M-RCBG Associate Working Paper No. 259
Reshaping Brazil's Degraded Pastures: Unlocking Sustainable Growth
Joshua Doyle
2025 Policy Analysis Exercise prepared for The Climate Policy Initiative
Executive Summary
As the largest net exporter of agricultural products, Brazil’s role in promoting sustainable food production is essential for both itself and the world. With rising food demand from developing countries like China, Brazilian policymakers must find ways to meet the increasing demand for agricultural commodities like beef, soy, and corn while limiting new deforestation to the greatest extent possible. With approximately 60% or 107.6 million hectares of Brazilian pastures showing low to medium levels of degradation, these lands represent a significant opportunity for food producers to increase sustainable food production that limits additional deforestation. Through effective institutional support and investment, degraded pastures can be transformed into various productive agricultural systems, including intensified cattle and dairy farming, crop conversion, agroforestry, and restored native ecosystems. In this context, this study aims to answer the following three questions.
1. What policy changes are required to effectively scale the conversion and restoration of degraded pastures? These changes focus on both positive and negative incentives to reach this goal.
2. How does the PNCPD fit into existing policy mechanisms, and what can be done to make it more successful?
3. What is the role of international policy mechanisms like the European Union’s Deforestation Regulation in converting and restoring degraded pastures?
Chapter 1 provides an overview of the Brazilian agriculture sector, in which degraded pastures are one lever for contributing to the country’s recent growth and Reshaping Brazil’s Degraded Pastures economic importance. To manage these lands more productively, an ecosystem of policies establishes clear regulatory frameworks and guidelines for producers. Instruments like the Forest Code, the NDC, the Plano Safra, and international regulations such as the EUDR shape both the incentive structure and compliance requirements for the agricultural sector, forming a foundation for novel policy approaches. Despite the large number of degraded pastures, only 27.7 Mha are managed by producers eligible for subsidized public credit, of which 73% are smallholder farmers. The PNCPD, which aims to attract $120 billion of private and international capital to convert these areas into productive systems, is the latest government proposal to accomplish this goal.
Chapter 2 focuses on the tension between economic growth and environmental protection, in which national and international stakeholders interested in Brazilian food production offer conflicting visions of the sector’s future. These narratives lead to four key challenges for pastoral conversion and restoration:
1. Inadequacy of existing policy mechanisms;
2. Imbalance of financial incentives for producers;
3. Competing priorities for degraded pasture conversion and restoration; and
4. Limited government coordination;
Chapter 3 makes five recommendations that rely on a combination of institutional changes and risk-reducing mechanisms to support producers in their quest to transform degraded pastures.
1. Enforcement of punitive measures: IBAMA’s increasing capacity for successful environmental monitoring needs to be supported by a judicial system that can collect fines and hold illegally operating producers responsible. Improving this capacity through adequate staffing is crucial to closing the enforcement gap for illegal infractions. This approach needs to be complemented by an EUDR definition that considers illegal deforestation across Brazil.
2. Collaboration for bringing farmers into compliance: MMA, MAPA, IBAMA, and the Federal Police should collaborate on a public program that uses degraded pastures as a pathway to bring illegally operating producers back into compliance. Environmental oversight and tiered subsidized interest are methods for incentivizing this change.
3. Dedicated TA facility: Allocate a share of loan application fees to technical assistance facilities instead of financial institutions. Given SENAR’s experience providing technical assistance, the organization is ideally placed to provide these services to producers.
4. Guarantee facility for degraded pastures: Incentivize credit access across different agricultural systems, taking the tenor and riskiness of the cashflows into account through guarantees.
5. Variable interest rates: The same approach is proposed through variable interest rates. This differentiation would allow rates to better align with the cost structures and expected cash flow timelines of different systems, whether agroforestry, integrated livestock forests, or crop conversions.