The relationship between rural credit policy and deforestation: evidence from Brazil

This study proposes the use of empirical estimates to identify if the National Rural Credit System has any relationship with the level of deforestation in the country. Using information from 5.354 Brazilian municipalities between 2013 and 2019 and focusing on livestock activity, we concluded that the form of capture and distribution of resources may affect deforestation in different levels. Our evidence indicates that credit destined for investment would be negatively correlated with deforestation in Brazil, while other purposes would not have significant effects. Other drivers that characterize agricultural credit as subsidy and uncontrolled credit tend to positively affect deforestation. Estimates for the Legal Amazon in general indicated a negative relationship between credit and deforestation. Estimates for the Cerrado and Pantanal biomes indicated a positive relationship between subsidized and uncontrolled credit and deforestation.