Unlocking Sustainable Profitability: Economic Feasibility of Integrated Crop–Livestock–Forest Systems for Pasture Recovery in the Brazilian Cerrado

Abstract

Tropical pasture degradation represents a major challenge for global food security and environmental conservation, particularly in Brazil, where up to 60% of pastures are degraded. This study evaluates the economic viability of recovery of degraded pastures using an integrated crop–livestock–forest (ICLF) system. A representative 2-hectare system in the Brazilian Cerrado was analyzed, featuring native Dipteryx alata trees interplanted with pasture for cattle grazing. A deterministic financial model was developed to simulate annual cash flows over a 20-year period under various financing scenarios, including self-financing and multiple subsidized rural credit lines (e.g., Pronaf and Pronamp programs, and ABC Ambiental). The analysis shows that subsidized credit lines with low interest rates and extended grace periods significantly improve project profitability, yielding positive NPVs and robust internal rates of return, while self-financing and high-cost credit options (such as Pronaf Mulher) result in negative NPVs. The dual cash flow strategy—where borrowed funds are immediately invested in secure fixed-income instruments—further enhances economic performance. The findings demonstrate that ICLF-based pasture recovery is economically viable when supported by appropriate financing, offering a scalable model for sustainable agriculture that delivers both economic and environmental benefits.

1. Introduction

Tropical pasture degradation represents a major challenge at the intersection of global food security and environmental conservation. Over 300 million hectares of pastures are degraded worldwide, with 60% of these areas located in Latin America [1]. This degradation affects nearly 25% of global agricultural lands. In Brazil—the country with the largest pasture area globally—approximately 60% of pastures are degraded, leading to reduced livestock productivity as well as environmental issues such as soil degradation, biodiversity loss, and diminished natural fertility [2].

The Brazilian Cerrado biome exemplifies this crisis. Decades of intensive cattle ranching have compromised nearly half of its 100 million hectares of pastures [3], resulting in a reduction of carrying capacity by 30%–70% and the emission of up to 2.4 t CO₂eq/ha annually [2]. Market pressures for sustainable meat production and the implementation of stricter environmental policies have accelerated the transition from traditional extensive livestock systems toward more sustainable practices. Despite these pressures, the scientific community remains divided regarding the most effective pasture recovery approaches. Proponents of intensive silvopastoral systems advocate for high-density tree planting alongside improved grasses [4], while traditionalists favor the use of lower-cost grass-legume mixtures [5]. This divergence highlights a fundamental tension between achieving ecological benefits and maintaining economic feasibility—especially for smallholders, who manage 70% of Brazil’s degraded pastures [6].

Integrated crop–livestock–forestry (ICLF) systems have emerged as a viable compromise solution. Controlled studies indicate that ICLF systems can yield productivity increases of 40%–90% relative to degraded pastures [7], sequester carbon at rates between 1.5 and 4.8 t C/ha/year [8], and achieve biodiversity indices that are approximately 30% closer to those of native vegetation [9]. Nonetheless, the high initial investment required for soil correction, seeding, planting of native tree species (e.g., Dipteryx alata), and intensive management practices poses a significant barrier. Empirical evidence further suggests that municipalities with larger areas of degraded pasture receive proportionally less rural credit, thereby exacerbating the financing gap [10]. Moreover, although Brazil’s ABC+ (RenovAgro) Credit Program allocates R$ 5 billion annually for sustainable agriculture [11], recent analyses indicate that only 15%–20% of these funds benefit small-scale recovery projects [12]. This discrepancy raises critical questions regarding the viability of financed recovery models.

In this context, the present study conducts a comprehensive financial analysis of an ICLF implementation under varying credit schemes. The analysis focuses on a representative 2-hectare system in Brazil’s Cerrado that incorporates native Dipteryx alata trees. The research is guided by the following hypotheses: (1) recovery of degraded pastures via ICLF is economically viable under current favorable rural credit conditions; (2) investment in pasture recovery yields positive long-term returns; and (3) variability in operational costs and interest rates significantly impacts project viability. This integrated analysis aims to elucidate the economic and environmental feasibility of pasture recovery strategies and to inform policy interventions that support sustainable agricultural practices.

