Brazil

The geography and climate of Brazil has provided a flourishing, export oriented agricultural base, with a huge potential for expansion of land under cultivation. The total area cultivated in Brazil has jumped 45% in the last 10 years to 170M acres, with the potential to nearly double again. Only 125 million acres or 42% of the estimated 300 million tillable acres is currently in production. In contrast, the US acreage of corn, soybean and wheat is approximately 170 million acres, and is slowly decreasing due to urban expansion. The land in the south of Brazil is fully developed with infrastructure on par with the American Midwest. Land prices in the region have now surpassed the American Midwest ($12,000 to $15,000/acre). This premium is partially justified by their ability to grow more than one cash crop per year. The center-west region of Brazil is where the majority of quality undeveloped land is located in Brazil. With prices currently ranging from $US800/ac to $US $3,500/ac, we fully expect these prices to appreciate to the levels found in the south over the next 10-20 years.

Brazil was discovered in 1500 by the Portuguese explorer Pedro Alvares Cabral and was governed as a series of colonies under the Portuguese crown. The wealth of the colonies was based on a series of commodity booms, principally sugar in the seventeenth century and gold in the eighteenth century.

As in the neighboring Spanish American colonies, by the late eighteenth century the infiltration of ideas from the European Enlightenment was generating a nascent independence movement. On September 7, 1822, Brazil declared independence.

Subsequent periods of republican governments were supported mainly by agricultural development. From 1964 to 1985 Brazil had military rule in an attempt to end political corruption. This period saw considerable economic development, but growing government instability and corruption. The oil crisis of the 1970’s severely affected the Brazilian economy. The world recession leading into the 1980’s generated growing calls for an end to military rule, and in March 1985 power passed to a civilian president. 

A constitutional convention drafted and approved a new constitution in 1988, and in November 1989 the first direct presidential elections of the post-military era were held. Despite initial success with inflation control, chronic distortions continued to hinder growth. Elections in October 1994 brought Fernando Henrique Cardoso to power. 

Cardoso, who served as the Minister of Finance in the previous administration, introduced the Plano Real, a successful monetary reform initiative. The Plano Real included capital and trade liberalization, elimination of price and salary indexing, strict fiscal control, privatization, banking reform and a more or less fixed foreign exchange rate. This plan has proven successful, and the country has enjoyed single-digit inflation since 1995.

Brazil is the fifth largest country in the world covering nearly half of South America about the same size as the continental U.S. Brazil is a federal republic composed of twenty-six states and the Federal district. Similar to the United States, each state has its own constitution with a governor and state legislature. 

The executive branch of the federal government is headed by a civilian president, elected by popular vote every four years. Legislative power is exercised by the National Congress, consisting of a Chamber of Deputies and the Federal Senate. Judicial power is exercised by the Federal Supreme Court, the Superior Court of Justice, the Federal Court system as well as separate courts for military, electoral, and labor matters. There is a state court system with local jurisdiction. The Brazilian constitution guarantees human rights, private property, and equality before the law - for Brazilians and non-Brazilians alike. The current population of approximately 170 million, of which almost one half is under twenty-years of age, provides a large, inexpensive labor base, especially in rural areas.

The Brazilian economy is one of the largest in the world. Over recent decades the country has developed from being primarily a source of raw materials into a diversified manufacturer that is increasingly integrated into global sourcing and production.