$Unique_ID{bob00134} $Pretitle{} $Title{Brazil Chapter 3D. Manufacuring and Agriculture} $Subtitle{} $Author{Darrel R. Eglin} $Affiliation{HQ, Department of the Army} $Subject{percent land manufacturing farms agricultural large holdings production less small} $Date{1982} $Log{} Title: Brazil Book: Brazil, A Country Study Author: Darrel R. Eglin Affiliation: HQ, Department of the Army Date: 1982 Chapter 3D. Manufacuring and Agriculture Manufacturing Until the twentieth century the country's minerals contributed little to the development of manufacturing. Colonial policies restricted Brazil to exporting primary products, such as sugar, cotton, tobacco, and gold, and importing manufactures. Portugal's commercial treaties from the early 1800s until the 1840s continued to open Brazil to imports, particularly from Britain, which made it difficult for any Brazilian manufacturing industry to emerge. Only late in the 1800s was local industry beginning to supply manufactured products on an appreciable scale to the domestic market. Until the 1960s manufacturing was mostly import substitution-developing domestic production to replace goods formerly imported. Government policy at times encouraged local manufacturing and at other times, in pursuit of other policy goals, achieved that result accidentally. The two world wars and the depression of the 1930s stimulated domestic industry because of the difficulties of obtaining imports. Import substitution started with consumer goods, particularly food processing and textiles, which branched out to include finished clothing. Important additions in the 1920s included an integrated steel plant and a cement plant. Direct investment by international firms in plants to produce rubber products, chemicals, and aluminum, and to assemble vehicles broadened the industrial base in the 1930s and 1940s. By 1950 manufacturing produced a broad range of products. Food, beverages, and tobacco accounted for 25 percent of the value added from industrial activity and textile products and shoes another 24 percent; these two broad manufacturing industries remained by far the largest in the economy, but their importance had declined from nearly 70 percent of value added in the 1920 census. Chemicals, nonmetallic minerals, metals, and machinery-the basic heavy industries-were added and grew substantially between 1920 and 1950; their combined contribution to value added in the latter year was 33 percent. Many of the manufacturing plants built in the 1930s and 1940s were large scale and modern. Moreover, institutions were established to train scientists and conduct research and development in order to advance the technology available to industry. After World War II Brazil's economic officials made a deliberate shift to a policy of fostering industrialization as the means for rapid economic growth. Studies of the economy by various international economists in the 1930s and 1940s pointed to the vulnerability of relying on the export of a few primary commodities. The war reinforced the message of the studies. The hazards of shipping and the closed markets during the war stimulated domestic industry. After the war, officials sought to continue the alteration of the structure of the economy rather than return to a focus on exports of primary products. Between 1945 and 1962 industry grew at an average rate of 8 percent a year, and industrial output increased nearly fourfold. Import substitution remained the basic objective, but the possibilities in food and textile industries were largely exhausted. Growth was concentrated in transport equipment, metal products, electric machinery, and chemicals and pharmaceuticals by public investments and encouragement of direct investment by foreign firms, particularly those in automotive fields. Import substitution created balance of payments pressures, however, along with other distortions. Even the substantial inflow of foreign capital was insufficient to compensate for the slow growth of exports, and by the early 1960s the importation of needed goods was restrained by controls. The stabilization program of the 1964-67 period resulted in slow growth of the economy and manufacturing (3.6 percent a year) but corrected many of the problems for the rapid growth that followed. Between 1968 and 1973 manufacturing industries grew at the remarkable average rate of 13.9 percent a year, and manufactured exports grew at 38 percent a year. Part of this growth resulted from putting to use idle manufacturing capacity, but numerous policy changes also contributed. The former system of multiple exchange rates, which afforded a high level of protection to favored industries, was replaced by a single rate that was devalued frequently in small amounts to avoid overvaluing the domestic currency. Tariff levels were reduced and import restrictions liberalized, although in a stop-and-go pattern. A number of fiscal and credit incentives were established to affect investment in industries that manufactured for export. Public investments also fostered growth in key industries. Foreign firms were encouraged to locate in Brazil through specific incentives and a hospitable political environment. The sharp price increases for crude oil in 1973 and 1974 created immediate balance of payments problems. The response of policymakers was to reimpose import restrictions, stress import substitution, and expand the foreign debt. Since the early 1960s import substitution possibilities had been largely confined to machinery, chemicals, fuel, and miscellaneous manufacturing. After the first oil crisis, government policy spurred expansion in these fields, accompanied by large public and private investments, particularly in steel, nonferrous metals, electric