Rising dollar tends to favor agribusiness, says Cepea coordinator

Brazilian agribusiness has no reason to worry about the rise in the dollar, as historically the devaluation of the real has positive impacts on the country's rural producers. This is the opinion of the scientific coordinator of Cepea/USP (Center for Advanced Studies in Applied Economics at the University of São Paulo), Geraldo Barros.

According to the professor, studies by Cepea/USP show that the rise in the dollar tends to favor agribusiness, because the sector exports more than it imports and has been in surplus for at least the last 25 years. “For the agricultural producer, a rise in the dollar acts via two channels: it increases costs due to the increase in the prices of imported inputs and it increases gross income because it increases the income from exports converted into reais. But, as a rule, it is known that the increase in income exceeds the increase in costs”, states Barros in an article published on the Cepea/USP website.

Since 2000, according to the Ipea study, the real value of the dollar (discounting Brazilian inflation) has fallen by close to 50%. “In other words, if our currency (the Real) had not appreciated in real terms, export revenue transformed into reais would be double the current figure”, explains the professor.

Still according to Barros, prices in dollars for Brazilian agribusiness products rose 124% from 2000 to 2011. Since then, they have been falling, but are currently up 53% compared to the year 2000. When these prices are converted into reais they are 27% below their values ​​in 2000 if inflation is discounted, according to Barros.

The Cepea coordinator adds that, even with the appreciation of the real in the long term, agribusiness has increased competitiveness and exported more and more. “Currently, agribusiness exports a volume of products 3,6 times greater than in 2000. How has this been possible? By increasing productivity”, adds Barros. He also recalls that studies by the Ministry of Agriculture, Livestock and Supply showed a growth in agricultural productivity of 78%, from 2000 to 2017, more than offsetting the drop in prices in reais, when discounting inflation.

The professor also says that Brazilian agribusiness should focus its concerns on “trade conflicts and the country's image with regard to environmental and health issues” and not on the current rise in the dollar.