09/14/2024 – 15:00
The federal government will allocate approximately US$1.3 billion of the Climate Fund’s resources to the national program for the recovery of degraded pastures and their conversion into arable land. The international resources will be raised through Eco Invest Brasil, a foreign exchange hedging program run by the National Treasury Secretariat to attract foreign investment focused on ecological transformation, says Carlos Ernesto Augustin, special advisor to the Ministry of Agriculture. “The resources will be made available to producers with interest rates of up to 6.5% per year, ten years of payment and a grace period. This amount has already been set aside, with the Treasury allocating US$1 billion, which could reach US$1.3 billion with the participation of banks,” Augustin explained to Broadcast Agrobehind the scenes of the meetings of the G20 Brazil Agriculture working group. The program is considered one of the ministry’s priorities to double Brazilian food production without opening new areas.
Fundraising via Eco Invest was the solution found by the government to internalize external resources, minimizing exchange rate variations. The expectation, according to Augustin, is that the resources will be made available to producers by the end of the year. “The resources from Eco Invest will allow the recovery and conversion of approximately 1 million hectares and effectively inaugurate this new agriculture. It will not be financing just to increase production, but there will have to be a strong counterpart of sustainability with low-carbon agriculture,” pointed out Augustin.
According to Augustin, the economic team and the Ministry of Agriculture are preparing specific rules to announce the call for proposals for the recovery of pastures within the Eco Invest “blended finance” line. After the model is defined, the auction will be offered to banks that will bid on the financing projects. The blended finance line combines public resources, from the Climate Fund managed by the National Bank for Economic and Social Development (BNDES), and private resources.
In parallel, the Ministry of Agriculture, together with the Brazilian Agricultural Research Corporation (Embrapa), is drafting a technical standard with the production criteria that producers must meet in order to be eligible for financing. The environmental practices that will be required include the use of direct planting, the use of bio-inputs, and practices to reduce greenhouse gas emissions. “Lower interest rates will be decisive for producers to convert their areas and adopt these practices. Today, the country already converts 1 million hectares per year and can convert twice that amount,” assessed the special advisor to the Ministry of Agriculture.
The federal government’s project aims to convert 40 million hectares of degraded areas into arable land within ten years through the National Program for the Conversion of Degraded Pastures into Sustainable Agricultural and Forestry Production Systems (PNCPD), created last year. The idea is to encourage the practice by granting financing at affordable interest rates to rural producers.
The average cost estimated by the ministry for converting pastures is around US$ 3,000 per hectare, which would generate a total investment of, at most, US$ 120 billion (equivalent to R$ 600 billion), considering the goal of recovering 40 million hectares in ten years. The calculation includes expenses for soil correction, environmental adaptation and costs.
At the same time, according to Augustin, the government is seeking mechanisms to reduce exchange rate variations in order to receive contributions from sovereign wealth funds and other countries in the pasture recovery program. The Japan International Cooperation Agency (Jika) has committed to providing between US$300 million and US$500 million to the Brazilian program.
*The journalist travels at the invitation of JBS.
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