BRAZIL'S GROWING POWER

It's not yet noon in Mato Grosso state, but already the tropical sun presses through the clouds like a steam iron. This is Brazil's far west, a flat, featureless expanse at the bottom lip of the Amazon basin. The mercury is pushing 40 Celsius, but the 100 or so people gathered today on a simmering stretch of fresh asphalt seem hardly to notice. They have come to get a glimpse of MT-449, the newest Brazilian highway. It's just a patch of tarmac, but don't tell that to the residents of Lucas do Rio Verde, a bustling farm town in the nation's biggest grain belt. Just getting their produce to market used to mean an epic journey over dirt tracks that melted away every rainy season. Now they bow their heads and give thanks while a priest spritzes holy water on the immaculate concrete. "This highway," says Mayor Otaviano Pivetta, with a sweep of his hand, "is redemption."

Brazil might well say "Amen." Lucas do Rio Verde arose from the dust 25 years ago when the government dispatched legions of farmers from the overcrowded south to the empty western outback. The settlers hacked down the scrubby forests, or cerrado, only to find weak and acidic soil. The heat was hellish, and the rains came in deluges. Malaria was rampant. One by one the farmers failed, some swapping their lots for nothing but a ride back home. But the few who hung on eventually prospered--and turned this drowsy village--into an agricultural boomtown. Now an empire of soybeans stretches from horizon to horizon.

It's more than a handsome vista. Here, in the cerrado of Mato Grosso, and radiating out through the Brazilian backlands, the frontier is dotted with hulking silos, computerized harvesters and plantations the size of townships. With the help of clever agronomists, modern technology and the callused hands of pioneers in scores of towns like Lucas, Brazil has become the world's newest agricultural superpower. Last year, while the national economy struggled, Brazilian farmers reaped another bountiful harvest of commodity crops. Grain production, for example, topped 123 million tons--double the figure of a decade ago. While Brazil's overall jobless rate spiked to 8 percent last year, rural employment grew by 6.5 percent, and 10 percent in the frontier states of Mato Grosso, Tocantins and Goias.

Brazil has long been a powerhouse producer of coffee and sugar. But now the country's farmers and agribusinesses are extending their global reach, grabbing market share with new crops and lapping the competition in industrialized farm goods like orange juice, alcohol, tobacco and leather hides. Led by the cerrado pioneers, Brazil in 2002 surpassed the United States as the world's largest exporter of soybeans, soybean oil and soybean meal. In addition, the country recently became the world's largest exporter of beef, passing Australia.

And while quantity is important, so is quality. Brazil's cattle herds eat only grass and soy meal, not feed made from ground-animal parts that some experts suspect is responsible for the spread of mad-cow disease. Agribusiness now accounts for more than a quarter of the country's $600 billion gross domestic product, and employs around 20 million people, roughly 37 percent of Brazil's total work force. "Brazil has technology, sunlight and a huge empty frontier," says Amaryllis Romano, an agricultural analyst for Tendencias, a So Paulo financial consultancy. "The result is now explosive growth."

With farm output swelling at nearly 6 percent a year, some Brazilian experts assert that the country could someday overtake the United States as the world's biggest agricultural producer. That won't happen any time soon: Brazil is a distant fourth as an agricultural exporter. But few farmers anywhere can match the country's productivity. Unlike in India and China, where low-tech, labor-intensive family farming is still widespread, Brazil employs the latest technology and modern methods, especially low-tillage planting--sowing fields without turning over the earth, so as to avoid soil erosion. Unlike most countries, Brazil also has plenty of virgin land left to plow--some 80 million hectares, or an area the size of Britain and France combined.

Brazilian farmers say the only thing that can slow the country's emergence as a farming superpower is protectionism--the barbed-wire fence of tariffs, red tape, sanitary restrictions and subsidies that encircles the United States and Europe. No wonder the country's diplomats are walking into trade parleys these days with a cowboy glare. "Agriculture has always been taboo at the major trade summits," says Marcos Sawaya Jank, an agricultural trade analyst who keeps close counsel with Brasilia. "Brazil wants to change the rules."

Indeed, a major food fight has already begun. Brazilian President Luiz Inacio Lula da Silva has made agricultural-trade liberalization a key policy objective for his administration--and the casus belli of the G20, the klatch of developing nations he mustered to challenge the rich world's agricultural subsidies. Brazilian trade negotiators have taken the EU to task at the World Trade Organization for its subsidies for sugar exporters, and filed a complaint against the United States for its soaring surtaxes on imported cotton. Not coincidentally, two of Lula's most trusted advisers are Agriculture Minister Roberto Rodrigues, himself a farmer, and Trade and Development Minister Luiz Furlan, who owns one of the continent's biggest meat-packing businesses, Sadia.

