May 28, 2008

Brazil to restructure US$45 billion in farm debt

Brazilian President Luiz Inacio Lula da Silva signed an executive order Tuesday (May 28, 2008) to restructure 75 billion Brazilian reals (US$45.2 billion) in public farm debt, the government said.

Some of the farm loans date back as late as the 1980s.

Interest rates on some loan types, especially for small rural producers, are expected to decline by at least one percentage point to as much as five percentage points.

Farm lobbies have been pushing the government to renegotiate old debt terms. Most farmer debt is owed to private banks, however, and not to the government.

Lower rates and new debt terms will help farmers pay back private lenders, and give farmers lower capital costs to invest in expansion next year.

Lula also sent a bill to congress to create a catastrophe fund for farmers to be used as a guarantor to farm insurance companies. As rural insurance is still a rarity in Brazil, the bill is expected to help protect farmers and their crops against unexpected disasters.