Rural Investment: BNDES Credit Contributes to Agricultural Intensification

This policy brief evaluates the impact of rural credit provided by the Brazilian National Development Bank (BNDES) for the purchase of farming machinery and equipment between 2005 and 2019. The study finds that such credit increases agricultural productivity and stimulates production without increasing deforestation, often by replacing pasture areas with more productive cropland. The effects are most pronounced in municipalities with high labor intensity and when credit is used for labor-saving equipment.

• BNDES rural credit for machinery and equipment increases agricultural productivity and production without driving deforestation. A 1% increase in the supply of municipal credit for equipment is associated with a 0.02 percentage point increase in the share of agricultural GDP in total municipal GDP and a 0.13% growth in the value of crop production. Furthermore, it results in a 0.18% increase in cropland productivity and a 0.08% increase in land productivity for cattle.
• The impact of equipment credit varies by the labor intensity of the municipality. In municipalities with a high proportion of workers per area (more labor-intensive), a 1% increase in credit leads to a 0.19% increase in agricultural GDP, a 0.09% increase in crop production, and a 0.06% increase in cattle production. In contrast, less labor-intensive municipalities show no significant impacts on agricultural GDP or crop production, though they do see a 0.11% growth in cattle production.
• Credit for labor-saving equipment—which includes tractors, harvesters, and soil preparation equipment and accounted for 68% of equipment credit between 2005 and 2019—has a stronger effect on production and productivity, particularly in labor-intensive municipalities. In these areas, a 1% increase in such credit leads to a 0.23% increase in crop production.
• While overall results show no increase in deforestation, disaggregated data suggests a small increase in deforestation specifically when credit is expanded to municipalities with the lowest proportions of workers per area. In these less labor-intensive municipalities, a 1% increase in credit is associated with a 0.01% increase in areas allocated to crops and a 0.002% increase in the total area of agriculture.
• BNDES credit for equipment is primarily distributed through indirect operations via the FINAME product, which finances domestic machinery. Between 2005 and 2019, the real volume of this credit increased by 97%, from R$ 4.9 billion to R$ 9.7 billion. Harvesters and tractors accounted for 56% of these funds during this period.

APA

Climate Policy Initiative (2022). Rural Investment: BNDES Credit Contributes to Agricultural Intensification. https://www.climatepolicyinitiative.org/publication/rural-investment-bndes-credit-contributes-to-agricultural-intensification/

Chicago

Climate Policy Initiative. Rural Investment: BNDES Credit Contributes to Agricultural Intensification. 2022. https://www.climatepolicyinitiative.org/publication/rural-investment-bndes-credit-contributes-to-agricultural-intensification/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Rural Investment: BNDES Credit Contributes to Agricultural Intensification |date=10 May 2022 |url=https://www.climatepolicyinitiative.org/publication/rural-investment-bndes-credit-contributes-to-agricultural-intensification/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2022rural, author = {{Climate Policy Initiative}}, title = {{Rural Investment: BNDES Credit Contributes to Agricultural Intensification}}, institution = {Climate Policy Initiative}, year = {2022}, month = may, url = {https://www.climatepolicyinitiative.org/publication/rural-investment-bndes-credit-contributes-to-agricultural-intensification/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }