SD:UTF/BRA/036/BRA BRAZILIAN FUNDS-IN-TRUST AGRARIAN POLICY AND SUSTAINABLE DEVELOPMENT GUIDELINES FOR SMALL FAMILY FARMING PROJECT FINDINGS AND RECOMMENDATIONS BRAZIL Terminal Report Report prepared for the Government of Brazil by the Food and Agriculture Organization of the United Nations Rome, 1998

Table of Contents

LIST OF ABBREVIATIONS

1. INTRODUCTION

1.1 PROJECT BACKGROUND

1.2  OUTLINE OF OFFICIAL ARRANGEMENTS

1.3  PROJECT OBJECTIVES

2.RESULTS AND CONCLUSIONS

2.1  WORKSHOPS AND SEMINARS

2.2  REPORT FINALIZATION

2.3  AGRARIAN SYSTEMS DIAGNOSTIC COURSES

2.4  DIAGNOSTICS OF REGIONAL AGRARIAN SYSTEMS

2.5  FOLLOW-ON ACTIVITIES

3.  RECOMMENDATIONS

3.1  INTEGRATED GLOBAL DEVELOPMENT

3.2  DIFFERENTIATED FARM POLICY

3.3  EDUCATION

3.4  SUSTAINABILITY

3.5  LAND TENURE POLICY

3.6  LAND REFORM

3.7  COSTS

3.8  AGRARIAN RATIONALIZATION

3.9  LEASING AND SHARE-CROPPING

3.10  TAXATION

3.11  OTHER ACTIONS

Appendix 1 PROJECT STAFF

Appendix 2 TRAINING ACTIVITIES

Appendix 3 MAJOR ITEMS OF EQUIPMENT SUPPLIED

Appendix 4 LIST OF PROJECT PUBLICATIONS

LIST OF ABBREVIATIONS

EMATER Technical Assistance and Rural Institute

EMBRAPA Empresa Brasileira de Pesquisas Agropecuaria

Brazilian Institute of Agrarian Investigation

IBGE Brazilian Institute of Geography and Statistics

INCRA National Institute for Colonization and Agrarian Reform

ITR Rural Land Tax

NGO Non-governmental Organization

PROCERA Special Credit Programme for Land Reform

PRONAF Programa Nacional de Apoyo a Agricultura Familiar

National Family Farming Support Programme

SOF Land Rationalization Company

1. INTRODUCTION

1.1 PROJECT BACKGROUND

The small family farming sector in Brazil refers to a particular category of rural producer, with certain defining characteristics. It concerns a segment of agriculture which differs from the others according to the type of work management employed. Maximum attention should be given to the question of productive diversity, as this is the main economic production strategy of family units.

Family farming is not necessarily synonymous with the traditional Brazilian concept of small family production; the concept of family farming is not related, therefore, to the size of the productive unit.

Historically, the small family farm sector amounted to about 4.5 million units in the 1980s. A process of minifundization had also been ongoing, and farm units with less than 10 ha had increased by 350% in 40 years, going from one-third of total farming units, managing 1.5% of the total arable area, to half of all units in the 1980s, farming 2.6% of the surface area.

There had been a parallel decrease in relative terms in the number of persons economically active in the rural sector, going from 69% of workers in 1940, to only 27% in the mid-1970s.

Censuses in 1975, 1980 and 1985 indicated that the small family farm sector was acting as a form of buffer against the violent economic crises of the period. Between 1975 and 1980, the number of persons working in the rural sector dropped 5%, which corresponded at a macro-level to an upsurge in the construction industry. In contrast, the same sector showed an increase of 17% between 1980 and 1985. This was attributed to the effects of the financial crisis of the early 1980s, with stagnation in the construction industry and general high urban unemployment. The conclusion was that people had gone to the cities for work, and then returned to the rural sector when times became bad.

When the economy started to recover, it was clear that the rural, and especially the small family farm, sector was not benefiting from the country's economic growth. Although funds had been allocated for rural development, the small family farm's share had been only limited at best. The project was intended to address the situation.

It was based on the outcome of an earlier UNDP/FAO project, BRA/87/022, which carried out a sample survey of the benefits of land reform throughout the country, interviewing 827 families distributed in 44 settlements. That project had two basic objectives: to characterize the socio-economic viability of land reform; and to analyse the main determinants of the process of income generation inside the settlements.

The study showed that the beneficiaries of land reform managed to generate income levels that were 3.70 times the legal minimum wage (including self-consumption), and so higher on average than the wages of rural and urban workers.

In addition, many socio-economic indicators were produced concerning the situation of land reform settlements in Brazil, and the determinants of the process of income generation.

A resurgence of social pressures for land reform, together with greater credibility concerning the viability of the settlements, due in part to the FAO work, led to the resumption of land reforms in 1993.

That same year, the National Institute for Colonization and Agrarian Reform (INCRA), through the Government, once again requested FAO assistance to carry out a series of investigations and help formulate proposals concerning the expansion and streamlining of the land reform strategy for Brazil.

In response to this request, FAO implemented project UTF/BRA/036/BRA, thus starting a period where land reform started to figure in the discussion on family farming in Brazil.

