Rollover of investment installment due this year should cost R$1.5bn
| Data de publicação | 25 Março 2024 |
The extension of the installments for rural investment credit operations maturing in 2024 is expected to use about R$1.5 billion of the federal budget allocated for interest equalization on new financing under the 2024/25 Crop Plan (Plano Safra)—a set of agricultural policies and financial programs in Brazil aimed at supporting the agricultural sector—starting in July, according to senior government sources
In total, there are R$28.1 billion in outstanding investment installments due this year, financed with resources that have been equalized, meaning the federal government subsidizes them to cover a portion of the interest and reduce the cost for the end borrowers
The government has implemented cuts to support the segments most impacted by the decline in commodity prices and adverse weather conditions—soy, corn, beef, and milk—and will exclude some producing states from the initiative. The remainder is less than R$28.1 billion, yet the expense remains substantial
Should all selected farmers and ranchers participate fully, the cost for the Treasury could rise to R$3.2 billion, according to two sources with knowledge of the situation. However, it is anticipated that only half of the eligible individuals will choose the extension, thereby limiting the cost to approximately R$1.5 billion
The government believe it will be more beneficial for these farmers to secure new financing at a lower cost rather than defer a currently more expensive installment. "Renegotiating installments at the present rate will only be an option for those in dire need," according to a source.
From the outset of the negotiations, the Ministry of Finance emphasized that the extensions would utilize funds allocated for interest equalization in the Crop Plan to varying degrees. Consequently, a broad measure to defer rural debts was dismissed to prevent depleting the budget’s "single pot" and compromising financing from July forward.
One approach was to narrow the measure’s scope by excluding some producing states, such as Maranhão and Piauí. Despite not being as severely affected by El Niño as the Central-West this season, the southern region was included due to its recent experience of three consecutive years of drought and losses. The aim is to support producers in Rio Grande do Sul and Paraná primarily.
The exact costs of the extension are still undetermined, but if fully utilized, it would absorb nearly all the funds designated for the equalization of new...
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