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Agriculture emerges as key Brazil election battleground

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Agriculture's emergence as a key political battleground ahead of Brazil's elections was underlined when the government of President Dilma Rousseff, who has slipped behind in the polls, unveiled concessions for sugar producers.

Guido Mantega, the Brazilian finance minister, on Wednesday revealed it would extend to the ethanol and sugar sectors the so-called Reintegra programme, ensuring producers a tax refund of 0.3% on the value of exports.

The figure will rise to 3% of the value of export next year.

The move comes in the face of a surge in opinion polls of opposition candidate Marina Silva, who has courted popularity in the ethanol sector by pledging to allow higher gasoline prices if she is elected at the presidential vote on October 5.

The cap that Ms Rousseff's administration has placed on gasoline prices, in an effort to control inflation, has been widely blamed for exacerbating problems at cane mills facing sugar prices near seven-year lows.

The limit on gasoline prices is viewed as preventing higher values of ethanol.

Green history

Many farmers are in fact wary of Ms Silva, who was named Socialist party candidate in the elections after the death of Eduardo Campos, given her record as an environmental campaigner.

Ms Silva, the daughter of an Amazonian rubber tapper, first gained prominence as an anti-deforestation campaigner and, as environment minister in 2003 and 2008, criticised the government for failing to do more for conservation.

Michael Cordonnier, a crop scout and Brazil expert, said that reforestation has become a dirty word for many farmers, who under a law passed two years ago were forced to replant land illegally felled.

"Some of what they had to replant was cleared generations ago," he told Agrimoney.com.

"At least crop prices were high then, so they could better afford it. Now when prices are low, many farmers are struggling to make a profit at all."

Coffee correlation?

In the coffee sector – an agricultural commodity of which Brazil is the top producer, as it is of sugar, while ranking as the top exporter of soybeans and second biggest shipper of corn – João Alberto Peres Brando at Brazil-based consultancy P&A Marketing noted an apparent correlation between Ms Silva's popularity and prices.

After two recent polls favouring Ms Silva's chances of winning the election "the price of coffee went significantly up.

"Since Marina has had historical environmental quarrels with the agriculture sector in Brazil, these price changes may signal market worries that Brazil's future supply of coffee may be curbed by government intervention or regulation," he said, if questioning whether such concerns are justified.

"Coffee farming and processing in Brazil," undertaken in eastern and southern areas far from Amazonia, "are considered of low environmental impact.

"There is margin to expand productivity and most potential new areas of production do not impose threats to native vegetation or indigenous communities."

'Big and powerful corporations'

In fact, Ms Silva has "always recognised the importance of the [agriculture] sector for the Brazilian economy", her office told the Wall Street Journal.

"There's a mistaken idea that when you talk about agriculture that means being against the environment and vice versa."

And in targeting the sugar and ethanol sector in particular, she is courting an industry with significant clout.

"It is a major sector, an industrial sector, with big and powerful corporations, concentrated in the state of Sao Paulo," Dr Cordonnier said.

"Dilma needs to win it."

By Mike Verdin

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