THE IMPACT OF RURAL CREDIT ON BRAZILIAN AGRICULTURE AND THE ENVIRONMENT

This policy brief analyzes the impact of rural credit in Brazil, finding that increased lending significantly boosts agricultural productivity and municipal GDP while promoting a shift from pasture to cropland. Crucially, the research indicates that rural credit can increase forest areas by allowing farmers to produce more on existing land, thereby supporting conservation goals. However, the brief notes that the current distribution system is outdated and fragmented, recommending gradual reforms to optimize credit access and further reduce deforestation pressures.

• Rural credit is the central agricultural policy in Brazil, accounting for approximately 40% of total agricultural production, which was valued at roughly R$225 billion (US$61 billion) in the 2018-2019 agricultural year.
• Rural credit funding is primarily managed through two government plans: the Agricultural Plan (Plano Agrícola e Pecuário - PAP) for medium and large producers, and the National Plan for Family Farming (Programa Nacional de Fortalecimento da Agricultura Familiar - PRONAF) for small producers. For the 2018-2019 agricultural year, PAP was allocated R$194 billion (US$52 billion) and PRONAF was allocated R$31 billion (US$8.4 billion).
• A 1% increase in rural credit lending results in measurable economic gains at the municipal level, specifically a 0.29% increase in crop production, a 0.17% increase in agricultural GDP, a 0.05% increase in total municipal GDP, a 0.21% increase in cropland productivity, and a 0.22% increase in rural worker crop productivity.
• Increased rural credit supply positively impacts land use by encouraging producers to shift from less productive pastures to more productive croplands, while also increasing forest areas. Specifically, a 1% increase in rural credit is associated with a 0.08% increase in crop area, a 0.11% decrease in pasture, and a 0.02% increase in forest areas.
• The current rural credit distribution system is described as outdated and fragmented, based on a 1960s framework. This complexity creates distortions in credit access and loan conditions, often determined by the geographic location of bank branches rather than agricultural potential, which inhibits the policy's overall effectiveness.
• The document recommends that rural credit be leveraged to reconcile production and conservation goals by promoting productivity gains on existing cleared land to relieve deforestation pressures. It further advises that any reforms to the system be introduced gradually to avoid disrupting agricultural output for financially constrained producers.

APA

Assunção, J., & Souza, P. (2019). THE IMPACT OF RURAL CREDIT ON BRAZILIAN AGRICULTURE AND THE ENVIRONMENT. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2019/04/PB-Impact-Rural-Credit-Brazilian-Agriculture-EN-17Abr.pdf

Chicago

Assunção, Juliano, and Priscila Souza. THE IMPACT OF RURAL CREDIT ON BRAZILIAN AGRICULTURE AND THE ENVIRONMENT. Climate Policy Initiative, 2019. https://www.climatepolicyinitiative.org/wp-content/uploads/2019/04/PB-Impact-Rural-Credit-Brazilian-Agriculture-EN-17Abr.pdf.

Wikipedia

{{cite report |last1=Assunção |first1=Juliano |last2=Souza |first2=Priscila |title=THE IMPACT OF RURAL CREDIT ON BRAZILIAN AGRICULTURE AND THE ENVIRONMENT |publisher=Climate Policy Initiative |date=March 2019 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2019/04/PB-Impact-Rural-Credit-Brazilian-Agriculture-EN-17Abr.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{assuno2019impact, author = {Assunção, Juliano and Souza, Priscila}, title = {{THE IMPACT OF RURAL CREDIT ON BRAZILIAN AGRICULTURE AND THE ENVIRONMENT}}, institution = {Climate Policy Initiative}, year = {2019}, month = mar, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2019/04/PB-Impact-Rural-Credit-Brazilian-Agriculture-EN-17Abr.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }