TRENDS AND IMPACTS OF FOREIGN INVESTMENT IN DEVELOPING COUNTRY AGRICULTURE

BRAZIL
Trends and impacts of foreign investment in
developing country agriculture
FIGURE 7
Current and differential scores of IAIF 2008
indicators - Brazil
Regulations 50 50
Property rights 50 50
Capital market
55 45
Labour force 39 61
Forest-industry Business support
37 63
Economic infrastructure
62 38
Capital and foreign investment flows
50 50
Adverse actions
42 58
Political risk
66 34
GDP growth rate
75 25
Social infrastructure
79 21
Agric. Livestock policies
57 43
Free trade
58 42
Tax burden over GDP
53 47
Restrictions on plantin or harvesting
52 48
Forest resources
40 55
Exchange rate stability
100
Domestic market
90 5
Real passive interest rate
97 3
FLV
80 20
0 20 40 60 80 100
Source: IAIF 2006
The Diagnostic
The diagnostic aims to characterize current
trends, and the situation of the sector today and
in the future as envisaged by stakeholders. It
uses IAIF and its indicators and models to analyze
the causes and effects that generate, and are
generated by, each factor. Systems dynamics
methodology is suggested for the identification
and inspection of factor interactions. As already
mentioned, IAIF shows indicators for the country
and how the country ranks relative to others. Due
to its simplicity, clarity, accuracy, measurability
and validity, IAIF lends itself to countless forms of
analyses, and to an understanding of the situation
from different angles. However, IAIF is less useful
for defining the processes to identify the desired
future situation.
The Analysis
The Analysis starts with the results of IAIF
for the country in question. IAIF can identify
convergences between countries or highlight
contrasts. The country may be compared to
others with similar IAIF performance, with the
top best ranked, with countries that have similar
GDPs or which are geographically closed. Figure
50
Current score
Differential score
FIGURE 8
Current and differential contributions for IAIF
2008 indicators - Brazil
Forest-industry Business support 4.3 7.20
Adverse actions 4.8 6.60
Regulations 1.6 1.60
Property rights 1.6 1.60
Capital market 1.7 1.40
Labor 1.2 1.90
Economic infrastructure 2.0 1.2
Capital and foreign investment flows 1.6 1.60
Forest resources
4.6 1.70
Social infrastructure 2.5 0.70
Political risk 1.6 0.80.80
Agric. Livestock policies 1.8 1.40
GDP growth rate 1.8 0.600
Restrictions on plantin or harvesting 1.7 1.50
Free trade 1.4 1.00
Tax burden over GDP 1.3 1.10
Domestic market
10.9 0.6060
Exchange rate stability 2.4 0.00
Real passive interest rate
FLV
2.3 0.100 12
0 2 4 6 8 10 12
Differential
Contribution
Current
Contribution
Source: IAIF 2006
5 shows as an example how Brazil compares to
the five best ranked countries in IAIF (2006).
In addition to overall scores, an analysis of
Supra, Inter and Intra sub-indices will help to
identify the factors that deserve greater attention
and have higher potential. Figure 6 shows a
simplified example of the type of analysis that
can be used with the sub-indices, where their
current contribution is compared to its maximum
potential. Figure 6 suggests that the interventions
with higher potential are those at inter- and intrasectorial
levels.
Every indicator and factor used to construct
the IAIF should be analysed, i.e. each of the 20
indicators and the more than 80 variables that
make up these indicators. Priority for action
should be given to those factors which make
the greatest contribution to increasing IAIF
performance, or rather those with the highest
potential to generate impact. A measure of
the growth potential for each indicator may be
obtained by calculating the spread between the
current and potential scores. In our example,
Figure 6 shows that the IAIF analysis should
concentrate on the indicators of the Inter- and
Intra-sub-indices. Figure 7 helps to further identify