The cost of renegotiating agricultural debts should be close to R$ 65 billion and will not have a fiscal impact on the government, says FPA.

The projections presented by the Ministry of Finance regarding the impact of bill 5.122/2023 are overestimated. A survey conducted by the Parliamentary Agricultural Front (FPA), using the same assumptions as the government, shows that the cost of renegotiation operations should not exceed R$ 65 billion over the next 13 years. The problems with the accounts presented by the Finance Ministry begin with the estimate of rural debt eligible for renegotiation. According to data from the Central Bank, the rural credit portfolio in April of this year was R$ 895.2 billion. In addition to this amount, there are another R$ 274 billion corresponding to CPRs (Rural Product Certificates) in the private (non-bank) market and R$ 57 billion in CPRs that are in the financial market, but not in rural credit. In total, the agricultural credit portfolio amounts to R$ 1.2 trillion. According to the FPA survey, the problematic portfolio would amount to approximately R$ 256 billion—including overdue, delinquent, renegotiated, and extended accounts. This amount is considered atypical as it results from shocks caused by climate problems and geopolitical tensions, mainly between 2024 and 2026. Renegotiation of this amount will not be automatic. The criteria for participating in the program ensure that not all debt is included in the renegotiation, such as the requirement of at least two crop losses between 2019 and 2025 and a loss of at least 30% of the expected gross income for those harvests. A technical report will be required, as stipulated in the text. Another point considered by the FPA projection is the degree of reach of a renegotiation measure. On average, other renegotiation programs have had an execution level of 40% in an optimistic scenario. This means that, of the total debt eligible for renegotiation in these programs, only 40% was actually renegotiated. This perspective was also ignored in the calculations of the Ministry of Finance. Considering this performance, the renegotiable amount would fall to approximately R$ 100 billion. In relation to the entire agricultural credit portfolio, the value represents 8.3% – far from the almost 17% indicated by the Executive. The volume, in fact, is more in line with what the Minister of Finance, Dario Durigan, expressed in a public hearing in the Chamber of Deputies this Wednesday (17), but far from the R$ 300 billion put in the ministry's explanation. “I will take the data from Banco do Brasil, the bank that carries out the most credit operations with Brazilian agribusiness. Historically, we had a lower default rate of 1% to 2%. Today we have a default rate of 5% to 6%, the default rate in agribusiness has increased,” said the minister. For the final calculation of the cost of renegotiation operations, the FPA used the same assumptions adopted by the ministry: a Selic rate of 13.5% in 2027, 11.0% in 2028, 10.0% in 2029 and 2030, 9.5% in 2031 and 2032, and 9.0% from 2033 to 2039; interest rates for the special line of credit varying between 3.5% and 7.5% per year, depending on the size of the producer; distribution of resources being 15% for family farmers, 30% for medium-sized producers, and 55% for other producers; a spread of 4% per year; a three-year grace period plus 10 years for repayment. Even so, the cost remained at R$ 63.4 billion — R$ 65 billion if there is a change in the distribution of resources, giving more weight to family farmers. In the peak year, the cost would be R$ 11.2 billion, below the R$ 22.4 billion estimated by the government's economic team. The bill is permissive and does not impose specific amounts. In addition to the calculation presented by the FPA (Parliamentary Front for Agriculture), the group has criticized the government's omission in not considering that the bill is permissive in nature. This means that it does not impose a limit on the amount that should be made available to renegotiate debts. "It is a permissive text for money that does not impact the government's primary revenues to serve, precisely, the primary sector of the economy, which has a direct relationship with inflation and exports," recalled the coordinator of the FPA's Property Rights Commission, Deputy Evair de Melo (Republicanos-ES). The bill stipulates that the Executive Branch will calibrate the size of the special line of credit. This gives the government autonomy to accommodate possible budgetary expenses. The primary surplus should not be impacted. Another point raised by the Finance Ministry is that there would be a fiscal impact. However, in the press release itself, the Ministry acknowledges that there will be no impact on the primary surplus with the use of resources from the Social Fund. Also included are the constitutional funds of the Central-West (FCO), Northeast (FNE), and North (FNO), in addition to the Coffee Economy Defense Fund (Funcafé). According to the FPA (Brazilian Parliamentary Front for Agriculture), the use of constitutional funds minimizes costs and ensures compliance with the Fiscal Responsibility Law. This is because the expenses would not be primary, but rather from the surplus of the funds. A portion of the cost for equalization would fall on the Treasury, but this can be addressed by the government. “There isn't a single cent of primary resources if the government doesn't want to use them. It can use resources from the funds. The government hasn't understood anything about Law 5.122, because it doesn't have a single cent of primary resources and cannot cause fiscal decline,” said the institutional coordinator of the FPA, Deputy Alceu Moreira (MDB-RS). The project is a result of negligence regarding Rural Insurance. In its survey, the FPA (Parliamentary Front for Agriculture) demonstrates that the current scenario of rural indebtedness is also a consequence of the government's omission regarding the Rural Insurance Premium Subsidy Program (PSR). Last year, the area insured by the program corresponded to only 3.27% of the planted area in the country. According to the parliamentarians, if the rural insurance policy were properly structured, the cost of preventing losses would be a fraction of the value currently being discussed in renegotiation measures. The warning becomes even more serious given the blocking of R$ 461.7 million in the PSR budget, announced last week, which reduces the protection capacity of producers precisely at a time of crisis in the agricultural sector. “The attempt now is to present the calculations to party leaders, as well as the president of the Chamber of Deputies, Hugo Motta (Republicanos-PB), to vote on the matter that, if approved, will allow those in default to access the 2026/2027 Harvest Plan,” said Pedro Lupion (Republicanos-PR), president of the FPA. The fear is that the debt situation will further affect rural producers' access to credit for the next harvest, which would impact production and, consequently, food inflation. 

This text was translated by machine from Brazilian Portuguese.