Agricultural Growth and Agrarian Structure in the Brazilian Cerrado : The Role of Land Prices, Natural Resources and Technology

This paper proposes that the rapid agricultural expansion of the cerrado regions, which has been limited to grains and livestock, is due to the low price of land in these regions as compared with the other agricultural regions of Brazil and abroad. This low price of land, in its turn, is attributed not only to the greater distance of these regions from the main markets, but, also, to the limitations of natural resources (the extremely harsh drought period, which limits the agricultural activities to grains and livestock) and, above all, to the technological innovations that created an abundance of land of good quality through its "production" from lower-quality lands. In order to show more clearly how this process has taken place, the paper develops a model of land market with "production of land", specially designed for the analysis of the cerrado. The paper proposes also a contrast with the theories of technical progress of Hayami and Ruttan and of Hicks, concluding that they are not adequate to the analysis of the phenomenon. It is also attempted to derive implications for the analyses of production functions and total factors productivity (TFP). Finally, the paper also seeks to explain why the agrarian structure of the cerrado is so concentrated and, in particular, why family farming is lesser important in the cerrado. The paper emphasizes, in this discussion, the low price of land and the peculiar characteristics of the natural resources and the technology, rather than the role of public policies. In its conclusions, the paper derives some implications for the environmental as well as the agrarian reform policies, and criticizes the existing econometric analyses of land prices in Brazil