The Cashew Industry of Ceará, Brazil: Case Study of a Regional Development Option

Author(s): Anne Meaney-Leckie

Source: Bulletin of Latin American Research , 1991, Vol. 10, No. 3 (1991), pp. 315-324
Published by: Wiley on behalf of Society for Latin American Studies (SLAS)

Stable URL: http://www.jstor.com/stable/3338673

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Bull. Latin Am.Res.,Vo\. 10, No. 3, pp. 315-324, 1991. 0261-3050/91 $3.00 + .00
Printed in Great Britain. ? Society for Latin American Studies
Pergamon Press plc

The Cashew Industry of Ceara, B

Study of a Regional Developmen
ANNE MEANEY-LECKIE

Department of Geography, State University College ofNew York

USA

INTRODUCTION

The socio-economic underdevelopment ofthe Northeast region of

been a concern of the federal government for over 100 years
comprehensive development plan recommended agricultural and
reforms to alleviate the situation. Subsequent plans have affirmed t
An integral part of the reforms included the use of indigenous
resistant crops in the fostering of local agro-industries. This paper
the cashew industry as an example of one of these industries and lo
role in the socio-economic development of Ceara over the last 30 ye
is accomplished by assessing the growth of the industry, the
offered to assist growth, and the development of markets fo
products. Conclusions are drawn as to the usefulness of the ind
development option in terms of employment benefits, in-flow of c
the region and infrastructural expansion.

BACKGROUND TO THE STUDY

During the 1950s the Brazilian government recognised the und

ment of the Northeast as being the result of an unstable soc
situation, exacerbated, if not caused, by recurrent drought. A 1959
hensive development plan, A Policy for the Economic Developm
Northeast' (GTDN, 1959), recommended implementation of a re
would decrease the dependence of the Northeastern popu
subsistence agriculture in the drought-prone region by strengt
infrastructural, industrial and agricultural foundations of the Nor
the strength of this report an integrated regional development
formed, the Superintendencia do Desenvolvimento do Nordeste
the Superintendency of Development in the Northeast). SUDEN
unprecedented powers to co-ordinate the activities of the existi
ment agencies in the region as well as to formulate policies of its o
The objectives of SUDENE were to improve the regional infr
modify the agricultural system, relocate people to colonisation
the wetter areas of the Northeast, and bring industry into th
specific intention of the latter was to include the use of droug
crops of the sertao to foster local industrialisation efforts (Ro
109; Dickenson, 1978: 190). Shortly after the creation of S

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316 BULLETIN OF LATIN AMERICAN RESEARCH

agency began, in particular, to promote industrial

Northeast through a series of fiscal incentives named a
which enacted the incentives in 1961. Under 434/18' Br
could reduce their tax liabilities by up to 50 per cent thr
in a fund established in the Banco do Nordeste do
Northeastern Brazil) and administered by SUDENE.
criteria applied by SUDENE, up to 75 per cent of th
build or revamp an existing plant could be obtaine
arrangement (Departmento de Industrializagao, 1970)
mined by the number of jobs created, the use of natur
existence of finished products that could be exported t
(Henshall and Momsen, 1976; Syrvund, 1974). There
processing, textile and oil-seed crushing industries tend
funding than the newly proposed chemical, electrical a
The former were viewed as more labour intensive and m
the needs of the sertao.
The 434/l 8' policy did succeed in attracting new industry to the Northeast,
diversifying the industrial structure and bringing in much needed capital,
despite the fact that it did not have the expected results in terms of employ-
ment (Henshall and Momsen, 1976; Kutcher and Scandizzo, 1981). 434/18,
was modified and improved over the years to meet the changing demands of
development. In December 1974, 434/18' was replaced by the Fundo do
Investimento do Nordeste (FINOR, Northeastern Investment Fund).
Operated by the BNB under SUDENE, FINOR's objectives were to secure
equal financing for the projects approved by SUDENE with effective
guarantees (see BNB, 1978).
SUDENE programmes in general came under fire after a severe drought in
1970 which illustrated that the programmes implemented in the previous
decade had little impact on the effects of the drought. As a result SUDENE
began to lose power in the 1970s and 1980s. However, other government
programmes were created to fill gaps. These programmes included the
Programa de Redistribugao de Terras e de Estimulo a Agroinditstria do Norte
e Nordeste (PROTERRA, Programme for Land Redistribution and Stimula-
tion of Agro-industry in the Northeast) which was designed to redistribute
land, but eventually became a line of credit, and POLONORDESTE
(Development Programme for Integrated Areas in the Northeast) which was
designed to create regional nuclei of development where technical and
financial services, industries and marketing co-operatives would be estab?
lished to help increase rural incomes. In addition, a series of five-year
national integration plans (PIN, Plano de Integraqao Nacional) beginning in
1970 have sought to ensure the basic goals of SUDENE: development ofthe
regional infrastructure, modifying the agricultural system, colonising the
moist margins of the region and industrialisation.

