Underdevelopment”:
B. Pests and parasites. A second major feature of tropical ecosystems is the high prevalence of crop pests and parasites. Tropical ecosystems generally are characterized by a high degree of biodiversity, which in a very general sense resists the monoculture systems that characterize temperate-zone food production. Monocultures in the tropics are prone to devastation through plant diseases, pests, and other forms of competition with highly biodiverse ecosystems. Just as with human diseases, the year-round high temperatures of the tropics, and the absence of freezing winter months to kill parasites and pests, are the root of the high-burden of plant diseases and crop losses due to spoilage. The high prevalence of tropical animal diseases, such as trypanosomiasis, has long hindered animal husbandry and the mixed crop-cattle agricultural systems characteristic of temperate ecozones.11
The factors that Jeffrey Sachs cites as contributing to high losses of the crops in the tropics to pests and parasites are real. They are not figments of the temperate-centric imagination. Equally, as Sachs was shrewd enough to recognize in his analysis from the year 2000, there are ecological barriers to technological diffusion. He proposed the convincing hypothesis,
that the rate of technological innovation in the temperate-zone economies was much higher than in the tropical-zone economies in the nineteenth and twentieth centuries, while the rate of technological diffusion between the two zones was very limited because key technologies could not cross the ecological divide.12
Sachs astutely framed the issues. Yet, I believe that his lucid analysis draws the wrong conclusion because at the very time when he was writing a fundamental change was taking place that has continued to gather momentum.
Thanks to research conducted over the last quarter of the twentieth century by Embrapa (Empresa Brasileira de Pesquisa Agropecuaria), the Brazilian Agricultural Research Corporation, a technical firm affiliated with the Brazilian Ministry of Agriculture, Brazil is now capitalizing on innovations unprecedented in the history of tropical farming. Dr. Silvio Crestana, the director-general of Embrapa, confirmed Sachs’s perspective on the difficulty of transporting key technologies across the ecological divide. He recounts, “We went to the U.S. and brought back the whole package [of cutting-edge agriculture in the 1970s]. That didn’t work and it took us 30 years to create our own.”13
Yes, there are ecological barriers to the diffusion of agricultural innovations between temperate and tropical regions. Heretofore, most of these have tended to favor producers in the temperate zone. And, yes, during the nineteenth and twentieth centuries the rate of innovation was much higher in the temperate zone. But no longer.
What Jeffrey Sachs and few others apparently suspected was that as the twenty-first century opened, a remarkable surge of technical innovations in tropical farming was poised to make Brazil the new bread-basket of the world. The innovations include the following:
As The Economist declared in “Brazilian Agriculture: The World’s Farm”:
Over the past 35 years Brazil has transformed itself from a food importer into one of the world’s largest exporters. It is the first tropical country to join the big farm-exporting ranks (the rest have temperate climates). The country is now the world’s biggest exporter of five internationally traded crops, and number two in soy beans and maize. None of the other big exporters has anything like this degree of diversification. Perhaps the most striking achievement has been the growth of soybeans: soya is a temperate crop and Brazilian research scientists had to breed new varieties that would grow in the tropical Cerrado, the savanna-like land where the farm miracle has taken place.16
This is evident in a 132 percent increase in Brazilian soybean production from 2000 to 2010. During that time in the state of Mato Grosso, according to the UN Food and Agricultural Organization (FAO), the cost of producing soybeans fell to about $6.23 per 60 kilogram bag, just 53 percent of the U.S. level of $11.72. Furthermore,
In 2002, for the first time in history, the overall average yield of soybeans in Brazil (2.6 t/ha) was higher than the average yield in the United States of America (2.4 t/ha). It is reasonable to state that in the Centre West region, Brazilian farmers are practicing one of the most advanced and sustainable agricultural systems in the world.17
The FAO and other experts are effusive in their estimates of the potential for farming in Brazil.
In a world suffering from declining marginal returns along a broad horizon, it is notable that Brazil’s surge in productivity exemplified by a 3,000 percent increase in soybean output over the past 35 years is overwhelmingly attributable to rising returns. According to the prominent Brazilian economist, Antonio Delfim Netto, over 90 percent of the increase in Brazilian agriculture over the past three decades has been due to improvements in total factor productivity with less than 10 percent attributable to increased use of land, labor, and capital.
