Abstract
The rural production in Brazil has experienced a significant competitive impact with the stabilization of the economy promoted by the Real Plan in 1994. Indeed, the Brazilian agriculture has achieved efficiency gains in terms of technology, economies of scale and general modernization of the activity in the field. In this context, the professional management of rural production evolved. However, the governance process does not evolve in the same dimension, and the “governance risk” is still poorly addressed in the rural environment, which often limits the potential of operations. In this study, we sought to deepen the understanding of the factors that impact the implementation of governance practices in rural properties in Brazil. Based on a convenience and non-probability sample, this study seeks to understand the evolution of the governance process on farms and its correlation with the management practices. This study found a correlation between the existence of some formal management processes (for example, strategic planning and more robust accounting systems) and advances in the governance mechanisms and processes, such as the establishment of a board of directors, clearer rules regarding the separation between corporate and family assets and more transparency in income statements. This study also found a lack of clarity in the separation of return on capital (dividend) and compensation for work (compensation for services provided) for partners, heirs and other family members. In summary, we concluded that there is the adoption of some governance mechanisms in the rural sector, but they are still poorly developed among rural producers, hence the need to stimulate them.
Highlights
The agribusiness sector in Brazil represents approximately 22.5% of Brazil’s GDP – based on data of 2013, generating approximately US$ 81 billion of trade surplus in 2014 (ABAG, 2015)
Its supply chains are formed by a wide variety of organizations, from large multinational corporations in the agrochemical, food processing and distribution, energy and fiber industries, to companies related to rural production, formed by cooperative organizations and family businesses of different sizes
The broad definition of the term implies a systemic view that expands the dimension of rural production itself (Davis & Goldberg, 1957): A commodity system encompasses all the participants involved in production, processing and marketing of a product
Summary
The agribusiness sector in Brazil represents approximately 22.5% of Brazil’s GDP – based on data of 2013, generating approximately US$ 81 billion of trade surplus in 2014 (ABAG, 2015). The term agribusiness was introduced in the literature by Harvard University professors John Davis and Ray Goldberg, in 1957. The broad definition of the term implies a systemic view that expands the dimension of rural production itself (Davis & Goldberg, 1957):. A commodity system encompasses all the participants involved in production, processing and marketing of a product. This system includes the market of agricultural supplies, agricultural production, storage operations, processing, wholesale and retail, delimiting a flow that ranges from inputs to the final consumer. The concept encompasses all the institutions which affect the coordination of the successive stages of a commodity flow, such as the government, futures markets and trade associations The concept encompasses all the institutions which affect the coordination of the successive stages of a commodity flow, such as the government, futures markets and trade associations (Davis and Goldberg, 1957, p. 2)
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