2. Materials and Methods

2.1. Study Area and Integrated System Design

The economic feasibility study was conducted on a small family farm (18 ha) located in the Brazilian Cerrado region. Within this property, a 2 ha area was designated for the pasture recovery and sustainable integration project. The ICLF system established on this site included the Baruzeiro tree (Dipteryx alata, a native Cerrado species) interplanted with pasture for cattle grazing. The 2 ha experimental area was subdivided into two plots with distinct tree spacing arrangements (10 m × 6 m in one plot, and 8 m × 3 m in the other) to evaluate different silvopastoral configurations. A total of 1.62 ha was occupied by Baruzeiro trees (with 10 rows of 23 trees in the first plot and 13 rows of 16 trees in the second plot), leaving 0.38 ha as open pasture alleys available for grazing between tree rows (i.e., 19% of the area for livestock). This design maximized land use by allowing cattle to graze in the alleys between young trees. Grazing management followed local best practices: initial stocking was calculated based on available forage and carrying capacity. Using a reference of 1 adult animal unit (AU) = 450 kg live weight, the 0.38 ha of dedicated pasture supported a stocking rate of 6 AU/ha. This corresponds to approximately 2.28 AU in the system (≈3 head of cattle at 350 kg each), ensuring no overgrazing. Cattle were introduced after trees were established, and husbandry practices (e.g., rotational grazing, pest control via on-farm biocontrol agents) were managed by the farm family to maintain pasture health and protect the young trees, as noted during interviews with the landholder.

Crucially, cattle are only introduced in Year 2 of the timeline. The decision to start grazing after a two-year establishment phase was made to allow the young tree seedlings to grow enough to withstand grazing pressure and to complete pasture establishment without damage. In Year 2, the first batch of 3 calves is purchased (at a local price of about R$ 2641.50 per head for 8-month-old weaners). That results in an upfront livestock purchase cost of R$ 7925 for the three calves (this cost is accounted in the cash flow at Year 2). These animals are then raised and sold around Year 4 (22 months later) for the revenue described above. Subsequently, to maintain continuous production, the farm would purchase a new batch of calves every two years (in Year 4, Year 6, …, up to Year 18) to replace those sold, thereby creating overlapping production cycles. In total, about 9 cycles over a 20-year horizon can be accommodated (with the final batch sold by Year 20). Each cycle’s costs (purchase of feeder calves, feed, etc.) and revenues (sale of finished cattle) are represented in the financial model at the appropriate years. From Year 3 onward, annual costs for baru nut harvesting and processing are also included: starting modestly around R$ 4500/year for manual nut collection and R$ 2250/year for small-scale processing (shelling/roasting). These costs reflect hiring labor for harvest (30 man-days at R$ 150 each) and post-harvest processing (15 man-days at R$ 150 each) once the trees begin fruiting (indicated in the model from year 3 onward). Over two decades, periodic maintenance of the pasture is required as well: for instance, applications of lime every 2 years (approx. 4 tons every other year at R$ 83.33/ton, i.e., R$ 333 each time) and annual pasture management costs (fertilizer, herbicide, mowing) of roughly R$ 920/year from Year 2 onward. All these operational and maintenance costs were carefully projected in the cash flow.

The costs and revenues used to calculate the models are outlined in

Table 1. Costs of baru and cattle production.