Remarkably, Brazil produces a quarter of the world’s soybean exports on just 6 percent of the country’s arable land. Brazil has ample room to expand production. According to the FAO, Brazil has more potential farmland than any other country—up to 400,000,000 hectares, of which only 50 million are currently in use. As canvassed earlier in this chapter, Brazil also has more fresh water than any other country: 8,000 cubic kilometers (1,919 mi3) of renewable water each year, more than the whole of Asia.
In Pillar of Sand: Can the Irrigation Miracle Last? Sandra Postel argues that irrigation miracles cannot last. She states that a key lesson from history is that most irrigation-based civilizations fail. Postel writes:
One out of every five hectares of irrigated land is losing productivity because of spreading soil salinization. And as water becomes scarce, competition for it is increasing—between neighboring states and countries, between farms and cities, and between people and their environment. . . . Water scarcity is now the single biggest threat to global food production.18
While irrigation in many areas is drawn from rapidly depleting fossil aquifers, Brazil enjoys more freshwater than any other country. One of Brazil’s great strengths as a growing agricultural power is that most of the country’s crop production is rainwater fed. Brazil has more than a quarter of all the farmland in the world that gets 975 millimeters or more of rain annually. Long after the fossil aquifers underpinning production in China, India, and the American Midwest have been depleted, Brazil will continue to be bathed in an average of 1,919 cubic miles of renewable freshwater annually. If, as projected, the world’s population reaches 9 billion by 2050, the main hope of avoiding a Malthusian crisis will lie with the farmers of Brazil.
Paul Collier, Professor of Economics at Oxford and author of The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done about It, points out that “after many years of stability, world food prices have jumped 83 percent since 2005—prompting warnings of a food crisis throughout much of the world.”19 Collier scolds the governments of OECD countries on several scores,
. . .encouraging beggar-thy-neighbor restrictions, pressure for yet larger farm subsidies, and they retreat into romanticism . . . the subsidy hunters have, unsurprisingly, turned the crisis into an opportunity; for example, Michael Barnier, the French agricultural Minister, took it as a chance to urge the European commission to reverse its incipient subsidy-slashing reforms of the common agricultural policy. And finally, the Romantics have portrayed the food crisis as demonstrating the failure of scientific commercial agriculture which they have long found distasteful. In its place they advocate the return to organic small-scale farming—counting on abandoned technologies to feed a prospective world population of nine billion.20
Collier continues by stating that “the world needs more commercial agriculture, not less” and arguing that Brazil’s model could be translated in areas where land is underused.21
Of course, the credit for the surging productivity of Brazilian agriculture upon which the hopes of a hungry world depend does not go equally to the proprietors of all of Brazil’s 5 million farms. Roughly 2.5 million of these earn less than R10,000 a year and account for just 7 percent of total Brazilian farm output. In other words, these are still the unproductive tropical farmers who by and large have not incorporated the technical innovations from Embrapa. Almost all the gains in Brazil’s agricultural productivity are attributable to 1.6 million large commercial operators toward whom Embrapa’s research and technical innovations are directed and who account for more than 75 percent of Brazil’s farm output.
On a per crop basis, the productivity premium of what the FAO describes as Brazil’s “good farmers” over the old-fashioned, tropical subsistence farmers is vast. For example, in 2004 the average yield for maize in Brazil was 3 tons per hectare. For the large commercial farmers, the yield was 10 tons per hectare. For beans, the average yield was 0.7 tons per hectare. Yields for good commercial farmers were five times higher (3.5 tons per hectare). Average wheat yields were 1.6 tons per hectare, while large commercial producers got 6 tons per hectare. The problem of low productivity among small producers who pulled down average yields for the whole country was not due to a lack of relevant agricultural technologies, but by the failure or inability of small farmers to apply them.22
The division between Brazil’s large, capital-intensive, export-oriented farms and the smaller operations of subsistence farmers has origins deep in Brazil’s past.
