After the removal of Dilma Rousseff in the impeachment process, the new president of Brazil, Michel Temer, named new ministers for his current government. Among them a very strong name in the world of agriculture was chosen; Blairo Maggi, who was named the new minister of agriculture.
This appointment comes at a key time for the Brazilian economy, which has been in recession for the last year and half and which is in urgent need of rapid recovery. Since agriculture in Brazil represents nearly a quarter of the country’s economy and 49.9 percent of its exports, according to MAPA (The Ministry of Agriculture), the agriculture minister has a very significant role to play in efforts to revert the current economic downturn.
Minister Maggi, who came from a family of small farmers in Paraná and together with his father built the Amaggi multi-billion dollar corporation, has vast knowledge and experience as both entrepreneur and politician.
Known as the Brazilian king of soybean, he started his political career in 2002 when he was elected the governor of Mato Grosso State, the agriculture powerhouse in Brazil. After eight years in office, and achieving 92 percent of approval according to Instituto Vox Populi, he comfortably won a place in the senate for the same State. His ascension to the ministry now presents him with perhaps his greatest political challenge so far: to help Brazil get out of the current economic crisis.
As Maggi recently said, “the economy of Brazil has no chance of recovery through the industrial sector. That would take years. The path forward is agribusiness.” For him, agriculture is the most important sector for Brazil, accounting for 22 percent of the country’s GDP and an essential role in exports. It is the most competitive sector in the country’s economy due in part to the scale of production, technologies in the fields and favorable climate.
One of the ideas that Mr. Maggi has put forward “with the support of president Temer” is the possibility of opening up land ownership to foreigners. He believes that this will lead to credit expansion, which is necessary to keep production upscale. Moreover, this would increase strategic business partners and promote the entry of foreign contribution that can strengthen the sector as a whole. In other words, investments in these assets not only attracts more money, but also technology and productivity. Since 2010, the scenario hasn´t been favorable and significant investments have been canceled in Brazil. For example, the forestry and cellulose industry had several projects aborted because of the crisis and the legal uncertainty created by protectionist laws. Therefore, Minister Maggi emphasizes that the country needs to come back to these important discussions [the participation of foreign capital in the Brazilian territory] as a way to encourage investment in the field.
Another big concern from the ministry is the interest rate charged by banks. Blairo Maggi has also been discussing the importance of a program for long-term financing where the grower can pay back with fair interest rates on loans for machinery, grain storage and other assets that normally take around 10 years to repay.
In a recent interview, he explained, “We have to look forwards. This is not a concern for the annual costing plan because it expires very rapidly and the interest rate is about 8.5% – 9% per annum with an inflation rate of 7%. It means that we have real interest of 1% or 2%. However, for investments such as machinery equipment, construction of warehouses and all these programs that a producer has 10 years or more to repay, this is not feasible. So imagine, in the future, a producer paying 10% interest per year with an inflation rate of 2% or 3% year. The idea being presented is that we would pay interest equivalent to the inflation rate plus an interest rate consistent with the type of activity”.
Recently, Minister Maggi and the U.S. ambassador to Brazil Liliana Ayalde, exchanged Equivalence Recognition Letters of Beef Controls. Under this agreement, Brazil will sell beef (fresh and frozen) to the U.S., and the U.S. will also be entitled to market the product in Brazil. According to Minister Maggi, “only the U.S. provides a potential revenue of $900 million for beef exports.” Maggi believes that American recognition will be a facilitator for Brazil to conquer other markets besides the U.S., for example the goal is to increase the Brazilian participation in the international market of agricultural products from the current seven percent to 10 percent. “Much more important than the possibility of sending thousands of tons to the United States, is the chance to also sell to other countries.”
Over 35 years of experience in agribusiness sector, of which 15 years have been dedicated to public service, Blairo Maggi has accumulated knowledge from both worlds. He has been successful as an entrepreneur and a politician and this combination is generating high expectations among farmers, investors and within government itself. So, many believe that Maggi is able to contribute not only to the sector but most importantly to put the nation back on the right track.
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Gabriel Prado de Barros comes from a family of ranchers in Mato Grosso, Brazil. He servers as Business Director of Business Development for KGN Consulting Company focusing on agribusiness investment and holds Master’s Degree in International Business from Hult International Business School.