Increasing agricultural productivity plays a key role in the efforts to combine agricultural growth and forest protection by allowing farmers to produce more using the same area. However, for agricultural productivity to increase, farmers must invest considerable resources to modernize their operations – purchasing equipment and spending more in fertilizers. The existence of these capital requirements to increase efficiency has important implications for the rural credit policies.

This publication summarizes the findings from a recent research project by Climate Policy Initiative/Pontifícia Universidade Católica do Rio de Janeiro (CPI/PUC-Rio) which computes the capital costs of maximizing Brazil’s agricultural production without increasing deforestation. The researchers find that Brazil can increase crop output by 79-105% and beef output by 27% without deforestation. To achieve the production gains farmers would need to use more inputs and accumulate capital. This transition would mean increases of 44-51% in operational costs and of 48-52% in the value of farm equipment. This research provides unique insights in potential policy changes needed in Brazil to help farmers overcome the constraints they face to invest in modern technologies, inputs and equipment. This way, the country can help ensure the transition to higher agricultural production and avoid additional deforestation.