Financing Sustainable Agriculture in the Cerrado Biome
Executive Summary
Brazil’s Cerrado biome sits at the center of the country’s agricultural expansion and climate ambitions. As the second-largest biome in the country, the Cerrado supplies a substantial share of national agricultural outputs, while also retaining significant biodiversity and ecosystem value. With nearly half of the Cerrado’s native vegetation still intact, there is an opportunity to expand production on already cleared land and a risk of continued conversion of native ecosystems. How agricultural finance is structured and deployed in the biome, particularly via public rural credit and emerging blended-finance instruments, will be decisive in shaping land-use outcomes.
Within the Cerrado, the MATOPIBA region—encompassing parts of Maranhão, Tocantins, Piauí, and Bahia states—has been at the center of recent agricultural expansion and deforestation pressures. Although MATOPIBA covers approximately 28% of the Cerrado, it accounted for more than 55% of deforestation in the biome between 2013 and 2022 and for nearly 80% of Brazil’s soybean expansion since 2000. This combination of ecological vulnerability and rapid agricultural growth positions the region as a critical testing ground for sustainable finance policies.
Climate Policy Initiative/Pontifical Catholic University of Rio de Janeiro (CPI/PUC-RIO) finds that while substantial resources are already flowing to the Cerrado and MATOPIBA, the current financial architecture falls short of sufficiently aligning agricultural finance with the country’s sustainability and zero-deforestation goals.
Incentive-based mechanisms are pivotal in accelerating the sustainable transformation of land use in the Cerrado and MATOPIBA while supporting Brazil’s broader effort to reconcile agricultural production with environmental conservation. CPI/PUC-RIO’s assessment in this report identifies key obstacles and gaps that must be addressed to expand the reach and effectiveness of finance, mobilize additional capital, and align financial flows with deforestation reduction and long-term sustainability objectives.
Key Findings
Finance Flows are Significant but Uneven
Between the 2020/21 and 2023/24 agricultural years, subsidized rural credit directed to the Cerrado totaled R$ 198 billion[1] (around 36% of total rural credit in Brazil. MATOPIBA alone accounted for R$ 48.59 billion (US$ 9.1 billion) over the same period. Notably, during that same period while the region generated about 14.5% of agricultural production value, it received more than 32% of financing volume—highlighting the intensity of capital flows supporting agricultural expansion.
Funding structures differ markedly across the Cerrado. Credit in the broader biome is relatively diversified across funding sources, including Brazilian Agricultural Plan (Plano Safra) programs, non-targeted credit lines, and Constitutional Financing Funds (Fundos Constitucionais de Financiamento – FCFs). In contrast, MATOPIBA relies disproportionately on FCF credit, which finances roughly 62% of subsidized credit in the region, increasing exposure to the design, governance, and targeting of these instruments.
Sustainable Credit Remains Limited and Highly Concentrated
Despite the scale of public financing, sustainable subsidized credit represented just 5.7% of total rural credit in the Cerrado from the agricultural years 2020/21 to 2023/24. Credit provision—particularly for sustainability-linked programs—is highly concentrated among certain institutions, producers, and geographies.
Sustainable, subsidized credit tends to favor larger producers. The Program for Financing Sustainable Agricultural Production Systems (Programa de Financiamento a Sistemas de Produção Agropecuária Sustentáveis – RENOVAGRO), is Brazil’s main sustainable credit line, together with the National Program for Low-Carbon Emissions in Agriculture (Programa para Redução da Emissão de Gases de Efeito Estufa na Agricultura – ABC Program), its predecessor. These credit lines are associated with larger average loan sizes—around R$ 1.2 million per installment—while other programs average between R$ 700,000 to R$ 750,000. This pattern suggests that access may be skewed toward large-scale farms. The disparity is even more pronounced in MATOPIBA, where FCF contracts average roughly R$ 1.2 million, compared to approximately R$ 524,000 in the rest of the Cerrado. Geographic distribution is similarly uneven. Sustainable credit lines have the weakest municipal coverage, with only 40% of municipalities in the Cerrado recording contracts under the RENOVAGRO/ABC Program, and 53% showing no contracted sustainable credit lines under the National Program for Strengthening Family Farming (Programa Nacional de Fortalecimento da Agricultura Familiar – PRONAF) during the period analyzed. These gaps point to persistent access constraints that may reflect supply-side limitations, insufficient outreach, or low program attractiveness relative to conventional credit. Regardless of the cause, limited territorial coverage undermines the ability of these instruments to drive widespread adoption of sustainable practices.
Market Concentration Limits Competition and Access
The rural credit market in MATOPIBA is dominated by a small number of financial institutions—primarily Banco do Brasil and banks administering FCFs, including Banco do Nordeste and Banco da Amazônia. This concentration reduces competition, restricts producers’ financing options, and may constrain product innovation.
Concentration is even greater in the sustainable credit segment: 45.5% of municipalities have only one institution offering either RENOVAGRO/ABC Program or sustainable PRONAF contracts—or none at all—effectively excluding many producers from sustainable finance. These structural features suggest that the current credit architecture may be insufficient to support a broad-based transition toward sustainable agricultural production.
Innovative Financial Instruments Show Promise but Face Scale Constraints
The analysis also examined nine blended mechanisms that, while not exclusively focused on the Cerrado, have generated tangible impacts in the region. These instruments predominantly deploy debt-based products and vary widely in scale, ranging from approximately R$ 20 million to more than R$ 1.5 billion.
Although these mechanisms demonstrate the potential of financial innovation to complement public credit, their overall scale remains limited relative to the financing required to shift production systems across the biome. Structural barriers—including pipeline constraints, risk perceptions, and market fragmentation—continue to restrict their ability to deploy capital at the speed and breadth necessary for transformational change.
Implications And Way Forward
Taken together, the findings suggest that sustainable public finance in the Cerrado—and particularly in MATOPIBA—is constrained by limited scale, insufficient transparency, concentration among larger producers and institutions, and uneven territorial coverage. Addressing these challenges will be essential for aligning financial flows with deforestation reduction and long-term sustainability goals.
Improve transparency and classification frameworks. Strengthening reporting systems and advancing tools such as the Brazilian Sustainable Taxonomy (BST) can clarify how taxpayer-supported credit is allocated and ensure that subsidies are aligned with verified sustainable practices—an especially urgent need in high-pressure regions like MATOPIBA. Improved systems may also capture a larger share of credit already supporting sustainable practices but that is not currently visible.
Expand the role of sustainable credit within the broader rural finance system. Given the extensive fiscal support embedded in rural credit through subsidies and tax exemptions, the federal government is well positioned to sharpen incentives by increasing the share of financing tied to sustainability outcomes. A more strategically designed credit architecture could accelerate practice change while supporting productivity gains without further land conversion.
Leverage financial innovation to mobilize and widen access to additional capital. Blended finance and other innovative structures can complement public credit by attracting private investment, diversifying funding sources, and extending financing to underserved producers. Scaling these approaches—while drawing lessons from existing mechanisms—will be critical to building a more effective financing ecosystem for sustainable agriculture in the Cerrado.
[1] This value is equivalent to US$ 36.7 billion, according to December 2024 exchange rates.
