Higher loan rates in Brazil threaten tractor sales rebound
Borrowing costs in Brazil rose 2 percentage points to 13.5%
Brazil has raised interest rates on farm equipment financing, threatening to constrain a much-needed recovery in tractor sales.
Borrowing costs under a key government credit line were boosted by 2 percentage points to as much as 13.5% a year, the Brazilian agriculture ministry said Tuesday. The move should have a “downward bias” on domestic tractor sales projections, according to Pedro Oliveira, head of a farm equipment sector chamber at industry group Abimaq, which represents manufacturers including Deere & Co.
The rate increase comes at a time when tractor sales in Brazil were just beginning to recover after two straight years of major declines amid a drop in the price of key crops and a farming debt glut. That’s a potential setback for companies such as Deere, AGCO Corp. and CNH Industrial NV, which rely on the South American nation for a significant share of their sales.
Abimaq’s outlook for an 8.2% increase this year may be revised lower after the move, with farmers expected to become “very selective” in their purchases, Oliveira said.
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