The impact of agricultural credit on the cattle inventory and deforestation in Colombia: a spatial analysis

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In developing countries' agriculture, access to credit is a crucial factor in driving innovation, optimizing resource distribution, and reducing inequalities. However, this landscape becomes complicated when considering other aspects such as environmental impacts, poverty alleviation, and the livelihoods of rural communities.

Agricultural credit, used as a tool for rural development, comes with high transaction costs, information asymmetries, and high interest rates, making accessibility difficult in rural areas of countries like Colombia, where the agricultural sector is still underdeveloped. Despite efforts to mitigate these challenges, there are still considerable gaps in credit access in rural Colombia. An example of this is the distribution of branches of the Agrarian Bank of Colombia (Banco Agrario de Colombia), the official financial institution for promoting agricultural credit in the country. The figure below shows a contrasting distribution of branches between the more developed and urbanized areas of the country (i.e., in the Andes) compared to the more remote areas in the Amazon and Eastern Plains.

One of the agriculture subsectors benefiting from these credits is cattle, which plays a crucial role in Colombia's economy, generating 19% of rural employment and significantly contributing to the country's gross domestic product. However, this activity is also associated with negative effects, especially regarding the environment, such as deforestation caused by the expansion of extensive cattle farming. The cattle sector is responsible for approximately 60% of deforestation in Colombia, due to inefficiencies in production, lack of state control, and land use conflicts driving the expansion of the agricultural frontier. Although credit can increase cattle sector productivity, it can also inadvertently contribute to deforestation, even if the funds are not specifically allocated to expanding grazing areas.

The article "The Impact of Agricultural Credit on the Cattle Inventory and Deforestation in Colombia: A Spatial Analysis" published in npj Climate Action, suggests a complex relationship between cattle production, credit distribution, and deforestation. This relationship highlights the importance of aligning these activities with the United Nations Sustainable Development Goals, i.e., those advocating for poverty eradication, promotion of sustainable economic growth, and environmental protection.

The results of the econometric analysis reveal significant, albeit sometimes contradictory, effects of credit access and land use on cattle herd size. While credits targeting cattle farming show a positive relationship with increased herd size, the total credit amounts show a negative relationship. For example, large producers account for only 1% of the total number of credit operations, but their share in the value of these operations is 54%.

On the other hand, when examining the relationship between the cattle herd size and deforestation, a negative association is found, suggesting that increases in the cattle inventory are linked to forest loss. However, other factors external to cattle farming, such as armed conflict, coca farming, and the COVID-19 pandemic, may have a greater influence on the deforestation rate.

In summary, the importance of coherent and uniform policies at the departmental level to improve credit access and effectively manage cattle farming is highlighted. Additionally, it is suggested to continue researching other external factors that may influence deforestation to develop more effective strategies for environmental conservation in Colombia.

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Animal Agriculture
Life Sciences > Biological Sciences > Zoology > Animal Science > Animal Agriculture
Environmental Sciences
Physical Sciences > Earth and Environmental Sciences > Environmental Sciences
Environmental Economics
Humanities and Social Sciences > Economics > Resource and Environmental Economics > Environmental Economics
Climate Change Mitigation
Humanities and Social Sciences > Society > Sociology > Environmental Social Sciences > Climate Change Mitigation

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