Through the first four centuries of Brazilian history, the country’s prosperity was based largely on tropical agricultural. For many years, Brazil’s main export was cane sugar, produced on large plantations located within 15 miles of the coasts or along navigable rivers. Sugar plantations, harnessing slave labor, enjoyed considerable economies of scale. Larger plantations tended to be more profitable. And the economic logic underpinning sugar farming on a large scale was reinforced by the political culture of Portuguese colonialism.
Between 1534 and 1536, Portuguese King John III created a system of hereditary captaincies dividing the “official” Portuguese territory east of the Treaty of Tordesillas line along lines of latitude. Although Brazil would eventually expand far to the west of the Tordesillas line (drawn to divide Portuguese from Spanish territory by the corrupt, Spanish-born Pope Alexander VI), the initial hereditary captaincies were cautiously defined according to the Tordesillas treaty’s terms.
The donataries were rich men, chosen not only because they had capital, but also because they were expected to sail thousands of miles and negotiate under challenging conditions with Indians from completely alien cultures. The hope was that the captaincies would succeed in developing Brazil at their own expense, thus saving the crown from undertaking the development outlays. Only 2 of the 15 captaincies proved profitable, based upon production and export of sugar. The more successful of these was Pernambuco, where Duarte Coelho prospered from the success of his sugarcane mills. However, other than São Vicente, the other 13 captaincies proved to be busts. The donataries either had no success dealing with the Indians or had not bothered to make the necessary investments to develop these huge tracts of land that spanned degrees of latitude and exceeded the size of European countries.
In response to the failure of the captaincies, the Portuguese crown undertook to sponsor the colonization of Brazil on its own. While the donations of crown land were downsized, they were informed by a similar perspective. The Portuguese crown wanted to accelerate the settlement and development of Brazil as rapidly as possible with the least investment on its part. At the time, Brazil was competing for capital and attention with the eastern Asian and African colonies of the Portuguese empire. With Portuguese capital stretched thin, and the powers that be nervous that French, British, Dutch, and other ships were visiting the Brazilian coast, the decision was reached to give large tracts of Brazilian land to grandees who were considered wealthy enough to develop them rapidly. This entailed the donation of crown land (sesmarias) in large blocks to wealthy Portuguese as well as to military personnel.
In theory, any settler could apply for these land grants, but he had to demonstrate that he had capital and access to slaves to operate the plantations.
Brazil was thus divided into gigantic tracts, called latifundia in the Roman style, which, although smaller than the captaincies, tended to be far larger than even the most prosperous estates of English colonists in North America. Unlike production of grain and hay that predominated in England’s North Atlantic colonies, where a higher production scale provided no appreciable advantages, monocropping of sugarcane over extensive areas of land did tend to reduce production costs.23 Large plantations also tended to be more profitable because they could better match their output to the capacity of sugarcane mills. A small sugarcane farm could not amortize the cost of building a mill. And needless to say, given the transportation conditions in sixteenth- and seventeenth-century Brazil, it was prohibitively expensive to move unprocessed sugarcane very far from the spot where it was harvested.
As suggested earlier, the large-scale economies of sugarcane farming underpinned a highly unequal land tenure system that tended to be self-reinforcing. To quote from the FAO’s summary history of the development of agriculture in Brazil, “in this way, the territory of Brazil was divided into immense properties, with very little land remaining without an owner in the areas where the Europeans lived, mainly along the coast.”24 The limited scope for small farmers led to accommodation of the small population of free whites, ex-slaves, and mestizos as sharecroppers occupying small strips of land on large estates for subsistence production and food for the local market. And perhaps more significantly, small farmers pioneered the Brazilian tradition of squatting on unoccupied land along the sparsely populated frontier. The very high transportation costs due to Brazil’s challenging topography discussed earlier kept the frontier close to the coast for a long time. In fact, by the beginning of the eighteenth century, 200 years after Brazil’s discovery, the country had a total population of only 300,000.
