Brazil’s President Gets Impeached
Brazil president Dilma Rousseff was suspended by the Brazilian Senate by 55 votes to 22, condemning her on charges of fiscal mismanagement this Thursday morning after several hours of session. The impeachment was long expected by significant parts of society after over a year of public demonstrations asking for her resignation amid political instability, social unrest, corruption scandals, police operations, and, therefore, institutional uncertainty. Michel Temer, the vice president of the coalition that elected Rousseff, will assume office with the challenge of boosting the Brazilian economy, reducing unemployment, and moderating social anger.
The impeachment will be better for Brazilian agriculture, according to some experts. Most banks and analysts foresee a stronger real in a Temer presidency, but interest rates would be lower and more domestic demand would be seen with the necessary measures for the economic recovery. After having its GDP falling by four percentage points, the gross product of Brazil may fall by over 3% again in 2016.
This happens as Brazil has nearly 60% of the corn crop sold and about 30% of the soybean crop still to liquidate. In the meantime, farmers awaited for the new political landscape to sell remaining stocks. In the eve of impeachment, the dollar valued reached R$3.44, after getting over R$3.60 a day before. For Carlos Cogo, a market analyst based in Porto Alegre, farmers would still wait for a clearer definition of the new economic policy.
“The new finance minister and the central bank president already indicated that they will try to keep the real weak to benefit the export sectors. Farmers will watch it closely before selling massive stocks and will take a little longer to do it,” said Cogo to Agriculture.com.
“There will be more incentives in general for the productive sector, and the government would not think to impose more taxes in the sector. They would boost exports, incentivize privatizations, and make concessions on infrastructure and logistics,” added Frederico Schmidt, an analyst of Priore Investimentos in Curitiba, in an interview to Agriculture.com. Logistics is a key issue for the Brazilian grain grower in terms of costs.
Prior to leaving the government, Rousseff anticipated the launch of the Crop Plan, the Brazilian version of the Farm Bill, last week. For the 2016/2017 crop season, the loans available with government subsidies will reach R$30 billion. That would have the average farmer paying an interest rate from 8.5% to 12.75%
For the first time in history, the Confederation of Agriculture and Livestock of Brazil have not participated in the launch as a way of protesting against the previous government.
“With no doubt, this unilateral decision will not please [the ag sector]. The agricultural sector is now fundamental to balancing the country,” said Mario Schreiner, president of the policy Commission at the Confederation.
The Association of Corn and Soybean Growers of Mato Grosso (Aprosoja-MT) had issue a similar stance on the issue. “We have had an announcement of higher interest rates at a time that the crop has frustrated us. We know that the crisis is an economic crisis, but higher interest rates slow down product,” declared Endrigo Dalcin, president of Aprosoja.
Temer already announced that the next agriculture minister would be Blairo Maggi, once the largest soybean grower in the world. Maggi, who is now a senator, was questioned by environmental activists but was supported by farmers. He was also subject to previous corruption charges, but he was declared innocent.
“He started as a very small grower and became one the major ag executives in the world. He is technically and politically prepared for the job post,” said Dalcin.
“As Maggi is a voice of the sector, I don’t believe major cuts or differences would be imposed to the government’s Crop Plan,” concluded Carlos Cogo.
Regarding wheat, the milling industry has the challenge after the bankruptcy of several companies. For U.S. farmers, it would also be interesting to watch Brazil’s real and the real size of Argentina’s crop. That would tell how much demand Brazil would have for U.S. wheat. Argentina is the natural supplier for Brazil because of geography, and projections say that the country would increase its exports between 20% and 30%.
“The stronger the real is, the better the demand is for U.S. wheat. But it would also depend on how much output comes from Argentina,” explained Luiz Carlos Pacheco, director of Curitiba consultancy Trigo & Farinhas.