Drought goes beyond agriculture and threatens to multiply losses in the economy of the South

The concern with the drought that punishes crops in the South region goes beyond the direct losses of agriculture. The lack of rain also threatens to spread losses to other sectors of the local economy.

The fear takes shape due to the great influence that the countryside exerts in part of the municipalities in the region, especially those of smaller size, located in the interior of states such as Rio Grande do Sul.

When agriculture is affected by the climate, as is the case today, the risk in these cities is less money circulating in the commerce and services sectors. It is a domino effect, of multiplying losses.

“Agriculture generates impacts before and after the gate of a rural property”, points out researcher Rodrigo Feix, from DEE (Department of Economics and Statistics), a research body linked to the Rio Grande do Sul government.

“One effect of the drought is the reduction of disposable income among farmers. This translates, for example, into a lower demand for goods and services in urban areas”, he adds.

According to DEE, agriculture represents around 9% of the gross value added to the economy of Rio Grande do Sul — in Brazil, the share is close to 5%.

The state government agency does not have a projection of the damage caused so far by the drought.

In early January, FecoAgro-RS (Federation of Agricultural Cooperatives of the State of Rio Grande do Sul) estimated at least R$ 19.77 billion in lost production in the state, just in soybeans and corn, due to the drought.

The number will be higher, with repercussions in other sectors of the local economy, projects Tarcísio Minetto, economist at the federation. “When the producer stops harvesting, the circulation of resources is smaller. The domino effect is large”, he comments.

Farsul (Federation of Agriculture of the State of Rio Grande do Sul) says it expects a clearer picture to calculate the impact of the drought, since in some regions the rain softened the scenario, and in others, it did not, according to the chief economist. Antonio da Luz.

“For every BRL 1 we produce within the gate, BRL 3.20 is produced or is not produced outside, in the urban environment. Although this input-output matrix data is from seven years ago, it is still valid, because it is the most current we have. And, as agribusiness has gained importance in the economy since then, it is quite possible that it will be even greater when it is updated”, he explains.

In 2019, more than half of the municipalities in Rio Grande do Sul (269 of the 497) had agriculture as responsible for at least 30% of the gross value added to the economy. In 69 of these locations, the countryside accounted for a share of 50% or more.

In the municipality of Barra do Rio Azul, in the northern region of the state, with an estimated population of 1,600 inhabitants, according to the IBGE (Brazilian Institute of Geography and Statistics), the production of about 450 rural properties corresponds to about 95% of the collection, according to Mayor Marcelo Arruda (PTB).

“Traders feel this retraction, people stop coming to the city, they end up holding back, that feeling of having to save, because they won’t have the revenue they expected. It’s a challenge for the public administration to move this gear again, because the drought is temporary, but the farmer lives a lot of that moment”, he says.

Rosilei Fátima Vanso’s family works with the sausage market and agribusiness in the municipality, two businesses that are already feeling the effects of the drought.

“Drought hits us because our municipality is agricultural. Those who used to buy a lot are reducing purchases because they don’t know how it will be. Even if we don’t work in the field, we are affected”, she says.

“This is one of the most difficult years, combining the pandemic with this drought. It left us more vulnerable.”

“Mechanics, even when it was raining, were beautiful. Now you can feel a reduction, people stop doing it, ask for a quote, prefer to wait a little longer, because money is tight”, says Ademir Marmentini, owner of a workshop in the city.

The commercial manager of the Cooperalfa unit in the municipality, Domingos Marmentini, also reports that the rural producer is holding back expenses.

“Mainly, it impacts the sale of inputs, feed, fertilizers. Now, in the off-season, the producer is planting, he is no longer investing, because the price of inputs has increased, milk production has decreased. The producer felt the impact and is spending less “, evaluates.

With drought problems recurring year after year, Mayor Arruda says that one of the challenges is for the government to act with programs and incentives to reduce damage in the next harvest — farmers who built cisterns, for example, are calmer in the face of the current frame.

Until this Friday (21), 335 of the 497 municipalities in Rio Grande do Sul had declared a state of emergency due to lack of rain, according to the Civil Defense.

“In many municipalities in Rio Grande do Sul, the effects of the drought that occurred in 2020, for example, were more dramatic than the economic impacts generated by Covid-19”, reports Patrícia Palermo, chief economist at Fecomercio-RS (Federation of Commerce of Goods and of Services of the State of Rio Grande do Sul).

The analyst adds that crop losses also tend to pressure the prices of agricultural products for the final consumer.

“Drought is a cause for concern, and it’s not a small thing. The situation is quite ugly. An important part of those who buy in the city’s commerce is formed by rural producers”, says Gilberto Aiolfi, president of Sindilojas Missões.

The entity represents shopkeepers from 17 municipalities in the northwest of the state, which this month received a visit from the minister of Agriculture, Tereza Cristina. She observed the effects of drought in rural areas and spoke with producers at the time.

The effects are significant on the economy of the entire state, according to the president of Famurs (Federation of Municipalities of RS) and mayor of São Borja, Eduardo Bonotto (PP).

“If we look at RS, the percentage of municipalities dependent on agriculture and livestock is significant. We have positioned ourselves and talked a lot about this issue, both in emergency actions, but also in structuring measures for the future, since the drought is cyclical in the state, so that the next ones have minimized damages to the producers”, he says.