power, petrochemicals, fertilizers, and pulp and paper. The goal was self-sufficiency by 1980. Demand in the economy was declining, however, and idle capacity became a problem as projects were completed. After 1976 the public investment program had to be slowed, lowering demand for machinery and construction materials. Manufacturing expanded at an average of only 6.8 percent a year between 1974 and 1980. Incentives were maintained for exports, but expansion of manufactured exports slowed, averaging only about 17 percent a year (in constant United States dollars) between 1975 and 1980. In 1981 manufacturing fell by 9.9 percent. Some industries were much more severely affected than others. Consumer durables dropped 27 percent, including a 35 percent fall in car production. In contrast, consumer nondurable goods declined by only 2 percent. Capital goods industries were depressed; production levels were nearly 19 percent below 1980. In the first quarter of 1981 capacity utilization of manufacturing was down to 78 percent generally and was lower in the more depressed industries. The recession forced manufacturers to find cost-saving techniques and to rationalize their operations. Another positive result was an increase of manufactured exports as foreign sales were sought to replace the contracting domestic market. Economists were predicting that a slow recovery of the economy and industry would begin in 1982, but many firms were in financial difficulty. The steel industry exemplified some of the problems the economy faced in 1982. Domestic demand for steel products expanded at a high rate after the 1940s. Because the country possessed large iron ore reserves, a usually expanding domestic market, and the potential for export, government planners approved substantial additions to capacity in the early 1970s during the economic miracle. In 1980 steel output exceeded 15 million tons, placing Brazil tenth in world production and ahead of traditional producers, such as Britain, Belgium, and Czechoslovakia. The public sector was highly active in basic steel, having seven operating companies that accounted for 60 percent of sales in 1981, substantially lower than in earlier years. About 32 private companies, primarily Brazilian owned, contributed mostly specialized products to steel production. In 1982 steelmaking capacity was about 18 million tons, but production would probably be close to 13 million tons. By 1985 capacity could reach 25 to 28 million tons if projects under construction are completed. One modern private plant completed in late 1980 was operating at 50 percent capacity in 1982 with financial costs twice as high as income. A highly sophisticated government-owned steel mill having a production capacity of 2 million tons a year was several years behind schedule and had incurred large cost overruns. It was considered a white elephant even before its completion, and in 1982 its fate was uncertain. Steel exports were about 2 million tons, providing a small export surplus over imports in value terms between 1979 and 1981. Officials faced hard decisions and difficult financing with the overcapacity and shortage of funds. Apart from recession-induced problems, Brazil had a large, broad-based manufacturing sector capable of producing automobiles, airplanes, large ships, heavy construction equipment, computers, modern communications systems, plastics, machine tools, and many other products (see table 8, Appendix). Broadening of manufacturing capabilities was rapid after World War II. In 1962, for example, traditional manufacturing (food, textiles, wood and furniture, and publishing and printing) contributed 49 percent of the value of production compared with 34 percent in 1980. Other industries, largely heavy industry, expanded substantially faster than traditional ones. In 1980 the value of chemical production (17 percent) and of metallurgy (nearly 17 percent) were each greater than the value of food processing (14 percent). When various types of machinery and equipment were consolidated, the value of production exceeded 19 percent of the value of manufacturing. Of all the Latin American countries, Brazil gave the greatest amount of explicit attention to technology to help the industrialization process. From 1920 on, various research and development institutions were created, and the training of engineers and scientists was encouraged. Institutions for funding such activities were added. An example of the progression was development of airplane production. The first airplane was built in Brazil in 1910, but the impetus for development of an aircraft industry came in 1940 with the creation of the Ministry of Aeronautics, which stimulated research. In 1946 a technical institute to train aerospace engineers was created, followed by a research center in 1954. A team at the research center developed the design of the Bandeirante airplane in the early 1960s as a replacement for aging American DC-3s widely used on Brazil's dirt-strip backcountry airports. The Bandeirante team was transferred to a newly formed public-private Brazilian aeronautics enterprise (Empresa Brasileira Aeronautica-Embraer), in which the government provided incentives for private investors to purchase over 90 percent of the company stock. The Bandeirante proved a success and was modified for various users at home and abroad (see Defense Industry, ch. 5). Embraer, formed in 1967, built other planes, including some under license from foreign firms. By 1980 Embraer was one of the larger aircraft companies in the world. Economic studies suggested that over one-fifth of industrial expansion between 1959 and 1970 resulted from technological advancement. One means of advancing technology was to encourage investment by foreign