The IEDI has been gathering a set of principles and suggestions that will integrate its soon-to-be-announced proposal for a industrial strategy, giving rise to a series of studies on important topics such as taxation, infrastructure, investment financing, international integration, competitiveness and innovation.

Today's Letter IEDI, based on the study prepared by the economist José Roberto Mendonça de Barros (available in full on the IEDI website, in Portuguese) discusses the definition of a productive development strategy based on the interrelations between the agribusiness (including livestock farming) and the industrial sector. As the author argues, the connection of these sectors is much greater than imagined. For example, about 30% of the 805 products that are part of the IBGE Monthly Industrial Survey (PIM-PF/IBGE) come from the agroindustrial complex, according to a very conservative assessment.

For this reason, the growing dynamism in the countryside has everything to stimulate industrial advance while, on the other hand, the progress of the industry is important for the constitution of modern agribusiness, especially with regard to the incorporation of new technologies into agricultural machinery, equipment and implements.

This two-way relationship between the industry and the agricultural sector should intensify even more in the near future and include more and more related services, as new frontiers are opening up with the acceleration of recent technological innovations. It should be noted that the new technologies underpinning Industry 4.0 are not restricted to the industrial sector, but are revolutionizing products, production and management methods, and entire markets in agriculture and in services as well.

According to Mendonça de Barros, the greater approximation between the sectors will evolve toward a continuing productivity increase in the field and steady advances in the sustainability of agricultural and industrial productions. With the cheapening of sensors and the increasing use of digital techniques, a "precision agriculture" has been developed, resulting in average productivity increases and cost reductions, because it eliminates input wasting.

Note that this requires geo-referencing the area being planted; sensors and other automatic controls of the planter-fertilizer; soil analyzes for small plots of land (to be made by a digital readout device connected to a laboratory) and a programe with a model to control the system and to send orders to the operator and the machines. In other words, precision agriculture is based on state-of-the-art machines and equipment produced by the industry and advanced services. There is, therefore, an opportunity for Brazil to expand and strengthen companies, including startups, focused on the creation and commercialization of solutions, both industrial and from services, to be employed by precision agriculture.

However, as the interaction between sectors operates in multiple directions, not only will agriculture and livestock farming demand new services and industrial products as fundamental inputs for their modernization, but also many branches of the industry will depend more and more on agricultural inputs.

One of the most promising areas, according to the author of the study, is "green chemistry". It consists of several segments, such as chemicals from natural/renewable products (solvents from ethanol and glycerol, material generated in the production of biodiesel, plasticizers from soybean oil etc.), and chemicals from the biomass of agricultural residues, such as ethanol obtained from sugarcane bagasse and chemicals extracted from seeds and fruits.

All of these segments point to an extremely promising route: the creation of products that meet consumer desires (produced from renewable goods, environmentally positive and biodegradable), elaborated from materials that are extremely competitive worldwide.

Thus, the introduction of new products, like green chemicals, will enable the creation of value both in the intermediate-goods link of the production chain —for instance: biofuels, bioelectricity and biomaterials— as well as in final goods to households, especially in areas such as food, pharmaceuticals, health and well-being. In this way, it is possible to develop a successful manufacturing sector from natural comparative advantages and leveraged by technologies already available or in the final stage of development.

The full text is available in Portuguese.