Tag Archives: conditional credit

Does credit affect deforestation? Evidence from a rural credit policy in the Brazilian Amazon

March 18, 2013 |

 

Clarissa Costalonga e Gandour also contributed to this piece, which was originally posted on Climate-Eval.

The deforestation rate in the Brazilian Amazon decreased sharply in the second half of the 2000s, falling from a peak of 27,000 km2 in 2004 to 5,000 km2 in 2011. In a previous CPI/NAPC study [Assunção et al. (2012)], we estimated that conservation policies introduced in the mid to late 2000s prevented the loss of approximately 62,000 km2 of forest in the 2005 through 2009 period. We’ve recently taken a closer look at one of these policies — National Monetary Council Resolution 3,545.

Introduced in mid-2008, Resolution 3,545 placed a condition on rural credit, an important source of financing for rural producers, in the Brazilian Amazon Biome. To get credit, borrowers had to present proof of compliance with environmental regulations, the legitimacy of their land claims, and the regularity of their rural establishments. To prove credit eligibility, Resolution 3,545 required borrowers to present a series of documents. Such documentation, however, varied according to borrower profiles, with small-scale producers subject to less stringent requirements. Resolution 3,545 represented a restriction on official rural credit — and thereby on the fraction of rural credit that is largely subsidized via lower interest rates — while other sources of financing for agricultural activity suffered no such restriction.

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