The highly anticipated Temporary Law (Medida Provisória) No. 897 (MP897) has been published byy the Brazilian President’s Cabinet and brought material legal innovations to foster funding to Brazil’s agribusiness.
Key innovations are:
(i) Certificado de Recebíveis do Agronegócio (CRA). A major innovation brought by MP897 is the possibility of issuance of Certificado de Recebíveis do Agronegócio (CRA) (Certificate of Agribusiness Receivables) in foreign currency, provided that it is backed by receivables also tied to exchange variation.
CRAs became a very attractable capital markets security issued by major Brazilian agribusiness companies to raise funds from institutional and retail investors, as an alternative to financial institutions. With the introduction of CRAs in foreign currency, foreign investors, including funds and banks, will be able to invest into Brazilian agribusiness through capital markets.
CRAs are generally backed by financial Cédula de Produto Rural (CRP) (Note of Rural Product). The agri company raising funds through CRAs in foreign currency assigns the receivables represented by CPRs also in foreign currency. The structuring and issuance of CRAs are conducted by securitization companies and the process is registered in the Brazilian Securities and Exchance Comission (CVM).
(ii) Cédula de Produto Rural (CPR) (Note of Rural Product). As said above, the MP897 allows now that CPR can be issued in foreign currency. Another new feature is that CPRs issued from July/2020 onwards must be registered with entities authorized by the Brazilian Central Bank or by the Brazilian Securities and Exchance Comission (CVM) within 30 days of its issue date, and not at the Registry of Titles and Deeds anymore. The only exception is when crop and property are used as collateral, in such case they shall be filed at the registry where the assets are located.
(iii) Segregate estate (patrimônio de afetação) over rural property. A great novelty from the MP897. It establishes that the landowner can submit its rural property to the segregate estate regimen named “patrimônio de afetação“, which will include the land, accessions, and the buildings, being able to assign them as security in credit operations entered into with financial institutions. The segregate estate must be linked to a new negotiable instrument called Cédula Imobiliária Rural (Rural Real Estate Note).
(iv) Cédula Imobiliária Rural (CIR) (Rural Real Estate Note). The MP897 institutes the Cédula Imobiliária Rural (Rural Real Estate Note), a negotiable instrument issued by the landowner (a company or an individual) to a financial institution, which must contain the obligation to hand over, in benefit of the creditor, rural property linked to the segregation estate as security to the credit operation contracted. The CIR can be issued by the landowner that has constituted a segregation estate.
Although already in effect in Brazilian legal system, MP897 is a Temporary Law (Medida Provisória) and as so, it requires the ratification by the Congress. It is now being analyzed by a Congress’s joint committee, where amendments and public consultations may be requested. After going through such joint committee, the MP897 will then be voted by the House of Representatives and the Senate.