Activity	Category	Method/Unit	Cost (BRL)	Year	Total (BRL)
Baru production	Soil preparation	Harrowing (h)	180.00	0	360.00
		Fertilization (L)	0.72	0	3600.00
		Ant control (kg)	45.00	0	225.00
		Pest control (kg)	15.00	0	37.50
		Labor (day)	100.00	0	500.00
	Planting	Seedlings (unit)	11.00	0	5500.00
		Seeds (kg)	75.00	0	375.00
		Inputs (L)	26.30	0	657.50
	Harvest	Manual (day)	150.00	3 *	4500.00
		Processing (day)	150.00	3 *	2250.00
Cattle production	Cattle inputs	Calf purchase (BRL)	2641.50	2, 4, 6, 8, 10	7924.50
		Mineral salt (bags)	120.00	2 *	480.00
		Corn (kg)	1.20	2 *	1728.00
		Açu grass (kg)	0.30	2 *	2016.00
		Electric fence (ha)	3534.95	0	7069.90
		Water trough (unit)	400.00	2	400.00
		Anthelmintic (mL)	1.50	2 *	31.50
		FMD vaccine (dose)	2.00	2 *	12.00
		Rabies vaccine (dose)	3.50	2 *	10.50
	Pasture maintenance	Limestone (t)	83.33	2, 4, 6, 8, 10	333.33
		NPK fertilizer (bags)	120.00	2 *	480.00
		Herbicide (L)	70.00	2 *	140.00
		Mowing (ha)	150.00	2 *	300.00

* Cost is continuous from the first indicated year of implementation.

and

Table 2. Production and net revenue of products.

Products	Production	Sale Price (BRL/m3)	ICMS	Net Revenue (BRL/Year)
Chestnuts (kg/year)	30	R$ 80.00	12%	R$ 2112.00
Roasted chestnuts (kg/year)	30	R$ 100.00	12%	R$ 2640.00
Shelled chestnuts (kg/year)	30	R$ 120.00	12%	R$ 3168.00
Cattle (@/cycle)	91.89	R$ 307.00	12%	R$ 24,825.00
Totals		R$ 607.00		R$ 32,745.00

 below.

2.2. Financial Modeling and Credit Line Scenarios

To assess economic viability, a deterministic financial model was built in MS Excel projecting the annual cash flows of the ICLF system under different financing conditions. Such deterministic modeling approaches have been applied by other researchers to assess investment risks and returns in land-use or environmental decision-making contexts [13,14,15]. The model was developed in real terms (inflation-adjusted), and a real discount rate of 8% per year was adopted as the base case for present value calculations. This 8% discount rate was chosen as a conservative estimate of the opportunity cost of capital in Brazilian agriculture, roughly aligned with long-term Brazilian government bond yields and typical returns required by rural investors. In addition to the base rate, sensitivity analysis was later performed with discount rates of 6% and 10% to see how project NPV responds to lower or higher capital costs (these represent more optimistic or more stringent hurdle rates, respectively). The input parameters of the model included: (i) initial investment costs (including planting, fencing, fertilization, and infrastructure), (ii) annual operating costs (e.g., maintenance, labor, and inputs), (iii) expected revenues from livestock and baru production, (iv) loan conditions (grace period, term, and interest rate), and (v) discount rates. Sensitivity analysis was conducted using 6% and 10% as alternative discount rates, representing optimistic and stringent capital cost scenarios, respectively. These thresholds were selected based on the typical range observed in recent agroforestry viability studies and Brazil’s rural financing context [16,17]. A total of nine financing scenarios were simulated, reflecting the use of different rural credit lines (or no credit) to fund the project. These scenarios are: (1) self-financing (no loan), where the farmer uses only their own capital; (2)–(6) five Pronaf credit lines (special programs for small family farmers)—Pronaf Floresta, Pronaf Agroecologia, Pronaf Mulher, Pronaf Agroindústria, and Pronaf Eco; (7)–(8) two Pronamp credit lines (for medium-sized producers)—Pronamp Investimento and a general Pronamp line; and (9) Programa ABC Ambiental (a credit line under the low-carbon agriculture program). These are all existing credit modalities in Brazil aimed at supporting sustainable agriculture and pasture recovery, each with distinct conditions.

Table 3. Key parameters of rural credit lines analyzed in the financing scenarios.

