Rural credit and mechanization of agriculture: the case of Moderfrota in Brazil and its impact on the agricultural sector

Abstract

This study aims to analyze, through time series, the impact that the MODERFROTA program has on the modernization of Brazilian agriculture and therefore on its product, particularly about the main agricultural commodities (herbaceous cotton, coffee, cane) sugar, corn, and soy). Thus, to contemplate this objective, a theoretical review will be carried out on the expansion of the agricultural frontier and the modernization of agriculture in the 2000s, as well as on the policies directed to the activity in question and the importance of MODERFROTA in this context, exposing some impacts of agricultural policy on crops. There will also be a presentation on the formation of the National Rural Credit System in Brazil and specifically on MODERFROTA. Furthermore, as a way of obtaining quantitative results, a model will be estimated via Auto regressive Vectors, in order to understand how the agricultural sector responds to oscillations in MODERFROTA. As a result, it was found that the program in question had a positive and considerable impact on the agricultural sector. However, changes related to the program’s eligibility, interest rate, grace period, and even competition in the credit system itself, caused it to lose its dynamism.