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Abstract

Macroeconomic reforms and policies have contributed to Brazil’s emergence as one of the world’s most competitive agricultural exporters. Brazil’s agricultural sector increased its exports in recent years, despite experiencing one of its worst recessions during 2014-16, falling international commodity prices, and slower demand growth in China and other foreign markets. To understand the forces behind this development, this report examines the effects of changing macroeconomic conditions on Brazil’s agricultural production and trade by simulating impacts of accelerated depreciation of its exchange rate and sustained macroeconomic growth. When the Brazilian currency weakens, higher prices in local currency stimulate production and exports of most major commodities. Simulations show that depreciation of Brazil’s currency results in greater world supplies, lower prices in global markets, and increased competition for U.S. exports. Finally, a simulation of stronger Brazilian economic growth shows that an increase in domestic consumption would have reduced Brazil’s exports of beef, corn, cotton, ethanol, pork, and soybean meal, easing downward pressure on world prices. However, Brazil’s soybean exports would not have been significantly affected by stronger economic growth.

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