Credit Line	Max. Amount (R$)	Grace Period (Years)	Total Term (Years)	Interest Rate (% p.a.)
Pronaf Floresta	100,000.00	12	20	3.00
Pronaf Agroecologia	250,000.00	3	10	3.00
Pronaf Mulher	250,000.00	3	10	8.00
Pronaf Agroindústria	210,000.00	3	10	3.00
Pronaf Eco	165,000.00	3	10	3.00
Pronamp Investimento	600,000.00	2	8	6.00
Pronamp	430,000.00	3	8	6.00
ABC Ambiental	2,000,000.00	8	12	6.00
Self-financing (own funds)	–	0	–	–

summarizes the key parameters of each credit line considered (maximum loan amount, grace period, total repayment term, and annual interest rate). All financing scenarios assume the producer takes the loan at project start (Year 0) to cover the needed investment. In cases where the required amount (R$ 350,000) exceeds the cap of a single credit line, a combination was devised (for example, using two Pronaf lines together)—however, for modeling simplicity, each scenario is treated as a single “composite” loan with the effective terms of the primary line. The self-financed scenario serves as a baseline, where no loan is taken and the farmer’s own funds carry the investment (implicitly, the opportunity cost of those funds is the 8% discount rate).

The Pronaf lines are tailored for small-scale farmers (family agriculture) with subsidized rates and longer terms. Among them, Pronaf Floresta specifically targets forestry and environmental recovery investments, offering up to R$ 100k at 3% p.a. with an exceptionally long term (20 years) and grace period (12 years). Pronaf Agroecologia supports sustainable agricultural systems with up to R$ 250k at 3% p.a., 10-year term (3-year grace). Pronaf Mulher is a line for women farmers (up to R$ 250k) but at a higher interest of 8% p.a. (also 3-year grace period), reflecting less subsidy. Pronaf Agroindústria (Investment) allows up to R$ 210k at 3% for on-farm agroindustry investments (e.g., machinery for processing produce), included here as it could finance equipment for nut processing or other infrastructure. Pronaf Eco (eco-friendly) similarly offers up to R$ 165k at 3% for environmental sustainability projects (10-year term). The Pronamp lines target medium producers (who typically do not qualify for Pronaf). Pronamp Investimento in this context can finance up to R$ 600k at 6% with 8-year total (2-year grace), whereas the general Pronamp line considered has a slightly smaller cap (around R$ 430k) and a 3-year grace on an 8-year term at 6%. Finally, the ABC (Ambiental) program is designed for larger sustainable agriculture projects, with a high ceiling (up to R$ 2 million) at 6% interest, and a generous 8-year grace within a 12-year term. All loans are assumed to be disbursed fully at the project outset to cover the establishment and initial operating costs, up to a target amount of R$ 350,000 needed for the 2 ha project (this amount was estimated based on the sum of discounted expenditures and serves as the scale of financing analyzed).

A unique financial management strategy was modeled: it was assumed that when a loan is taken, the entire loan principal is received in Year 0 and immediately invested in a secure fixed-income instrument until needed. In practice, this means the borrowed capital is placed in an interest-bearing account (the study used a Brazilian Treasury bond yielding 14.83%p.a. as of February 2025).

Then, each year, funds are withdrawn from this investment to pay for the project’s annual costs (operational expenses, loan interest, etc.). By doing this, the high yield on the temporarily invested loan proceeds helps subsidize the project’s cash flow, effectively arbitraging the difference between the investment return (14.83%) and the concessional loan interest (e.g., 3%–8%). This approach separates the cash flow into two parts: (a) the financial investment flow (loan drawdown, interest earned on idle funds, and loan repayments) and (b) the operational agricultural flow (revenues from cattle, nuts, and direct farming costs). The combined effect is reflected in the overall net cash flow. Notably, for loans with low interest and long grace periods, this strategy can significantly improve project viability, as interest earned during grace can offset a portion of the project costs. All financing scenarios were modeled using this approach, under the assumption that the farmer is financially savvy and manages the funds optimally. In the self-financed scenario, no external loan exists, but we implicitly assume the farmer could similarly invest any unused capital—however, since all funds are the farmer’s own, the relevant comparison is simply the NPV using the 8% opportunity cost.

