The National Bank for Economic and Social Development (BNDES) added rural credit (BNDES Rural Credit) to its financing options in 2020. BNDES Rural Credit is an unsubsidized financial product that uses BNDES funds to support agricultural activities - including fishing, aquaculture, forestry production, and agro-industrial activities. This support is provided through the granting of financing for both funding and investment, both for investment projects and for one-off acquisition of machinery and equipment.

Among the operations that can be financed through BNDES Rural Credit are the following:

  • fixed and semi-fixed investment projects in goods and services directly related to agricultural activity;
  • individual purchases of machinery and equipment for use in agricultural activities; and
  • financing for the funding of agricultural and livestock activities.

In the last three years, BNDES Rural Credit has already approved the release of R$ 11.2 billion in credit, distributed in more than 25 thousand transactions. In total, 98% of these transactions are targeted at micro, small, and medium-sized enterprises, which represents 90% of the total funds to be invested.

BNDES Rural Credit can be requested by:

  • individuals who are farmers and resident and domiciled in Brazil;
  • legal entities that are farmers with headquarters and management in Brazil; and
  • cooperatives of farmers, with headquarters and administration in Brazil. In this case, in order to apply, potential borrowers of BNDES Rural Credit must seek a financial institution accredited by BNDES (the financial agent), which will provide the necessary documentation, analyze the possibility of granting the financing, and negotiate the applicable guarantees.

More than 70 institutions can act as financial agents. These include public and private banks, regional development banks, cooperative banks and credit unions, as well as automakers' banks.

On April 17 of this year, BNDES and the Ministry of Agriculture and Livestock (MAPA) launched a fixed-rate rural financing line in dollars (BNDES Rural Credit in Dollars), to give Brazilian farmers a financing alternative linked to the US currency.

In a context of exchange rate volatility and economic uncertainties, BNDES Rural Credit in Dollars has emerged as a new financing option to mitigate the risks associated with exchange rate fluctuations. This line of financing offers farmers the opportunity to hedge against possible devaluations of the Brazilian Real, as their revenues are often tied to exports.

In all, the BNDES will offer R$2 billion for the acquisition of agricultural machinery and equipment, considering monetary correction linked to the exchange rate variation, plus an interest rate of 7.59% per year (fixed rate).

In addition to the new BNDES Rural Credit in Dollars line, whose remuneration is composed of the fixed rate, BNDES Rural Credit has three other possibilities of basic financial costs in the formation of the final rate for financing:

  • the Selic rate;
  • the BNDES long-term rate (TLP); or
  • the BNDES fixed rate (TFB).

The total terms of BNDES Rural Credit in Dollars range from 25 to 120 months, with a grace period of up to 24 months. To obtain financing, the borrower must meet specific criteria, such as:

  • have revenues in US dollars or pegged to the US currency, which should be ascertained by the financial agent;
  • have the ability to pay;
  • earmark the funds for rural activities; and
  • comply with legal and regulatory requirements.

BNDES Rural Credit in Dollars provides farmers with greater financial predictability, allowing for long-term planning and strategic decision-making with more security. In addition, it contributes to attracting international investors interested in participating in the Brazilian agricultural market, stimulating the development of the sector.

It is essential, however, that potential borrowers of BNDES Rural Credit carefully assess, together with the financial agent, the risks involved in this type of financing, such as possible exchange rate variations and the need for protection against dollar fluctuations.

In summary, BNDES Rural Credit in Dollars should supplement BNDES Rural Credit and potentially increase the productivity of the Brazilian agricultural market by granting credit to farmers and farm cooperatives with revenues in dollars or pegged to the US currency. A financing option that will allow farmers and farm cooperatives to purchase essential equipment.