MACHINES AND EQUIPMENT: The Brazilian hope for recovering exportations

UNINPORT 3030 (Divulgação Jacto)

The More Food International Program (PMAI) is being restructured and other private initiatives should inject some new energy to the sector. “2016 was not a good year. The market suffered a big recession, the exchange rate did not help and the price of commodities also did not contribute much to that”, lamented Pedro Estevão Bastos, president of the Machinery Sectorial Chamber of the Brazilian Machinery and Equipment Association (Abimaq).

Pedro Estevão estimates that African continent is responsible for 15% of the exportation of agricultural machines and equipment manufactured in Brazil. He laments the PMAI slowdown. “This program is very important to the sector, but the government has reduced its resources due to cutting down on expenses. Thus, we had to also reduce investments”, he says. “We have been working in Mozambique, Zimbabwe, Ghana, and Senegal. And now we are trying to expand to Nigeria and Angola”. PMAI was created by the Brazilian government and it provides support to agrarian development projects and seeks to increase family farming production in participating countries. Mozambique, Ghana, Zimbabwe, Senegal, and Kenya participate on the African continent. A concessional line of credit was created as a complementary support initiative for the funding of agricultural machinery and equipment from Brazil for small producers in the participating countries of the program.

With the recent change in the government in Brazil, the program is going through a new phase. “At the end of 2016, a technical mission visited all the partnering African countries and also Nigeria, as it has already requested joining the program. Besides that, several other countries have already requested their participation in the program and their requests are being evaluated”, assures Guilherme Martinelli, special advisor of the Brazilian Special Secretariat for Family Farming and Agrarian Development (Sead). “Right now, the technical group responsible for managing the program is discussing what projects will be put into effect this year. A recovery of exportations is expected in the coming months this year”.

This announcement can impel Brazilian machinery and equipment industries as a whole as which earned which earned R$ 66.2 billion in 2016, a 24.3% recession compared to 2015, the fourth sequential annual drop in this sector, according to Abimaq data. PMAI is one of the main players for exporting machinery and equipment to Africa. “It is a serious program completely followed up by the Brazilian government. There are verification to check if these tractors are utilized effectively and if the government bidding processes are being complied with. This program has helped agriculture a great deal”, explains Edson Aires, who is the commercial director of Agrale, a Brazilian company. “In the past three years, we have shipped 500 tractors to Zimbabwe. Also we have sent some people to teach them how to operate the machines and tractors and in turn, we have brought technicians from the government of Zimbabwe to Brazil for training. The country has been a model in this program. This is the same kind of work we wish to carry out in other African countries”.

ADVANCE 3000 (Divulgação Jacto)

A strategic continent

The PMAI and PROEX Programs are essential for companies as the Brazilian Jacto Company. Headquartered in São Paulo, the company has been operating in Africa since the 1970s, partnering with local companies. South Africa, Kenya, Zambia, and Ethiopia are some of its main markets. The greatest demand for the company’s machines is the ones operated by tractor, especially those meeting the needs of small and medium-sized rural properties. In some markets, its market share ranges up to 42%.

However, the sector has seen other created initiatives, such as the Food For All program, developed by the Union of Machinery Industries and Agricultural Implements of Rio Grande do Sul (SIMERS), intending to increase its exportation volume by trying to include small and medium-sized industries. “We have mapped 23 markets to be worked on in the next 36 months in 2016. These markets are located in South America, Central America, the Caribbean, and Africa. Some of these markets are extensive, others are intensive, others are based on livestock, and others are focused on crops, but, practically all of them are needy for mechanization”, observed Eduardo Teixeira, manager of the SIMERS international consultant and program. “Each one of these markets are distinct and it is necessary to understand each one individually, if not, we will waste time and money. Even if it is not possible to sell the entire product line to these markets, it is possible to add some products to specific market niches”.

A partnership for the future

The fact is that nobody intends to take their focus off of Africa; at least in a medium term. This concept prevails in the private sector as well as in the government. “It is necessary to keep in mind, this is the first phase of PMAI, and the first time this magnitude has been put into effect in Brazil. Over 60 thousand machines and equipment have already been exported and that amount is expected to further increase in the coming years”, predicts Guilherme Martinelli, from Sead. “We are active in Namibia, Angola, Zimbabwe, Ethiopia, Ghana, Uganda, Ruanda, and Nigeria. Besides that, there are a series of other countries in our radar”, adds Edson Aires, from Agrale. “We also wish to continue growing in the countries where we are already present”.

UNIPORT 3030 (Divulgação Jacto)

The lack of credit is the bottleneck

Despite the interest in investing in Africa by Brazilian businessmen, there are some bottlenecks hindering the supply of agricultural machinery and implements. One of them is the lack of credit. “The African continent is a potential market; we have exported to various countries. But, the continent faces a big problem regarding credit. Not all countries can afford to pay for credit. And other countries have their credit blocked. But, there is great potential for this continent, due to the climate, the variety of crops, and our adaptable machinery”, tells Pedro Estevão Bastos, from Abimaq.

CONDOR 800 (Divulgação Jacto)

Incentive for exportation

Besides the More Food International Program (PMAI), Brazilian companies can utilize lines of credit for exportation, such as the Export Financing Program (PROEX), created in 1991 to guarantee the competiveness of Brazilian exportations. Its purpose is to promote funding for exportations through “compatible rates as those employed in the international market”. Companies with a maximum of annual turnover of R$ 600 million are targeted for this program which has Bank of Brazil as funding agent.

In 2016, the total amount of exportations supported by the program reached US$ 5.8 billion, according to data from the Ministry of Industry, Foreign Trade, and Services. The agricultural machinery and equipment and tractor sector was responsible for about US$ 357 million in exportations borne by the program last year and USD$ 99.7 million was shipped to the African continent having South Africa was the main destination.

ARBUS (Divulgação Jacto)

Program History

The More Food Africa program is an initiative of the Brazilian Government that arose from the “The Brazilian Dialog — Africa on Food Security, Fighting Hunger, and Rural Development”, an event that took place in Brasilia from May 10th to 12th in 2010. With the aim to respond to requests for support and technical cooperation by countries outside the African continent, in the South-South Cooperation scope, the Brazilian Special Secretariat for Family Farming and Agrarian Development proposed to expand the More Food Program.

With the entry of Cuba and the interest from other Latin American countries, More Food Africa was renamed, as of January 2012, More Food International (PMAI). The purpose of the program is to set up a technical cooperative line focused on the productivity of small farmer and the production of foods in developing countries, in order to promote food and nutritional security.