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17 de May de 2024

Provisional presidential decree attracts foreign investments in Brazil

Provisional presidential decree seeks to attract foreign investments in Brazil and Brazilian National Bank for Economic and Social Development (BNDES) launches credit line to boost agribusiness

The Provisional Presidential Decree No. 1,213/2024 (MP 1,213/2024) strengthens financial inclusion and economic growth in Brazil through initiatives such as the Eco Invest Brazil Program. Meanwhile, BNDES introduced a new credit line that will allocate up to R$ 10 billion to support agribusiness in 2024, facilitating access to credit for a wide range of producers and cooperatives. Check out more details below!

MP 1,213/2024: New Strategies for Mobilizing International Capital

In April, the Federal Government, through MP 1,213/2024, established innovative credit lines for financial agents, investors, and companies focused on attracting foreign investors to strengthen the Brazilian economy and promote sustainable development. Among the measures provided for in the MP, the Eco Invest Brazil Program stands out.

Eco Invest Brazil Program

The Eco Invest Brazil Program, also called the “Private External Capital Mobilization and Foreign Exchange Hedge Program” (“Program” or “Eco Invest”), was created by the MP with the objectives of expanding investments in ecological transformation projects, making them sustainable, and attracting direct external investments to Brazil, as well as indirect investments through the facilitation of operations in the capital market, aiming to raise funds abroad by companies, investors, and financial institutions based in Brazil. Finally, it also aims to develop efficiency and liquidity in the long-term foreign exchange hedge market.

The Eco Invest is part of the National Fund on Climate Change (FNMC), established by Law No. 12,114/2009, linked to the Ministry of the Environment, which aims to ensure resources to support projects that seek to mitigate and adapt to climate change and their respective consequences.

Within the scope of FNMC, Eco Invest will offer the Private External Capital Mobilization and Foreign Exchange Hedge Line (“External Capital and Hedge Line”), aimed at national and foreign companies or investors with the following sub-lines: a) blended finance; b) liquidity; c) offering of foreign exchange derivatives or other financial assets; and d) project structuring.

The External Capital and Hedge Line will have its own accounting and governance with resources separate from the FNMC resources. Nevertheless, it can be accessed and operated directly by financial institutions authorized to operate by the Central Bank of Brazil (“BCB”), as long as they assume the credit risk of the operations as well as bear the risks of such activity.

When accessing the External Capital and Hedge Line, financial institutions can use it to offer or facilitate the following financial support services:

  • Partial financing of blended finance projects: in this model, institutions finance only a portion of the necessary resources for the project, with the rest of the financing to be raised by the investor, institution, or company in the international market;

  • Credit offerings to help companies and investors manage risks associated with exchange rate volatility, ensuring greater liquidity in operations;

  • Offering of foreign exchange derivative instruments such as options, forwards, futures, and swaps aiming to mitigate partially or in full the exchange rate risk to the investor; and

  • Financing studies and projects, providing or offering infrastructure focused on the export of products and services to attract sustainable international tourism to Brazil.

It should be noted, however, that many regulatory aspects are still pending. For example, the Ministry of Finance still needs to establish the eligibility criteria for investments under the Program. Additionally, it must also set the conditions and criteria for the qualification of financial institutions that will act as financial agents; determine how resources will be allocated among participating institutions, including financing limits and volumes; and establish rules for the disclosure of resource accountability.

Moreover, the BCB is authorized to acquire foreign exchange derivatives or other financial assets from multilateral financial entities and pass them on to financial institutions authorized to operate foreign exchange by the Central Bank of Brazil, subject to the requirement of credit guarantees, in order to strengthen the long-term foreign exchange hedge market in Brazil. The Central Bank of Brazil can also directly offer swaps and other financial derivatives, regardless of the duration of such operations.

The Provisional Presidential Decree is available clicking here.

BNDES Launches R$ 10 Billion Credit Line to Boost Agribusiness

On April 28, during Agrishow – an agribusiness fair held annually in Ribeirão Preto, São Paulo – the Brazilian National Bank for Economic and Social Development (BNDES) announced the expansion of its credit operations aimed at the agricultural sector through the creation of the BNDES CPR Line within the BNDES Rural Credit Product, which promises to make up to R$10 billion available for the sector this year.

The BNDES CPR Line (“Line”), created by Circular SUP/ADIG N° 19/2024-BNDES of May 3, 2024, consists of loans formalized through:

  • Financial Rural Product Notes (CPR-F), which must have been issued by rural producers or cooperatives of rural products; or

  • Agribusiness Credit Rights Certificates (CDCA): provided they are backed by agribusiness credit rights and have been issued by cooperatives of rural products and other legal entities.

Additionally, only the following individuals and entities can benefit from the Line, as long as they are classified as Micro, Small, or Medium Enterprises (MSME):

  • Rural producers residing or domiciled in Brazil if individuals, or with headquarters and administration in Brazil if legal entities;

  • Cooperatives of rural producers with headquarters and administration in Brazil;

  • In the case of formalization by CDCA, any legal entity headquartered in Brazil as long as they engage in the commercialization, processing, or industrialization of agricultural, livestock, forestry, aquaculture, and extractive products, inputs, machines, and implements.

Among other specific conditions of the BNDES CPR Line, the following stand out:

  • Loans cannot be granted through CPR-F and CDCA from the secondary market;

  • Operations intended for properties identified with deforestation cannot be contracted;

  • Operations that have, as final beneficiaries, individuals with current embargoes registered in the Environmental Embargoes and Infractions Register of IBAMA cannot be contracted.

The table below summarizes the main information regarding the financing conditions of the BNDES CPR Line:

BNDES CPR Line
Financial Cost
BNDES Fixed Rate (TFB); Selic Rate (TS); Long-Term Rate (TLP); or BNDES Fixed Rate in Dollar (TFBD)
BNDES Remuneration
1.45% per year
Remuneration of the Accredited Financial Agent
Up to 4.3% per year
Repayment Term
Up to 5 years, including a grace period of up to 2 years
Repayment Term (if Financial Cost TFB)
Up to 5 years, including a grace period of 1 year
Payment Frequency
Interest during the grace period: quarterly, semiannual, or annual
Amortization payments: monthly, semiannual, or annual
Interest during the amortization period: together with the principal installments
BNDES Participation Level
Up to 100% of the value of financeable items
Limit
R$20 million every twelve months, counted from the date of operation approval
Guarantees
Freely agreed upon between the beneficiary and the accredited financial agent, except for the Investment Guarantee Fund (FGI), which cannot provide guarantees

The Circular is available clicking here.