Priorities that do not prioritize: The mismatch between the objectives and the application of resources from constitutional funds leads to credit concentration in the rural sector

The policy brief examines the Constitutional Financing Funds (FCFs) in Brazil's North, Northeast, and Midwest regions. It finds that while FCFs are designed to support small producers and low-income areas, the criteria for 'priority' beneficiaries and geographies have become so broad that they encompass nearly all producers and most municipalities. This lack of strict targeting has led to a concentration of resources in higher-value contracts and a small number of municipalities, particularly in the Matopiba region. Despite this concentration, FCFs remain a critical source of credit for the most underdeveloped municipalities in the North and Northeast, where alternative financing is often unavailable.

• The criteria used to define priority beneficiaries and geographic areas for FCFs are so broad that they fail to effectively prioritize resources. Based on the 2017 Agricultural Census, 99.96% of establishments in FCF regions qualify as priority beneficiaries because they have a gross annual income up to R$ 16 million. Geographically, priority status applies to 97% of municipalities in the Northeast (FNE), 90% in the North (FNO), and 51% in the Midwest (FCO).
• Eligibility criteria for priority classes have expanded over time, allowing larger producers more access to funds. For example, until 2010, priority was limited to small-scale producers with gross annual incomes up to R$ 300,000; however, in 2011, a 'small-medium scale' class was created, extending priority status to those with annual gross incomes up to R$ 16 million.
• Loose criteria have resulted in the concentration of FCF resources in high-value contracts and specific municipalities. Between the 2013/14 and 2020/21 agricultural years, the top 5% of municipalities receiving rural credit from FCFs held an average of 41% of FNE resources, 36% of FNO resources, and 24% of FCO resources, which exceeds their share of agricultural production value.
• The Matopiba region, comprising Tocantins and parts of Maranhão, Piauí, and Bahia, is notable for having municipalities that consistently remained among the top 5% of FCF credit recipients between 2013/14 and 2020/21.
• FCFs are vital for producers and municipalities with limited credit market access, especially in the North and Northeast. Between 2013/14 and 2020/21, FCFs were the primary source of rural credit for 78% of FNE municipalities and 59% of FNO municipalities, compared to only 9% in the Midwest (FCO).
• Municipalities most dependent on FCFs (where resources account for more than 75% of rural credit) typically exhibit lower development levels, characterized by lower Municipal Human Development Index (MHDI) scores, higher illiteracy rates, and lower average monthly nominal incomes.

APA

Climate Policy Initiative (2022). Priorities that do not prioritize: The mismatch between the objectives and the application of resources from constitutional funds leads to credit concentration in the rural sector. https://www.climatepolicyinitiative.org/publication/priorities-that-do-not-prioritize-the-mismatch-between-the-objectives-and-the-application-of-resources-from-constitutional-funds-leads-to-credit-concentration-in-the-rural-sector/

Chicago

Climate Policy Initiative. Priorities that do not prioritize: The mismatch between the objectives and the application of resources from constitutional funds leads to credit concentration in the rural sector. 2022. https://www.climatepolicyinitiative.org/publication/priorities-that-do-not-prioritize-the-mismatch-between-the-objectives-and-the-application-of-resources-from-constitutional-funds-leads-to-credit-concentration-in-the-rural-sector/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Priorities that do not prioritize: The mismatch between the objectives and the application of resources from constitutional funds leads to credit concentration in the rural sector |date=18 March 2022 |url=https://www.climatepolicyinitiative.org/publication/priorities-that-do-not-prioritize-the-mismatch-between-the-objectives-and-the-application-of-resources-from-constitutional-funds-leads-to-credit-concentration-in-the-rural-sector/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2022priorities, author = {{Climate Policy Initiative}}, title = {{Priorities that do not prioritize: The mismatch between the objectives and the application of resources from constitutional funds leads to credit concentration in the rural sector}}, institution = {Climate Policy Initiative}, year = {2022}, month = mar, url = {https://www.climatepolicyinitiative.org/publication/priorities-that-do-not-prioritize-the-mismatch-between-the-objectives-and-the-application-of-resources-from-constitutional-funds-leads-to-credit-concentration-in-the-rural-sector/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }