The challenges of Brazilian agribusiness in international trade relations

Brazil, with its vast territorial extension and abundant natural resources, has historically been recognized as one of the main exporters of agricultural products in the world. However, the dynamics of the global market and changes in commercial relations have presented significant challenges for the agricultural sector, while at the same time opening up new opportunities for growth and expansion.

Now more recently, we have been following the protests by farmers in several countries in Europe, especially in France, through the media. A situation that has raised concerns about possible impacts on international commercial relations and trade between Brazil and the European Union (EU). Protesters express dissatisfaction with rising production costs, particularly related to rising diesel prices and stricter environmental requirements as part of the European Green Deal. These demands raise questions about the competitiveness of European agricultural products compared to those imported from other regions, including Brazil.

To better understand the possible developments, it is important to analyze the context of commercial relations between Brazil and the European bloc. The trade agreement between Mercosur and the EU, negotiated over two decades and finalized in 2019, represents a significant opportunity for national agribusiness to expand its access to the market there. However, the ratification and full implementation of this agreement have faced political obstacles and resistance from certain sectors of European civil society, especially in relation to environmental and social concerns.

These farmer protests in Europe could intensify this resistance and increase non-tariff barriers imposed on the entry of agricultural products from outside the bloc. This could negatively impact Brazilian agricultural export prospects and make the conclusion and implementation of the Mercosur-European Union agreement even more difficult.

However, despite the challenges presented in Europe, the Brazilian agricultural sector continues to record impressive export numbers. In 2023, according to the Secretariat of Commerce and International Relations of the Ministry of Agriculture and Livestock (Mapa), it reached a record of US$ 166,55 billion, representing a significant increase compared to the previous year. This performance is mainly driven by strong global demand for agricultural commodities, such as soybeans, corn, beef, among others.

The Brazilian Center-West, especially the states of Mato Grosso, Mato Grosso do Sul and Goiás, plays a crucial role in this scenario, being responsible for a significant portion of exports. Data from the Mato Grosso Institute of Agricultural Economics (Imea) reveal that the region exported 680,1 thousand tons of fresh beef between January and September 2022, representing 45,3% of the total exported by Brazil in that period.

These numbers highlight the strategic importance of the region for national agribusiness and its contribution to the country's trade balance. However, it is important to recognize that the sector faces a number of challenges, including environmental, social and regulatory issues, which can affect its competitiveness in the global market. For example, the European Union has recently implemented stricter regulations, such as the Deforestation-free Regulation, which requires the absence of deforestation and human rights violations throughout the production chain of imported agricultural products. These regulations, although intended to promote sustainability, may also impose additional burdens on Brazilian producers and hinder access to European markets.

Among the challenges presented by these regulations and policies, the carbon tax (Carbon Border Adjustment Mechanism - CBAM) proposed by the EU stands out, which aims to quantify and price the carbon emissions embodied in imported products. This measure could increase production and export costs for Brazil, representing an additional challenge that requires a strategic response from the government and producers.

However, despite the difficulties imposed by such measures, Brazil has significant comparative advantages in the global food market. With its vast expanse of fertile land, favorable climate and advanced agricultural technology, the country is well positioned to meet the growing demand for food, especially in a context of population growth and changing consumption patterns.

Additionally, our nation has been committed to promoting sustainability and environmental responsibility in its agriculture. Programs such as the ABC Plan (Low Carbon Emission Agriculture) aim to promote more sustainable agricultural practices, including crop-livestock-forest integration, direct planting, the recovery of degraded areas and the environmental regularization of rural properties. These initiatives demonstrate Brazil's commitment to environmental conservation and the sustainable development of its agriculture.

These initiatives not only contribute to reducing greenhouse gas emissions and combating deforestation, but also strengthen Brazil's image as a reliable and sustainable supplier. This is worth its weight in gold, in a global market that is increasingly aware and concerned about environmental issues, these credentials can become a competitive differentiator.

Brazil has sought to diversify its export markets and reduce its dependence on certain trading partners. The growing demand for food in emerging markets, such as China, India and Southeast Asian countries, offers new expansion opportunities for agribusiness. The increase in consumption of animal proteins and the demand for agricultural commodities, such as soybeans and corn, in these regions could further boost Brazilian exports in the coming years.

To fully take advantage of these opportunities, a series of internal challenges must be addressed, including poor infrastructure, excessive bureaucracy, land issues and legal uncertainty. Investments in logistics, transport, storage and technology are essential to increase the efficiency and competitiveness of Brazilian agribusiness in the global market.

It is essential that the country intensifies its efforts in agricultural diplomacy and seeks greater integration with international organizations and regional trade blocs. Market diversification and the search for strategic partnerships can significantly contribute to reducing the vulnerability of Brazilian agribusiness to fluctuations in international trade and possible global economic crises.

In summary, Brazilian agribusiness faces significant challenges in a global context marked by change and uncertainty. Farmer protests in Europe, stricter environmental regulations and protectionist policies represent important obstacles to Brazilian exports. However, the country also has significant comparative advantages and growth opportunities, especially in emerging markets.

To capitalize on these opportunities and face the challenges, it is essential that Brazil adopts a strategic and coordinated approach, involving the government, the private sector, civil society and other relevant stakeholders. Investments in infrastructure, technological innovation, sustainability and agricultural diplomacy are fundamental to guarantee the economic and sustainable development of Brazilian agribusiness in the 21st century.

By Leandro Viegas, CEO of Sell Agro