BRAZIL: An Introduction to Agribusiness

Brazil’s Unique Agricultural Success 

The Brazilian agribusiness sector has been making significant efforts to meet the global demand for food, renewable energy, and high-quality fibres while adhering to international standards and regulations, particularly those related to environmental protection and climate change. This sector has been successful in supplying these products to nearly 1 billion people worldwide, thanks to the regulatory frameworks established by Brazil since the 1960s. Notably, environmental protection regulations – such as the 2012 Forest Code and other trade, production, and finance regulations – have played a crucial role.

This favourable picture owes much to sustainable and consistent public policies implemented since the early 1960s. These policies have focused on market regulations, production, visionary research, and incentives to develop and adapt technologies for agricultural expansion in regions such as the “Cerrado” without harming the country’s original forested areas. Agricultural land occupies less than 10% of Brazil's national territory, making it a unique and highly successful player in the agribusiness field.

Challenges to Be Addressed 

The relationship between production and conservation as set out above puts into perspective the fact that the country can significantly raise its production and meet global demand, based on a sustainable model which does not harm global governance in relation to climate change and other aspects of international trade and environmental standards. There are, however, some challenges ahead that will need to be addressed in order to sustain this progress and meet the needs of over 10 billion people by 2050.

Some are related to infrastructure for logistics, warehousing and other projects to facilitate the flow of goods to the international markets. Others are related to ensuring that an adequate workforce and financial resources are available to fuel growth in production (including logistic projects). Still more are related to corporate governance and the succession of farmers and producers to maintain high performance standards.

New Laws and Judicial Interpretations 

Agribusiness laws and their alignment with the public policies in place since the 1960s are vital to ensure consistency and predictability in the sector, especially in a market where fluctuations in climate, physical conditions, health concerns, and pricing are an ever present element, adding high levels of uncertainty in relation to operational risks.

Further recent laws, such as Law 14.130/21 creating the agribusiness investment fund “FIAGRO”, and amendments to agribusiness bonds, such as the Cédula do Produto Rural (CPR), through laws No 13.986/20 and No 14.421/22, have brought new trends and introduced new features to facilitate the issuance and trading of CPR bonds and other agricultural bonds in the financial and capital markets. For example, facilitating their issuance (eg, electronically), registering and providing stronger and more straightforward guarantees in order to secure the liquidation of transactions and the “CPR-Verde”. The CPR-Verde is a green agribusiness bond based on the conservation of the forests, which allows farmers and agricultural producers to capture part of the environmental benefits they produce, selling environmental preservation products, as carbon credits, for example, which represents a new income stream from their business as well as enhancing environmental protection and compliance with international standards compliance in agriculture.

Added to those new “tools”, Brazilian courts, including the Superior Court of Justice and State Courts of Justice, have provided more consolidated interpretations of legal issues surrounding transactions involving agribusiness legal instruments and tools such as the CPR, thereby enhancing predictability and institutional protection for businesses in the sector. This has particularly beneficial to long-term finance agreements, project finance, and land transactions facilitated by FIAGRO and other new investment vehicles, attracting both local and foreign investors to participate in Brazil's agribusiness success.

All of those special characteristics, technologies (eg, the tropicalisation of farm production, inputs and machinery and the crop finance mechanisms within the financial system) and legal rules contribute to a unique business environment able to not only meet but surpass the crop figures projections for 2023 made by Conab (the Public Agency for Agricultural Supply of Agricultural Products in Brazil). These were, for example, 315 million tons of grains. Brail is meeting the challenge of supplying the world with food, renewable energy and high-quality fibres, contributing decisively to a worldwide business environment, stocking global supply chains of production and effectively minimising the adverse effects of climate change in line with the scientific consensus on its impact on humanity worldwide.