1.2  OUTLINE OF OFFICIAL ARRANGEMENTS

The original agreement for Trust Fund project UTF/BRA/036/BRA, Agrarian policy and sustainable development guidelines for small family farming, was signed by the Government of Brazil on 16 November 1993 and by FAO, the Executing Agency, on 4 June 1993. The original project had a budget of $US 226 000, and a planned duration of 8 months. It became operational immediately upon signature by the Government.

The project was later amended, and Amendment No. 1 had a budget increase of $US 680 260, bringing the total budget for UTF/BRA/036/BRA to $US 906 260; revised objectives and a planned duration of 24 months in two phases: 8 months in 1994 (January to August), and 16 months (September 1994 to December 1995).

The project was later revised, and Amendment No. 2 signed by both parties on 30 January 1996. Activities under Amendment No. 2 form the subject of this report.

The budget for UTF/BRA/036/BRA Amendment No. 2 was $US 619 000, bringing the total budget for UTF/BRA/036/BRA to $US 1 525 260. The National Institute for Colonization and Agrarian Reform (INCRA) was the government counterpart agency responsible for project implementation. The total planned duration of activities under Amendment No. 2 was a total of 12 months (1 January to 31 December 1996).

The project was again revised, on 14 October 1996, and activities under Amendment No. 3 will be reported separately.

1.3  PROJECT OBJECTIVES

The development objectives for Amendment No. 2 were:

  � improved efficiency of INCRA activities within agrarian reform settlements;

  � support for the family farm sector through adequate agricultural policies, with particular reference to agrarian reform settlers; and

  � sustainability of the agrarian system approach in activities of INCRA and decentralized organizations.

The immediate objectives for activities under UTF/BRA/036/BRA were to:

  � study the feasibility of technology and organization transfers from family farm sectors which have good experience of efficient agricultural production systems and marketing procedures, to new land reform beneficiaries;

  � draft regionalized guidelines for sustainable development of family farming in Brazil;

  � train various INCRA and MAARA officers and agents of decentralized organizations so that they would be able to implement the agrarian system methodology when dealing with diagnostic analysis of rural development and farming systems; and

  � identify and support research on agrarian issues.

2.RESULTS AND CONCLUSIONS

2.1  WORKSHOPS AND SEMINARS

A series of workshops was held to consider the regional reports produced in 1995 (an activity under Amendment No. 1) by the FAO/INCRA work team.

These reports summarized the diagnostics of family farming in the Brazilian context and the main obstacles to its development and progress, and put forward some regional-level policy proposals directed at solving the problems found.

The field investigations were carried out in the municipalities of Quilombo (SC), Fernand�polis (SP), Varios de Goi�s, Valente (BA) and Altamira (PA) and, although not absolutely comprehensive regarding all aspects of each region, they were highly innovative concerning the diagnostics of income, the systems and the proposals.

There were up to 40 participants in each regional meeting, representative of the principal institutions dealing with family farming in Brazil, including the Technical Assistance and Rural Institute (EMATER); INCRA; Inst. de Tierras; EMBRAPA; Department of Agriculture; non-governmental organizations (NGOs); universities; landless peasant movements; employers' federations; and others.

The project was responsible for two reports for each meeting: a National Report on the Profile of Family Farming in Brazil, presented by the Chief Technical Adviser, and a Report on the Family Farming of the corresponding Region, which was presented by the teams from each region. These presentations were followed by debate, which in every case was extremely constructive, with no significant criticisms being made to the project's proposals.

Nevertheless, it was decided to consider the regional reports as preliminary drafts for more exhaustive and more regionally specific reports to be produced when the results of the field investigations of the 1996 season became available. The 1996 investigations were to cover additional areas of the regions under study. In this way the final report would have greater relevance for each respective region.

Details of the regional seminars are given in Appendix 2.

2.2  REPORT FINALIZATION

The project finalized and published a major report, Profile of Family Farming in Brazil - Statistical Dossiers.

As input to the report, various special data tabulations and maps derived from its census were provided by the Brazilian Institute of Geography and Statistics (IBGE). These were then combined with the results of numerous discussions within the report preparation team, and with INCRA, the Confederation of Agricultural Workers (CONTAG), the Land Institute of S�o Paulo (ITESP), various universities and academic centres, the Congress of the Brazilian Society for Scientific Progress and, of course, the five regional seminars. The result was an almost definitive draft, which was then reviewed critically both academically and technically.

The report had considerable coverage in the local press, television and radio.

2.3  AGRARIAN SYSTEMS DIAGNOSTIC COURSES

The organization of the five courses was undertaken by the regional teams set up under the project. The main activities involved were logistics (arranging of transport, accommodation and supplies), selection of participants (institutional and personnel criteria), and selection of the work areas (visits to the region, etc.). Material was produced and distributed in advance to the participants.

The five 10-day courses were successfully held between July and August 1996, for a total of 104 trainees, with excellent support from INCRA. This clearly went beyond the initial objective of training 60 persons in three regions.

The course content was simultaneously theoretical and practical, and so the outputs were twofold: training of the groups, and accumulation of data on the settlement region, the types of producers and the production systems. This second output was extremely useful as an input to the diagnostic work to be carried out by the team in the two subsequent months.

A significant aspect of this training activity was the production of five regional reports elaborated according to identical methodology.

The consultant also collaborated in the selection of a group of 48 persons from among the total participants to form the basis for multiplying the experience in 1997.