For each scenario, standard investment performance indicators were calculated: the net present value (NPV), equivalent periodic (annual) benefit (BPE), internal rate of return (IRR), modified internal rate of return (MTIR), payback period and benefit–cost ratio (B/C), as expressed in

Table 4. Financial formulas used in the economic feasibility analysis.

Indicator	Formula and Description
Net present value (NPV) [18]	$$\mathrm{NPV}=\sum _{t=0}^n{\displaystyle \frac{F{C}_t}{{(1+r)}^t}}=\sum _{t=1}^n{\displaystyle \frac{F{C}_t}{{(1+r)}^t}}-I_0$$ (1) Calculates the present value of future net cash flows ($F{C}_t$) discounted at rate r, subtracting the initial investment $I_0$.
Equivalent periodic benefit (EPB) [19]	$$\mathrm{EPB}={\displaystyle \frac{\mathrm{NPV}\times i}{1-{(1+i)}^{-n}}}$$ (2) Converts NPV into a uniform annual equivalent income, using discount rate i over n years.
Internal rate of return (IRR) [20]	$$0=\sum _{t=0}^n{\displaystyle \frac{F{C}_t}{{(1+\mathrm{IRR})}^t}}=\sum _{t=1}^n{\displaystyle \frac{F{C}_t}{{(1+\mathrm{IRR})}^t}}-I_0$$ (3) Determines the discount rate (IRR) at which the project’s NPV equals zero.
Modified internal rate of return (MIRR) [21]	$$\mathrm{MIRR}={\left({\displaystyle \frac{F{V}_{positive}}{P{V}_{negative}}}\right)}^{1/n}-1$$ (4) Calculates the rate of return considering the cost of capital and reinvestment rate, addressing limitations of IRR.
Payback period (PBP) [22]	$$\mathrm{PBP}=min\left\{t\mid \sum _{i=0}^{t}F{C}_i\ge I_0\right\}$$ (5) Indicates the time period t when the cumulative cash flow equals or exceeds the initial investment $I_0$.
Benefit–cost ratio (B/C) [22]	$$\mathrm{B}/\mathrm{C}={\displaystyle \frac{{\sum }_{t=0}^n\frac{B_t}{{(1+r)}^t}}{{\sum }_{t=0}^n\frac{C_t}{{(1+r)}^t}}}$$ (6) Represents the ratio between the present value of benefits ($B_t$) and costs ($C_t$), both discounted at rate r. Values above 1 indicate feasibility.
Economic profit (EP) [23,24]	$$\mathrm{EP}=R-C$$ (7) Calculates economic profit as the difference between total revenue (R) and total cost (C).

.

All calculations were performed using Excel software, using input parameters and price series from credible sources (CEPEA/ESALQ for agricultural prices, IBGE for productivity benchmarks, etc.) to ensure realism. Loan payments were modeled according to typical amortization schedules given the grace periods (Table 3). The model thus simulates the annual net cash flow under each financing scheme, from year 0 to year 20, and computes the above indicators. In addition to the base runs, a sensitivity analysis was conducted on key variables: notably, the effect of varying the discount rate (6%, 8%, 10% as mentioned) and the effect of introducing a pro-labore (owner’s salary) expense, as described in the Results section.

3. Results

3.1. Financial Performance by Credit Line

Table 5. Financial and operational results for each financing scenario (8% discount rate).

Credit Line	Financed (BRL)	NPV (BRL)	BPE (BRL)	TIR (%)	MTIR (%)	Payback (yrs)	B/C
ABC Ambiental	343,930.43	97,462.41	13,652.18	35%	27%	17	1.24
Pronamp Inv.	343,930.43	69,410.33	9722.74	37%	32%	18	1.22
Pronaf Agroec.	250,000.00	59,414.78	8322.61	33%	26%	18	1.23
Pronaf Floresta	100,000.00	49,195.32	6891.10	31%	16%	9	1.17
Pronaf Agroind.	210,000.00	33,366.13	5137.15	29%	23%	21	1.17
Pronaf Eco	165,000.00	26,821.12	3757.00	26%	13%	13	1.08
Pronamp	343,930.43	2204.72	308.83	9%	9%	69	1.03
Self-financing	–	−4248.61	−595.13	6%	10%	26	1.10
Pronaf Mulher	250,000.00	−28,804.09	−4034.77	#NÚM!	−100%	(none)	0.94

