State-ownership and bank presence in deforesting regions: evidence from the Amazon rainforest

Cristina Ortega and Matias Ossandon Busch

Applied Economics Letters, 2025, vol. 32, issue 18, 2652-2656

Abstract: We investigate the link between state ownership in banking and deforestation activities within the Brazilian Legal Amazon. The analysis relies on novel data combining information on bank branches at the municipal-level and deforestation records from satellite-based images for the period between 2002 and 2020. Our findings suggest that state ownership in banking matters to explain banks’ presence in high deforestation regions; on the contrary, foreign banks are less prone to engage in lending activities in these regions. Moreover, state-owned banks exhibit a greater inclination to allocate funds towards agribusiness, a sector known for its contribution to deforestation. These findings suggest that market distortions associated with state ownership in banking can influence the allocation of capital towards industries involved in deforestation.

Date: 2025
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DOI: 10.1080/13504851.2024.2337327

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