World Bank to help boost sustainability in Mato Grosso

A recently approved $250 million loan from Washington-based World Bank will aim to promote fiscal and environmental sustainability in the Brazilian state of Mato Grosso. The state is expected to make strides in sustainable agriculture, forest preservation, and the mitigation of climate change.

To meet these goals, investments will support an initiative dubbed Produzir, Conservar, Incluir (“produce, conserve, include,” PCI in the original), aimed at attracting investment in sustainable farming and supporting the conduction of a rural survey, as well as supporting the state’s new prevention and control plan for deforestation and wildfire.

The move will also serve to support fiscal reforms to ensure that the main source of costs can be kept in check..  

Secretary Rogério Gallo  - Divulgação SEFAZ/Mato Grosso

Good timing

Even though Mato Grosso’s economy has grown above the national average, the state’s fiscal situation has been deteriorating since 2015 due to an increase in the payroll—67 percent in real figures from 2011 to 2018. As a result, overdue payments for suppliers added up to $600 million, or 15 percent of state revenues, by the end of last year.

Mato Grosso Finance Secretary Rogério Gallo told Agência Brasil that the approval of the loan from the Central Bank “plays in a unique, structural role as it comes as the acknowledgment from an international multilateral organism that the state has made firm strides towards fiscal sustainability.”

“These funds will allow Mato Grosso to clear a nearly overdue debt in less time, easing cash flow at a moment of fiscal recovery,” he said.

Better services

German Cornelius Fleischhaker, manager of the World Bank project, says the loan also aims to bolster Mato Grosso’s tax basis.

“In addition to curbing spending in a sensible way, the state policies backed by the project seek to increase the fiscal contribution in agribusiness. This should enable Mato Grosso to have more funding to invest in better public services,” he argued.

Less deforestation

The loan is also expected to slash deforestation in the Amazon biome within the state by 29 percent compared to 2018 estimates. Central Bank agricultural economist Barbara Farinelli warns that “long-term economic prosperity in Mato Grosso depends on the sustainable use of its natural resources.”

In her view, the state’s access to the international funding for climate under the PCI initiative “will also be a key source of revenue in the future.” After all, over 50 percent of Mato Grosso’s GDP is directly linked to agriculture and animal husbandry.

Despite the latest efforts, the signs of environmental risks in the region are still appalling. Last year, the agricultural expansion in the state took place as deforestation advanced, also in the Amazon. Even though deforestation stood at 75 percent below the post-2010 average, it continues to bring concerns, as the rate started increasing again in 2015.

*With information from UN News and the World Bank