By FERNANDO NOGUEIRA DA COSTA*
Note on monetary-financial circulation between agribusiness and urban-industrial services
Continuous advertising on TV seeks to convince the uninformed Brazilian public opinion that agribusiness is everything in the Brazilian economy. In seeking this hegemony, it tries to transform it into a deserving totality of the privileges offered by the public policies – agricultural, commercial, financial, tax, land and technology – of the Brazilian State. After all, agro is pop…
The exporting agribusiness receives tax incentives in income tax, does not pay export tax and pays little in Rural Territorial Tax (ITR). It benefits from the depreciated national currency in favor of its exports and enjoys subsidies in rural credit. The National Treasury, that is, all taxpayers, finances interest rate equalization: a government subsidy given to rural producers when the government covers the difference between the interest rate practiced in the financial market and the rate effectively paid by the debtor producer.
The myth to justify all this would be the supposed transformation of foreign trade into a completely dependent on commodities agricultural. On the one hand, it abstracts oil and mineral exports apart from manufactured goods. On the other hand, it does not highlight the great responsibility for the jump in exports from US$ 48 billion in 1999 to US$ 334 billion in 2022 that was the external demand, in particular, that of China.
Incidentally, it is worth highlighting: between 2003 and 2011, the average of annual variations of Brazilian exports was 18,6% pa with a single drop in 2009; between 2012 and 2020, this average was negative (-1,7% pa), with increases only in 2017 and 2018. The growth in 2021 and 2022 was exceptional, respectively +34,2% and +19%, due to the recovery of business flow after the global pandemic.
Guilherme Delgado (degree, May 2023) conceptualizes agribusiness as “a Political Economy pact, associating integrated agro-industrial complexes with large land properties and the State planning profit from production and asset valuation, with a view to generating surplus external commercial results as a primary goal” .
The national objective is for the trade balance surplus to cover the deficit in the services and income account sent abroad. For example, in 2022, the current account balance deficit was US$55,7 billion, despite the trade balance surplus of US$44,4 billion, due to payments abroad of US$40 billion in services and remittances of primary income of US$64 billion, either in direct investment (US$42 billion) or in portfolio investment (US$21 billion). Profits and dividends remitted abroad predominate: those from branches to parent companies and those received in the stock portfolio.
It is a reductionist option to define agribusiness as agrarian capitalism, just as it would be to define “financialization” as financial capitalism – and so on. From this perspective, industrial capitalism would have lost its hegemony and this, presumably, would be a disaster from the point of view of generating productive jobs and added value.
One must understand the integrated functioning of the set of subsystems of the capitalist system: agricultural, livestock, industrial, mercantile and financial. They interact, are interdependent and do not exclude one another, whether on a national or global scale. Multinational corporations tend to control complex systems with agricultural, industrial, mercantile, financial, technological and ideological components.
Agribusiness is not just the agro-industrial complex. It is configured by a complex of networks interconnected by governments, politicians, multilateral financial organizations, supermarket chains, banks, etc. The possible development model for the Brazilian economy is not, exclusively, the primary-exporter, “outward-facing”.
The Physiocracy to the outrage it is anachronistic. The etymology of the Greek means "government of nature". It was one of the first economic theories, developed by the French in the XNUMXth century in the pre-industrial era. They assumed the wealth of nations to be derived solely from the value of "agricultural land" or "rural development".
Still predominant in many ideological minds is the Physiocratic emphasis on productive labor as the sole source of national wealth. This thinking was contrasting with Mercantilism. This focused on the wealth of the Kingdom, on the accumulation of gold reserves through surpluses on the trade balance.
Mercantilism preached the golden rule of commerce: the value of society's products would be created by the seller selling his products for more money than the price originally paid. The ideological strength of the physiocratic current of economic thought was that it was the first to defend work as the only source of value.
However, for the physiocrats, only agricultural work created value in products with the support of nature, sowing cheaper and reaping more expensive. All other non-agricultural jobs would be unproductive appendages. Merchants did not produce goods, they only distributed those produced by agricultural landlords.
Worse, Karl Marx and his disciples adopted the proposition of productive work as a dogma. In fact, according to the Marxist scheme, “productive” capital is not opposed to “unproductive”, but to capital in the process of circulation.
Productive capital directly organizes the process of creating goods and services. Capital in the circulation process organizes buying and selling, that is, the transfer of property rights over products. Wage labor, if employed in this circulation, does it not create value, despite being exploited?!
When used for the transfer of private property rights, all workers employed, among other “tertiary activities”, in commerce (buying and selling), in government (public administration) and in the financial system (payments, financing and money management) ) would be “unproductive”? Evidently, this is an inappropriate adjective, because it can be confused with “useless”. Well, they enable financial leverage, generating a larger scale of jobs and carrying out sales with added value greater than intermediary expenses.
All over the world, there has been a shift in the population from rural to urban areas and a consequent increase in the proportion of inhabitants in cities. By 2050, around 64% of the developing world and 86% of the developed world will be considered urbanized. The degree of urbanization in Brazil has already reached this last level.
In 1940, only 32% of the Brazilian population lived in cities. The 1970 demographic census registered the urban population overtaking the rural one.
The urbanization process in Brazil developed, mainly, in the second half of the XNUMXth century, from the industrialization process. This was a factor of attraction for the displacement of the population from the rural area towards the urban area. There were also repulsion factors for this countryside-city migration, for example, land concentration without agrarian reform and the mechanization of the countryside.
This rural exodus was symptomatic of the shift from an agrarian-export model to an urban-industrial model. The IBGE System of National Accounts already recorded in 1947 that Services (55,7% of GDP) had surpassed Agriculture (21,4%) and Industry (26%). Among them, Finance accounted for 3,3%. In 1989, Agriculture had fallen to 9,8% and General Industry increased to 46,3% – its peak occurred in 1985 with 48%. Financial Services, in this year of high inflation, reached 26,4%!
In 2022, its added value was accounted for at just 7,5%. In fact, the financial system does not add, but rather circulates (and appropriates) added value in other activities. It provides for the carrying and protection of the financial wealth accumulated by workers and capitalists. By fulfilling this social mission of money management, it enables social mobility if the planning of financial life is fulfilled.
Urbanization is usually seen as negative when residents move to peripheral suburbs without infrastructure. The development of infrastructure, with state planning instead of self-construction without the presence of the local government, leads to a reduction in transportation expenses and increases opportunities for employment, education, housing and transportation.
Economic growth may not be smooth if it is based on a small number of large businesses and depends on thousands of micro-enterprises. The lack of access to financial and business advisory services, the difficulty in obtaining credit to open a business and the lack of entrepreneurial skills are barriers for new generations to have access to professional and entrepreneurial opportunities.
Investment in human capital (personal earning capacity), for young people to have access to quality education, is essential. Together with infrastructure, for agribusiness and urban-industrial services, it makes it possible to overcome barriers.
*Fernando Nogueira da Costa He is a full professor at the Institute of Economics at Unicamp. Author, among other books, of Brazil of banks (EDUSP).
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