THE CASHEW AS A DEVELOPMENT OPTION

The primary thrust ofthe early SUDENE years was industrialisation.

end a significant effort was made to modernise the textile industry, t
refineries, the tanneries and the oil-seed refineries. However, in add

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THE CASHEWINDUSTRY OF CEARA, BRAZIL 317

promoting the traditional industries there was an effort to discover and foster
additional local agro-industries. It was argued that local drought-resistant
crops, particularly those easily processed locally, requiring little capital
investment, using a large portion of both the rural and urban labour force, for
which a lucrative market for the final product could be found, would
contribute significantly to the efforts to industrialise the Northeast. It was
also argued that such industrialisation would serve to decrease the flow of
capital out of the region and improve the local infrastructure (Instituto de
Planejamento, 1974).
In the late 1950s an increase in foreign demand for the cashew kernel and
the consequent increase in the global price of kernels created an optimal
enterprise for SUDENE funding. The cashew tree was indigenous, drought
resistant and grew in natural stands along the coasts of the Northeastern
states of Ceara and Rio Grande do Norte (see Fig. 1) on land too poor to
support subsistence food crops. In addition, the tree yielded three products
that could be commercialised: the cashew kernel, CNSL (Cashew Nut Shell

Map by Brian Okey

FIG 1 Location map ofCeard

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318 BULLETIN OF LATIN AMERICAN RESEARCH

Liquid), and the peduncle. Each of these products could

ised because little capital investment was required and t
mechanised processing equipment could be 'hom
anticipated that because of the nature of the process
manual harvesting required, significant portions of bot
populations could be employed on a semi-permanent
their vulnerability to drought.
Through the incentives provided by 434/18\ FIN
programmes, all facets of the cashew industry have gr
years, albeit with some difficulty in matching industria
production. Ninety per cent of the cashews on the wor
grown and processed in Northeastern Brazil, primarily
In order to evaluate the potential of the cashew industry
plan for socio-economic stability and development in th
now goes on to address the growth of the industry, the
assist growth, and the development of markets for cas

THE GROWTH OF THE CASHEW INDUSTRY

Indigenous stands of cashew trees along the Northeastern coast of

were used by natives for food and medicinal purposes. After colonisa
the area in the mid-1500s, the tree was cultivated by European settler
the kernel was used by navigators as a reserve food source on long vo
(Lery, 1770). Through this process the cashew was disseminated t
tropical areas in the world, specifically East Africa and India. Desp
diffusion, cultivation and processing techniques remained rudimentar
commercialisation limited, until the 1940s.
During World War II, in return for technical assistance in aviat
general industrialisation, the Brazilian government allowed the United
of America to run a series of expeditions in search of raw materials th
be used in the war effort. During this time modern uses for CN
discovered, and the world became more familiar with the taste of the
kernel.
CNSL is one of the few natural and economic sources of phenol, an
alcohol that is poisonous when taken internally and causes deep burns
it comes in contact with the skin. Traditionally, the natives used
antiseptic and as a treatment for skin diseases such as ringworm. How
testing in the 1940s showed that CNSL could be used as a synthesising
in forming other chemical compounds, particularly substitutes f
various derivatives of petroleum (Holanda, 1971). Therefore, it was us
the war effort as a petroleum substitute in ammunition, rubber, and
essential materials.
In 1943 a partially American-owned firm, Brasil Oiticica, began manu-
facturing CNSL in Fortaleza, Ceara. The manner of processing also used the
kernel, which, when roasted and salted, sold well on the international market.
By 1945 Brasil Oiticica had secured the American cashew kernel market
from potential competitors in India and East Africa. This was primarily
because of a US federal regulation that required that CNSL be extracted and
made available to the USA before any kernels were imported. The distance,

