Article: The "Plano Safra" - Solution or Obstacle for Agribusiness?

Despite increased resources, the Plano Safra has not kept pace with the agribusiness sector's expansion. Originally created by the federal government to provide credit and incentives for agribusiness, it has now been surpassed by available private credit, highlighting that the sector no longer relies on state-directed funding. This shift is largely due to recent Agro Laws 1 and 2, which aim to facilitate private credit access for rural producers.

Plano Safra subsidies are often justified to protect small producers and offset private credit costs. However, Brazil’s high credit cost is structural, driven by legal uncertainty, frequent bankruptcies, rising default rates, and contract breaches. This environment elevates both risk and interest rates, where reliable borrowers are penalized by defaults. Without improvements in legal security, credit costs will remain high.

Another factor is government fiscal irresponsibility, which, by destabilizing public accounts, spurs inflation and raises interest rates. High interest rates are symptomatic of economic challenges restricting credit, harming productive sectors like agribusiness. In contrast, stabilized economic policies and contract enforcement would benefit the sector by reducing credit costs and enabling greater investment in modernization.

Additionally, high financing costs prompt producers to adopt more transparent and efficient management practices, minimizing information gaps between lenders and borrowers. This attracts lenders as confidence grows with financial clarity. Financial management, supported by technology, reduces credit costs and boosts agribusiness competitiveness.

However, subsidies ultimately do more harm than good, as they address symptoms without solving structural issues. Propping up less competitive operations creates inefficiencies, misallocates resources, and keeps unproductive producers in the market, preventing more productive resource use. This dependency weakens innovation, as subsidized producers tend to adopt fewer technologies and poorly adapt to market dynamics, limiting agricultural advancement.

In contrast, producers operating in a free credit market, without subsidies, tend to pursue greater efficiency and innovation, strengthening the sector. Private credit allocates resources efficiently, channeling them to the most productive and innovative. This occurs because the market objectively prices risks and assesses each borrower’s productive capacity, promoting sustainable growth and a more dynamic agriculture sector.

Thus, producers who adapt to private credit take on a proactive role, seeking efficient management practices that make them more resilient and prepared to handle market fluctuations. This approach promotes a cycle of competitiveness and sustainability as producers continuously enhance financial and operational management, thereby increasing lenders' trust.

In summary, while subsidized credit may have a role in specific cases, it does not sustainably foster productivity and competitiveness. Subsidies and directed credit, by perpetuating inefficiencies, limit agribusiness’s growth potential. A free credit market is more effective in fostering competitive, resilient agriculture less dependent on political and economic fluctuations.

Reducing or even phasing out the Plano Safra thus appears rational, given the impact of state intervention. Transitioning to a freer, more efficient credit market is essential to ensure that Brazilian agribusiness continues to grow in a competitive global landscape.