The Brazilian Cotton Chain - Abrapa

BILLIONS OF REAIS (R$)
2.5
2.0
1.5
1.0
0.5
0
ESTIMATE OF THE EFFECT OF THE REAL EXCHANGE RATE ON EXPORTS
R$ 0.02
R$ 0.65
2006
R$ 0.16
R$ 0.99
2007
R$ 1.28
2008
REVENUE R$ NOMINAL EXCHANGE RATE
2009
ADDITIONAL REVENUE R$ REAL EXCHANGE RATE
Graph 2.9 - Estimates of export revenue of the cotton sector: nominal exchange rate and real exchange rate - 2006 to 2010.
Source: Compiled by Markestrat based on data from the Central Bank of Brazil
If, on the one hand, the weak dollar has
harmed revenue in R$ of cotton growers,
on the other hand it has benefited
importers. And despite the unfavorable
exchange rate for exporters, the cotton
sector remained firm in exports of cotton
fiber as a global supplier. Other sectors,
R$ 0.34
R$ 0.37
R$ 1.64
R$ 0.53
R$ 1.20
2010
however, have exhibited greater difficulty
to resist pressure from the increased value
of the Brazilian Real (R$), as is the case of
the textile industry. In fact, the exchange
rate today is a major constraint in Brazilian
production chains.
THE CONDITIONS OF LOGISTICS INFRASTRUCTURE INCREASE THE COST OF
PRODUCTION AND DISTRIBUTION OF BRAZILIAN COTTON, REDUCING ITS
COMPETITIVENESS AND POSSIBLY EVEN HARMING ITS IMAGE ABROAD.
Brazilian exports face many problems related
to the logistics of products, which affects
the profitability of producers, cooperatives
and trading companies. Among the most
prominent difficulties are the poor conditions
of roadways and the low capacity of
alternative modes of transportation such as
railways and inland waterways.
In the case of cotton, for which most of the
production exported comes from states in
the Center-West and western Bahia, the
situation is further complicated due to long
distances. For example, the distance between
Rondonópolis, Mato Grosso and the Port
of Santos is over 1,400 kilometers. It is
noteworthy that such distances make not only
the distribution of cotton more expensive,
but also production itself, since part of
the inputs/supplies are imported through
the same ports through which production
is exported, particularly fertilizers, and
another part is produced at large industrial
centers in the Southeast. Thus, establishing
more efficient ways for shipping supplies
and agricultural production is essential to
maintaining the competitiveness of Brazilian
agribusiness in the near future.
of customs clearance and the low capacity
for the flow of goods – makes exporting and
importing slow and costly.
These problems are aggravated in the peak
months of cotton exports, from September to
December, when production has already been
harvested and processed. During this time,
there is a shortage of warehousing space,
the goods remain at the port terminals for
too long, and delays in shipments become
more frequent, all resulting in increased costs
and risks of failing to meet contractually
stipulated deadlines, and may even harm the
image of Brazilian products abroad.
Moreover, rising exports have exposed two
major bottlenecks in Brazil: the capacity
of the port infrastructure and excessive
bureaucracy. Besides being few in number,
the existing ports are not structured to meet
the increasing flows of goods and require
investments for modernization. This –
coupled with inefficient bureaucratic process
Rising exports have exposed
two major bottlenecks in
Brazil: the capacity of the
port infrastructure and
excessive bureaucracy.
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