firms in manufacturing plants in Brazil. Government policy generally provided incentives and a hospitable environment for direct foreign investment, but such investments fluctuated for various reasons. In 1979 foreign firms held an average of 22 percent of the equity in all manufacturing industries, down from 34 percent in 1971. Foreign equity varied considerably in 1979 from 96 percent in tobacco manufacturing, to 66 percent in pharmaceuticals, 57 percent in transportation equipment (mainly cars and trucks), 19 percent in chemicals, 11 percent in metallurgy, and very small amounts in some traditional industries. In the 1970s Brazilians again became concerned with direct foreign investment controlling the economy. Various measures were adopted to lessen foreign participation. In the mid-1970s foreign companies could no longer buy Brazilian companies considered by the government as important in priority industries. Public sector companies (an important element in the economy) also gave preference to sales from wholly owned Brazilian companies. Public investment and, therefore, equity increased in manufacturing. Nationalism crept into commercial and investment policies, but declining demand, lower profits, and other factors also helped discourage foreign investors. In the 1970s public sector ownership in manufacturing continued the increase that had begun in the 1940s. The publicly held equity in manufacturing firms increased from 18 percent in 1971 to 22 percent in 1979. The public sector was dominant in chemicals (64 percent of total equity in 1979), reflecting government activity in oil refining and petrochemicals. The public sector owned 38 percent of equity in the metallurgical industry, primarily steel. Government equity in other industries was expanding but represented only a small part of total ownership shares. Private domestic investors increased their equity in most industries and raised their share of total equity in manufacturing from 47 percent in 1971 to 55 percent in 1979. Brazil's industry operated in a protected market. In 1973 the nominal average tariff on manufactured imports was 57 percent. In 1980 the market was even more highly protected, nominal tariffs ranging from 23 percent to 203 percent and averaging just above 100 percent. The increased tariffs and other measures were imposed after the first oil crisis to restrict imports. The protection appeared excessive and fostered production for the domestic market at the expense of exports. Studies suggested that Brazil's long-term use of import restrictions since World War II had not promoted inefficient and socially costly manufacturing industries. Although efficiency varied considerably among firms and between industries, Brazilian manufacturing was generally judged competitive with that in other countries, and the growth of manufactured exports since 1967 supported the findings of individual studies. Most manufacturing firms were small; many were little more than shops. In 1970 (the last industrial census available in late 1982) firms employing up to 99 workers made up almost 98 percent of the 142, 110 establishments and employed 50 percent of the industrial labor force but contributed only 36 percent of the value added manufacturing. Medium-sized firms (employing 100 to 250 workers) were little more than 1 percent of the total and provided 15 percent of industrial employment and 17 percent of value added. Large firms (employing over 250 workers) numbered 1,213 (just under 1 percent) and provided 35 percent of employment but accounted for 48 percent of value added. The importance of small firms to employment and large firms to output was obvious. Brazil's industry is highly concentrated in the Southeast-the states of Minas Gerais, Rio de Janeiro, Espirito Santo and, especially, Sao Paulo. In 1976 this region's share of total industrial employment was 70 percent and of total value added, 77 percent. In the 1960s the government established programs and provided liberal incentives to locate industry in disadvantaged regions, particularly the North and the Northeast. The programs stimulated industrialization outside of the Southeast, suggesting that geographical concentration peaked in the 1960s, but available data indicated that the deconcentration achieved by 1976 was small. The South had the second largest share of manufacturing. In 1976 this region had 21 percent of the firms, 19 percent of industrial employment, and 15 percent of value added manufacturing. Manufacturing increased substantially in the Northeast, but its relative share continued the decline reflected in industrial censuses since at least 1940. In 1976 the Northeast had 10 percent of the manufacturing firms (15 percent in 1940), 8 percent of industrial employment (18 percent in 1940), and 6 percent of the value added (9 percent in 1940). The North contributed only 0.6 percent of the value added by manufacturing in 1976. Industrialization in the North and Northeast expanded more slowly than the national average in spite of the special incentive programs. Agriculture From the earliest years of the colonial era, agriculture has held center stage in the economy. Plantation agriculture was the country's link to the world economy. Large holdings dedicated to monocultural export crop production and dependent on slave labor formed the basis of the agrarian economy. Beginning with sugar cultivation in the sixteenth century, economic trends have been dictated by a series of "boom-bust" agricultural cycles. Cotton, cocoa, rubber, and coffee followed sugar. In each case Brazil brought reserves of land into cultivation, specialized in the export crop of the hour, and attained a position of dominance in the world market only to be supplanted