Debt renegotiation approved by Senate committee and enters final stage to become law.

One of the demands that has gained strength in the agricultural sector in recent years is close to being met, says the Parliamentary Agricultural Front (FPA). The Senate's Economic Affairs Committee (CAE) approved the legislative proposal that paves the way for the renegotiation of rural producers' debts. Bill 5.122/2023 provides mechanisms for extending these debts with more accessible interest rates and terms. The matter benefits producers throughout Brazil who are currently experiencing a "perfect storm" against agricultural production. High interest rates, low commodity prices, increased production costs, and crop failures due to adverse weather conditions are some of the factors that explain the producers' situation. "We are not refusing to pay debts, we are asking for help to breathe," some producers reported. The committee gave a positive assessment this Wednesday (27) for the bill to now proceed to the Senate Plenary, under an urgency procedure. The approved text has changes compared to what came out of the Chamber of Deputies, such as the expansion of funding sources to enable the renegotiation of debts. Despite rounds of negotiations with the federal government through the Ministry of Finance, there was no full agreement. The last proposal sent by the ministry was considered insufficient and limited, as it did not meet the needs of a large portion of rural producers. Senator Tereza Cristina (PP-MS), vice-president of the Parliamentary Agricultural Front (FPA), also spoke about these negotiations. According to her, it wasn't the ideal text, but "it was the best possible." She also pointed out that not everything proposed by the Finance Ministry was rejected. "What came yesterday leaves out a huge range of producers who did not cause this situation. And we have a time problem, due to the installments that are due," she said, recalling the last proposal sent by the government. With this scenario, the FPA is also preparing for possible reprisals from the government, as warned by the president of the caucus, Deputy Pedro Lupion (Republicanos-PR). “There is already talk within this corridor of the possibility of disqualifying the resources of the Plano Safra (agricultural plan) to pay for what we have just approved. […] We have taken an extremely important step. We are warning here today that we will not accept, in any way, that this be disqualified or dismantled. We will work for the vote in the Senate and, afterwards, for the approval in the Chamber of the text approved here, so that we can provide relief and a solution to the indebtedness of our producers,” he commented after the approval in the CAE (Committee on Economic Affairs).

Special line

The proposal creates a specific line of credit using resources from the Social Fund (FS) and the surplus of other funds overseen by the Ministry of Finance. Other sources indicated by the Executive Branch may also contribute to this line of credit. One of the government's requests was that there be no limit on the amounts, which was accepted in the text. Regarding the conditions for the line of credit, the project indicates that the limit for borrowing will be R$ 10 million per producer, potentially reaching R$ 50 million in the case of associations, cooperatives, or producer consortia. Interest rates will be: 3.5% per year for producers in the National Program for Strengthening Family Farming (Pronaf) and small producers; 5.5% per year for producers in the National Program for Supporting Medium-Sized Rural Producers (Pronamp) and medium-sized producers; and 7.5% per year for other producers. The term will be three years of grace period and 10 years for repayment. In extraordinary cases, this period may reach 15 years—the criteria will be defined in subsequent regulations. Guarantees are the usual ones for rural credit. Additional guarantees are prohibited, except when they exceed regulatory values. Another important point concerns the debts that may be included in the renegotiation. In this sense, the scope of the proposal has been broadened, as it now includes operations contracted until December 31, 2025, with installments due or to become due, including those already renegotiated. In addition to rural credit operations, Rural Product Certificates (CPRs) may also be renegotiated through the special line of the Social Fund. To access the resources of this line, the producer must meet at least one of these conditions: have registered losses in two or more harvests of at least 30% of production in the period from 2019 to 2025 — upon presentation of a report; the financed enterprise must be located in a municipality that has declared a state of public calamity or emergency situation between 2019 and 2025, with recognition from the federal or state government, motivated by some climatic event; The funded project must be located in a municipality that has registered at least two production losses of at least 20% of the average production yield. These losses must occur in at least two of the three main agricultural activities of the municipality and in the period from 2019 to 2025; projects in cities where the percentage of debts more than 90 days overdue and renegotiated debts exceeds 10% of the total rural credit portfolio of the municipality as of December 31, 2025; producers who can prove cash flow difficulties due to losses in previous harvests resulting from adverse weather conditions between 2019 and 2025. Economic impacts of international geopolitical conflicts that resulted in revenue losses and increased costs are also considered justifications. Sub-legal regulations, such as resolutions of the National Monetary Council (CMN), that restrict what is foreseen in the project are also prohibited.

Authorizations for new lines of credit

The wording approved by the CAE also incorporates provisions that allow the federal government to expand support mechanisms for renegotiation. One of them authorizes the National Treasury to issue bonds to enable the extension of debts not covered by the special line of credit. These issuances must observe the limits of the fiscal targets foreseen in the Budget Guidelines Law. It also authorizes the government to create additional credit lines to the special line. The regulation will be the responsibility of the CMN, but some parameters must be observed, such as a payment term of up to 13 years, with the possibility of extension for another five years in specific cases, and interest rates of 6% for beneficiaries of Pronaf, 8% for beneficiaries of Pronamp, and 10% for other producers.

Amendments increase resources and transparency.

Senator Renan Calheiros' final report also incorporates suggestions presented by members of the FPA (Parliamentary Agricultural Front). This includes Senator Tereza Cristina's amendment, which authorizes the allocation of federal funds to a guarantee fund to cover rural credit operations contracted by producers affected by adverse weather events. The measure also allows producers, banks, financial institutions, and state and municipal governments to participate in the fund. This initiative could increase the volume of resources available for financing, as the fund will act as a guarantee for producers' operations. Initial estimates indicate that, depending on the amount allocated, the leverage could reach R$ 200 billion. Another amendment by the senator accepted in the report ensures greater transparency in the relief actions for producers. The federal government must present a report on the execution of the support measures, to be made available within 180 days after the deadline for contracting the credit line. Parliamentarians celebrate approval. Other members of the FPA celebrated the progress of the bill in the CAE (Committee on Economic Affairs). The Institutional Coordinator of the parliamentary group, Deputy Alceu Moreira (MDB-RS), highlighted the role of the rapporteur, Senator Renan Calheiros (MDB-AL), in mediating the issue and listening to the demands of the producers. “Today we approved a bill that is not a project to solve this episode we are experiencing in Brazilian agriculture. Senator Renan Calheiros has just been the rapporteur for a project that inaugurates another financing model, with other funds, for Brazilian agribusiness. Now we will have resources from the most diverse sources,” he emphasized. Deputy Pedro Westphalen (PP-RS), from Rio Grande do Sul and a member of the FPA (Parliamentary Agricultural Front), stressed the importance of the proposal's progress. “This project is a hope for those who want to pay the bill and have always paid the bill, the rural producer. In fact, it is the only sector that has grown vertically in Brazil, but which at this moment is in the ICU, it is intubated. It is necessary for the Brazilian State to extend a hand at the speed that the producer needs so that he can continue producing,” he said.

This text was translated by machine from Brazilian Portuguese.