The Impact of the European Union Sugar Sector Policy on Brazilian Poverty

Abstract

This study assesses the impact of the European Union (EU) common sugar policy on Brazilian poverty levels. First, using a simple linear regression, the Brazilian and EU sugar exports to common third countries were analysed, the results showing an insignificant connection between the two. However, due to the impossibility to segregate raw and refined sugar, it was concluded that the results returned by the linear regression function were uncertain. Yet, a visual observation of the trade data revealed an augment of Brazilian sugar exports to certain third countries simultaneously with a plunge in the EU sugar exports to the same states. Considering, in addition, the vast opportunities for Brazilian sugar cane sector to expand at low production costs, it was deduced that Brazil might partly fulfil the gap left by the EU after the 2006 common market organization (CMO) for sugar reform. Next, several regression analyses and correlation matrices were performed evaluating the relations between the Brazilian the expansion of the states’ and municipalities’ sugar cane sectors, and development indicators. The analyses of the municipalities with a high importance of the sugar cane industry showed strong links between the sugar cane sector growth, and the municipalities’ changes of the GDP per capita and Human Development Indices, and educational and health systems. Yet, the correlations between the variables diverged, confirming the heterogeneity of each municipality and state. The main conclusion was that the sugar sector growth can have different outcomes for development, depending on the region, therefore the Brazilian government has to direct its resources to the sectors which are the most likely to alleviate poverty.