Brazilian banks must start checking deforestation risks before rural loans
Brazil’s banks will begin verifying official, satellite-based deforestation information tied to rural properties before approving rural credit, starting Wednesday, a rule approved in December says. Under the new requirement, lenders must check whether a property is listed in a government database of areas with potential illegal deforestation after July 31, 2019.
The database is maintained by Brazil’s Ministry of Environment and Climate Change and is based on satellite data produced by Brazil’s National Institute for Space Research, or INPE. If a property is flagged in the registry, the farmer seeking credit can challenge the designation by showing that the deforestation was legal. The Finance Ministry’s rule describes potential challenge materials that include authorization documents, restoration plans for altered or degraded areas, or a technical remote-sensing report.
The Finance Ministry said the changes are intended to align rural credit with conservation and sustainability policies. In Brazil, agriculture is the leading driver of deforestation across the country’s biomes, and the rule is framed as an effort to connect the financial system’s lending decisions to environmental compliance.
Paulo Camuri, climate and territorial intelligence manager at the nonprofit Imaflora, said the policy functions as an “intelligent incentive mechanism” that uses credit—described by him as the main driver of agribusiness development—as a lever for better practices. Camuri said linking access to credit to environmental requirements encourages more sustainable production and strengthens the agribusiness sector’s environmental responsibility.
The Confederation of Agriculture and Livestock of Brazil, or CNA, the country’s main farm lobby, said the measure adds another verification step in rural lending but does not automatically distinguish legal from illegal deforestation. CNA warned that the new system could create uncertainty in credit analysis and raise the risk of restricting financing for producers that comply with environmental legislation, and it said it is backing legislation in Congress to block the measures.
The Brazilian Federation of Banks said financial institutions have made the needed adaptations and that the rule strengthens governance. The banking body said lenders can continue providing loans when farmers provide proof of compliance if an alert is triggered, adding that credit flow will continue with adjustments to ensure socio-environmental compliance and legal certainty.