The Price Support Policy and the Agricultural Development of the Center-West Region

IPEA Working Paper No. 870

38 Pages Posted: 28 May 2002

Date Written: April 2002

Abstract

This paper discusses the policy of fixing minimum prices for the Center-West, that the government adopted specially in the 1980s and in the first half of the 1990s, without taking in due consideration the higher transportation costs between this region and the importing regions, vis-a-vis the other exporting regions. The paper presents, initially, the argument that this policy should make it more difficult to achieve market integration between the Center-West and the net importing regions, depending upon the intensity of the policy. Based on this hypothesis, the paper presents an analysis both of market integration and of the degree of intensity of the policy, which shows that the 1985-1989, the period of the "New Republic", was the period when it was highest the degree of spatial inconsistency of the policy. The paper presents, in addition, new data on stocks formed in this period on the basis of this policy, that show the formidable dimension of this policy; these data on stocks also provided na evidence of the changes that occurred in the 1990s. Finally, the paper presents the argument that, despite having favored the growth of agricultural production in the Center-West in the short run, in the long run the implications of this policy were negative for the agricultural development of the Center-West. This is for the reason that this policy did not contribute to the solution of serious problems of infra-structure, warehousing, and financing of the marketing of the crops; actually, it postponed the solution of these problems, what is beginning to happen only now. In addition, the keeping of high grain prices in the Center-West prevented the grain consuming industries to migrate to region, what also started to take place only after the policy was discontinued, in the decade of the 1990s.

Note: The downloadable document is written in Portuguese.

Keywords: Agricultural development, Center west Region, Role of price support policy

JEL Classification: Q13, Q18

Suggested Citation

Castro de Rezende, Gervasio, The Price Support Policy and the Agricultural Development of the Center-West Region (April 2002). IPEA Working Paper No. 870, Available at SSRN: https://ssrn.com/abstract=309540 or http://dx.doi.org/10.2139/ssrn.309540

Gervasio Castro de Rezende (Contact Author)

Institute of Applied Economic Research (IPEA) ( email )

Av. Pres. Antonio Carlos , 51 - 17 andar
Rio de Janeiro, RJ, 20020-010
Brazil
+55 21 3804 8000 (Phone)
+55 21 2240 1920 (Fax)

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