Durigan: Agricultural default is not "scorched earth"

Agribusiness default rates rose from around 2% to 6% of the BB (Banco do Brasil) portfolio, said Finance Minister Dario Durigan to CNN Brasil. Despite the increase, he said that the scenario in the field does not represent a "scorched earth", since, according to the government, 94% of the sector's operations are still up to date.

The statement comes amid negotiations between the government and the agricultural bench on the rural debt renegotiation project (PL 5122/23), which provides for an extension of the term, a longer grace period and the creation of a guarantee fund for indebted producers.

Durigan stated that the economic team's main concern is to prevent the proposal approved in Congress from including non-compliant producers and ending up causing credit restrictions in the countryside.

"We cannot allow a text to be approved in Congress that covers any and all agricultural debt, including non-performing debt, debt owed by those who do not need renegotiation, because we could create a credit restriction problem", he said in an interview with Hora H, on CNN Brasil.

According to the minister, broadly limiting interest rates on rural credit could also have the opposite effect to that expected by the sector.

"If you come to a large project and say: any and all interest rates for agribusiness have to be limited to 10%, 12%, what will happen is a shot in the foot for agribusiness", he stated. "The banks will say: 'I can't give credit at this level, I won't give credit'", he stressed.

Durigan said that the government accepts discussing extension of deadlines, grace periods and adjustments to rural credit rules to assist defaulting producers, but defended a focus only on cases of actual financial difficulty.

"It's important that we don't take our main economic power, which is agribusiness, and create a scorched earth, because that's not the case," he stated. "Now, with that, I'm not saying that we don't have to deal with this area of farmers, which is a more restricted space, which in fact has a problem", he pointed out.

Source: CNN