Lula eyes ‘green’ farm loans to tackle Amazon deforestation

By Thomson Reuters Aug 17, 2022 | 6:22 AM

By Lisandra Paraguassu

SAO PAULO (Reuters) – Advisors to leftist Brazilian presidential hopeful Luiz Inacio Lula da Silva are proposing subsidized “green” farm loans to spur planting of soybeans and corn on open pasture and reduce deforestation of the Amazon rainforest.

The proposal, revealed to Reuters by a senior Lula advisor, is one of the clearest examples yet of how the former president has tried to court allies in the powerhouse agribusiness sector while promising more environmentally friendly policies.

“The ecological transition is a central axis for all our policies,” said Aloizio Mercadante, who is coordinating the Workers Party (PT) platform. “We can open differentiated lines of credit to encourage migration to agriculture that sequesters carbon.”

Most opinion polls show Lula with a double-digit lead over right-wing incumbent Jair Bolsonaro, who rode a wave of rural support to office four years ago. Lula’s entreaties to farm leaders have drawn concern from some environmental activists and met with disdain from powerful ag groups.

Under the proposed green credit program, Brazilian farmers could apply for cheaper, government-subsidized loans if they agree to meet targets for sustainable agricultural practices, Mercadante said.

The program would aim to encourage conversion of degraded pastures into crop-growing areas and also increase the use of greener, bio-pesticides in Brazil, the world’s biggest supplier of soybeans, coffee and sugar among other food staples.

The green loans are similar to a subsidized credit program launched for the 2010/11 crop, in Lula’s last year in office.

That program, now called ABC+, helped cut an estimated 170 million tonnes of net carbon emissions over the seven years to 2018, government information on the scheme said.

However, that only represents 2% of Brazil’s total subsidized farm credit, or about 6 billion reais ($1.17 billion) in the current crop.

Lula’s advisors see plenty of room to grow, eyeing an estimated 30 million hectares (74.1 million acres) of underused pastureland where ranching could be replaced by crops.

Farmers in Brazil’s biggest grain state Mato Grosso would be prime candidates for the green loans, the advisors said, as the state boasts 11 million hectares of planted area and almost as large an area of degraded pastures.

In 2021, deforestation in Mato Grosso reached 2,300 square kilometers, according to Brazilian space research agency INPE.

Carlos Ernesto Agustin, an agribusiness entrepreneur who has been consulting on the PT’s proposals, said the plan would boost agricultural output, reduce deforestation risks and improve Brazil’s image abroad by encouraging a transition from ranching to farming.

“Why doesn’t this migration happen?” he said. “Because it lacks an incentive … a public financing policy.”

Former Environment Minister Izabella Teixeira, who has also been advising Lula’s campaign, said 35% of Brazil’s livestock production is in the Amazon region, where productivity is low.

She said that land would be more productive with crops that would also sequester more carbon than the degraded pastures, without affecting meat processing.

However, Teixeira underscored that incentives for more sustainable agriculture were only part of the solution to reducing deforestation of the Brazilian Amazon, which has hit a 15-year high as Bolsonaro has cut back on environmental law enforcement.

“One thing is confronting deforestation. You need policies for command-and-control. Another thing is the low-carbon transformation of economic sectors,” she said.

($1 = 5.1404 reais)

(Reporting by Lisandra Paraguassu; Writing by Ana Mano; Editing by Brad Haynes and Sam Holmes)