Brazil, the largest coffee and sugar exporter,
may escalate a fight over U.S. and European barriers at the World Trade
Organization to gain a bigger share of global markets, Agriculture
Minister Roberto Rodrigues said.
Brazil is awaiting the outcome of a WTO ruling in its favor over $3
billion of U.S. cotton subsidies before deciding whether to challenge
other farm aid that hampers trade, Rodrigues said. South America's
largest economy wants to boost agriculture output by about half within a
decade, in part by competing with U.S. farmers, he said.
``We are after the reduction of protectionism for a freer, fair and
just market,'' Rodrigues, 61, said in an interview in his office in
Brasilia, Brazil's capital. ``If that happens, it will make new markets
a lot more viable.''
A more aggressive push by Brazil at the WTO would aggravate relations
with the U.S., already strained by the South American country's
resistance to a hemisphere-wide free-trade agreement promoted by the
U.S., said Bob Stallman, president of the American Farm Bureau
Federation. Brazilian President Luiz Inacio Lula da Silva has fought
U.S. and European farm aid since taking office in January 2003, and
formed a bloc with China that scuttled global free trade talks in
Cancun, Mexico.
``This isn't a substitute for WTO negotiations,'' said Stallman, whose
Washington-based organization represents 5.5 million U.S. farm families.
``Excess litigation at this point in the negotiations will probably
create more barriers than successes.''
No Decision
Brazil hasn't decided whether to file more complaints and won't act
until appeals of the cotton ruling are exhausted, said Rodrigues. Brazil
also is awaiting a WTO decision on a compliant over European Union sugar
exports.
The U.S., Brazil's largest trading partner, accounted for 28 percent of
Brazil's record $25 billion trade surplus last year, making the country
important to Lula's efforts to bolster exports to help sustain an
economic recovery. Brazil's economy grew 2.7 percent in the first
quarter from the same period last year, after shrinking for four
quarters.
The U.S., whose biggest trading partners are Mexico and Canada, had a
record trade deficit last year of $496.5 billion.
Lula has said opening new markets is critical for Brazil to meet a goal
of becoming the world's biggest food exporter within a decade. Brazil
has almost doubled grain production since 1992, as companies such as
Bunge Ltd., the world's biggest oilseed processor, and Cargill Inc., the
largest U.S. agriculture company, built ports and silos and financed
farming to make the country a base for exporting crops worldwide.
Brazilian farmers are taking advantage of lower costs -- grain farmland
in Rio Grande do Sul state costs half what it does in Iowa -- to meet
surging demand for food in countries such as China.
More Production
With 300,000 square kilometers (116,000 square miles) of pastures, an
area larger than Italy, which could be converted to crops, Brazilian
grain production alone could jump by half, to about 200 million tons, in
a decade, Rodrigues said. The sugar cane crop could grow by 100 million
tons, or about one-third.
``There are a lot of potential areas of growth for Brazilian
agriculture,'' said Rodrigues, a sugar cane and soybean farmer named by
Lula after leading several farming cooperative groups.
Some U.S. farmers have found it so hard to compete they are buying land
in Brazil. Royal, Iowa-based Brazil Iowa Farms LLC raised $13 million
from U.S. and Canadian farmers seeking to profit from lower costs in
Brazil, said David Kruse, chief operating officer of the fund.
The fund bought 11,400 acres of farmland in the Brazil's northwestern
Bahia state, where it will grow cotton and soybeans, he said.
Cheap Capital
``We are employing cheap U.S. capital to buy high return farmland in
Brazil,'' Kruse said. ``It is the best of both worlds.''
Brazil remains committed to meeting an end of July deadline for a
preliminary global free trade agreement, Rodrigues said. He said he
expects negotiating an end to agriculture barriers will take far longer.
``I don't have much hope that the WTO agreement this year will resolve
the principal issues facing by global trade,'' he said.
Brazil, after doubling the size of its soybean crop since 1997, ran
into trouble in late April when China blocked soybean imports after some
grain cargos were found to be mixed with pesticide-laced seeds. Brazil's
beef industry, which last year became the world's largest exporter, lost
sales this month when Russia and Argentina halted imports after an
outbreak of foot-and- mouth disease in the eastern Amazon rainforest.
China Embargo
Brazil last week persuaded China to lift the embargo on soybean
shipments by 23 grain traders by lowering the tolerance for seeds and
other contaminants and allowing Chinese inspectors into its ports.
Russia, which buys about 12 percent of Brazil's beef, poultry and pork
exports, ended its ban yesterday after confirming the diseased cows were
far from any of its supplier. Brazil also is adding more than 400
inspectors to improve enforcement of export rules, Rodrigues said.
``There are no angels in the market,'' Rodrigues said. ``Competitors
that lost market, or were hurt by productivity gains by Brazilian
farming will use this against Brazil.''
Farming advocates such as Sergio Mendes of the Brazilian National Grain
Exporters Association, said China imposed the embargo to force traders
to reduce prices after soybean futures fell from 15-year highs since
March.
``As the government, I can't say I believe that,'' Rodrigues said.
Rodrigues said he backed an effort by soybean producers in Argentina,
Brazil and the U.S. to develop international standards for contaminants
in grains to head off future efforts by countries to impose
zero-tolerance, as China did to justify the embargo.
New Investment
The government is making a push to lure investment in roads, ports and
railways to ease bottlenecks that threaten to hamper the ability to sell
more food to the world. Next year, soybean production may jump roughly
20 percent to a record 60 million tons as farmers recover from weather
problems, disease and China's embargo, Rodrigues predicted.
Last year Brazil, already the world's biggest coffee, orange juice and
sugar exporter, became the biggest beef, poultry and soybean exporter by
taking advantage of a ban on U.S. beef exports and a drought that cut
into the U.S. soybean crop, Rodrigues said.
``Undoubtedly Brazilian products have gained space,'' Rodrigues said.
``Keeping that space depends on a number of factors.''
To contact the reporter on this story:
Michael Smith in Rio de
Janeiro at mssmith@bloomberg.net.Bloomberg:
