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$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.