by other producers and to suffer economic reverses as world prices declined. "Booms" were inexorably followed by "busts" and a period of stagnation until another "boom". Agriculture in the 1980s offered both contrasts and continuities with this pattern of development. The agricultural sector continued to play a significant role in the economy, but in terms of neither domestic production nor exports did a single crop dominate the way sugar, coffee, or rubber had at their apexes. The government had aggressively pursued a policy of industrialization and diversification of exports. Policymakers relied on agriculture to provide the food, fuel, and labor for industrial growth. In the 1970s soybeans outpaced Brazil's traditional agricultural income earners: coffee, cocoa, and sugar. There was as well a general rise in the number of agricultural products exported. Largely as a result of government incentives favoring processed goods over raw crops, the volume, value, and variety of semiprocessed and manufactured agricultural products increased substantially. The notable changes in output tended to divert attention from the long-term continuity in the structure of agriculture. Large landholdings retained their dominant position. Land use remained extensive; gains in productivity were limited. Export and commercial crops garnered a disproportionate share of the best land, as well as of improved inputs, research funding, and developed infrastructure. There has been a general neglect of most common foodstuff items: manioc, corn, and beans. In the mid-1970s the government started funding centers for research on specific food crops. As a whole, however, what Brazilians ate was grown by small farmers on marginal land under primitive conditions; what they exported was the domain of large landowners holding the most desirable land and having access to modern agricultural technology. Land Tenure Landholding continues to be concentrated: a relative few control reserves of land disproportionate to their number. This pattern of landownership dates almost from the colony's inception. Faced with the task of forestalling French claims to Brazil and lacking population reserves to settle the region, the Portuguese crown gave vast land grants to a few. Colonization was an alternative to effective military control of the Brazilian coast. Within decades of the initial settlement, the best coastal land had been divided into large sugar plantations. The backlands followed soon thereafter with enormous cattle ranches; a steady supply of animal traction was almost as essential as slave labor to sugar mills. Wealthy plantation owners endeavored to own their own cattle ranches to ensure a dependable source of draft animals. The crown made belated efforts to reverse the process of land accumulation; in 1695 a single grant was limited to 14,400 hectares, and soon thereafter the maximum was dropped to 10,800 hectares. Throughout the eighteenth century there were periodic royal threats to expropriate uncultivated land. Although the system of land grants was formally abolished in 1822, from 1830 onward public lands could be leased on the basis of squatters' rights without any size limitation. There has been little curb on the accumulation of vast landholdings and still less incentive to use land intensively. The pattern has been to abandon land and move farther toward the frontier as soils became exhausted and yields declined. According to the 1975 agricultural census, slightly more than half of all agricultural establishments (farms) controlled less than 3 percent of all farmland. At the other end of the scale, less than 1 percent of all farms held more than 40 percent of the land. The level of concentration holds whether one looks at land in temporary or permanent crops and, practically speaking, regardless of the region of the country. There is, however, variation in both the extent to which landholdings are concentrated among the largest farms, i.e., those of more than 1,000 hectares, and the level of land fragmentation to which small holdings are subject. Farms of 1,000 hectares or more have their greatest share of all land in the North and Center-West where they represent 54 and 69 percent of agricultural land, respectively, (see table 9, Appendix). Land distribution has been basically unchanged over the past half-century. The share of small, medium, and large farms has been generally stable since 1920 (see table 10, Appendix). Although the average holding in 1975 was only one-quarter of what it had been in 1920. most of this decrease was absorbed by larger holdings (those over 100 hectares in size); relative to those farms size, the decline has been minimal. In relative terms the smallest holdings fared the worst; the average size of farms of less than 10 hectares declined by 20 percent between 1940 and 1975. Mid-sized farms (from 10 to 100) were roughly equal to their 1940 averages (see table 11, Appendix). Farm size was maintained by bringing new land under cultivation; total hectares held by farms nearly doubled between 1920 and 1975. The last half-century has been an almost constant process of expansion onto virgin agricultural land. The push into Parana began in the 1920s and finally leveled off in the 1950s. Then in the late 1950s and throughout the 1960s there was expansion into Goias and Mato Grosso do Sul, encouraged in part by the relocation of the capital to Brasilia. In the 1970s farmers brought increasing amounts of land in Rondonia, Acre, and Roraima under claim if not into production. The rise in land under cultivation accounts for most of the increase in crop production (see Land Use, this ch.). The move into Parana brought productive agricultural land under cultivation and generated sufficient income to invest in infrastructure. Moves in the 1970s were into increasingly remote regions. At the same time, increases in the cost of oil made transportation and marketing more expensive. Infrastructure in recently settled regions was rudimentary. Amazonian settlements also required substantial investments in agricultural research. Much of the remaining frontier land was tropical forest; once cleared, its thin topsoil was rapidly leached, and yields declined within several years of first planting. Satellite surveys discovered areas of rich topsoil in the Amazon Basin, however. Research in the late 1970s demonstrated a number of promising possibilities for sustained-yield agricultural production in the tropics. Some agronomic studies found that properly managed pasturage actually stabilized tropical soils and enhanced their fertility. A research station in the Peruvian Amazon maintained yields of some 10 tons of grain per hectare annually for nearly a decade through a complex system of crop rotation. It remained to be seen whether tax incentives would be changed to favor intensive land use rather than extensive clearing and abandonment of land. Given the relative availability of new forestland, it was doubtful that most farmers or ranchers would choose land management systems capable of generating sustained yields. An early 1980s survey of cattle ranches in Para, for example, found that 80 percent had been abandoned. Although the country's extensive land reserves and growing rural-urban migration alleviated the problem of land fragmentation, more than half of all farms had less than 10 hectares. The level of fragmentation was most acute in the Northeast where, overall, some 70 percent of all holdings were of less than 10 hectares. In Paraiba and Pernambuco the proportion rose to three-quarters of all holdings; in Maranhao nearly 90 percent of all farms had less than 10 hectares. One corollary of concentration in agricultural holdings is that intensity of land use varies inversely with farm size. Further, with the exception of cotton in Alagoas, coffee in Sao Paulo, and cocoa and sugar in some regions, agricultural surveys through the mid-1970s consistently found that large holders do not outproduce small farmers on a per hectare basis, and small farmers tend to use their limited resources more intensively than do large landowners. This relationship holds true even when allowance is made on the quality of land. It is not simply that large farms include a greater portion of land inappropriate for crop production within their boundaries. Some surveys found that sharecroppers rank higher in factor productivity than do landowners; they tend to use their limited land, labor, and capital more productively. It is also true regardless of region: large holdings in the South and Southeast tend to outperform their counterparts in the Northeast, but small holdings still use land more intensively across the board. What is produced does have an impact on returns to scale and intensity of land use. Among large landholdings, cattle ranches use land least intensively, and coffee plantations much more so. The Northeast provides an instructive, albeit extreme, example of the relationship between land size and use. In that region holdings of less than 10 hectares maintain an average of half their land in cultivation; among the largest farms the proportion falls to a scant 10 percent. On farms of more than 500 hectares some 85 percent of the land is used for neither crops nor fodder. These farms control nearly half of all agricultural land and contribute less than one-third of output. Small holdings, accounting for 1.4 percent of farmed land, produce roughly 7 percent of agricultural production. Looking at expenditures per hectare, including labor, mid-sized farms spend one-quarter the rate of those with less than 10 hectares; holdings of more than 500 hectares spend less than one-tenth the rate of the smallest farms. Large holdings use labor and capital less intensively than do small holdings. Labor input drops steeply as the farm size rises. Capital expenditures per hectare also drop, but not as precipitously as labor, so that large and mid-sized holdings tend to have higher capital-to-labor ratios than do smaller holdings. As a rule the largest holdings woefully underutilize labor while the smallest overuse it. Again, the Northeast provides a useful example: the smallest holdings use from 25 to 45 times the labor per hectare that the largest holdings do. Most of the smallest farms make use of family labor that simply has not been absorbed by nonagricultural employment or wage labor off the family farm. On large holdings the marginal productivity of labor is estimated at double the wage rate. The data from agricultural surveys do not readily lend themselves to long-term comparisons between the factor use and productivity of various sized farms over time. On crops and regions for which adequate comparable data are available, the relationship between agricultural output and farm size remained roughly constant from the early 1960s through the mid-1970s. Economists estimate that a division of unproductively used land into parcels of the sort envisioned by the Land Reform Statute of 1964 would result in an overall increase of agricultural output in the range of 15 to 25 percent (see Government Policy, this ch.). In the Northeast, Brazil's poorest region and the one in which problems related to land distribution and use are most acute, such a redivision would double the number of farms. It would absorb significantly higher levels of labor than the extant agricultural system. Increases in foodstuff production would lower prices for consumers, although the magnitudes are difficult