Agricultural Credit Interest Rate Equalization Policy: A Growth Subsidy?

Abstract

The Brazilian Interest Rate Equalization System (IRES) subsidizes farmers by providing them with credit at lower than market interest rates. The objective of this research is to evaluate the IRES by comparing its monetary cost with its benefits as measured by Brazilian GDP growth. Estimates are carried out using input-output matrix. The results suggest that each Brazilian real spent by IRES to assist Brazilian family farms increases Brazilian GDP by R$1.75 and that each real spent to assist commercial farms increases GDP by R$ 3.57. The IRES is a subsidy that generates economic growth greater than its cost to society.IRES subsidy, growth, input-output matrix, Agricultural Finance, Q18, C67, O40, H81,