Agribusiness success drives job creation, also increase income in other sectors
08/01/2023
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Bruno Imaizumi, economista da LCA Consultores — Foto: Leonardo Rodrigues/Valor
In a period of job recovery in the country, the Central-West region tops the list of formal and informal job creation. Employment grew by 6.8% between the Continuous National Household Sample Survey (Pnad), of the Brazilian statistics agency IBGE, made in December 2019 —therefore, before the turbulent effects of the Covid-19 pandemic – and the one made in March 2023.
It is almost three times the increase in the country’s occupancy, of 2.4% in the same period. At the end of the first quarter of this year, 8.4 million people were employed in the region, according to a study carried out by LCA Consultores based on the PNAD quarterly data.
In second place comes the North region, with an increase of 5.1% since 2019. However, in absolute terms for employment, the two regions are behind the others, which are more populated.
“The main cause [for the Central-West’s increase] is the performance of the agribusiness sector,” said Bruno Imaizumi, an economist at LCA. “There has been a commodity boom in recent years and record harvests have boosted direct and indirect job creation.”
For 2023, LCA’s forecast for employment in the country is still positive, although it is expected to grow more slowly in response to the pace of the macroeconomic scenario.
The agricultural sector is not the biggest powerhouse in terms of direct job opportunities. According to Pnad data, in March this year, within the employed workforce, 8% was allocated to agriculture, livestock, forestry, fishing, and aquaculture. The services sector accounted for more than half of the region’s workforce.
A study conducted by the commerce federation Fecomércio of the state of Mato Grosso shows that if we look only at the formal employment presented by the General Register of Employed and Unemployed Workers (Caged), agriculture occupies 12% in Mato Grosso and 21% in Goiás and Mato Grosso do Sul in 2023. In São Paulo and Rio de Janeiro, the activity does not represent more than 5% of the total balance of formal jobs. In the Southeast, agribusiness has more weight in Minas Gerais (15%) and Espírito Santo (31%), due to their global leadership in coffee production.
But as the number of jobs in the countryside increases, there is a domino effect in other sectors of the economy. “Each job created in one industry generates four more indirectly,” said Silvio Rangel, president of the Federation of Industries of the Mato Grosso State (Fiemt). In other words, an increase in soybean (corn or other products) production leads to a higher demand for warehousing services, transportation to distribute the harvest, and consulting services in the countryside. Additionally, it contributes to the growth of agricultural retail services for inputs, among other main activities.
“Every year production increases. This generates value and, consequently, more jobs and income,” said Leonardo Machado, technical advisor at Faeg, a private institution that represents agribusiness unions in Goiás. It’s also a food exporting region. This is a factor that explains the support of the local business environment in recent years of economic crisis, said Laysa Avalos, a research assistant at the Research and Analysis Institute of Fecomércio MT. According to Ms. Avalos, the number of listed companies since 2020 has progressed more than the ones that closed, demonstrating a favorable environment for business.
However, according to a study by Tendências Consultoria, the Central-West’s GDP is expected to grow by 2.3% in 2023, higher than the 1.9% projected for the country as a whole. The study’s author, economist Lucas Assis, points out to record soybean and corn harvests, as well as good results for sugarcane, livestock, the food industry, and biofuels.
There are risks for next year’s agricultural production due to weather conditions, but despite the challenges of the scenario, Tendências projects an annual average high of 2.5% of the Center-West’s GDP between 2024 and 2032 – above the high annual average of 2% estimated for Brazil in that period.
Mr. Imaizumi, of LCA Consultores, also adds that the high level of the key interest rate Selic, although bitter in many ways to make the economy move, has shown a positive facet in terms of the supply of credit to the countryside: since mid-2020 it has attracted a strong volume of funds for the Agricultural Credit Bills (LCAs). These securities, whose earnings are tied to interest rates and are exempt from income tax, are now an important source of rural credit, he recalls.
Also, according to the economist, the Central-West had the highest level of average income in the latest Pnad with a regional cut. The average of R$3,575 increased by 12.2% since December 2019 – and was also the largest increase in the comparison between regions in the observed period.
Mr. Imaizumi recalls that the Federal District has a large concentration of well-paid civil servants, which is a factor that influences the regional calculation, but adds that there is a significant effect of the increase in formal employability in Mato Grosso, Goiás, and Mato Grosso do Sul, which brings along better wages.
