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Connecting two true national champions: IPOs and agribusiness
Ricardo Rodil | Managing Partner of Capital Markets
Much is said about the economic 'engine' of our country: agribusiness. And I ask: do we know how this activity is financed? Is it being financed in the most efficient way possible, in order to optimize its performance?
There are several instruments on the market for financing these activities; remembering that agribusiness does not refer only to agriculture and livestock, it also includes investments in land and machinery, specialized services, etc. There are instruments that we will call private, such as: CPR (Rural Producer Certificate), CDA (Agricultural Deposit Certificate), LCA (Agribusiness Letter of Credit), and CRA (Agribusiness Receivables Certificate). The main advantage offered to those who invest in them, either directly or through investment funds (FIAGROs), lies in the exemption from Income Tax.
Thinking only of official financing, the main one is represented by the so-called Safra Plan, incentivized credit offered by the Federal Government for two decades. For 2023, the GDP of this sector should be around R$ 1 trillion. The amount contemplated by the Safra Plan is almost R$ 341 billion, distributed in 3 (three) bands:
(i) Pronaf, aimed at strengthening family farming, with 36% of resources;
(ii) Pronamp, aimed at medium producers, with 28%;
(iii) Other producers and cooperatives, with the remaining 36%. The most important part of these programs is that, in general, the interest rates applied fluctuate between 5.5% and 8.5% per annum. There is also a range called interest free.
In this scenario, anyone would think that no agribusiness company would dare to go public with subsidized credit available. But this does not seem to be the view of the CVM – Comissão de Valores Mobiliários, which signed cooperation agreements, at the beginning of last month, with the Instituto Pensar Agropecuária and the Instituto Brasileiro de Direito Agropecuário, with the objective of strengthening access processes for the agribusiness to the capital market. In the words of the CVM President himself “Agribusiness has a place in the capital market”.
Let's come and agree that those entities or individual companies that represent the family farming sector are not, at least in the near future, candidates to open their capital on the stock exchanges, but medium and large entities have an open path to finance their activities via capital market. Always without forgetting that, when we talk about agribusiness, we are not just talking about agriculture and livestock, but about the production chain as a whole, including, in addition to typical field activities, buying and selling land, manufacturing and selling equipment, production of seeds and fertilizers, storage, logistics, transport, etc. One should also think that the need to adapt to new environmental requirements will lead to new investments.
Conclusion: with the strength of Brazilian agribusiness, it is to be expected that companies in the sector expand their fundraising through the capital market, going far beyond investment funds, LCAs, CRAs, etc.