BRASILIA- Credit to farmers was raised by 8% on Wednesday to 202 billion reais ($57 billion) this year; however by the same tone Brazil also raised the rates of interest on many of those subsidized loans. The Brazilian agriculture plan has been revealed which gives producers access to around 168 billion reais to pay for planting and commercialization, which was around 149 billion reais only last year.
But interest rates on 115 billion reais worth of those loans jumped from 8.75 percent a year on average in 2015 to between 9.5 to 11.25 percent. Market rates will be applied to remaining 53 billion reais.
Where the rates were 5.2 billion last year, it is expected according to the government a total cost of 6.2 billion reais this year. Further, these loans are disbursed by private and state-controlled banks, but the Brazilian government pays the difference from market interest rates to those set for the crop plan.
“Food security is strategic. Brazil needs this kind of support”, said President Dilma Rousseff, in probably one of her last appearances as the country’s leader as the Senate is poised to suspend her on May 11 for allegedly breaking fiscal laws. Producers usually use most of the money made available with subsidized interest rates, since normal credit in private banks could cost much more.
Up from 11 percent in May last year Brazil’s benchmark Selic rate is currently at 14.25 percent. Agriculture Minister Katia Abreu said the government decided to increase credit for planting and harvesting and reduce funds for investments because of the crippling recession.
Abreu said since we are going through an economic crisis, we believe producers would hold on to some investments this year, but certainly they will maintain planting levels.
Brazil was expected to harvest a record grains crop of 202 million tonnes in 2015/16, according to the government’s statistic agency Conab, but excessive dryness could cut that amount.