This is the assessment of experts such as Renato Buranello, president of the Brazilian Institute of Agribusiness Law
The changes made to the rules governing the issuance of Agribusiness Receivables Certificates (CRAs) and Agricultural Credit Bills (LCAs) could have a “negative impact” on the development of the capital market as a source of financing for agribusiness, according to Renato Buranello, a partner at the VBSO Advogados law firm and president of the Brazilian Institute of Agribusiness Law (IBDA).
According to him, any excesses in the issuance of tax-exempt bonds can be limited, but without extreme rules and with an analysis of the regulatory impact. “Agro-industrial chains are made up of small, medium, and large companies. Large companies that issue bonds in the market directly or indirectly drive the entire production chain,” he said.
The stock of these two agribusiness bonds currently exceeds half a billion reais. Consolidated figures until November 2023 show R$449.2 billion in LCAs and R$123.4 billion in CRAs.
The changes were approved at an extraordinary meeting of the National Monetary Council (CMN) on Thursday. The changes will take effect in July for the next crop year, 2024/25, and will not affect current operations.
The CMN banned the issuance of CRAs backed by debt issued by publicly-traded companies not related to the agricultural sector. According to the Central Bank, the aim is to “ensure that the instruments are backed by operations compatible with the purposes that justified their creation.”
Experts believe that the monetary authority’s intention was to prevent a “frenzy” with the issuance of CRAs by companies not linked to the sector.
For Mr. Buranello, this restriction on the composition of the backing for CRAs is a “serious disincentive” to private financing for agribusiness.
The lawyer believes that the changes could cause “serious problems” for the Funds for Investments in Agribusiness Production Chains (Fiagro), which invest in CRAs. According to a technical analysis carried out by the VBSO, the funds “will have difficulties reinvesting when CRIs and CRAs currently in their portfolios are paid off, given the severe restrictions imposed by the CMN.”
The announced restrictions surprised many of the specialists working on the matter. Members of the Ministry of Agriculture’s Thematic Chamber for Credit Modernization and Agribusiness Risk Management Instruments (Modercred) spent Friday trying to understand the real scope of the measures.
The members want to understand whether the changes also apply to Rural Producer Bills (CPR), which have been used to finance a wide range of activities related to agribusiness: from production in the fields, to the purchase of inputs and machinery, to logistical operations.
The doubt arose when one of the resolutions approved by the CMN stated that the restrictions would apply to bonds and instruments with a promise of future payment, such as the CPR. The assessment of Ministry of Agriculture officials is that CPRs will be preserved. In the Ministry of Finance, there are those who think otherwise.
*Por Rafael Walendorff — Brasília
Source: Valor International