On one side is Plano Safra, Brazil’s flagship rural credit program: Treasury-backed financing offered at interest rates below market levels. In the 2024/25 crop year, the program mobilized roughly R$475 billion in rural credit, a significant portion of it supported by interest-rate equalization. In practice, farmers pay less than the real cost of capital. The difference does not disappear. It is absorbed by taxpayers.
On the other side is Fiagro, Brazil’s agribusiness investment fund structure: market-based capital, with no direct subsidy, where returns must compensate investors for risk — including climate risk. As long as these two systems coexist, large producers will hardly migrate voluntarily to the market. Subsidized money costs less because part of the volatility sits outside the farm and inside the public budget.
This arrangement worked for decades. It helped finance Brazil’s agricultural expansion, reduced credit risk in a strategic sector and gave producers some predictability in a business exposed to global commodity prices, exchange rates, weather shocks and poor logistics. But the bill is becoming harder to hide. With interest rates still high, equalization has become more expensive and more visible. The system needed roughly R$10 billion in additional support to sustain rural credit amid losses and portfolio imbalances, with direct impact on institutions such as Banco do Brasil. This is not a collapse, but it is not trivial either.
The most relevant difference between Plano Safra and Fiagro is not just size. It is how each one deals with risk. Plano Safra smooths volatility. Fiagro prices it into the return required by investors. Still small compared with official rural credit — with an estimated stock of around R$35 billion to R$40 billion, and annual fundraising far below the size of Plano Safra — the instrument is growing without direct dependence on the Treasury. But it does not offer a free lunch.
Climate makes this transition more delicate. Rural insurance covers part of the losses, but it does not eliminate the problem. Penetration remains limited, its economics depend on public support, and its effectiveness weakens when events stop being isolated. Droughts, floods and broad regional crop failures turn individual risk into systemic risk. For Fiagro, this creates a correlation problem: a portfolio looks diversified until climate hits several borrowers at the same time.
That is where the liberal thesis meets its limit. Fiagro can finance a growing share of Brazilian agribusiness, but it is unlikely to replace the state in covering the most extreme risks. Large producers may accept market capital for expansion, securitization, receivables and specific transactions. But when subsidized money is available, it will remain the preferred option. The economic rationale is simple: when there are two sources of capital, the cheaper one wins.
Fiagro was not created to end Plano Safra. It was created to expose its limits. Subsidized credit should remain relevant, but it should become more selective: family farming, small and medium-sized producers, climate transition, innovation, insurance and structural risk reduction. Large export-oriented producers, with scale and access to capital markets, could rely less on the public balance sheet.
Brazilian agribusiness will never be fully private in terms of risk. What is changing is more subtle: the subsidy may leave the contract, but it rarely leaves the system. And in that gap, the state pays the difference.
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