The courses and their venues are given in Appendix 2.

2.4  DIAGNOSTICS OF REGIONAL AGRARIAN SYSTEMS

As a continuation of the course on agrarian systems, five diagnostic studies of the regional agrarian systems of the country were planned. These diagnostics were designed to characterize the status of family agriculture and the land reform settlements of the regions, their main production systems and the obstacles to their development. This was seen as a means to try and transfer experiences from family farming to the settlements and to produce regional reports about family agriculture and land reform in Brazil, and were discussed from 17 to 19 December 1996 in a workshop in Bras�lia.

The conceptual development process and the statistical bases also achieved more than expected, generating a significant interest in both the systems method and family farming potential in Brazil. The project's work and its publications led to a number of important conclusions about family farming and land reform in Brazil:

  � There were 4 339 053 establishments (75% of the total) with family characteristics in Brazil, occupying 22% of the total area, and accounting for 60% of rural occupations and 28% of the total value of farm production. Of all the establishments which obtained financing, 44.2% were families, representing 11% of the total financing.

  � There was a family farm sector - on the lines of the American family farm - of around 1 500 000 producers (Group A), distributed in the different regions of the country, although more concentrated in the south. This sector generated an average annual monetary income of 57.1 � minimum wages from an average area of 32.1 ha.

  � There was a so-called transition sector of around 1 020 000 establishments which was in danger of becoming a marginal group if it did not receive immediate support from agrarian and farm policies.

  � Family farming predominated in the north, northeast and south, where it contributed high percentages of production, particularly beans (62% in the south), maize (63% in the north, 61% in the south and 62% in the northeast), rice (62% in the northeast), cassava (83% in the north and 76% in the south), poultry (52% in the south and 57% in the north) and milk (65% in the south). In the south, its contribution to the total production of the region reached 43%, and 28% in the country as a whole because of the strong influence of the southeast, which was more corporate-based.

  � Family farming had proved more efficient in using the production factors of land and capital compared with the corporate farming sector.

  � The land-size factor did not appear to be the sole explanation of social ascension, in terms of income, from Group C to B, but seemed fundamental in overcoming the problem of hunger.

One of the most important results of the work carried out in 1996 was the official decision of the Government, both in INCRA and Programa Nacional de Apoyo a Agricultura Familiar (PRONAF), to progres-sively encourage the use of the agrarian systems diagnostic method in the technical assistance to be offered to settlers and family farmers.

The recent crisis in the corporate farming sector of Brazilian agriculture (i.e., sugar cane zone, cocoa zone, important soybean areas, etc.), however, worsened the conflicts and required a more obvious response from the family farming side. It was now a question not only of diagnosing the problems of the settlements, but also of producing family models able to replace in an efficient and productive way, at least in some regions, the corporate farming which was in decline.

There were also clear problems in the small family farm sector's access to credit, and various options for providing more governmental support in this area were explored by the project teams.

2.5  FOLLOW-ON ACTIVITIES

The conceptual and methodological efforts needed expansion to respond to the new demands that had arisen. INCRA and the government sector responsible for family farming (SDR-PRONAF) needed empirical and theoretical elements that would allow them to carry out ex ante planning of the new farming that they sought to promote. An important conclusion, therefore, was that government programmes, in as far as they referred to access and use of the land, could not be limited to solving localized problems. According to the view one had of Brazilian agriculture, one should propose reforms directed at strengthening and developing the systems considered fundamental to the new strategy.

From this viewpoint, deciding ex ante the system that was proper to develop by means of land reform, coupled with increasing expertise in the agrarian systems diagnostic method, the Ministry of Land Affairs requested and signed Amendment No. 3 of UTF/BRA/036/BRA, thus ensuring continuity in project activities. It had an expected duration of 18 months, to commence in January 1997.

3.  RECOMMENDATIONS

3.1  INTEGRATED GLOBAL DEVELOPMENT

Agricultural supply had grown significantly in the fifteen years from 1980, in great part as a result of greater productivity. However, this increase in productivity took place at a higher total cost while the volume of resources devoted to rural credit dropped abruptly, implying that many producers gave up institutional rural credit.

The category which suffered the most from the brutal reduction in the volume of bank credit was family farming, particularly the segment which lost its self-financing at the peak of the so-called "conservative modernization". The proliferation of new credit schemes launched by the state banks of the centre-south region, particularly aimed at the small and medium producers, was a reflection of this situation. Credit cooperativism also grew, but in an environment fraught with legislative difficulties and opposition from establishment banks.

It is therefore recommended that the Government investigate the possibility of creating a special system of investment credit specifically designed to support the young family farmer. This would be an integral element of a policy for sustainable, integrated global development, understood here to mean the execution of expansion plans, re-orienting or converting the productive system practised in a certain establishment.

Such a credit initiative would require the cooperation of relevant agencies with an interest in the sector, and eligibility for such credit should be contingent upon farming activities being a family undertaking; the farmer possessing sufficient professional capacity; undertaking to maintain an accounting system from the beginning of the plan; and having a family income below an established level (to be fixed in terms of multiples of the nationally benchmarked minimum wages.

3.2  DIFFERENTIATED FARM POLICY

Agricultural Law No. 8.171/91 established the principle of a "differentiated policy" as a way of meeting the specific needs of the so-called "small producer". This principle should result in a different political treatment for this category, having recognized the preferential treatment given to "large producers".

