CMN Resolutions – Climate Conditionalities for Rural Credit

The integration of sustainability concerns into Brazilian rural credit has developed gradually, through a combination of incentives and restrictions, mobilizing distinct governance structures, constellations of actors, and power dynamics. On the incentive side, discussions have been influenced by environmental issues, while remaining largely dominated by agricultural institutions, particularly the Ministry of Agriculture (MAPA), Embrapa, and organizations representing commercial agriculture. This dynamic has led to the development of subsidized credit lines designed to encourage soil conservation and the adoption of low-carbon agricultural practices. Restrictive measures have followed a different trajectory, marked by the gradual strengthening of the influence of environmental actors within a governance space historically dominated by agricultural and financial institutions. They stem from long-standing concerns about the role of subsidized rural credit in financing agricultural expansion and deforestation, particularly in the Amazon. Several decisive steps have thus progressively made access to rural credit conditional on compliance with environmental requirements, with the aim of strengthening regulatory compliance and combating deforestation. The main developments are presented in the timeline below.

The resolutions analyzed in this study are also situated within a broader political and international context. The increasing demands of international markets for socio-environmental standards, the growing prominence of climate commitments in international governance forums, and the federal government's commitment to reducing deforestation and achieving a zero-deforestation goal have created a favorable environment for integrating sustainability objectives into rural credit regulations. From an institutional innovation perspective, the National Monetary Council's (NMC) resolutions simultaneously impact governance mechanisms and producer behavior. At the institutional level, they strengthen coordination between agricultural, environmental, and financial policies, creating new interdependencies between sectoral ministries, regulatory authorities, and financial institutions. At the producer level, they influence behavior through a combination of subsidized interest rates, environmental conditionality, and restrictions on access to credit.

Although formally adopted by the National Monetary Council (NMC), the development of these rules takes place within a less visible decision-making arena comprised of senior civil servants and middle managers from the agricultural, financial, and environmental administrations. It is within this space that the technical negotiations, consensus-building processes, and cross-sectoral arbitrations that precede formal adoption occur. Institutional innovation has not been driven primarily by external actors or solely by market pressures. It has also relied on actors occupying strategic positions within the administration, who have acted as true policy entrepreneurs,fostering new forms of coordination and regulatory innovation while remaining embedded within existing institutional structures. Many of them combined practical experience, academic training, and prior involvement in policymaking, whether they were career civil servants or political officeholders. The resulting governance arrangements are based on a form of negotiated hierarchy, combining the regulatory authority of the state with interbureaucratic negotiation mechanisms. Although strongly focused on public action, they remain open to external influences, insofar as environmental organizations, agricultural professional organizations, research institutions, and other stakeholders seek to guide decisions, directly or indirectly, through their relationships with public decision-makers.

Chronology of the instrument

Timeline of rural credit policy