Effects of Pronaf on the Technical Efficiency of Family Farmers in Brazil

ABSTRACT: This paper measures the impact of a Brazilian program of rural credit granted to family farming (called Pronaf), especially its brand that targets the poorest share of family farming (called Pronaf B), on the technical efficiency of family farming, comparing it with other groups of family farmers in Brazil In order to measure the causality of Pronaf (from line B and other modalities) on family farmers, two econometric estimations were conducted. In the first stage, variables were constructed based on aggregated information from these farmers at the municipal level, available in the IBGE Automatic Recovery System (SIDRA), for the estimation of the stochastic frontier model. In the second stage, the technical efficiency scores obtained from the stochastic frontier estimations were used as outcomes in the Propensity Score Matching (PSM), in order to measure whether access to rural credit via Pronaf increases the technical efficiency of the program's beneficiaries. For this purpose, the strategy of considering representative establishments in each municipality was followed, aiming to mitigate the effects of sample heterogeneity. The results found in this study showed that Pronaf produced partially expected impacts in terms of differentiating family farmers when assessed by their level of efficiency, due to possible existing market failures. Farmers eligible for Pronaf B are less efficient than other Pronafians and non-Pronafians. Regarding the determinants of efficiency, the factors of land, labor, and input expenses were the variables that most contributed to improving productive performance, especially among family farmers eligible for Pronaf. Based on the PSM estimation, it was possible to verify that Pronaf B rural credit had a negative impact on the technical efficiency of these establishments when compared to non-Pronaf farmers. Thus, being a Pronaf B beneficiary is not a sufficient condition for a family farmer to increase their level of technical efficiency. Pronaf's rural credit policies, especially the Pronaf B modality, should be reassessed. The simple provision of low-interest credit does not guarantee greater technical efficiency for the poorest farmers. Implementing measures such as targeted technical assistance and strengthening cooperatives can improve the efficiency of these producers and maximize the impact of Pronaf, especially in disadvantaged regions.