Brazil & Southern Cone - April 2009 (ISSN 1741-4431)

Credit is starting to contract. According to the Superintendencia de Bancos, in February 2009 loans to the commercial sector fell for the first time in 10 months. In January, the sector had outstanding loans of G$2,405bn (US$471m) but these fell to G$2,362bn in February.
Despite the fall, total outstanding loans are still 20% higher than at end September 2008, when they stood at G$1,999bn. Year-on-year, credit to the commercial sector was still 50% up in February than in the same year earlier month.

What seems to be happening is that banks preferred to lend more to the commercial sector rather than increase their lending to the primary sector any further. Lower commodity prices have made lending to farmers and agricultural processers more of a risk. Bank lending to the agricultural sector stands at G$4,916bn and remains the biggest single exposure on the banking sector's books. 

Farmers have also been helped by central government subsidies. In the past 12 years, cotton growers and sesame seed producers have enjoyed US$140m in government subsidies. Most of the money has been extracted under pressure: in 2007, the current governor of the province of San Pedro,  José “Pakova" Ledesma, organised protests that forced the-then president, Nicanor Duarte Frutos, to hand over G$18bn from accounts owned by Itaipú, the dam across the Paraná, that is jointly owned with Brazil.