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THE CASHEW INDUSTRY OF CEARA, BRAZIL 319
the peril of the wartime seas, and the rudimentary nature of the industry i
India and Africa prevented them from becoming major suppliers (Estev
1961).
After the war the demand for CNSL fell, but as the world economy
recovered demand for the kernel as a delicacy food rose. Brasil Oiticica and
other vegetable-processing industries realised the potentially larger market
and increased their production of kernels. Through a series of contracts with
local farmers the harvest of existing stands was intensified. For example, the
average yield of 100 hectares in 1958 was 31,481 kilogrammes of fruit, and
by 1961,45,462 kilogrammes (IBGE, 1958,1961). In the late 1950s several
small experimental plantations of cashews were established in an effort to
increase the supply of raw materials. In fact, the state government had a
standing offer of free seeds to anyone willing to cultivate cashews (Caval-
cante and Neto, 1973). However, because the tree takes 7-8 years to mature,
the investment in land and cultivation equipment was too costly for many
individuals or firms to undertake. Between 1960 and 1968, for example, only
10,000 hectares of cashews were planted while in the same period the num?
ber of processing industries increased from 2 to 17. This latter was largely in
response to the industrial incentives offered by '34/18'.
Finally, in 1968 both the government agencies and the industry agreed that
only large, well-organised plantations could begin to provide the necessary
raw material and avert a production crisis (Johnson, 1972). The concept of
vertically integrated firms was encouraged, and most of the processing firms
established their own plantations. By the end of 1972,182,000 hectares had
been approved for financing, but less than half were ever planted (Cavalcante
and Neto, 1973).
A production crisis was not averted because the government continued to
provide financial incentives for the establishment of processing plants and,
because the cashew industry was considered a priority, industrialists were
able to receive up to 75 per cent funding from 434/18\ By 1987 there were
24 processing plants in operation in Fortaleza, all of which were operating at
less than 50 per cent capacity and several at a fiscal loss.1 This unequal
funding of the industry and plantations decreased efficiency of the former.
During the 1980s five processing plants in Fortaleza were forced into bank?
ruptcy because of a lack of raw materials.2
Despite such setbacks the industry continues as a priority for government
funding primarily because buoyant international demand keeps the price of
the product high. In response to the production shortage in Northeast Brazil,
the world price for cashew kernels leapt from $900/tonne in 1966 to $2500/
tonne in 1975 and reached almost $5000/tonne in 1978 (Instituto de
Planejamento, 1974; Meaney, 1980). The 50 per cent increase between
1975 and 1978 was due to a lack of raw materials because the plantations
implemented after 1968 had not yet come into production. It was also a time
when the only other international producer of cashews, Mozambique, was
experiencing political turmoil. The price stabilised in the 1980s as produc?
tion increased, and by the late 1980s one tonne of cashew kernels was
approximately priced at $6200 (IBGE, 1987a).
It should be noted that in addition to the demand for cashew kernels, the

