Does rural credit enhance a sustainable and intensive agriculture in Brazil?

Abstract

This paper examines the effects of rural credit, through Brazil’s Plano Safra, on agricultural production, land use, and greenhouse gas (GHG) emissions. Using fixed-effects econometric models at the municipal and yearly levels, the findings show that rural credit is positively associated with increased agricultural output, primarily through expansion of cultivated area rather than productivity gains. However, rural credit is also linked to deforestation and higher GHG emissions, particularly in livestock-related activities. Credit targeted at family farming (PRONAF) proves more effective in boosting production. The study concludes that more selective credit policies with stronger environmental safeguards are necessary to align rural credit with sustainability and just transition goals.