However, the concrete demands of this differentiated policy concern chiefly the financing agencies and marketing support, which are strongly dominated by the large-scale agricultural sector, with the agencies remaining indifferent to the problems of family producers.

It is recommended that the Government consider defining fiscal policy schemes that make it viable to finance a programme for "family farmers", not only in the area of traditional, but also non-traditional, resources. Any such scheme should make due allowance for the restricted resources of the typical small family farm unit. Such schemes, however, can only be made viable if there is a reasonable consensus about the legitimacy of the proposals.

In support of this process, it is recommended that:

  � farm credit for the small family sector be linked exclusively to the "equivalent-product" contract for family producers, with full settlement of the debt on termination of the contract. Rates of interest should cover at least the cost of the funds (when these originate from international credits). Procedures should be simple to facilitate access;

  � the minimum price policy be linked, in the case of family producers, to the equivalent-product contract, which implicitly grants a price insurance to such producers. However, given the highly fragmented character of family production, it will also be useful to adopt adjustment mechanisms for settling contracts, avoiding cash payments or obligations, possibly applying the "target price" concept to the guaranteed prices in the equivalent-product contracts. Thus every time the commercial price is below the said "target price", the family producer would be given the option of marketing his or her production within certain previously established price limits, linking such commercialization to the cash settlement of the equivalent-product contracts. The shortfalls (between market price and target-price limits), would be covered by explicit subsidies for the settlement of the contracts, in a similar manner to current arrangements for budgetary subsidies for matching commercialization loans;

  � family agriculture be introduced into a favourable macro-economic, financial and fiscal environment. This implies, on the one hand, eliminating fiscal exemptions and subsidies for corporate farm production, such as the importation of heavy machinery and, on the other hand, reducing taxes on rural wages in order to eliminate the bias in favour of premature mechanization. Furthermore, certain fiscal and customs advantages should be maintained for simple tools and equipment adapted to medium-sized productive systems; and

  � technical manuals be elaborated for production systems suitable for producers in marginal areas with adverse climatic and water conditions, with a systems focus and stressing good sustainable management schemes for micro-regions with mixed activities, including agroforestry, agro-forestry-grazing systems, etc. Such production systems should stress sustainable farming and be formulated to encourage the active involvement of non-governmental entities (private-sector professionals, consultants, NGOs, etc.), and aim to achieve self-financing technical assistance when production and income increases allow so. This would leave public agencies with a secondary but important support role in technical assistance (training of agricultural technicians involved in the technical assistance programmes for small producers; the loan of audiovisual equipment as a support to the technicians carrying out primary work in the field; development of training programmes using radio, television and video, etc.), besides carrying out basic and applied research. This change of emphasis will require a degree of rethinking of the overall role of the public agencies in training, and especially traditional training programmes dependent on public agencies.

3.3  EDUCATION

The introduction of a new technological model for farming, based on the small family farm sector and on sustainability, implies a need for reforms in the system of rural education. The new model will require new skills not currently provided by the present educational environment available to farmers. Educational environment refers to the basic education offered in rural schools; the very limited professional training opportunities; and training and technical assistance networks, and their relationship with the agricultural research system.

It is recommended that the Ministry of Agriculture consider establishing a high-level commission, with union and cooperative movement participation, charged with studying the current situation and proposing possible extensive reforms to the rural education system. The Franco-Belgian Maison Familiale formula already introduced in some municipalities as Rural Family (CFR) projects is an example. Such approaches involve both formal and applied training, thus simultaneously addressing basic education and occupational training. They can also improve the relationship between farmers and the professionals providing technical assistance, whether through official networks or cooperatives.

As it is most unlikely that the state technical assistance networks can be restructured and developed to help a significant part of the 2.5 million farmers that make up the target group of these proposals, new directions must be sought which avoid the obvious problems. One possibility is to encourage organized groups of farmers to contract their own farm technicians to operate more efficiently than the technicians employed by public agencies. Some of the most efficient technical assistance networks have been formed in this way, through private initiative. A number of efficient technical assistance networks have been formed through NGOs, involving groups of family farmers studying agricultural techniques, and such networks have demonstrated their effectiveness in responding to the challenges of sustainable agriculture.

3.4  SUSTAINABILITY

Awareness of environmental distortions introduced by the present systems of food production and consumption is undoubtedly growing stronger in advanced countries. There is growing concern about the healthiness of food, and the conservation of natural resources used. This requires new farm production methods which reduce adverse environmental impacts and ensure high levels of purity and the absence of toxic substances in foods. In the final analysis, this is the implicit social challenge in the expression "sustainable farming".

Corporate farming has led to erosion, pollution of water resources and contamination of foodstuffs, for which society is beginning to demand compensation. Current thinking is to redirect incentives towards diversification, through crop rotation, particularly in grain production. Appropriate crop rotation may be the only viable solution - both economically and ecologically - to phytopathological and edaphic problems associated with annual monocropping. It is urgent, therefore, to provide educational support for the producers who are today operating on a small scale, but who can progressively become medium- and large-sized concerns, without necessarily losing their essentially family characteristics.

