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

A research paper finds that Brazil's 2008 Resolution 3,545, which tied rural credit to environmental and land-titling compliance, reduced deforestation in the Amazon by approximately 60%. The effect was strongest in cattle-ranching areas and driven by a reduction in medium and large loans, demonstrating a positive correlation between credit availability and land clearing in the region.

• The implementation of Resolution 3,545 in 2008, which conditioned subsidized rural credit in the Amazon on legal titling and environmental compliance, led to a substantial reduction in deforestation. The authors estimate that the total deforested area during the study period was approximately 60% smaller than it would have been without the policy.
• The reduction in deforestation was most pronounced in municipalities where cattle ranching served as the primary economic activity, whereas the effect was not statistically significant in crop-oriented municipalities.
• The policy functioned primarily by restricting access to rural credit. The study found a sizable reduction in credit concessions, with loans specifically for cattle ranching accounting for 75% of this reduction.
• The restriction of credit access under Resolution 3,545 primarily affected medium and large loans, while small-scale producers faced less stringent requirements and were therefore less impacted.
• Using a 2SLS approach, the researchers found a positive relationship between rural credit and deforestation in the Amazon. This suggests that the region's agricultural activities are land-intensive and that farmers face significant credit constraints.
• The study concludes that the financial environment in the Brazilian Amazon is characterized by significant credit constraints, implying that policies increasing financial resource availability could potentially increase forest clearings.

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} }