Brazil could double its budget for subsidizing farm insurance in 2020, the country’s agriculture policy secretary said on Thursday, seemingly running counter to the new government’s pledge to slash public spending in the face of mounting debt.
The government could increase its budget to subsidize premiums for insurance against potential harvest losses to 1 billion reais ($266.31 million), the Agriculture Ministry’s policy secretary Eduardo Sampaio said in an interview.
That compares to a 2019 budget of 440 million reais, which subsidizes insurance to cover an estimated 6.8 million hectares, or just under 10 percent of Brazil’s total planted area, according to government data.
Subsidy levels for farm loans and insurance for next year are under negotiation between the Agriculture Ministry, Economy Ministry and Central Bank, and specific numbers have yet to be agreed to, Sampaio said.
The negotiations highlight a struggle between the Economy Ministry, which is seeking to embrace free markets and cut spending to reduce massive public debt, and special interest groups such as the farm sector, which want to preserve financial benefits.
The two sides have agreed to make changes gradually, with no abrupt drop in credit subsidies for the next crop year, while reducing government intervention over the medium-term, Sampaio said. This would include shifting more subsidies to insurance and away from credit.
“There will not be a rupture, but movement in the sense that there will be more rationalization, modernization with less state intervention,” he said.
The government has also agreed that subsidized financing for small- and medium-sized farms will be maintained, while large producers will be gradually weaned off subsidies, Sampaio said.
For this year, the hope is that subsidized farm loans of 194 billion reais in the most recent national harvest plan will be maintained or increased for the next crop year, he said.
Brazil’s record low official borrowing costs would allow the government to hand out more subsidized loans at similar rates while spending the same amount of money, Sampaio said.
Source – https://www.reuters.com