It is therefore recommended that:

  � science and technology policy be expanded to include research initiatives into more complex agricultural systems, particularly into systems that integrate arable and livestock farming for the production of traditional products of high aggregate value but which require a lot of labour;

  � technology dissemination be improved by restructuring the rural training service, with the aim of supporting the development of more complex, integrated agricultural systems. Land reform settlements, in particular, offer scope for applying the knowledge available of such multicrop agriculture in official agencies such as EMBRAPA;

  � vertical integration of arable and livestock farming be promoted, based on small-sized animals with a large capacity for efficient biomass transformation. This integration will not only increase the ecological efficiency of the farming system, but also increase the economic flexibility of the productive unit vis-�-vis risk arising from market fluctuations;

  � crop rotation be encouraged as an efficient way of obtaining ecological benefits from associated crops, without precluding mechanization, and offering great flexibility for integration with livestock farming;

  � integrated pest management practices be promoted, minimizing the use of agrochemicals;

  � the use of organic compost be promoted. While impractical in monoculture, it is an efficient practice in the type of mixed agriculture proposed. This will require the use of relatively simple techniques for treating vegetable and animal residues so as to avoid wasting nutrients, particularly nitrogen;

  � soil conservation be stressed, both through mechanical measures of containing surface water runoff (contour planting, terracing, etc.), and through cultivation practices such as green mulching; and

  � the use of agroforestry systems be developed and supported, especially in regions with abundant forestry resources, such as Amazonas. Research into such systems has been going on for some time and a significant body of successful experiences exists, both in Brazil and elsewhere in Latin America. It is an economically and ecologically efficient alternative for exploiting balanced, but fragile, ecosystems, and has a biogenetic value whose conservation is considered of paramount importance.

3.5  LAND TENURE POLICY

On the basis of Complementary Law 76 (July 1993), there now exists the potential for sensible land reform. It is recommended that the Government use the opportunity thus presented to support the development of the small family farm sector with suitable fiscal and institutional provisions, so that the sector can mature into a sustainable and productive element in the national agricultural structure. The current discrepancy between, on the one hand, the demands and expectations of the new social actors and, on the other, the fiscal and institutional capacity of the State to meet these demands, gives cause for concern. This situation might well deteriorate in the face of increasing pressures on the small family farm sector and the reduced operational capacity of government entities. It is important, therefore, that the critical resources to support the development process be made available as soon as possible.

This will involve not only rethinking the land reform programme but also complementing it with other initiatives, such as establishing regulatory norms, facilitating indirect access (leasing and share-cropping) and adjusting taxation.

3.6  LAND REFORM

Following enactment of Agrarian Law No. 8.629/93, land reform has become a possibility. In order to ensure progress in its implementation and in obtaining land resources, the institutional question will have to be addressed. It is therefore recommended that the Government consider restructuring the executive organ and the state and municipal institutions linked to setting up and consolidating settlement projects in their regions. There is need for coordinated decentralization, with the rights and duties of the public bodies clearly established and the forms of participation of the settlers in the region made clear. Any such commitments should be sufficiently flexible so as to assimilate the large regional and social diversity of the settlers and to take into consideration the variations in the capacity of local government to fulfil their specific responsibilities.

The urgency of the situation leads to the following recommendations:

  � expropriation activities should be concentrated in the federal sphere. Constitutionally, the only activity that requires the authorization of the President of the Republic is the expropriation of private lands in the social interest;

  � the settlement policy should be decentralized and simplified by using a methodology which produces more expeditious projects. The implementation of construction work and the control and monitoring of services for the settlers could be delegated to the states and municipalities, with the Federal Government concentrating on what is strictly necessary;

  � greater powers should be delegated to the regional offices, promoting decentralization and the creation of a new institutional matrix. This implies, above all, the need for a thorough remodelling of the executive organ to fit the new reality. Expropriation and planning functions should be retained at the federal level and more power delegated to the regional offices;

  � duplication in implementing land reform actions should be eliminated: decentralization favouring regional and state agencies would have to be by right and not by act, as very often happens, creating a climate of dispute in occupying spaces and winning power. It is suggested that the State Land Institutes devote themselves exclusively to resolving land tenure questions, leaving productive aspects to the State Departments of Agriculture. Putting an end to the differentiation between state and federal settlements should also be considered, since they will all come under the jurisdiction of state policy;

  � the process of obtaining land resources should be decentralized: to be able to make a selection of areas for expropriation, the municipalities should have access to the Register. INCRA would only establish the necessary norms to ensure homogeneity in the state registers and continue to elaborate registry statistics.

  � society's participation in the land reform process should be made official, so that the public's participation is also by right, legalizing the channels of participation and communication between the different social and institutional ambits. It is suggested that this participation be given substance by creating state, inter-municipal or municipal commissions for rural development through which society's mobilizations and demands can be channelled, but which also have some degree of autonomy to resolve concrete questions such as, for example, indicating areas that can be expropriated, or selecting potential beneficiaries (as has already occurred in Santa Catarina);

