BRASILIA (Reuters) - Brazil will increase a subsidized credit line available to farmers to prepare for the 2017-2018 crop by about one-fifth to 12 billion reais ($3.72 billion), President Michel Temer told Reuters on Monday.
The new crop financing will allow Brazilian producers to purchase agricultural inputs such as seeds, fertilizers and pesticides at reduced interest rates to better plan future production.
Last year, the government made 10 billion reais available to prepare for the 2016-2017 crop, which is on track to break records.
The agricultural sector has provided a rare glimmer of hope amid the worst recession on record in Brazil, the top exporter of soy, coffee, sugar, orange juice and tobacco.
Government crop agency Conab forecasts a record soy crop of 103.8 million tonnes for the 2016-2017 season in the country. Favorable weather is expected to improve corn and wheat crops as well, it said.
“We will inject 12 billion reais into agriculture,” Temer said in an interview in his office in the Planalto presidential palace. “It will be announced this week or next week (as part of) the pre-crop plan.”
Last year, state-controlled Banco do Brasil, the country’s No. 1 lender by assets, offered a preferential interest rate of 8.75 percent for new crop financing. The government usually pays the difference between that rate and the normal cost for the bank to raise the capital in the market.
Interest rates in Brazil are falling from decade-high levels as inflation subsides during the economic slowdown. The central bank cut its benchmark lending rate last week by 75 basis points to 13.00 percent - markets had expected a smaller cut.
Temer, who took over from former president Dilma Rousseff after her impeachment last year, also said in the interview that government agency Sebrae would announce a further 1.2 billion reais in cheap financing for small- and medium-sized businesses.
The increase in credit comes as Temer’s center-right government seeks ways to drag Latin America’s largest economy out of a two-year recession without placing further strain on overstretched government finances.
His government announced a series of measures in December aimed at reducing the debts of struggling companies and making it easier to do business in Brazil.
Reporting by Lisandra Paraguassu, Anthony Boadle, Maria-Pia Sica Palermo and Daniel Flynn; Editing by Paul Simao