The Effect of Rural Credit on Deforestation: Evidence from the Brazilian Amazon

The study finds that Resolution 3,545, implemented in 2008, led to a substantial reduction in deforestation in the Brazilian Amazon, primarily by restricting access to rural credit for cattle ranching. Using a difference-in-differences approach and 2SLS estimation, the authors estimate that total deforested area from 2009 to 2011 was approximately 60% smaller than it would have been without the policy. The results indicate that cattle ranching is highly dependent on official credit and that credit constraints in the region lead to reduced expansion at the extensive margin. In contrast, crop-oriented municipalities showed no significant impact on deforestation, as crop production is less dependent on official rural credit and more focused on intensification.

• Resolution 3,545 significantly reduced deforestation in the Amazon biome, with total deforested area between 2009 and 2011 estimated to be 60% smaller than in a counterfactual scenario without the policy.
• The reduction in deforestation was most pronounced in municipalities where cattle ranching is the primary economic activity, while no significant impact was found in crop-oriented municipalities.
• The policy functioned by reducing the concession of rural credit, with a total reduction of approximately BRL 579 million (USD 290 million) in loans between 2009 and 2011 for the benchmark sample.
• Credit restrictions primarily affected cattle ranching activities and larger loan sizes, whereas small-scale producers were less affected due to less stringent requirements.
• 2SLS estimates demonstrate a positive relationship between rural credit availability and deforestation, suggesting that credit in the Amazon is used to expand production at the extensive margin rather than the intensive margin.
• The financial environment in the Brazilian Amazon is characterized by significant credit constraints, meaning that policies increasing financial resource availability could potentially increase deforestation rates.

APA

Assunção, J., Gandour, C., Rocha, R., & Rocha, R. (2016). The Effect of Rural Credit on Deforestation: Evidence from the Brazilian Amazon. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2013/01/CPI_Technical_Paper_Does_Credit_Affect_Deforestation_UPDATE_set2016.pdf

Chicago

Assunção, Juliano, Clarissa Gandour, Romero Rocha, and Rudi Rocha. The Effect of Rural Credit on Deforestation: Evidence from the Brazilian Amazon. Climate Policy Initiative, 2016. https://www.climatepolicyinitiative.org/wp-content/uploads/2013/01/CPI_Technical_Paper_Does_Credit_Affect_Deforestation_UPDATE_set2016.pdf.

Wikipedia

{{cite report |last1=Assunção |first1=Juliano |last2=Gandour |first2=Clarissa |last3=Rocha |first3=Romero |last4=Rocha |first4=Rudi |title=The Effect of Rural Credit on Deforestation: Evidence from the Brazilian Amazon |publisher=Climate Policy Initiative |date=September 2016 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2013/01/CPI_Technical_Paper_Does_Credit_Affect_Deforestation_UPDATE_set2016.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{assuno2016effect, author = {Assunção, Juliano and Gandour, Clarissa and Rocha, Romero and Rocha, Rudi}, title = {{The Effect of Rural Credit on Deforestation: Evidence from the Brazilian Amazon}}, institution = {Climate Policy Initiative}, year = {2016}, month = sep, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2013/01/CPI_Technical_Paper_Does_Credit_Affect_Deforestation_UPDATE_set2016.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }