Oct. 15, 2015
Brazilian is facing the worst crises in the last 40 years. Inflation is close to 10% per year. Companies are reducing head counting and investments or closing factories. Denouncements of corruption in stated owned companies have seizure investments. The biggest company of the country, Petrobras, stated owned, has lost billions of dollars of its value in the stock market. S&P lowered credit rating and Brazil loses investment-grade rating. GDP shall be negative in 2015 and in the next year too. Dollar exchange rate is unpredictable (drop/increase of 5% in three days). President of the country is being threatened to be impeached from her mandate.
Agriculture was stressed during two consecutive years by drought; ethanol prices’ (produced from sugar-cane) were artificially controlled to be lower due to the government policy to keep gasoline at cheap levels in order to manage inflation resulting in bankruptcy of several sugar-cane millers, pesticide sales in 2015 shall decrease compared to 2014; several dealers have no credit and are facing losses; regulatory agencies increased fees in almost 300%, pesticide product registration evaluation/approval is demanding 4 to 7 years; regulation changes are often and new rules implies in higher costs for the registrants.
Would there be a more pessimistic overview of the Brazilian economy, market and perspectives? It can be said that these types of difficulties most of the countries have faced them not once but several times along the history. So does Brazil now. Today’s the 9th economy of the world has the challenge to recover years of sustainable growth that were lost in last decade.
For this, agriculture is the main cornerstone for this recovery. While Brazilian GDP growth estimative for 2015 and 2016 are negative, agriculture GDP estimative is growth.
|GDP growth (%): Agriculture vs Brazil
The biggest arable agriculture area in the world, with the possibility to have up to 2.5 harvesting seasons in the same area per year with favorable weather conditions, high technology in crop management, seeds, genetics, pest control and pest resistance management, agriculture managed as an enterprise (not as subsistence) are some of the key points that makes Brazilian agriculture a global exponent. Different from the other parts of the world agriculture is limited by weather conditions, not traditional business, low technology, much higher costs. Thus Brazil shall lead agriculture businesses in the world for next decades.
In the pesticide market, as mentioned before, 2015 sales increase shall not be accomplished as forecasted. Last year high product inventory in the field is one of the main reasons for this.
Pesticide registration regulations are been reviewed in such a way a new Pesticide Agency may be created taking place of MAPA, ANVISA and IBAMA. If so, it would have the objective to speed up product registrations that today is demanding approximately 5 years for approval. It should also be considered the high level of rejections. Nevertheless other regulations are been proposed with the perspective to restrict product registrations as well as it uses. Also there are several products under re-evaluation, environmental or toxicological that may result in product ban. Today ANVISA proposed to ban paraquat in Brazil. In other cases even though the product would not be banned, authorities does not evaluate on-going registration submissions, such as imidacloprid and thiamethoxam, until the re-evaluation is concluded.
Considering Brazilian pesticide market is ranked top 1 in the world in sales value, US$ 12.3 billion in 2014, where 85% of the market is controlled by no more than 10 companies, it would be expected to have several barriers for access. Professional teams focused in long term business, good registration support, anticipating regulatory issues, deep understanding of the regulations and the market are mandatory for the success in this atypical environment.
All these topics and much more shall be addressed in the next 8th Forum AllierBrasil in Qingdao, China in January 7th and 8th, 2016.