Brazil was not always so ambitious. For the first four centuries after the landing of Portuguese explorers, the country lived with its back to the wilderness. Generations of settlers were content to scratch out a living "like crabs," as the colonial historian Frei Vicente do Salvador once wrote, along the narrow Atlantic seaboard. Many dreamed of returning to a golden retirement in Portugal. Many more feared the serto, the vast outback, with its feral beasts, unknown Indian tribes and the killer heat of the tropics. In time, with the population growing, and word spreading of riches to be found in the forests, people began to venture west and north, all the way to the Amazon rain forest. But it was the cerrado--the sprawling stretch of savanna, scrub and squat forest in western Brazil--that caught their attention, and that would become the New World's most unlikely breadbasket.

While Brazil is blessed with good weather, the country's hot climate can also be a curse, cooking crops and setting loose all types of plant diseases. It took three generations of trial and error, but farmers, scientists and entrepreneurs defeated nature's resistance. Much of the credit goes to Embrapa, the government agricultural- and cattle-research institute, where painstaking experiments with plant genetics and organic pest control have pushed the farming frontier all the way to the equator.

One of the research institute's early coups was adapting soybeans, a temperate-climate crop originally from China, to the tropics. With new tropicalized soy seeds, Brazil turned the steamy cerrado into a garden, growing two crops of soy a year, plus a fallow crop of corn in between, against a single crop for Northern Hemisphere growers. Such success has turned Embrapa into an oracle of sorts for developing nations, which are home to two thirds of the world's population and three quarters of its hungry. Hardly a week goes by without officials from Asia, Africa and Central America calling on the institute for advice, seeds and farm technology--a growing Brazilian export.

Embrapa has done a lot with little money. As a government agency, it's hampered by Brasilia's chronic budget shortfalls. Telephones at Embrapa branch offices often fail to work, and underpaid researchers have to scrimp and beg for funds for field work. Embrapa cattle expert Judson Valentim has taught a generation of ranchers in the western Amazon basin how to triple their herds without cutting down a single additional hectare of rain forest. But he does it on a shoestring. "Whenever there's an economic crisis," laments Valentim, "agricultural research suffers."

In the 1970s, when the military ran Brazil, agriculture was a protected industry. But the policy failed. "It was a copy of U.S. farm policy," says Jank, "but without the money to back it." A decade later, with Latin America immersed in a debt crisis, Brasilia ended its farm-subsidy program and threw open the country to world competition. Suddenly, the farmers, herders and agro-industrialists were on their own.

Fortunately, by then a solid decade of public investment in farming technology came onstream. Major private investors like Cargill, Bunge and the Brazilian soy mogul Blairo Maggi (now governor of Mato Grosso) also contributed. As government largesse evaporated, private-sector investors stepped in, investing heavily in food processing, transport and infrastructure; the combination helped turn Brazil into one of the world's most competitive farming economies. "Agriculture has managed to absorb technology and investment in a way that other sectors have not," says Brazilian Finance Minister Antonio Palocci. "This is a model for the rest of the economy."

For all its modern vitality, the Brazilian countryside is not an unblemished landscape. Among the gleaming silos and air-cooled tractors, bitter poverty and brazen cruelty can be found. Late last month four government labor inspectors were murdered in an ambush as they were investigating the alleged enslavement of farmhands by rural landlords in southeast Brazil. Brasilia reckons that some 180,000 farm workers are being treated inhumanely (subjected to many hours of work, often without pay or benefits) on ranches throughout Brazil. But that is not the rule. Where modern farming methods have been established, labor has become more and more specialized, and the workers better paid. Whereas Brazilian per capita income has been flat for more than a year, rural wages grew 6.9 percent last year.

Ironically, Brazil's farming success has been achieved largely without genetically modified crops. Commercial GM plots are still technically illegal--though scores of farmers grow them everywhere in Brazil. A huge row between environmentalists, farmers and big agribusiness has split Lula's government. Last month Brasilia hedged its position on the issue: the government opted to keep the GM growing ban in place but allowed farmers to sell their bootleg crop anyway, at least until a panel of experts gives the final verdict on the health and environmental hazards of biotech crops.

Meanwhile, Brazil's agronomists have quietly developed an array of experimental GM crops, from cotton to papaya, that will yield disease-resistant strains of food and farm goods that could substantially boost exports--if agricultural protectionism, and resistance to GM foods in Europe, ever fades. Whatever happens, Brazil's bountiful farming revolution is still in an early stage. That is good news for Latin America's biggest economy, and bad news for its competitors.