Change in credit model reflects crisis in agriculture, says expert

Brazilian agribusiness faces a crisis that goes beyond climate and geopolitical factors. Speaking to WW, the president of IBDA (Brazilian Institute of Administrative Law) and vice-president of Abag (Brazilian Agribusiness Association), Renato Buranello, assessed that the current situation reflects a profound change in the sector's credit model, making the situation more serious than the cyclical crises recorded over the last few decades.

According to Buranello, crises in agribusiness are historic and recurring. "We have noticed over the years that crises are repeated. They are cyclical in agribusiness," he stated. However, he highlighted that the current crisis differs from previous ones due to its greater duration and intensity, driven by a structural transformation in the sector's financing.

Transition from official to private credit
The president of IBDA explained that Brazil is experiencing a broad regulatory change in agricultural financing, which began with the creation of the rural product card and progressed with agribusiness bonds and, more recently, with Fiagro (Agroindustrial Chains Investment Fund).

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This movement has progressively reduced the relevance of official subsidized credit lines, such as the National Rural Credit System and BNDES programs, in favor of the private credit market.

"That custom, much more standardized conduct of resorting to these official lines, now has less importance and the private credit market has a greater percentage of participation", explained Buranello. For him, the great news of this crisis is precisely the greater presence of the capital market, which makes the scenario more difficult for producers.

Rural producers in a vulnerable situation
The expert highlighted that the unfavorable macroeconomic context and geopolitical factors - such as the impact on fertilizer prices - further worsened the situation. Studies indicate that crises in the sector tend to repeat themselves in cycles of four to five years, but the current one arrives with greater intensity. "He's in greater pain", summed up Buranello.

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According to him, the combination between the transition of the credit model and external factors has left "a large group of rural producers" in a situation of discouragement and financial vulnerability, especially small and medium-sized producers, who face difficulties in dealing with the new dynamics of the agricultural financing market.

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Source: CNN