(1) “Payback (yrs)” refers to the year in which cumulative net cash flow becomes positive; (2) For Pronaf Mulher, the IRR is #NUM (no real solution) and the MTIR is effectively −100%; (3) BPE = equivalent periodic benefit; (4) B/C = benefit-cost ratio.

compiles the principal economic indicators and cash-flow parameters for the nine financing scenarios (plus self-financing) examined in this study. A real discount rate of 8% was used to calculate NPV. The modified internal rate of return (MTIR) accounts for actual loan costs, whereas the conventional IRR ignores them, typically inflating the apparent return. Payback corresponds to the estimated time (in years) for the project’s cumulative net cash flow to become positive.

ABC Ambiental: With 6% interest, 8-year grace, and a 12-year term. Its long grace period permits early reinvestment and greatly reduces cash flow pressures, leading to the highest NPV (R$  97.5k) and a robust MTIR (27%). Although payback is reached around year 17, the project thereafter continues generating net surpluses.

Pronamp Investimento: Also at 6% interest but with only 2 years of grace and an 8-year total term, this line achieves an NPV of R$  69.4k, second only to ABC. Its IRR is the highest (37%), reflecting strong biological returns, but the shorter grace shrinks the arbitrage window. Payback stands at 18 years, slightly longer than ABC.

Pronaf Agroecologia: With 3% interest and a 3-year grace, it yields NPV ≈ R$  59.4k and an MTIR of 26%. Despite financing only R$  250k (the rest presumably from equity), the low interest rate helps maintain healthy overall returns.

Pronaf Floresta: Limited to R$  100k at 3% interest, it posts an NPV around R$  49.2k. The 12-year grace is highly favorable, but because only part of the project is financed cheaply, extra capital must be sourced at higher cost or from savings. Payback occurs at year 9, notably sooner than some lines with shorter terms but heavier debt loads.

Pronaf Agroindústria: Offering up to R$  210k at 3%, it achieves NPV ≈ R$  33.4k, IRR 29%, and MTIR 23%. The payback is the longest (21 years), partly due to an operational focus on agroindustrial components and partial coverage.

Pronaf Eco: Capped at R$  165k, it yields NPV ≈ R$  26.8k. Its 3% rate is attractive, but the lower financed amount compels additional financing or equity. Consequently, the MTIR is just 13%, with payback around year 13.

Pronamp: Though it has a 6% rate, a 3-year grace, and an 8-year term, the outcome is marginal: NPV of R$  2.2k and an IRR/MTIR near 9%. The payback extends to 69 years, essentially meaning the net cash flow remains tight for much of the project.

Self-Financing: In the absence of subsidized credit, the project struggles to surpass the 8% discount hurdle, showing a slightly negative NPV of −R$  4.25k. Its B/C ratio is 1.10, but the IRR is just 6%, and the MTIR ≈ 10%. Payback arrives only after 26 years.

Pronaf Mulher: Carrying the highest interest (8%), it produces a negative NPV (−R$ 28.8k). No valid IRR emerges (#NUM), and the MTIR is effectively −100%, indicating a net loss once financing costs are accounted for. Thus, the project never breaks even under this scenario.

Although the payback period under the ABC Ambiental line occurs only in year 17, this does not imply that the investment is unattractive. On the contrary, the project continues to generate substantial positive cash flows beyond this point, indicating consistent profitability in the long term. This behavior reflects the biological lag and capital intensiveness typical of ICLF systems, especially with perennial components such as baru trees. Despite delayed return of capital, the ABC line supports higher NPV and lower financial stress due to its longer grace period and extended amortization.

