🚜 Show me the money!

Good morning! This week, we talk about how Lula wants to use credit as a way to get closer to Brazil’s farmers. What is preventing the decarbonization of Brazil’s shipping sector. A major debt renegotiation deal. And the looming pensions crisis.

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Getting in the good books of farmers

One year ago, Agriculture Minister Carlos Fávaro was uninvited to the opening of Agrishow, Brazil’s biggest agricultural fair. The organizers feared that Mr. Fávaro’s presence would irritate last year’s guest of honor: far-right former President Jair Bolsonaro, who is generally very popular among farmers.

Flash-forward. In 2024, however, Mr. Fávaro and Vice President Geraldo Alckmin were warmly welcomed by the event, which kicked off on Sunday. Mr. Bolsonaro is only expected to make an appearance at Agrishow today.

Bearing gifts. The relationship between farmers and the Luiz Inácio Lula da Silva administration is by no means a warm one. But it has become less confrontational since the government made a record amount of money available through the 2023-2024 Harvest Plan, Brazil’s main agricultural financing instrument.

• The government will announce the Harvest Plan figures for the next cycle this week. Mr. Fávaro promised the program would beat another record, coming close to the BRL 570 billion (USD 111.4 billion) demanded by the National Confederation of Agriculture.

In his words. Mr. Fávaro said the sector’s request is a tall order, but added that the period of lower prices for agricultural commodities and lower income in countryside Brazil requires more financing incentives.

Meanwhile … The National Development Bank (BNDES) is launching a new credit line for rural producers, with roughly BRL 10 billion available. The funds will be allocated to farmers earning up to BRL 300 million annually, with a priority given to those who have experienced harvest disruptions in recent years.

• “We will seek lower interest rates, and we will tell farmers: now is the time to invest,” Mr. Fávaro said on Sunday.

 Why it matters. The Harvest Plan is one of the main tools to guarantee the financial security of Brazilian agriculture, due to climate risks, currency volatility, and other risk factors.

Conservatives’ day. While the Agrishow opening featured senior government officials, today’s program will feature hardcore conservatives, such as Jair Bolsonaro and state governors Tarcísio de Freitas of São Paulo and Ronaldo Caiado of Goiás (the latter two are presidential hopefuls who try to take the mantle of Brazilian conservatism from Mr. Bolsonaro after the former president was deemed ineligible for office).

You should also read:

• Brazil mimics the U.S.’s urban-left v. rural-right polarization

• How Brazilian agribusiness became a vector for putschism

Regulatory uncertainty hinders decarbonization of Brazilian shipping 

At a recent hearing before a House committee, Danilo Veras, vice president of public affairs and regulation for cargo giant Maersk, said regulatory uncertainty is the main obstacle to decarbonizing Brazilian shipping.

What they are saying. Mr. Veras says Maersk has investment plans of BRL 5 billion in Brazil until 2025. The projects include investments in sectoral energy transitions and alternatives for coastal shipping. However, he highlights that companies need to understand the rules around vertical integration before pulling the trigger on investments.

• “It would make little sense to have a green ship dock at a diesel or fossil fuel terminal, or for its cargo, upon arrival, to leave in trucks also burning fossil fuel,” he said, pointing out that logistics accounts for approximately 11 percent of general global emissions, 3 percent in the shipping area alone.

 Why it matters. Dino Antunes, Brazil’s national secretary of waterways and navigation, said there are no ports in the country that are prepared for electrification.

State of play. The Ports and Airports Ministry says it is not its prerogative to pick a model for energy transition in ports or what kind of green fuel should be used. Mr. Antunes believes the market will make these decisions itself, taking into account cost, availability, and necessary fueling infrastructure.

• The government wants to steer the sector toward transitioning to greener fuels by offering “the right incentives.” One of these could be allowing sustainable vessels to access money from the Merchant Navy Fund.

• But Brazil still lacks a comprehensive inventory of carbon emissions from the shipping industry, a key step towards setting decarbonization goals.

Disputes. In the backdrop of decarbonization discussions is a feud between biodiesel producers and shipping companies. The National Confederation of Transportation said at a Senate hearing that Brazil’s biodiesel “is not that green.” Abiove, an association of oilseed producers, says transportation companies do not wish to seriously discuss ways to decarbonize their operations — choosing instead to throw out broad and vague accusations.

You should also read:

• Brazilian producers complain about looser biodiesel import rules

• Bad apples do not invalidate the REDD+ framework, says Moss.Earth CEO

Markets

Casas Bahia, a massive retail group, announced on Sunday that it had entered an extrajudicial recovery program after making a deal with creditors to renegotiate its liabilities. The group’s debt reaches BRL 4.1 billion (USD 801 million). 

• The plan gives Casas Bahia a two-year grace period to pay interest on the debt and a thirty-month grace period to resume amortization of the debt principal.

• Extrajudicial recovery plans are more limited in scope than traditional bankruptcy protection plans. They do not concern all of the company’s debt, do not change its relationship with customers and suppliers, and should last up to two months only.

Chart of the week: A new pension reform in order?

According to projections from the Treasury Department, the pension system’s deficit will reach BRL 326.2 billion (2.5 percent of GDP) in 2024. If nothing is done, the deficit could reach BRL 25.5 trillion (or 10.3 percent of GDP) by the year 2100. Just five years after Brazil passed a pension reform, experts are already flagging the need for another one. The growing problem is being fueled by the rise of informal labor and the fast aging pace of the Brazilian population.

Stories we’re following

The Supreme Court is one vote shy of a majority to strike down legislation extending payroll tax exemptions to 17 economic sectors until 2027. If extended, the tax breaks would be detrimental to public accounts. The trial was interrupted during the weekend.

A report by the Federal Comptroller’s Office flagged irregularities in publicly funded paving works on roads leading to properties belonging to Juscelino Filho, the minister of communications. He is under investigation for possible links to a ring that embezzled public money.

Collective health plans will have a double-digit hike in premiums this year, according to a report by XP with data from regulators. The average increase was 15 percent in the period between December 2023 and February 2024.

In case you missed it

The government presented its proposal to regulate aspects of the sweeping tax reform approved by Congress in December. The new VAT rate is expected to fall between 25.7 and 27.3 percent, with an average of 26.5 percent

Brazil’s Foreign Trade Chamber (Camex) on Tuesday raised import tariffs on 11 different steel products to 25 percent and set import quotas for the new taxes to be enforced. Domestic producers were struggling to cope with cheaper Chinese steel.

Google will no longer allow political content to be boosted on its ads platform. The company preferred to pull the plug on political ads altogether rather than comply with all the guidelines set by electoral boards.

Brazil recorded 2,203 land conflicts in 2023, the highest total ever recorded by the Pastoral Land Commission, dating back to 1985.

iFood, Brazil’s leading food delivery app, met with the Labor Ministry to discuss gig work regulations for couriers — which were not contemplated by recently proposed rules for ride-hailing apps 

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