  � the basis for consensus on signing a general agreement on the question of land reform should be established, to include the federal authorities, states and municipalities concerning the decentralization initiatives. Where there is firm, demonstrated interest by municipal administrations for having land reform settlements within their territorial limits, owing to the economic development they generate, it is suggested that an institutional matrix of the following type be considered: the demand for creating a settlement should originate from the municipal commissions, with the equal participation of the authorities and the social movements, who would propose the area to be expropriated or acquired by the federal authorities. The federal authorities would analyse the proposal coming from the municipal commissions and, in the event of proceeding with the expropriation, would demand an undertaking from the municipalities to carry out certain basic infrastructure works (demarcation, roads, silos) and to provide certain services in the health and education areas;

  � the provision of technical assistance for the settlements should be under the jurisdiction of the state governments, possibly in collaboration with NGOs, but it could be the responsibility of the municipal administration to sign agreements with the State Agricultural Departments to provide this service in the settlements. Alternatively, a scheme similar to that in Santa Catarina could be set up, where the municipal commissions are also responsible for technical assistance, using technicians and vehicles on loan from the state government;

  � infrastructure that the municipal administrations are not in a position to implement, as well as supply of the equipment and tools necessary to commence productive activities in the settlements, should be financed by the Federal Government through the Special Credit Programme for Land Reform (PROCERA), once it is adapted to the new conditions resulting from the economic stabilization plan (the Real Plan); and

  � in sum, the matrix would have federal elements (obtaining land and credit), state elements (technical assistance and monitoring the development of the settlement), and municipal elements (implementing the basic infrastructure and providing direct assistance services for the settlers).

3.7  COSTS

Despite the fact that land reform continues to be one of the most controversial issues on the Brazilian political agenda, one of its main virtues cannot be contested: its huge potential for generating jobs and income. Neither can one ignore the fact that the creation of a work post in farming requires only a seventh of the resources required to create a new job in other sectors of the economy. However, there are limited data on the true costs of the settlements. In fact, land reform should require little actual expenditure and is more a question of advancing resources, given that the beneficiaries, according to the law, should reimburse almost all the costs of the settlement. The four primary cost elements are expropriation, including the cost of the land and compensation for improvements; building of infrastructure (roads, schools, health posts, silos, wells, etc.); installation credits (food, production costs, housing); and PROCERA (operation and investment), the administrative costs of maintaining the institution responsible for executing land reform. Of the four cost components, the most difficult to estimate is the cost of obtaining the land, particularly because in the majority of cases the actual cost of obtaining the land will only be known when the expropriation is legally concluded. It is fundamental, therefore, that methods are formulated that allow an optimum use of the available financial resources by means of better control and planning of expenditures. To this end it is recommended that:

  � the methodology for calculating the cost of the plots be reformulated so that repayment of the plots and the credits received by the settlers form a way of returning the resources already disbursed by INCRA. In view of the anomalies in costings, particularly whether values are indexed, historical or market, it is suggested that the value of the land and the credit be updated and the plots of land received by the beneficiaries be charged for at realistic rates, but obviously on terms compatible with their ability to pay;

  � a databank on land prices be set up at the municipal level as knowledge of the market value of land will enable more realistic valuations to be made, minimizing delay due to litigation over compensation to be paid. This delay, besides holding up the emancipation of the settlements, increases excessively the cost of obtaining the land, as it multiplies administrative costs, fees and compensatory interests;

  � certain obligations be transferred to the states and municipalities as part of the decentralization process. Thus infrastructure works carried out by the municipal governments, for example, would probably be cheaper and with better cost control;

  � support be given to the associative organization of the settlers, engendering better use of the infrastructure and encouraging the social cohesion of the settlement community. It is the participatory process, without doubt, which optimizes the performance of the collective teams;

  � the rate of emancipation and issuing of land titles be accelerated as the emancipatory process of the settlements has been delayed for various reasons which very often do not depend on the work of the executive organ. There are also obstacles related to the bureaucracy itself, particularly concerning the paternalism that still persists in the norms and procedures in force, which should have been resolved long ago;

  � the search for land resources be concentrated in areas of lower value, as the costs of the expropriations in the states of the south and in S�o Paulo have been excessively high;

  � greater emphasis be given to obtaining public lands, particularly by means of repossession suits, thus recovering public lands that have been occupied illegally by farmers who therefore have no legal land little. Although this is a slow and complex process, the effect on the volume of land resources available for land reform, at low cost, could be very significant, particularly in the south and southeast of the country;

  � the minimum rural module by region be re-evaluated. It is suggested that a new methodology be applied for calculating the rural modules - one which seeks to identify the viable productive systems in each micro-region (i.e., a system focus) and which includes exogenous variables of importance, such as proximity to urban centres, soil quality, and the income generating capacity of the areas. In this way the size of the plots would be geared to the to the socio-economic conditions of the beneficiaries, avoiding both the creation of new mini-holdings and oversized plots, in relation to the settlers' work capacity and capitalization; and

  � the PROCERA subsidies be reduced. PROCERA has operated with a very high built-in subsidy because of the limited incorporation of indexation. The value of the quotas was exceeded also by the cost of the debt settlement service, resulting in a reduction of the resources available for the programme. It is suggested that the reduced indexation be replaced by a system of calculation which includes some type of subsidy, in a transparent form, and which does not depend on the future variations of the rate of inflation. It could be based on a product-equivalent payment, with some level of reduction in the initial capital (10% for example), as a way of stimulating the social and economic development of the settlers. There should be some subsidy as an initial support for the settlement, but the rate of interest must be more realistic for the rest of the loan capital. In this way the PROCERA system will have the features of a rotating financing fund.