Lines such as Pronamp Investimento and Pronaf Agroecologia offer faster capital turnover, but yield comparatively lower NPV and EPB. The higher IRR observed in Pronamp reflects rapid returns, but under constrained liquidity and less margin for reinvestment. In contrast, Pronaf Agroecologia, although offering subsidized interest rates, is limited by shorter terms and grace, which dampen its relative advantage in a long-cycle system.

These findings suggest that longer-term financing with flexible grace and amortization conditions better align with the cash flow patterns of integrated and regenerative models, where productivity and income grow over time. In policy terms, such results support the design of credit instruments tailored to ecological transitions, with capital structure aligned to biological realities.

3.2. Sensitivity Analysis

Table 6. Variation of NPV as a function of the minimum attractive rate (MAR) for different credit lines (in R$).

Credit Line	NPV @ 6% p.a.	NPV @ 8% p.a.	NPV @ 10% p.a.
ABC Ambiental	119,819.92	97,462.41	79,339.73
Pronamp Investimento	81,514.98	69,410.33	59,012.93
Pronaf Agroecologia	71,293.75	59,414.78	49,406.81
Pronaf Floresta	58,054.16	49,195.32	41,335.50
Pronaf Agroindústria	48,061.53	40,143.44	33,366.13
Pronaf Eco	33,081.56	26,821.12	21,673.01
Pronamp (conventional)	5662.56	2204.72	−722.13
Self–financing	1310.07	−10,029.54	−8456.38
Pronaf Mulher	−30,771.24	−28,804.09	−27,199.60

summarizes the sensitivity analysis of NPV with respect to the minimum attractive rate (MAR) for each financing line. Analyses revealed that an increase from 6% to 10% significantly reduced NPVs. The table shows the NPV variation for each credit line across the three discount rate scenarios.

Figure 1 presents a line plot for three selected credit lines (ABC Ambiental, Pronamp Investimento, and Pronaf Mulher) to illustrate how their NPVs change with varying discount rates. Notably while ABC Ambiental remains positive throughout, Pronaf Mulher shows negative NPVs across the range.

Among the selected credit lines, Pronaf Mulher shows the highest sensitivity to discount rate changes, with its NPV declining more steeply than ABC Ambiental and Pronamp Investimento. This reflects the limited financial margin and shorter amortization conditions of this line, which amplify the effect of capital cost increases on project viability.

3.3. Impact of Producer Remuneration

Incorporating a fixed annual producer remuneration (pro-labore) generally reduced NPVs and extended the payback periods. Figure 2 compares the NPVs of two robust credit lines (ABC Ambiental and Pronamp Investimento) with and without the producer’s remuneration. The grouped bar chart clearly shows the downward impact of including the pro-labore cost on project viability.

4. Discussion

The financial indicators used in this study—namely, net present value (NPV), modified internal rate of return (MIRR), benefit-to-cost (B/C) ratio, and payback period—provide a comprehensive picture of the economic performance of different rural credit lines. These metrics reveal the potential profitability and risk associated with each financing option and are critical for assessing the viability of implementing integrated crop–livestock–forest systems (ICLF) for pasture recovery [25].

Our results indicate that financing lines with favorable conditions, such as low interest rates and extended grace periods, yield significantly higher NPVs and more attractive MIRRs compared to lines with more restrictive terms. The high NPVs observed in programs like ABC Ambiental and Pronamp Investimento suggest that such credit conditions are essential for unlocking the economic potential of sustainable livestock systems. Additionally, high B/C ratios in these scenarios demonstrate that the benefits of these investments substantially outweigh the costs.

The sensitivity analysis further reinforces these findings. Even a modest increase in the discount rate (or the minimum attractive rate of return) has a pronounced effect on NPV values. A two-percentage-point increase can shift projects from profitable to unfeasible, underlining the inherent vulnerability of these projects to fluctuations in market conditions and financial costs [26].

