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Brazil provides a low level of support to its farmers, with a Nominal Protection Coefficient of close to unity. Most payments to farmers are made in the form of credit subsidies, although these are low relative to the value of production.
Government spending on agriculture has been stable in recent years, with total support placing a modest and stable burden on the economy.
- Brazil provides a relatively low level of support to its farmers, despite maintaining an extensive range of price and credit policies.
- Price supports are mostly targeted by region, seeking to support small farmers as well as commercial farmers in regions that are distant from main consumer markets and ports. Existing mechanisms for social protection could protect the incomes more effectively, while direct investments in infrastructure could support the expansion of profitable agriculture more efficiently.
- There is strong intervention in the credit sector via interest rate subsidies and the requirement that banks allocate at least 29% of their demand deposits to agricultural lending. Brazil’s system of managed credit benefits recipients of subsidies and is of little consequence for larger farmers who can borrow on international markets. However, it imposes a burden on medium-sized farmers and other industries obliged to borrow domestically at market rates, and reforms would reduce the misallocation of resources and lower average rates.
- Weak infrastructure remains a major bottleneck to the development of Brazilian agriculture, but funding is low relative to farm support and there is a need for deeper investments in transport networks and rural infrastructure.
- Brazil has undertaken a range of initiatives to address environmental concerns, and to adapt to and mitigate climate change. Moreover, environmental and sustainability criteria are now written into farm support programmes. These regulations are likely to have an increasing role, given the pace of output growth and the expansion of agricultural area in the Centre West.
Brazil: OECD Producer Support Estimates (PSE)
Level and composition by support categories, 1995-2010