3.8  AGRARIAN RATIONALIZATION

Land reform actions, although faster and more efficient with the new legislation, do not cover the land needs of farmers that already have land, although insufficient, and who need, therefore, to increase the size of their holdings in order to become really viable family production units. This complementary action, here termed agrarian rationalization, arises from the need to resolve this type of situation. This is best effected at municipal level, operating within normative guidelines set at federal and state government levels.

It is recommended that the Government investigate the possibility of introducing legislation to facilitate the rationalization of land holdings to enable young small family farm units to expand to an efficient economic size. One possibility would be the introduction of legislation establishing the conditions for setting up and operating Land Rationalization Companies (SOFs). At the time of writing, there existed no institutional basis in Brazil for establishing control over agricultural structures, although this problem had been explicitly recognized in many contexts and on many occasions.

No single formula would meet all demands and suit the socio-economic and cultural variables of the different regions. Hence only an outline proposal can be offered. The main elements would be to stimulate the emergence of SOFs with the basic aim of facilitating the maintenance, expansion and creation of family farm businesses, particularly those managed by young people. This would require legislation granting legally constituted SOFs the pre-emptive right to purchase rural properties located in their operational area and put up for sale by private parties or made available by state agencies. This right would be established bearing in mind the need to maintain or resettle farmers, and to increase the area of already existing farm establishments up to a limit of five times the rural module. For the SOFs to become operational, they would have to be recognized by decree from the Ministries of Agriculture and of Finance, which would also fix their zone of operation. The Federal Government would transfer Agrarian Debt Titles to each recognized SOF on a scale equal to a certain percentage of the market value of the rural lands in its zone of operation.

3.9  LEASING AND SHARE-CROPPING

Historically, relations between landowners and their share-croppers or tenant farmers have never been very peaceful, usually due either to the absence of formally written and registered contracts, which gives rise to disputes over terms, distribution of output and rent payments, or because of the unequal strengths of the contracting parties, where the share-cropper or tenant farmer is generally a small, undercapitalized business unit and almost always subject to the designs of the landowner.

The relations between land supply and demand are distorted by the real possibility of retaining speculative stocks. The supply of land is less than the demand, as the cost of keeping land idle is very low, or even negative, as in the case of the large cattle ranches, which are an extremely profitable way of controlling large areas with little supervision involved, a small investment and very little labour, while one waits for a return from the appreciation of the asset.

The reluctance of landowners to allow their land to be used is strengthened by the fear of conflicts with tenant farmers, in part because of pressure being exerted in favour of land reform which, despite its limited expression, remains a serious threat to the landowners. In the light of these considerations, it is recommended that:

  � some type of legal measure be applied that works in favour of reducing land prices, by eliminating their speculative elements. Should this be effective, it might induce some landowners to lease out their land. However, the inefficiency of the present tax system (Rural Land Tax (ITR)) and the ambiguity of the agrarian legislation have produced the opposite effect. Therefore it is vital to eliminate the present ambiguities in the legislation, particularly concerning priority expropriation of areas with a concentration of share-croppers and tenant farmers; and

  � tenant farmers and share-croppers have the option to buy, and be in a position to acquire the land they work, wherever the price of the land reflects its productive potential and not its speculative potential. Parallel to this, the State could open, as has occurred elsewhere in the world, long-term land credits (with low, but positive, interest rates) for those producers who wish to acquire land.

3.10  TAXATION

It is recommended that the policy for taxing land be closely related to the land reform programme. The low rates of ITR, instead of helping, have been an important factor in encouraging rural land speculation, low productivity and absenteeism.

Taxation will not replace land reform, but it is certainly an indispensable prerequisite for its success. Regrettably, the present ITR does not fulfil this function, and radical restructuring should be considered. It is recommended that:

  � the ITR be used as a complementary instrument of land policy, capable of penalizing landowners who do not fulfil the social function of land. The municipalization of this tax, as with the Urban Property Tax (IPTU), might be a way of increasing pressure on landowners in view of the greater proximity between public agents and the big land-holdings which would be included in the assessment; and

  � in the medium term, the ITR be simplified, replacing the current criteria for calculating land utilization by criteria which are easier to verify. Linking the ITR to the degree of efficiency in exploiting the land, although important and just from the point of view of the social function of the property, is highly vulnerable to manipulation and very difficult to oversee. High tax rates linked only to the location and size of the property would greatly increase the productivity of the tax and be a strong inducement to the owner to either use or sell the land.

3.11  OTHER ACTIONS

Any programme directed at family production should differentiate the policy instruments that seek to strengthen family farming considered "viable" from the instruments directed at the extremely poor rural population (mainly that of the northeast), which for many analysts has no chance of generating viable farm units, although it must be remembered that the poor family units in the northeast have been severely hampered by insecure land tenure and by the insignificant size of the majority of the holdings. A settlement programme addresses both aspects: it confers secure tenure, and allows the beneficiaries to take advantage of the available scale advantages. Although one cannot expect spectacular results, especially in comparison with more favoured areas, very often the results can be crucial for the destiny of the families involved, in terms of alleviating poverty, reducing infant mortality and malnutrition, checking rural migration and, in many cases, generating monetary income through the sale of surplus production.