A notable component of our financial assessment is the inclusion of producer remuneration (pro-labore) in the cash flow analysis. Traditionally, studies often omit pro-labore to present an idealized financial scenario; however, smallholder farmers require a stable income to support their households. Our analysis shows that while robust projects can absorb the cost of pro-labore without a drastic decline in profitability, marginal projects suffer considerably, leading to a significant deterioration in overall financial performance [27].

Moreover, when projects are financed solely with the producer’s own resources, the opportunity cost of using personal capital becomes evident. The analysis indicates that self-financing results in a negative NPV, largely because the capital could yield higher returns if invested in low-risk instruments. This finding emphasizes the economic disadvantage of relying exclusively on internal funds, especially when favorable external credit is available [28].

The performance of the Pronaf Mulher credit line is particularly concerning. Characterized by higher interest rates (8% per annum) and shorter repayment periods, this line consistently produced negative NPVs and low B/C ratios. Such unfavorable conditions not only undermine the economic feasibility of pasture recovery but may also discourage female producers—who often face additional socioeconomic barriers—from adopting sustainable practices [29].

In addition to the direct financial metrics, our study underscores the importance of risk mitigation in rural credit schemes. The high sensitivity of NPV to small increases in the discount rate suggests that external factors—such as rising input costs and fluctuating interest rates—can quickly render a project unviable. Implementing risk mitigation measures, such as crop insurance, subsidies, or flexible repayment schedules, may help buffer producers against these adverse conditions [26].

The design of the financing terms is another critical factor. Programs that offer longer grace periods allow the project sufficient time to generate cash flow before the onset of repayment obligations. This design flexibility is essential for projects with long gestation periods, such as those involving ICLF, where initial investments take several years to translate into substantial revenue. Adjusting repayment terms to align with the production cycle can markedly improve project sustainability.

The diversification benefits inherent in ICLF also merit discussion. The incorporation of forest components, such as the planting of native species like Dipteryx alata, not only enhances environmental outcomes—through carbon sequestration and biodiversity conservation—but also provides additional revenue streams. Although these benefits were not fully quantified in our financial model, their qualitative impact on overall project attractiveness is significant [9].

From a policy perspective, our findings carry substantial implications. Public financing programs such as ABC Ambiental and Pronamp Investimento demonstrate that well-structured credit lines can stimulate investments in regenerative livestock systems, leading to both improved production and environmental benefits. Conversely, lines with rigid or unfavorable conditions, such as Pronaf Mulher, may hinder the adoption of sustainable practices and should be revised to better support producers [30].

In summary, the study confirms that recovery of degraded pastures via ICLF is economically viable under favorable rural credit conditions (H1) and that such investments yield positive long-term returns (H2). Furthermore, the pronounced impact of small changes in operational costs and interest rates on project viability underscores the critical importance of flexible and risk-aware financing schemes (H3).

These results suggest that integrated public policies—combining favorable credit terms, risk mitigation measures, and support for producer income—are vital for the widespread adoption of pasture recovery practices. Tailoring financing conditions to the operational realities of ICLF can help ensure both economic and environmental sustainability.

Overall, while the financial feasibility of ICLF-based pasture recovery is evident under optimal conditions, attention must be paid to the nuances of producer remuneration and the inherent risks of self-financing. Future research should further explore these dynamics, including a more detailed quantification of indirect environmental benefits, to support more informed decision-making in rural finance.

5. Conclusions

This study assessed the economic viability of recovering degraded pastures in Brazil through an integrated crop–livestock–forestry (ICLF) system involving cattle and Baruzeiro, under eight rural credit lines. Results indicate that credit conditions—particularly interest rates, grace periods, and loan terms—are decisive for project feasibility. The ABC Ambiental line provided the most favorable results due to long grace and amortization periods, whereas programs with shorter terms and high opportunity costs showed limited viability. Sensitivity analysis demonstrated that NPV is highly responsive to capital cost assumptions, and producer remuneration can significantly alter financial outcomes. These findings reinforce the need for public and private financial instruments that align with the biological and economic dynamics of regenerative systems. Tailored credit design is key to supporting sustainable agricultural transitions in Brazil.