AGRIBUSINESS IN NORTHEAST BRAZIL
General aspects of food consumption and agribusiness
Nowadays we can identify three major global consumptions trends that will remain solid within the following years: food, energy and construction.
We shall focus, in this preliminary analysis, in what it concerns to food concerns: general consumption worldwide and the competitive advantages that Brazil has in this global market. Globally, the human species consumes 130% of what it produces, and as long as that places a significant pressure on markets it also represents a business opportunity bound to stay accurate for the next generations.
While we see new emerging economies heading towards new food consumption patterns, we still have countries where most of the population lies below poverty lines, therefore experiencing less per capita food intake.
We have a total world population on the verge of reaching 7 billion, with more than 200.000 people of daily growth, and that places a high pressure on world food consumption.
Brazil has 8.456.510 sq. km. of land, with about 388 million hectars of agricultural soil, a size 16 times the size of the United Kingdom, placing it at the most strong player worldwide in what it concerns to food production potential. Brazil also has the biggest water reserve in the world, representing 12% of the total fresh water available on earth. Regarding Northeast Brazil, we can point some major competitive advantages:.
a) Northeast Brazil represents the fastest GDP growing nationwide, with Bahia, Ceara, Piaui and Maranhão standing out as the States that show the most significant improvements in this indicator.
b) In Northeast Brazil we find the consumption trend, expressed by the growth of the middle C classes, along with its growing consumption capacity: “Brazil has about 192 million inhabitants, and 53.591.197 of those are found in the Northeast” (www.mundoeducacao.com.br). Fortaleza became the 4th most populated capital in Brazil, with 2.416.920 inhabitants, representing 7.587,66 people per square kilometer”. (Diário do Nordeste – 30jul’07).
“Brazil’s middle-class is growing, too – a trend that is significantly aiding growth. Between 2001 and 2007, Brazil’s poorest 10% enjoyed a 49% jump in real income.
And with half of Brazil’s 200 million population now considered “middle class,” credit card purchases have jumped by 22% a year over the past decade. Auto sales hit a record high of 300,000 in June 2009”. (www.investmentu.com /2010/January/investing-in-brazil.html)
c) In Northeast Brazil we find innumerous water and land resources ready to be used in agribusiness activities: the Rio São Francisco is 3.100 kms long and crosses 5 States; only in Ceará we have about 17,8 billion cubic meters of water in public dams; in Ceará, again, we have 14 irrigated public districts fully infrastructure.
d) Optimal geographical location, places Porto do Pecém and Mucuripe (both Ceará Ports) as the shortest transit time between Brazil, Africa, Europe and the United States.
e) Other infrastructure items outstand: Industrial and Harbour Complex in Pecém; ZPE – free trade zone; Fuel Refinary, set up to operate in 2018; Ironwork facility and a total of 14 airports.
f) Technology in some of the most attractive agribusiness areas can be found in Ceará: Embrapa Agroindústria Tropical (the worldwide distinguished brasilian agribusiness public research company); Embrapa Caprinos e Ovinos; DNOCS (State Department for Projects against Drought) and State University (Universidade Federal do Ceará) perform the best fish farming technologies in Brazil.
Fruits. The Porto do Pecém stands out as one of the most important ones in Brazil, exporting averagely about 250.000 tons of fruits per year. Good production soil can be found in Ceará amongst the major 8 irrigated public districts, as well in other privileged locations for agribusiness in Piaui and Maranhão states.
Northeast states are placed near the Equator, with mild temperatures falling within 20º and 30º Celsius, allowing for more than one crop per year and maximum production.
Fish farming. In the 17,8 billion cubic meters of restrained water in Ceará could be produced 12 times more fish than what is done nowadays, as only 1% (127 ha)of that total area is used for fish farming. Ceará is already the state that produces more Tilápia (22.000 tons in 2010) and where consumption is bigger (about 20% of all Tilápia produced in Brazil is consumed in Ceará) in Brazil. In Ceará, during 2010, about 25.000 tons of shrimp were produced in 180 facilities.
So we seem to find the best arguments to go into business: market, technology, clear favorable trend.
Biomass and forestry for energy. In Northeast Brazil, forestry entrepreneurs are establishing production systems that approach the rentability found in southern parts of the country. In Bahia we find the adequate climate and soil characteristics to plant and explore African mahogany and Guanandi.
In both Bahia an Ceará it is already possible to see forests being sustainably developed with local species like Sabiá native wood. This way, we can address several markets related to wood demand: furniture, construction, biomasses for energy.
Whatever the dimension the agribusiness project might be, from family to entrepreneur level, it is crucial that the following steps be addressed: 1st) market study; 2nd) economic and financial viability study; 3rd) strategic and operational planning; 4th) implementation and infrastructure; 5th) administration and marketing; 6th) post-sale (eventually).
Become a (major) producer of agribusiness products, either by hiring famers (and providing technical assistance) or by joining with a Brazilian partner.
Develop processing industries, some of them with location in the Free Trade Zone now fully operational, and therefore benefiting from tax exemptions
Markets: Domestic (local, national) and Foreign exports
In this way, address foreign markets and also supply domestic growing markets (local, state regional, national).