December 16, 2010

Low Cost Financing Stimulates Equipment Sales in Brazil

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Since June of 2010, the Brazilian government has provided R$ 2 billion in low cost financing through its PSI-BK program for the purchase of agricultural equipment. According to the National Automobile Manufacturers Association (Anfavea), 69,000 units should be sold thus far in 2010 making it the second best year in equipment sales since the mid 1970s. The only better year was 1976 when 80,200 units were sold as the result of another stimulus package from the federal government.

The current plan offers low interest loans of 5.5% with up to ten years to repay and a grace period of two years before the first payment is due. The equipment being purchased includes: combines, tractors wheel and track, motorized cultivators, and sprayers.

Odds are good that the program will be extended from December 2010 to March 2011. Another R$ 2 billion is expected to be put into the program bring the total commitment to R$ 4 billion. While R$ 4 billion may seem like a lot, it is only a small part of the R$ 100 billion allocated by the federal government for the 2010/11 Agricultural Plan.