(Image: Paulo Whitaker/REUTERS)
O Bank of Brazil (BBAS3), the country's second largest bank in terms of total assets, launched a campaign in June to avoid requests for judicial recoverya senior executive said on Wednesday, saying the lawsuit, which has gained recent momentum, is damaging to the industry.
Last week, the retailer of agricultural supplies and services AgroGalaxy filed a request for judicial recovery, following a wave of requests that has been seen in the country in a scenario of falling commodity prices and the occurrence of extreme weather events, such as unprecedented floods and droughts.
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“The judicial recovery process for rural producers is not healthy,” said BB’s vice president of internal controls and risk management, Felipe Prince.
“It puts the producers’ assets, which are their land, at risk and it closes off the possibility of new credit concessions for them. And agribusiness is cyclical, you need resources to start a harvest.”
Leader in credit for agribusiness in Brazil, with a “market share” of 50% among rural producers, Banco do Brasil has engaged superintendents in the main producing areas in an “awareness process” to “show the harm and how this can even create a disruption in the economic activity of the rural producerl”.
Prince highlighted as an alternative the assistance to clients through measures such as debt extension and credit management.
“Some producers have taken some measures, in my opinion, that are irrational and have resorted to this process,” said the executive, attributing part of the decisions to “predatory legal practice and the process of protecting assets.”
Despite acknowledging the recent increase in requests for judicial recovery, Prince pointed out that the volume is still very small: among the more than 700 thousand producers that make up the bank's portfolio, 150 are in judicial recovery.
According to Serasa, 321 companies that provide products and services directly related to agribusiness filed for bankruptcy protection last year, an increase of 82% compared to the previous year. In the first quarter of this year, there were 82 more requests, according to data released by the company this month.
Regarding the impact of extreme weather events, Prince pointed out that BB's robust database, with information on agricultural harvests since 1960, has been used as input for predicting future scenarios, increasing awareness of risks and driving the creation of alternatives to try to mitigate them.
This same base has been used, in association with artificial intelligence and georeferencing techniques, to see if producers are eventually invading production areas.
“If this happens and we see it here in our monitoring, we even pay off the debt immediately, disqualify it from rural credit, and so on,” said Prince.
The bank's sustainable credit portfolio is R$360 billion, of which R$155 billion is in sustainable agriculture. The goal is to increase these figures to R$500 billion and R$200 billion, respectively, by 2030.
ESG Focus
Speaking to Reuters by telephone from New York, where the bank hosted an investor event this week amid Climate Week, Prince said the general perception is that Brazil is well positioned to become a leader in sustainability, with BB seeking to establish itself as a key player in the carbon credit market.
On Tuesday, the bank announced it had raised $800 million from JPMorgan Chase Bank, Standard Chartered Bank, HSBC Bank and Crédit Agricole to finance small and medium-sized farmers using low-carbon farming methods.
After issuing 750 million dollars in sustainable bonds on the international market in March this year, the third associated with the bank's environmental, social and governance (ESG) commitments, Prince also stated that BB remains attentive to opportunities, although it has ruled out the possibility of a new operation this year.
“If there is an opportunity (later), we will capture it. So this is perennial,” he said.