Brazil to dole out $707 mln in agriculture subsidies - source

The subsidies are on top of its initial allocation, which ran out amid sharp interest rate hikes
calendar icon 10 February 2022
clock icon 2 minute read

Brazil's government plans to unveil 3.7 billion reais ($706.73 million) in fresh agriculture subsidies after its initial allocation for the sector ran out amid sharp interest rate hikes, according to a source involved in the plan.

The source, who spoke to Reuters on condition of anonymity, said the government will soon sign an executive order announcing 800 million reais that will be allocated as credit to climate-affected producers in the south of the country, as well as farmers in the state of Mato Grosso do Sul.

Another 2.9 billion reais will be earmarked for subsidized loans to producers after the Treasury announced the suspension of these operations this week.

However, the funds for the subsidized loans are reliant on a bill that has yet to be sent to Congress, said the source, adding that the government is still studying what it can cut from this year's budget to accommodate the new spending.

Brazil's central bank has unleashed the world's most aggressive monetary tightening cycle to combat double-digit inflation. Last week it raised rates to 10.75% in its eighth consecutive hike since departing from record lows of 2% in March last year.

The rise in interest rates has burned through the government's subsidy pot, as it pays banks to make loans cheaper for producers. As rates go up, the government must pay more to the banks to maintain the low rates for the producers who have contracted the loan.

Melanie Epp

Melanie Epp is a freelance agricultural journalist from Ontario, Canada.

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