In the semi-arid zone which forms more than half the northeast region, irrigation is needed to make any new farming initiative viable. There are about a million hectares of irrigable land with local water resources that, depending on the production system adopted, could allow around 250 000 families to be settled. Lines of available credit already exist, with financing from the World Bank and BID. It is therefore recommended that applied research be directed towards developing low-cost technology suitable for small-scale irrigation appropriate for the various production systems most indicated for the region. In this respect it is recommended that massive programmes for constructing micro-irrigation systems be implemented, linked to programmes of production development for commercial productions. Current emphasis on macrosystems of irrigation should be switched to small systems which make it possible to increase and improve the use of water by a limited number of families. The investment cost should be recovered (although only partially) and the operation and maintenance of the systems should be transferred and put under the responsibility of the users grouped into settlements, consortia, cooperatives and other organizational forms.

It is recommended that encouragement be given to stimulate the forging of links between family farming and the agro-industrial sector by improving the mechanisms that will make integration possible. The potential for integration is greater in the sector producing animal protein, as popular consumption is moving towards a diet with a high incidence of animal protein; livestock farming is a highly dynamic activity, since it exerts a demand for grain and oleaginous plants in the form of animal feed; family farming is already established as a privileged link in this sphere of agro-industrial chains.

Within the animal protein sector, the dairy sub-sector is the one which opens up the best prospects for strengthening family farming, followed by pig production. In the current model of poultry farming, prospects are also favourable. It is suggested that the breeding of small animals be stimulated in the settlements and more importance be given to the dairy sector, which is already part of the majority of family production systems (it generates cash flows, occupies the available labour, and makes good use of crops in the form of animal feed).

In the northeast, the agro-industrial structure has been highly inefficient and unfavourable to family production, combining excessive installed capacity in industry with an exclusively extractive strategy as far as farming is concerned. The result has been a degradation of rural inputs and a loss of agro-industry competitiveness. It is necessary, therefore, to encourage a resumption of primary processing activities in the rural context, by means of investments in rural producer associations, besides scaling down and decentralizing activities. Agricultural research should give priority to taking advantage of regional resources that could become competitive as subsidies in transport and tax distortions are eliminated.

It is recommended that the activities of federal, state and municipal agencies involved in the provision of basic services (water supply, education, heath, housing, access roads, sanitation, etc.) be coordinated, to carry out projects in the rural areas in the light of developments in family farming. This should avoid the duplication of institutions and efforts to support the infrastructure of new and pre-existing settlements which are not equipped with such basic services.

It is recommended that the development of credit cooperatives and rural savings banks be fostered, as they can channel the savings capacity of the small rural producers and other groups of the population in rural or semi-urban zones into rural activities, farming and non-farming, which need credit for labour-intensive projects, and which seek to alleviate the unemployment and poverty situation.

It is recommended that support and financial backing be given to family farming organizations for the commercialization of farm production and for the supply of inputs and investments in machinery. As for marketing support, this should include market information services, setting up systems of futures markets and modifying the legal norms, seeking to modernize storage systems.

Appendix 1: PROJECT STAFF

Appendix 2: TRAINING ACTIVITIES

2.1   DIAGNOSTIC SEMINARS ON AGRARIAN SYSTEMS, TO DISCUSS THE REGIONAL REPORTS ON FAMILY FARMING

2.2   TRAINING COURSES IN AGRARIAN SYSTEMS METHODOLOGY

Northeast Region: Para�ba - Pitimbu, 17 -26 August 1996, for 19 trainees.

Consultants:Adriana Freitas Alves, Sebastian Bainville, Ghislaine Duqu�,

Emilia Rodat, Benedito Silva Neto and Marc Dufumier.

North Region: Par� - Aurora do Par�; 6 - 15 August 1996; 19 trainees.

Consultants:Ademar Romeiro, Antonio Cardoso, Aliomar Arapira,

Maria da Gra�a Loureiro, Benedito Silva Neto and Marc Dufumier.

Central West: Mato Grosso - Nova Xavantina; 26 July - 4 August 1996; 21 trainees.

Consultants:Shigeo Shiki, Jos� Paulo Piestrafesa, Adolfo Hurtado,

Benedito Silva Neto and Marc Dufumier.

South Region: Paran� - Pitanga; 4 - 13 July 1996; 23 trainees.

Consultants:

Gilson Bittencourt, Valter Bianchini, Jo�o Carlos Torres,

Benedito Silva Neto and Marc Dufumier.

Southeast: S�o Paulo - Promiss�o; 15 - 24 July 1996; 22 trainees.

Note: (1) Unable to complete the training course.

Consultants:

Danilo Prado, Patrick Davies, Celso L.R. Vegro,

Benedito Silva Neto and Marc Dufumier.

Appendix 3: MAJOR ITEMS OF EQUIPMENT SUPPLIED

1 Microcomputer (Blue Tech; 486 DX2-66 CPU; 8 Mb RAM) 2 150

1 Microcomputer (Blue Tech; 486 DX2-66 CPU) + printer 4 250

1 Airconditioner (Springer)

1 Printer (Deskjet HP 680 C)

Appendix 4: LIST OF PROJECT PUBLICATIONS

Profile of Brazilian Family Farming - Statistical Dossiers. Field Document of Project UTF/BRA/036/BRA -Amendment No. 2.