Bill on rural debt focuses on climate-related losses, says Finance Minister.

The National Congress and the federal government are about to conclude the debate surrounding the proposal to renegotiate the debts of the agricultural sector, according to Finance Minister Dario Durigan, this Thursday (9), says a note from "Agência Brasil". “We have been discussing the issue of rural debt with representatives of the sector in the National Congress, deputies and senators from different committees, for some time now. I would say for more than a year,” said Durigan, in an interview with Rádio Gaúcha. “I understand and have said that we have reached the final point. And that, with the negotiations finalized, we will issue a provisional measure (MP), balancing the proposal of the National Congress and the country's budgetary limit,” added the minister. According to Durigan, the text should be edited and published in the Official Gazette of the Union by next week. By law, any provisional measure comes into force as soon as it is published, but it needs to be subsequently considered by the Chamber of Deputies and the Senate, which have up to 120 days to approve or reject the proposal. During the interview, the minister anticipated some points that the Executive Branch, the National Congress, and representatives of the agricultural sector have been discussing, such as establishing a ten-year period for rural producers affected by climate crises to settle their debts. “I always proposed six years for renegotiation with defaulting farmers, because they had problems. The rural caucus always demanded ten years. We reached eight years and now we are studying extending the period to ten years, in cases of more serious climate losses.” Durigan explained that, in these cases, the producer will have to prove that they suffered serious losses due to repeated harvests, caused by severe weather phenomena such as floods and droughts. “We cannot allow public money to serve as aid for those who cannot prove losses,” he emphasized, adding that the negotiation foresees that producers harmed by climate phenomena will have up to two years of grace period to begin paying the renegotiated debts and that the Provisional Measure should establish a limit of up to R$ 8 million per CPF (Brazilian individual taxpayer registration number) in the case of large producers. The provisional measure should also address the needs of farmers harmed by market volatility, that is, by extreme price fluctuations. These farmers, especially large producers, will be able to renegotiate debts up to a limit of R$ 4 million, should the text be approved according to the most recent negotiations. Among the aspects still to be defined are the interest rates. According to Durigan, one of the proposals under discussion foresees a rate of 6% per year for small farmers; 9% for medium-sized farmers; and a maximum of 12% for large farmers. "We are making the final calculations, but we are certainly talking about unprecedented annual rates in the country," said the minister. According to him, if approved, the changes under discussion will represent an additional R$ 2 billion to R$ 3 billion per year in costs to the package, which, overall, will require just over R$ 100 billion from public coffers. Durigan also commented that there is a suggestion to create an agricultural guarantee fund, similar to the FGC used by the banking sector. “To structure the sector, we are considering [the possibility of] a guarantee fund that the government, banks, and the private sector can capitalize on so that, in the future, it serves as a [compensation] fund for initial losses in the [agricultural] sector.” Finally, the minister said that the federal government supports the inclusion of new rules for financial institutions in the provisional measure. “One [legal] provision [under debate] stipulates that [in renegotiations] banks must accept guarantees given [by producers] who are in default on previous operations. The other requirement for banks is the proportionality of the size of the guarantee. Several people have reported to me that there are banks demanding two, three times the value of the operation as collateral,” said the minister, defending the urgency of the provisional measure. “[Representatives of] banks with whom I speak have reported to me, in recent months, an increase in default due to moral hazard. 'Look, the rules must change, so don't pay your installment now.' This is very bad and will harm agricultural credit in the future,” concluded Durigan.

This text was translated by machine from Brazilian Portuguese.