Obviously, with the monocropping of sugarcane predominating on the large plantations, someone had to produce the food required for consumption by the landlord class, the slaves, priests, the military, and the other government functionaries. But the Portuguese legal system as imposed in Brazil did not provide a framework of property rights to protect small holdings. With rare exceptions, up to 1822, when Brazil became independent, the increase in the number of small properties in Brazil was due to squatting and illegal ownership, as property could not be acquired except by donation personally from the Portuguese monarch.
This history is important because it informed a very different trajectory for Brazilian landholdings in the middle of the nineteenth century than that in the United States. In the United States, the Homestead Act of 1862 made land grants to small farmers who promised to cultivate the land. This encouraged an influx of migrants from Europe seeking the opportunity to own land, which was typically planted in grain. In Brazil, by contrast, farming in the plantation system produced high-value crops for export, which generally offered few prospects for participation by smallholders.
The sesmarias system of allocating property through royal land grants was abolished when Brazil became independent in 1822. But strangely, no new process for allocating legal title to property was put in place for the next 28 years. In effect, there was no regularized process for allocating land titles for almost three decades in Brazil. The only method to acquire new land was by squatting—taking physical possession. This enabled some small holders to stake tentative claims on the sparsely populated frontier. But the main beneficiaries of the 30-year anarchy in Brazil’s land title system were the owners of the latifundia, the great estates. As economic historians Lee Alston, Gary Libecap, and Bernardo Mueller observed, the owners of the large estates “had the capital and other resources to occupy and defend additional land claims.”25
By the mid-nineteenth century, the relative importance of sugar had declined in Brazil. It then comprised just 26.7 percent of Brazil’s exports, while coffee had surged to more than 41 percent, (on the way to becoming approximately 70 percent of exports). After three decades in which Brazil really had no legal process for establishing property rights in its vast reserves of unused land the dramatic growth in world demand for coffee precipitated a crisis. The proximate problem was that small producers could compete in coffee production, which did not require high fixed capital investments. Therefore, it suddenly became a matter of urgent importance for the large holders to call a halt to the acquisition of unused land (of which Brazil had plenty) by squatting. The potential competition from small holders threatened to undermine profitability.
The fact that the international slave trade had been suspended and slavery was in its twilight created an additional problem that the owners of the large plantations sought to resolve. They wanted to attract free labor by increased immigration from Europe, and at the same time, make sure that the new immigrant laborers would hang around to work on the plantations rather than settling on the abundant, unused land and farm it for themselves.
Hence, the Land Law of 1850. The law legalized informal squatter claims prior to 1850, while conditioning formalization upon payment of a substantial tax. It also revalidated the sesmarias’ land titles. At the same time, the law forbade further acquisitions by squatting. It stipulated that thereafter, unused land in Brazil could only be acquired by purchase. Thomas E. Skidmore rightly observed, “the chief purpose of the law was to promote the large plantation system.”26
Brazil’s very different approach to land tenure was at least partially dictated by its tropical climate and the relatively high-scale economies involved in the production of sugar during the early centuries of settlement. The fact that for the first 322 years of Brazil’s history land titles could only be acquired under the sesmarias system in a personal grant from the king of Portugal significantly limited the emergence of a middle class in Brazil. This was particularly true because farming was the principal means to acquire wealth in the centuries when Brazil’s main exports were tropical commodities.
As The Economist put it,
The increase in Brazil’s farm production has been stunning. Between 1996 and 2006 the total value of the country’s crops rose from 23 billion reias ($23 billion) to 108 billion reias, or 365 percent. Brazil increased its beef exports tenfold in a decade, overtaking Australia as the world’s largest exporter. It has the world’s largest cattle herd after India’s. It is also the world’s largest exporter of poultry, sugar cane and ethanol. . . . Since 1990 its soyabean output has risen from barely 15m tonnes to over 60m. Brazil accounts for about a third of the world soyabean exports, second only to America. In 1994 Brazil’s soyabean exports were one-seventh of America’s; now they are six-sevenths. Moreover, Brazil supplies a quarter of the world soyabean trade on just 6 percent of the country’s arable land.27
In the next chapter, we explore an emerging advantage closely associated with the Brazilian economy: its role as an energy superpower in the era of peak oil. While the advanced temperate zone economies are hard-pressed to prosper as the price of BTUs soars, Brazil is leveraging its unmatched agricultural capabilities to become a leader in biofuels, as well as a nation rich in oil.
