An analysis of default rates and their causes in Brazil’s land credit program

Abstract

The National Land Credit Program in Brazil has succeeded in providing land access to over 68,000 rural workers in just over 20 years. However, the program faces the challenge of defaulting on part of the contracts. Quantifying default on land credit is important to understand the reasons for it and propose improvements. This study sought to quantify the default rate and explore its causes. To do so, public databases on the status of contracted operations were analyzed, followed by interviews with agents directly involved with the beneficiaries, using the Iramuteq software. The results obtained demonstrate that 37 % of its active beneficiaries are lagging on payments, both with financial agents and those listed in active debt with the Federal Government. According to the perceptions of the interviewed actors, the causes are varied, with particular emphasis on the maximum financing limit, which is considered insufficient for purchasing suitable property in some regions, and successive renegotiations, which end up discouraging others from fulfilling their payments as agreed by granting significant discounts for settlement. Furthermore, there is a perception that post-contracting is crucial for the success of the program, especially with the provision of technical assistance and the supply of resources for productive investments. As recommendations and lessons learned, the research shows that land credit must be worked on in conjunction with other public policies such as encouraging production through other lines of rural credit, technical assistance, infrastructure conditions, among others.