Brazil's leading presidential candidates promise to reduce the country's fertilizer import dependency, but the path and the approach to do so may differ.
Considering a scenario in which left-wing Luiz Inacio Lula da Silva — Brazil's president from 2003-2010 and current poll leader — wins the election, market participants expect him to focus on strengthening domestic fertilizer production by encouraging state-owned companies in the sector. "We oppose Petrobras' privatization," according to his government plan.
Lula's administration considered a national fertilizer project during his second mandate from 2007-2010. Brazil's production and export of agricultural commodities boomed in the 1990s, which led to an increase in fertilizer consumption. But the international financial crisis in 2008 set off a warning signal regarding Brazil's high dependence on imported fertilizers. Lula discussed a plan to increase domestic production and reduce the country's dependency on imports from 75pc to 25pc, noting that supply was dependant on only a few producers. The plan was never released as a formal document and was instead used as a study that helped define future administrations' targets and goals.
The plan designated that Brazil's development bank, the ministry of development and state-owned Petrobras should team up with the private sector to accelerate investments and projects to increase domestic fertilizer production. Lula's administration focused on Petrobras' growth and wanted to include multimetals mining group Vale on the production process.
Both Lula and current president Jair Bolsonaro — the second-leading candidate in the elections' polls — agree that Brazil needs to reduce its import dependency. But Bolsonaro's approach might be different.
Fertile ground for investments
The conservative candidate launched the current national fertilizer plan in the first quarter of 2022.
Its main goal is to reduce the share of fertilizers Brazil sources from imports to around 40pc by 2050, down from nearly 85pc. T government plan says it is important "to map the strategic areas to make investments in the medium and long terms."
Bolsonaro's administration may continue to attract investment from the private sector to expand production, market participants say. During Bolsonaro's mandate, Brazilian state-controlled oil company Petrobras announced targets for its withdrawal from the fertilizer sector as part of its 2021-25 strategic plan. The firm leased two units — one in Sergipe and another in Bahia state — in November 2019 in a 10-year deal with Brazilian petrochemicals group Unigel.
A third nitrogen fertilizer unit called UFN3, in Mato Grosso do Sul state, is also undergoing a sale process. Earlier this year, Petrobras agreed to sell it to the Russian company Acron, but the negotiation was suspended because the group could not fulfill legal requirements. A new sale process — in which Petrobras added 34 rights to mine or research potash in the Amazon basin — started in June. The unit's operations are halted.
During the launch of the national fertilizer plan, Bolsonaro's agriculture ministry reinforced that it is a Brazilian state plan, not a government plan, which means it would not be affected by changes in the federal government.
The current administration would also maintain so-called fertilizer diplomacy with key supplier countries. Brazilian delegates and Bolsonaro traveled to fertilizer producing countries such as Iran, Canada, Morocco, Saudi Arabia, Algeria and Oman. The diplomacy may also be in Lula's agenda, as his government program says it will rescue Brazil from its "international isolation." Bolsonaro's foreign policy has been criticized by left-wing sectors, especially when it comes to environmental commitments and management.
Lula leads the presidential race with 47pc of voting intentions, 14 percentage points above Bolsonaro's 33pc, according to Datafolha's poll, which was conducted from 20-22 September. The former president may win the election in the first round. But if a second round is needed, it is unlikely that it will feature any other runners, as Ciro Gomes — the third-leading candidate — has 7pc of intentions.