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 320 BULLETIN OF LATIN AMERICAN RESEARCH

world demand for pure CNSL began to rise again

petroleum prices soared and new uses for CNSL
CNSL can be found in over 200 US patented item
linings and electrical wiring to plastics, insecticid
sequence the demand and price have begun to rise
1973 and 1980 there was a 57 per cent increase in
and a 200 per cent increase in the price (Meaney, 198
Brazilian industrialisation for commercial production
that use CNSL is in the distant future. Many of the p
and Brazil currently lacks the industrial linkages nec
work entailed.
Always popular on the regional level, demand for p
as fruits, juices, pastes and jellies is increasing on th
for example, cashew pastes accounted for 7 per cent o
national market. However, when compared to guava a
64 and 25 per cent ofthe market, respectively, it is
demand for peduncle products is limited (Instituto d
Peduncle products have yet to become popular on int
make up only about 2 per cent of the tropical fruit ex
The cashew industry then, received and continues t
government incentives to develop because it uses
which is easily industrialised within the region for w
has been developed and maintained.
THE INDUSTRY AS A SOCIO-ECONOMIC STABILISER

The primary motivation behind the government's industrial and agr

incentive programmes was to bring socio-economic stability to the p
stricken region. It was argued that if the reliance of the population
vagaries of subsistence agriculture in the drought-prone Northeast c
reduced by the establishment of permanent jobs not affected by rec
drought, then the region could begin to develop and present less of a
the national coffers. In addition, the incentives would provide an inf
capital and improve local infrastructure. The establishment of th
industry in the region was one means of addressing the concern
government and the data indicate that this has been largely successf

Employment
Traditionally the population most vulnerable to drought-related problems
are the subsistence agriculturalists in the interior. During times of severe
drought much of this population becomes migratory and, in the twentieth
century, has either joined government public 4work-fronts' if positions were
available, or entire families, or parts of families, have migrated to the coastal
cities in search of work. The development of vertically integrated industries
such as the cashew, which function regardless of drought conditions and
employ portions of both the rural and urban labour forces in Ceara, have
helped break this cycle.
The cashew plantations, 90 per cent of which are located between
Beberibe and Mossoro (see Fig. 1), offer a variety of jobs at different stages of

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THE CASHEW INDUSTRY OF CEARA, BRAZIL 321
their development. During the early years, labour is required to clear, plant,
and maintain the land. In addition, most plantations are intercropped wit
annual cash crops to generate income for the first years and to provide food
for the workers. Usually intercrops are removed once the plantation is in ful
production because the income they provide is no longer necessary. How
ever, more recently some FINOR financing has required that the intercrops
be continued or alternative land be made available for subsistence crops t
be grown for workers (Meaney, 1980).
A large plantation requires a high concentration of unskilled labour for
3-5 month period during the harvest. This labour force is usually made up of
women and children who often migrate between plantations. Cavalcante and
Neto (1973:90) estimated that by 1987-1988, when plantations were in fu
production, approximately one-quarter of the rural population over the ag
of five between the towns of Mossoro and Aracati (see Fig. 1) would be
employed on them (see Meaney, 1980). The 1989 production figures show
that 58,685 tonnes of cashew nuts were harvested in Ceara and 47,275
tonnes in Rio Grande do Norte (IBGE/CEPAGO, 1990: 33). The tota
number of people employed in harvesting in these two states then was
approximately 40,000. In addition to the above-mentioned figures, a smaller
number of permanent jobs in caretaking and maintenance are available fo
men on the plantations. It has also been shown that these jobs have not been
affected by droughts (see DNOCS, 1985).
The cashew processing plants also employ a large number of people. In
1960 the two processing plants in existence employed about 600 people.
Today the 24 nut-processing firms employ about 17,000 people. In
addition there are 17 fruit-processing firms that have over one-half of their
production in peduncle products and employ about 1500 people. Th
entire cashew processing industry, then, employs just under 20,000 peopl
or 25 per cent of the industrial workers employed in Ceara (IBGE, 1987b
483). Ninety per cent of the employees in the cashew industry are women
drawn from the urban poor who live on the outskirts of the city. They come
primarily from families who have fled the interior in the face of drough
and are classified as 'unskilled' (Cavalcante and Neto, 1973: 91; Meaney,
1980).
The cashew industry, then, has served to employ sectors of the urban and
rural population who traditionally have been either vulnerable to drought or
lacked the skills necessary for employment in an urban setting.

