Brazil extends credit to boost farms

The Brazilian government plans to extend credit in the agricultural sector in an attempt to increase production of key foodstuffs and damp down inflation, which has pushed the basic basket of goods up by 50 per cent in some cities in Brazil over the last 12 months. The ministry of agriculture said on Wednesday that it would increase loans avail-able for agricultural use to 78bn Reals (£24.4bn), a 12 per cent increase, and will hold interest rates steady for these loans at 6.75 per cent.

The ministry hopes to boost Brazil’s production of grains by 5 per cent in the forthcoming harvest to 150m tonnes. The government will also start to stockpile key crops, such as rice and corn, and intends to build wheat stockpiles, for which Brazil depends on imports, up to 200,000 tons from 6,000 tons.

Longer term, Brazil’s landmass, climate and large amounts of unused land put it in an ideal position to step up food exports, an ambition that President Luiz Inácio Lula da Silva has shown himself eager to pursue. On Wednesday, he said the world food crisis could shape up to be an opportunity for Brazil as the world’s granary.

But that ambition looks some way off. Cities in the poorer north-east of the country have seen the basic basket of goods shoot up by 50 per cent or more in the last 12 months, in part thanks to higher levels of consumption and late planting in the last harvest because of a drought. The Inter-Union Department of Statistics and Socio-Economic Studies (Dieese), the union movement which produced the data, said the Brazilian staples of rice, beans and beef were feeding inflation.

The basket of basic goods was up more than 50 per cent in the city of Natal and by more than 40 per cent in three other large cities in the region, with a rise of nearly 185 per cent in the price of beans alone in Natal. The study measured prices in 16 state capitals, with rises of some 15 per cent reported in Brazil’s largest city, São Paulo.

All that is slashing the disposable income of the middle and lower classes while the minimum salary is failing to keep pace: it increased just 9.21 per cent over the last 12 months. Food inflation is also driving up general price indexes in the country, with overall inflation expected to rise more than 6 per cent this year.

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