1 Peter C. Kahn, Thomas Molnar, Gengyun G. Zhang, and C. Reed Funk, “Investing in Perennial Crops to Sustainably Feed the World,” Issues online, Summer 2011, www.issues.org/27.4/kahn.html.
2 Lester R. Brown, “Population Growth Sentencing Millions to Hydrological Poverty,” The Policy Institute, June 21, 2000, www.earth-policy.org/plan_b_updates/2000/alert4.
3 Katherine Q. Seelye, “Aquifer’s Depletion Poses Sweeping Threat,” Green (blog), May 4, 2011, http://green.blogs.nytimes.com/2011/05/04/aquifers-depletion-poses-sweeping-threat.
4 “The Miracle of the Cerrado,” The Economist, August 26, 2010.
5 Duncan Geere, “Underground river discovered below Amazon,” Wired.co.uk, August 26, 2011, www.wired.co.uk/news/archive/2011-08/26/underground-river-amazon.
6 O. D. von Engeln, “Effects of Continental Glaciation on Agriculture,” Bulletin of the American Geographical Society 46, no. 4 (1914): 242–243.
7 Von Engeln, “Effects of Continental Glaciation,” 243.
8 “The Miracle of the Cerrado.”
9 “Prevention of Post-Harvest Food Losses: Fruits, Vegetables and Root Crops. A Training Manual,” International Center for Tropical Agriculture, FAO Corporate Document Repository.
10 Christopher Wheatley, “Adding Value to Root and Tuber Crops,” International Center for Tropical Agriculture, FAO Corporate Document Repository.
11 Jeffrey D. Sachs, “Tropical Underdevelopment,” Center for International Development at Harvard University, Working Paper no. 57, December 2000.
12 Sachs, “Tropical Underdevelopment.”
13 “The Miracle of the Cerrado.”
14 “The Miracle of the Cerrado.”
15 M.G. Cardoso Costa, A. Xavier, and W. Campos Otoni, “Horticultural Biotechnology in Brazil,” ISHS Acta Horticulturae 725: Fifth International Symposium on in Vitro Culture and Horticultural Breeding.
16 “Brazilian Agriculture: The World’s Farm,” The Economist, August 27, 2010.
17 “Fertilizer Use by Crop in Brazil,” Land and Plant Nutrition Management Service, Land and Water Development Division, www.fao.org/docrep/007/y5376e/y5376e0b.htm.
18 Sandra Postel, Pillar of Sand: Can the Irrigation Miracle Last? (New York: W.W. Norton & Company, 1999), 6.
19 Paul Collier, “The Politics of Hunger: How Illusion and Greed Fan the Food Crisis,” Foreign Affairs (November/December, 2008).
20 Ibid.
21 Collier, “The Politics of Hunger.”
22 Land and Plant Nutrition Management Service, Land and Water Development Division, “Fertilizer Consumption of Some Basic Food Crops and Export Crops in 2002,” Chap. 10 in Fertilizer Use by Crop in Brazil (Rome: Food and Agricultural Organization of the United Nations, 2004), 30–39, ftp://ftp.fao.org/agl/agll/docs/fertusebrazil.pdf.
23 Land and Plant Nutrition Management Service, Land and Water Development Division, Fertilizer Use by Crop in Brazil (Rome: Food and Agricultural Organization of the United Nations, 2004), 11.
24 Ibid.
25 Lee J. Alston, Gary D. Libecap, and Bernardo Mueller, Titles, Conflict, and Land Use: The Development of Property Rights and Land Reform on the Brazilian Amazon Frontier (Ann Arbor: University of Michigan Press, 1999), 34.
26 Thomas E. Skidmore, Brazil: Five Centuries of Change, 2nd ed. (New York: Oxford University Press, 2010), 59.
27 “The Miracle of the Cerrado.”