Rural credit and agricultural development in the Brazilian Amazon: spatial analysis and policy implications

Purpose In the 21st century, agricultural production in the Amazon expanded significantly; however, the role of rural credit and its sources in this process remains uncertain. This study aims to identify the factors influencing agricultural income and production in the Brazilian Amazon, focusing on the impact of the rural credit policy. Design/methodology/approach We compared the ordinary least squares (OLS) and Spatial Durbin Model (Spatial-DM) analyses, examining 2 decades of 679 municipality-level data to assess the spillover effects of how rural credit and economic factors affect Amazon agricultural production and income. Findings The findings indicate that rural credit contributes substantially to agricultural production and rural income, although it is predominantly concentrated in commodity markets and more developed municipalities. Our models highlight the significance of mechanization and the expansion of crop areas in enhancing agricultural output and rural income, whereas the expansion of pasture areas has adverse effects owing to inefficient cattle ranching practices. Results indicate that constitutional funds, despite constituting a minor portion of the rural credit policy, contribute significantly to increasing agricultural income and total production value, mitigating credit concentration and reducing regional inequalities. Originality/value This study is unique in dissociating the sources of rural credit in the Brazilian Amazon, especially for the constitutional funds, which focus on reducing economic disparities. It highlights the necessity of policies that implement new strategies and funding programs to reach a broader range of farmers in developed areas and municipalities.