Investing in Brazilian agribusiness no longer means just buying land, seeds or cattle. Today, it can also mean investing part of your savings account in financial securities and reaping profits later.
Agribusiness is also financial. And this financialization is growing, supported by the increased interest of city investors in the sector's earnings and the desire of farmers to expand their businesses more and more.
According to Brazil’s Ministry of Agriculture, the total assets of private financial instruments to support agriculture have more than doubled in two years. At the end of 2021, they totalled BRL 383 billion. By the end of 2023, they amounted to BRL 953 billion, almost three times the amount of funding promised in the 2023/2024 Safra Plan, the government's main source of support for agribusiness.
The stock of private financial investment in agribusiness includes rural product bills (CPRs, in Portuguese), agribusiness letters of credit (LCAs, in Portuguese), agribusiness credit rights certificates (CDCAs, in Portuguese), agribusiness receivables certificates (CRAs, in Portuguese) and the balance of Agribusiness Chain Investment Funds (Fiagros, in Portuguese).
All these instruments were created, in theory, to reduce agribusiness' dependence on public funding. According to experts Brasil de Fato interviewed, they have not fully reached their goal. In addition, they have aggravated existing problems in agribusiness production and generated new ones.
"[These are] Financial instruments that don't solve the problem of credit supply and have a brutal impact on the agrarian structure," said Gerson Teixeira, an agronomist and director of the Brazilian Agrarian Reform Association (Abra, in Portuguese).
Teixeira warned mainly about the effects of the Fiagros on the Brazilian countryside. This type of fund can, among other things, use investors' money to buy land in Brazil that can later be leased out, and the money received is used to pay the fund's investors.
He explained that, through Fiagro, foreigners can circumvent legal restrictions and acquire land in Brazil. "A foreigner can buy land in a [Brazilian] border area through Fiagro, which is not allowed outside the fund," he said. "The legislation is too flexible."
Reinforcing problems
Diego Moreira, from the national coordination of the production sector of the Landless Workers' Movement (MST, in Portuguese), reaffirms his criticism of the financialization of agriculture in Brazil. He recalls that all the instruments were designed to make the sector "independent" of the Safra Plan, which would supposedly free up public resources to support family farming.
In practice, this has not happened. Agribusiness has a financing program about five times larger than family farming: BRL 364 billion to the Safra Plan compared to BRL 77 billion to the Family Farming Safra Plan.
Moreira also complained that part of what should reach family farmers doesn't. "Only 10% of MST settled families have accessed the funds."
Vitor Hugo Miro Couto Silva, economist and professor in the Agricultural Economics department at the Federal University of Ceará (UFC, in Portuguese), comments: "The alternatives presented on the financial market are still very restricted to producers already engaged in the market. These producers have more professional management and were already able to access different financing alternatives for their activities," he said.
Economist and agronomist José Giacomo Baccarin also pointed out other problems. According to him, the money that goes to agribusiness via private financial instruments doesn't take into account the way the sector produces. Those who invest in a CRA or LCA are interested in how much they will profit and don’t consider sustainability in the countryside or measures to curb global warming.
"I often joke that people aren't interested in knowing how many times a cow is milked a day, or that corn has stalks (male) and ears (female). What does matter to them is how much they will profit from investing in a dairy or cereal company," he said.
Agribusinesses that receive money through the financial market tend to seek a quick and immediate return, mainly through large estates and monocultures for export. "This increases land concentration and unemployment in the countryside because there is no work for everyone on a soy farm; violence against peasants, Indigenous and Quilombola peoples; and hunger, because there is no food production," said Moreira, from the MST.
He also said that agribusiness financial instruments facilitate the "export" of the sector's profits abroad, via earnings. With this money sent abroad, there is a lack of resources for investments that would benefit agribusiness itself, such as the construction of fertilizer factories.
"What is the country's private fertilizer industry? There isn't one. Agribusiness prefers to import it. What kind of seed industry does Brazil have?" Moreira asked.
Agribusiness financial instruments:
CPR - means rural product bill. Through it, a rural producer or cooperative compromises to deliver a certain amount of their production in exchange for an advance of funds. It's like a loan paid in soybeans after the harvest.
LCA - the agribusiness bill of credit is a security issued by a bank to raise funds for agricultural financing. An investor lends money to the bank at a certain interest rate by buying an LCA. In turn, the bank uses these funds to grant loans to the agribusiness sector.
CDCA - the agribusiness credit rights certificate is a security linked to business carried out between rural producers. This security is traded on the market. Thus, producers can sell a bond for something they will receive in a year's time, for instance, to advance funds and finance their production.
CRA - the agribusiness receivables certificate is a bond issued by a cooperative or agribusiness company. Through it, the issuer promises to pay a certain amount within a certain period to the buyer of the paper. Cooperatives use CRAs to obtain money on the market and not have to resort to loans.
Fiagro - An investment fund in agro-industrial chains is a pool of savings for various investors interested in profiting from agribusiness. Through the administration of a fund manager, savings are invested in buying land, associating with companies in the sector or even buying CRAs, CPRs or LCAs.
In the case of Fiagros aimed at buying land, Baccarin said they tend to raise the price of properties in the country. "If Fiagro raises more financial resources, there tends to be inflation in the prices of leases and land sales," he said.
Taxation
Some investments in financial instruments to support agriculture, such as LCAs and Fiagros, are exempt from income tax.
