Agro Credit: Boosting Productivity and Ensuring Environmental Sustainability

In recent years, we have witnessed extreme weather events in Brazil and around the world. The climate crisis is already a reality and demands efforts from the public and private sectors. The financial system plays an important role in preventing damage, and is responsible for choosing which business projects to finance - in accordance with environmental and sustainability legislation.

These criteria are increasingly present in risk assessment in both the credit and capital markets. This is of interest to investors and financial institutions because, by failing to comply with environmental standards, in addition to imposing an impact on society, the producer incurs a regulatory risk. The supply of credit for rural activities is more sensitive to these criteria.

The agricultural sector is of indisputable importance to the Brazilian economy. Brazil is the fourth largest global producer of grains and a leading producer of coffee, sugar and oranges. It is also the largest exporter of beef and chicken. A generator of income and foreign currency, it is also a model of productivity gains over the last few years. According to IBGE data, agriculture accounts for around 5.6% of GDP. Considering agribusiness as a whole, which includes industrial and service activities focused on the countryside, this amounts to 23.2% of GDP, according to the indicator drawn up by ESALQ. This result was achieved despite the difficulties imposed by the drought that affected the agricultural sector in 2024.

In foreign trade, the value of agribusiness exports reached US$ 152.63 billion in 2024, according to data from the Ministry of Agriculture and Livestock. The figure is equivalent to 48.9% of total exports, with soybeans as the mainstay. Looking ahead, 2025 promises to be a year of recovery for the sector. IBGE projections indicate a growth of 12.2% for the country's grain harvest, after a fall of 7.2% in 2024.

Sustaining good agribusiness figures requires resources. Financing agricultural production mobilizes the efforts of both public and private entities. The active participation of public entities is aimed at enabling the countryside to access more advantageous credit conditions, including through subsidies, given the sector's importance to the economy and the performance of the external sector.

One of Brazil's agricultural policy instruments is the Safra Plan, created in 2002. Published annually, the Plan allocates resources for rural business credit through lines of credit and subsidies. In the 2024/25 Safra Plan, the volume of resources reached R$ 400.59 billion, an increase of 10% compared to the previous Plan. Of the total funds, R$ 189 billion were made available at controlled rates and R$ 211.5 - more than half of the total - were made available at rates freely agreed between financial institutions and borrowers.

Under the current Safra Plan, environmental responsibility has also gained weight. Rural producers with an updated Rural Environmental Registry and who adopt sustainable practices were able to claim a reduction of around 1 percentage point in the interest rate for production costs.

Brazilian agribusiness demands a lot of credit, with the 24/25 Safra Plan providing for R$ 400 billion (~40%) and the rest coming from the capital market, the banking market, industries and equity (60%).

So much so that the market is already awaiting the publication of the 2025/26 Crop Plan. Over the last few weeks, the government has received proposals from entities representing agribusiness. There are challenges to be considered, such as the fiscal issue, which limits the space for subsidies, while the rise in the basic interest rate puts pressure on the cost of credit.

Finally, it is worth emphasizing the traditional economic and financial analysis, which remains important for obtaining credit, especially if resources at controlled rates become scarcer.

The challenges include the time lag between the production cycle, payment, and the need for confidence in future delivery. Capital market opportunities for agribusiness have grown significantly, with private bonds reaching R$ 1.256 trillion in February 2025.

In this scenario, instruments such as the Positive Registry can make a difference, enabling more favorable interest conditions based on payment history. This is all the more true for small producers with little access to the financial system, since the CP gathers information from other sectors, broadening visibility for credit.

Resources for the countryside are fundamental for the country to reap good economic results and, more than that, they are an instrument for encouraging good environmental practices, helping to tackle the climate challenge.