By 2009, a combination of sound macroeconomic policies and bold, pro-poor social programs saw the Brazilian economy boom and reduced poverty and inequality. Agricultural productivity and exports soared, both nationally and at the state level. In the State of Sao Paulo, agriculture represented over half of all economic activity in 60 % of the state’s municipalities and 80 % of rural employment. Even so, the rural sector was still characterized by inequalities. Some 80 % of the estimated 330,0000 agricultural units state-wide were small, family-based operations occupying just 20 % of total farming area. Family agriculture faced twin challenges of low competitiveness and environmental degradation. While family farming played a major role in agricultural production, poor productive infrastructure, high transportation costs, and limited access to credit hindered its market participation. Producers also lacked management capacity, market knowledge, and access to technical assistance, and their organizations lacked the formality needed for commercial activity. Their leverage and negotiating power along the supply/value chains were weak, and their products were insufficiently differentiated or market-targeted. Further, poor land management during repeated agricultural boom cycles, along with farming intensification, had promoted soil erosion and sedimentation of reservoirs, springs, and headwaters, increasing farmers’ vulnerability to climate change.
In line with Brazil’s state government priorities, the Sao Paulo Sustainable Rural Development and Access to Markets Project addressed two main challenges faced by family farmers. Using innovative finance instruments, the project emphasized markets and sales, moving beyond earlier World Bank–supported rural development projects. Qualified family-farmer organizations were selected through rigorous targeting; investments in market-driven ventures were based on strong business plans, including priority road works; and organizations engaged in technical assistance and training to develop business and marketing skills, improve and diversify products, build operational capacity, and adopt sustainable farming practices. A matching grant mechanism required organizations to contribute up to 50 % of the value of their business plan investments; grants supplied the balance. Further, the project supported public policies promoting environmental conservation and climate awareness. Registering the state’s family farmers in the Rural Environmental Cadaster provided the state with a physical and land-use profile of all small farm properties state-wide on which to base Stage II land recuperation programs. Innovative pilots for payment for environmental services (PES) on farmers’ land demonstrated the potential economic benefits of conservation activities on lands unsuitable for conventional agriculture and established the analytical foundation for scaling up PES in other parts of the state. Other efforts under the project intensified and expanded farmers’ adoption of sustainable agroforestry and multipurpose forest technologies and systems.