Rethinking Agriculture Support in Brazil for a Competitive, Inclusive, Green Sector

The World Bank’s 2025 report urges Brazil to reform its agrifood support system by prioritizing inclusive, climate-resilient policies and redirecting subsidies toward public goods and smallholder farmers. Despite global agricultural dominance, Brazil's current support remains skewed, regressive, and environmentally unsustainable.

In its 2025 flagship report, the World Bank, alongside research partners such as Cepea/ESALQ-USP, EMBRAPA, and the Climate Policy Initiative, paints a nuanced portrait of a sector that is both a cornerstone of Brazil’s economy and a mirror of its most persistent social and environmental challenges. While Brazil is the world’s largest net food exporter and a powerhouse in global commodity markets, its agrifood sector remains marked by sharp inequalities, limited support to vulnerable producers, and an urgent need for greener and more inclusive public policies.

A Global Agrifood Giant with Local Inequities

The agrifood sector, broadly defined as production, agroindustry, and services, contributes approximately 22 percent of Brazil’s GDP and drives nearly 40 percent of its exports. In 2023, it was responsible for 30 percent of national economic growth. Brazil leads the world in the export of soybeans, poultry, beef, and sugar, with productivity rates that outpace the global average. Yet this global strength masks internal fragmentation. Around 3 million rural families live in poverty, and more than 70 million Brazilians face food insecurity, an especially troubling statistic in an agricultural superpower.

Family farming, despite representing nearly 80 percent of rural establishments and employing two-thirds of rural labor, contributes only about 23 percent of the sector’s output. These producers are concentrated in the North and Northeast, where land tenure insecurity, poor infrastructure, and weak institutional support hinder development. Meanwhile, larger, better-capitalized farms in the South and Southeast dominate credit access, technology adoption, and market participation. The result is a dual system, one modern and globally competitive, the other marginalized and struggling for basic services.

Climate Change: The Sector’s Achilles Heel

While agrifood is central to Brazil’s economic engine, it is also increasingly vulnerable to climate change. On average, Brazil loses 1 percent of its agricultural GDP each year due to extreme weather, with droughts and floods becoming more frequent and severe. The Northeast, already economically fragile, faces the greatest risk of desertification and water scarcity. These trends threaten to deepen rural poverty and trigger migration pressures, particularly among smallholders and indigenous communities.

At the same time, the sector is a major contributor to Brazil’s greenhouse gas emissions. Agriculture alone is responsible for 26 percent of emissions, primarily from livestock and fertilizer use. When combined with emissions from land use change, largely driven by deforestation in the Amazon and Cerrado biomes, agrifood accounts for more than half of Brazil’s emissions profile. However, this also makes the sector a critical lever for mitigation. Programs such as the ABC+ Plan and RenovAgro offer financing for low-carbon practices, including pasture restoration, integrated crop-livestock-forest systems, and organic farming. Yet, uptake remains limited, and support is unevenly distributed.

A Shrinking but Skewed System of Public Support

To analyze the structure and impact of agrifood subsidies, the World Bank employs the OECD’s Producer Support Estimate (PSE) methodology, which tracks transfers from taxpayers and consumers to producers. Brazil’s total support has been declining for two decades, falling from 0.7 percent of GDP in 2000–2002 to 0.5 percent in 2020–2022, well below the OECD average. Producer support remains below 5 percent of gross farm receipts, compared to an average of 10 percent among OECD countries.

The bulk of Brazil’s support comes from subsidized rural credit, especially through the annual Plano Safra. In 2024/25, it earmarked R$400 billion for medium and large-scale farmers and R$85.7 billion for family farmers under PRONAF. But despite its inclusive rhetoric, only 15 percent of total subsidized credit reaches family farms. Credit remains highly concentrated among large producers in the South and Southeast and skewed toward grain production. The complexity of the system, heavy reliance on public banks, and outdated land measurement criteria all create additional barriers for smaller, riskier borrowers in underserved regions.

State-Level Snapshots: Bahia, Santa Catarina, and São Paulo

The report turns a spotlight on three representative states Bahia in the Northeast, Santa Catarina in the South, and São Paulo in the Southeast to explore subnational variations in public support. These three states together account for nearly 40 percent of Brazil’s GDP and display stark contrasts in agrifood structure and policy design.

In Bahia, most public support goes toward rural infrastructure and development projects like Bahia Produtiva, but overall support remains under 1 percent of agricultural GDP. Santa Catarina has recently increased input-based support to producers and boosted public investment in consumer subsidies, particularly school feeding programs. São Paulo, more advanced in financial mechanisms, has linked credit programs to environmental performance criteria, especially for biofuels and sustainable land use. Still, all three states invest relatively little in agrifood public goods such as research, technical assistance, and climate resilience when benchmarked against OECD peers.

A Call for Structural Redesign

The World Bank argues that Brazil stands at a crucial crossroads and must reconfigure its agrifood support to foster a competitive, inclusive, and green future. First, it recommends increasing investments in agrifood public goods such as infrastructure, R&D, and extension services, which have consistently shown higher economic returns than input subsidies. Second, the report urges the federal government to diversify its policy toolkit to include decoupled payments, crop insurance, matching grants, and payments for environmental services. Third, it calls for a reorientation of support toward smallholders and environmentally sustainable practices, including the expansion of low-carbon financing tools like RenovAgro.

Finally, the report stresses the importance of aligning federal and state-level strategies under a unified monitoring and evaluation framework. Agencies like MAPA (Ministry of Agriculture and Livestock) and MDAAF (Ministry of Agrarian Development and Family Farming) should take the lead in coordinating efforts, setting shared performance indicators, and ensuring that subsidies support long-term resilience and inclusivity. Without such a pivot, the risk is that Brazil’s agrifood sector may continue to reinforce inequality and environmental degradation, despite its undeniable economic clout.