According to the National Supply Company (Conab), the volume of the most recent grain crop increased by 15% over the previous one, yielding 158.6 million tonnes in the Central-West, pulled by soybeans.
Considering the ecosystems of agribusiness, other business chains stand out, such as meat, biofuels, sugar, and vegetable oils, activities that foster much of the economy in the states of the region.
The production of pig iron and toys were also cited as highlights of Mato Grosso do Sul in addition to agribusiness, said Ezequiel Resende, chief economist of the Federation of Industries of the Mato Grosso do Sul State (Fiems), which represents local industries. According to him, the pandemic has not affected job creation in the state. With the boost of agribusiness, in 2022 alone, the 6,000 industries opened 9,700 positions.
According to Mr. Resende, there are 28 projects in Mato Grosso do Sul that involve the construction of units and/or industrial expansions that will require investments of nearly R$40 billion by 2028. Due mainly to factory expansions, the local construction industry has about 35,000 formal workers. “And there’s a shortage of people,” he said.
Fiems cites the JBS and Aurora slaughterhouse expansions as current projects. The JBS unit in Dourados is expected to increase its capacity to 10,000 from the current 5,000 pigs per day. There are also big-ticket investments in the Suzano pulp mill and a competitor, the Chilean Arauco, that has chosen the municipality of Inocência, about 330 kilometers from the capital of Mato Grosso do Sul, as its location for the investment.
Suzano is building its new plant in Ribas do Rio Pardo (100 kilometers from the state capital), and estimates that it will create 3,000 direct jobs in forestry and industrial operations. The investment is estimated at R$22 billion. Between direct and indirect jobs, the plant will be able to employ a total of about 10,000 people once in operation. “This is almost half the population of Ribas,” said Rodolpho Mangialardo, regional director of Senai, the National Service for Industrial Training. The city has a population of 23,000.
At the peak of the work, which occurs in 2023, the impact will be seen in the construction industry, with nearly 10,000 additional workers in operation – in this case, much of it from services providers from other locations, said Mr. Mangialardo. To train the workers who can find a place in the project, Senai had to create mobile units, in containers, and bring in teachers from Maranhão, Bahia, and Paraná, who joined the local team to teach the classes. Vocational courses continue.
The installation of Suzano’s forest and pulp mill has attracted more people unrelated with the project. According to the state government, work is being done on local highways, such as the section connecting Ribas do Rio Pardo to BR-060 in Camapuã. A plan to expand the sewage network is also being studied. The city has a sewage network service close to universalization, informs Senai, but it will be necessary to adapt the structure of the city to the landing of the new production unit.
Arauco is expected to start work on its new plant in 2024 but already employs 800 people in the forestry sector. The contribution is estimated at R$20 billion, said Bruno Gouveia, executive secretary of professional qualification and work of the Secretariat of the Environment and Development of Mato Grosso do Sul. He informs that the state has signed a memorandum of understanding with the two pulp companies, which have committed to carry out works and provide essential services to communities to meet basic needs in education, health, security, and infrastructure.
Another large-scale project, this time in the state of Mato Grosso, is the construction of the railroad that will connect Rondonópolis to Lucas do Rio Verde. The work is in the hands of Rumo, one of the largest logistics companies in the country. In this case, the investment is estimated at R$14 billion.
According to the company, this year’s works are expected to create almost 1,000 job positions joining the construction of the first railway viaduct in Rondonópolis and the works of earthmoving and drainage services, as well as another front dedicated to the construction of bridges and viaducts. It is estimated that 186,000 jobs will be created, of which 105,000 will be direct.
Also in Mato Grosso, the leading state in soybean production in the country, meat and biofuel industries have been making substantial investments, said Mr. Rangel, president of Fiemt. These are two areas among the main focuses of the local Senai, which has closed contracts with the government of Mato Grosso to train about 50,000 people in 141 municipalities.
The federal government recently increased the blending of biodiesel into diesel, one of the causes of the reactivation of the local plants, Mr. Rangel said. Investors in Mato Grosso include FS Fuel Sustainability, which invested R$2.3 billion in a new plant in the municipality of Primavera do Leste that began operations this year. Inpasa, which produces corn ethanol, expanded its plant in Nova Mutum last year, and biogas company Uisa is building a plant. The three projects have created more than 1,000 jobs, said Fiemt.
*Por Erica Polo — São Paulo
Source: Valor International