to project. A 1978 World Bank (see Glossary) study found that the number of families able to afford a minimally adequate diet would rise by more than 100 percent. In addition, the projected redistribution would provide full-time employment for another 500,000 workers. Tenancy-in the sense of operator of a farm-is strongly geared toward ownership. In 1975 (the last agricultural census for which information was available in late 1982) slightly more than 60 percent of all farms were owner operated. The national average obscures significant regional variation in the incidence of landownership (see table 12, Appendix). The preponderance of landowners among all agricultural establishments reflects the large number of small proprietors in Brazil. Approximately one-fifth of all farms are held by simple squatters' rights or, less frequently, occupied without title payment but with an owner's tacit or formal consent. Farms occupied without or without a rental or sharecropping agreement are found principally in the North, where they account for half of all farms and more than one-third of the land, primarily because of the region's recent settlement. There continues to be considerable confusion over land titles, and relative chaos in landholding has accompanied the move onto frontier land (see Rural Society, ch. 2). The early phases of land settlement are rarely under government control, and it requires years to bring order to land titles. The government has initiated a number of efforts to resolve land conflicts. The National Institute for Colonization and Agrarian Reform (Instituto Nacional da Colonizacao e Reforma Agraria-INCRA), the agency in charge of administering the Land Reform Statute and organizing government-sponsored settlement projects, has recently redirected its efforts. INCRA by the early 1980s was focusing on resolving land conflicts among migrants who came to the North on their own initiative. The agency issued more than 100,000 land titles annually in 1980 and 1981; in 1982 INCRA expected to grant more than 300,000 titles. In late 1981 the government halved the length of occupancy (from 10 to five years) necessary for squatters to establish title to unclaimed land. The change was expected to benefit roughly 100,000 squatters. Less than 20 percent of all farms and a minute portion of agricultural landholdings (under 5 percent) are worked under sharecropping or rental arrangement. Sharecroppers give a portion of their harvest to the landowner and often must put in a certain amount of labor on the owner's fields. Renters pay, either in cash or produce, a specified fee for the use of a parcel of land for a specified period. Renting is most common in the Northeast, where the level of land fragmentation makes it essential for small farmers to rent in order to supplement their own plots of land. Renting and sharecropping are subsidiary arrangements for large landowners in all regions. Nationwide only 1.2 percent of all land is sharecropped; in no region does the figure approach 5 percent of land. Similarly, except for the North and the South, where approximately 6 percent of the land is rented, little land finds its way into the rental market. That large owners let relatively little of their holdings contributes significantly to the generally low level of intensity with which land is used. At best, renting and sharecropping give access to small plots of land. Renters and sharecroppers are concentrated among smallholders: more than half have less than five hectares (see table 13, Appendix). Small proprietors reportedly rent or sharecrop to supplement their production, although the exact extent to which this occurs is not known. Nonowning terms of tenancy are not common for larger holdings; nonetheless, they do occur, and the distribution of rented and sharecropped land among the various size categories reveals the same patterns as that among landowners. Rented and sharecropped land is concentrated. Less than 4 percent of all renters, holding parcels of 100 hectares or more in size, control nearly 70 percent of all rented land. Slightly more than one-quarter (with less than one hectare) garner less than 1 percent of the rented land. The top 1 percent of sharecroppers have nearly 40 percent of the sharecropped land; the lower half (with parcels of less than five hectares) have approximately 10 percent. Although overall land distribution has been relatively stable since 1940, the share of the various tenure categories has changed substantially, as has the distribution of sharecropped, owned, rented, and squatter farms. Although still a majority, in 1975 owner-operated farms had declined relative to most other kinds of tenure. The percentage of squatters had more than tripled, and that of renters and sharecroppers was roughly one-third its 1940 level. Occupants increased their share of landholdings substantially-probably a reflection of the growing pace of frontier settlement. The average land size declined for all kinds of tenure except squatters. The steepest decreases were registered for renters and sharecroppers, whose average holding in 1975 was 15 percent that of 1940. A number of changes in the 1960s and 1970s were implicated in the drop in sharecropped and rented land. Incentives for increased beef and dairy production indemnified coffee growers for switching from that crop (a labor intensive one) to pasture. Rising soybean prices further encouraged a switch from coffee. The national alcohol program (Proalcool) may have had a similar effect (see Energy, this ch.). Finally, legislation designed to regulate the conditions of employment and tenancy in agriculture has had as a side effect a decline in economic opportunities for those the laws sought to protect.