Agribusiness is fundamental to the Brazilian economy and represents 21.4% of the Country’s total GDP, according to the survey conducted by the Confederation of Agriculture and Livestock of Brazil (CNA).
The President of the Republic, on April 7, 2020, sanctioned the New Agribusiness Law (Law No. 13.986/2020), and, among the new features, aspects more directed at the financing and financial enablement of the sector stand out, establishing instruments that speed up and reduce the bureaucracy of financing, granting greater security to creditors, reducing the costs of rural credit and, consequently, generating more opportunities for rural producers to expand their businesses.
Among some of the new features brought by the legislation, the innovations related to the Joint Guarantee Fund (FGS), the rural affectation estate (patrimônio rural de afetação) and the Rural Real Estate Note (CIR) stand out:
- Joint Guarantee Fund (FGS): a modality of guarantee applicable to credit operations taken by a rural producer, intended for all agribusiness operations, such as the acquisition of equipment, vehicles, technology, machinery, storage, production inputs, transport and insurance. According to the legislation, the FGS may be composed of at least two debtors, the creditor and the guarantor, if any.
- Rural Affectation Estate (Patrimônio Rural de Afetação): an instrument that allows the rural producer to segregate part of their estate to serve as guarantee in credit operations, with the assets comprising the rural affectation estate not commingling with the other assets, rights and obligations of the owner’s general estate or of other rural affectation estates constituted by them.
- Rural Real Estate Note (CIR): a credit instrument issued by a rural producer who owns rural real property, in favor of a financial institution, to obtain credit. The note protects the right of the financial institution because, if the issuer does not pay the debt at maturity, the creditor may immediately exercise the right to the transfer, to its ownership, of the registration of the property given as guarantee of the credit, or of a fraction thereof.
With regard to the Rural Product Note (CPR), this instrument was already provided for in Law 8.929/1994, but now, with the approval of the new Agribusiness Law, it expands the list of those entitled to issue the instrument, such as the Rural Producer, the Agricultural Cooperative and the Association of Rural Producers. Furthermore, when issued under an affectation estate, the CPR, in addition to not forming part of the rural producer’s assets in the event of a request for judicial reorganization, may be issued for the renegotiation of debts with high interest rates and penalties, benefiting tradings and financial institutions.
Notwithstanding that the Agribusiness Law has as its objective the reduction of the costs of rural credit, there is a strong contention that the legislation protects (and greatly so) the creditors, it being recommended that the rural producer, before encumbering their rural estate to obtain credit, conduct an analysis of the legal consequences through their advisors.
This article is generic and informative in nature; it does not constitute legal opinion for any specific case.
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