Capital investments
The '34/18' and FINOR incentives encouraged investment in Northeastern
Brazil by offering tax advantages and supplementary funding. A number of
large firms took advantage of these offers and became involved in cashew
ventures in the Northeast as tax shelters (Cavalcante and Neto, 1973; Pessoa
and Carneiro, 1978). This allowed for an influx of capital into the region that
otherwise is unlikely to have materialised. The income generated by the
industry has encouraged local entrepreneurs to stay in the region and to
reinvest profits in other development opportunities, such as the vertical
integration of cashew processing plants with plantation development. Thus,

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322 BULLETIN OF LATIN AMERICAN RESEARCH

the tendency for profits to be filtered out of the region to

is reduced, the gross regional income is increased, and th
economy is encouraged. There have also been several '
particularly in the processing of other tropical fruit
passion fruit.

Infrastructural improvements
Because of already existing port facilities in Fortaleza the city has become the
export centre for cashew products in Northeastern Brazil. The international
market associated with the cashew kernel and CNSL has increased the use of
these facilities and has played a role in decisions for their improvement. The
city has also become the major processing centre primarily because of the
existence ofthe port and early industries, but also because ofa transportation
network that converges on Fortaleza from the interior, and the existence of a
major coastal highway.
The two-lane, all-weather, highway connects Fortaleza with the main
cashew plantation areas south of Mossoro, and beyond, and facilitates the
transport of raw materials to the plants. There has also been spontaneous
development of cashew plantations along this stretch of road in the last
10 years due to ease of transportation. The industry has also been a
significant factor in the bettering ofthe transport and communication system
from Fortaleza west to Pacajus (see Fig. 1) where four major cashew planta?
tions have been established since 1978. The existence of these improved
transportation and communication facilities has also served to decrease the
vulnerability of the population in the interior to drought because relief aid is
much more easily distributed. The cashew industry then has assisted in, and
taken advantage of, the infrastructural improvements in the region.

CONCLUSIONS

The comprehensive development plan implemented in Northeast

1959 had as its base a reform that would decrease the effect of recurrent
drought on the population and increase the standard of living through
agricultural reform, industrial development and relocation schemes. Since
that time many projects in all three of these categories have been imple?
mented with varying degrees of success. In terms ofthe projects implemented
to foster local industries in the region few have met the development
objectives as well as the cashew industry. Dickenson (1978), for example,
notes that efforts to establish steelworks and a synthetic rubber factory based
on cane alcohol were both delayed. He also notes that although there was
tremendous potential for revitalising the textile industry, the end-product
was a loss of 20,000 jobs between 1960 and 1970 (ibid.).
The cashew industry, on the other hand, has grown beyond the original
expectations of the planners, primarily because of a strong international
demand and the multiplicity of products. It is important, therefore, that both
these factors be taken into consideration when translating the success of the
cashew industry to potentials for other industries. The ability of the kernel
market, for example, to absorb rapid price increases without deteriorating is
not a factor that would necessarily be true with other agro-products. Nor

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 THE CASHEWINDUSTRY OF CEARA, BRAZIL 323
would many fledgling industries be able to sustain the internal mism
ment that resulted in a lack of raw materials and an excess of installed
capacity in the factories.
However, it could be argued that some of the success of the cashew
industry in providing employment for the rural and urban poor, in helping to
impro ve the regional infrastructure, and increasing the flow of capital into the
region, could be translated to the development of other crops. Fruit crops,
such as guava and passion fruit, with growing international market value, are
certainly possibilities. The increase in the number of fruit-processing plants
in Fortaleza in the last 10 years indicates a trend in this direction. One could
also argue for the revitalisation of the oil-seed industry, if increased demand
could be created for its products. It is also evident that there is a need for
further study into secondary products that may be derived from a single
plant, thus increasing the market value of the crop.

NOTES

1. Personal communication, T. A. Falcao, cashew exporter, Fortaleza, Ceara.

2. Personal communication, M. Rodriguez, Banco do Nordeste do Brasil.

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