South America Calling

Brazil Breaks Crop Insurance Promise

One of the big differences between producing grains in Brazil and the U.S. is the lack of comprehensive crop insurance.

That has been changing slowly over the last decade, with the percentage of Brazilian planted area covered rising from 0.1% in 2005 to 13% in 2013.

The government's policy of subsidizing 40% to 60% of premiums was vital to that growth, leading some farm leaders to dream that crop insurance could soon become the norm in riskier grain production areas.

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The momentum appeared to have been maintained in 2014 when President Dilma Rousseff announced a 75% increase in the crop insurance budget for the 2014-15 season to R$700 million ($269 million).

But only R$400 million of that budget was released by the deadline of Dec. 31. Now we are in a new year and that budget has disappeared. Moreover, Brazil is currently slashing budgets across the board in an effort to balance the books better and regain creditability with financial markets.

The new Agriculture Minister Katia Abreu is working to get the funds released for the winter crops, and will try to dip into the 2015 budget for other areas to do so, according to Valor Economico, a local business daily.

However, budgetary rules may stop her from doing that.

Previous attempts to get crop insurance going were stymied by bureaucracy and slow payment on policies.

Could we be seeing history repeat itself?

There was already concern that the crop insurance project was starting to lose momentum after good growth between 2008 and 2011 was followed by less impressive performance in the two subsequent years. The current tightening of the federal purse strings means there will not likely be abundant funds available for premium subsidy next year either.

(CZ)

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