This policy brief summarizes findings from an emerging portfolio of research by Climate Policy Initiative (CPI) on the role rural credit plays in Brazil. CPI analysts determined that rural credit makes a significant difference in raising agricultural productivity and improving land use. They show that an increase in rural credit lending leads to improvements across a number of agricultural indicators, including municipal crop production, agricultural GDP, total municipal GDP, cropland productivity, and rural worker crop productivity. The analysts conclude that lack of financial resources often limits farmers’ production possibilities in Brazil. Improved credit access allows producers to make new decisions that lead to higher productivity.
The research also finds that rural credit has a positive impact on Brazil’s agricultural land use. After increases in municipal credit supply, rural producers shift their land use from less to more productive alternatives – specifically, pastures to croplands –, and also result in an increase in forest areas. Rural credit’s central role in increasing productivity highlights the opportunity policymakers have to leverage it as a means to balance Brazil’s agricultural and economic growth with greater protection of its natural resources.