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Research Seminar: Dr Diego Vazquez

30/01/2013 (13:00-15:00)

Dr Diego Vazquez

Paper Title: 'Reducing Social Vulnerability and environmental deterioration through market mechanisms? The case of Petrobras and small-scale farmers in Brazil'

Abstract: This seminar analyse a market-led strategy aimed at reducing social vulnerability and environmental deterioration in the area of Guaribas in north east Brazil, the country’s poorest region.. Such intervention, a core part of Brazil’s bio diesel programme, creates incentives for market mechanisms promoting the implementation of innovative and sustainable agricultural production models (castor bean farming) in socially and environmentally vulnerable dry lands. The programme was launched with considerable political fanfare by the central government, which officially presented the bio diesel initiative as a key policy measure to alleviate the lingering problems of the rural poor. The strategy was implemented by  Petrobras -the state-owned Brazilian oil giant- and primarily designed to create demand-side incentives to improve the livelihoods of small-scale farmers in the region, to the point that it is a legal requirement that bio diesel produced in the poorest areas of the country should contain at least 50% of raw materials provided by small-scale framers.. Evidence from interviews indicates that family farmers may make a 20 per cent gain in income. Because of the low level of incomes/revenues involved, this seems to be a significant opportunity for them to enhance their material conditions.

However, supply levels were far below targets. Low production was primarily related to low participation rates, and in some areas there was no participation at all.. Most small-scale farmers were not interested in taking part in the programme, and many of those who participated faced economic losses because of price fluctuations in the fuel market. There was also a strong negative correlation between productivity levels and the participation ofs mall-scale farmers. Areas with higher levels of participation of small-scale farmers in the programme were significantly related with lower productivity levels per hectare. The average productivity of small-scale farmers is only 30 per cent of the figure estimated in pilot studies as being achievable under proper conditions.

The results were particularly disappointing in the north east, where the programme had been heralded as the start of an agricultural revolution to end chronic poverty [1] .  (Freire de Sousa and Figueira, 2009) . After the programme’s first year, therefore, the government had to cut by 50 per cent the minimum percentage of feedstock that producers have to buy from family agriculture in the region in order to secure tax benefits.

Insufficient supply suggests a fundamental failure in the system of incentives to foster participation in (and the continuity of) the programme.It also points to potential governance problems affecting the implementation of sustainable innovations. Consequently, the business model is neither efficient(costs of the large-scale design, bureaucracy, technical support and subsidies support largely offset productivity benefits), nor effective (limited participation leads to a modest impact on reducing poverty, vulnerability and environmental deterioration).

This seminar provides a brief institutional analysis of the interaction between actors and processes, with a view to offering insights into the reasons of such supply failure and the current effectiveness of the programme as a sustainable rural development tool

[1] The productivity of castor in the region was estimated at about 0.5 kilograms per hectare in 2008/2009. This figure was far below Petrobras targets of 1.5 tons per hectare of castor based on pilot projects


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