Created in 1994, the Brazilian Note of Rural Product (Cédula de Produto Rural – “CPR”) is one of the main negotiable instruments for financing the Brazilian agribusiness.
See below 3 types of CPRs and their main characteristics:
(i) “Physical” CPR: It was created by Federal Law in 1994 to finance crops of commodities. In its origins, the CPR represented the promise of delivering only agricultural products in their physical form, hence the name “Physical CPR”.
(ii) “Financial” CPR: in 2001, Federal Law added the possibility of paying the CPR through financial settlement, ie, the delivery of the product is replaced by its cash equivalent. An essential requirement for this type of security is the express name “CPR with Financial Settlement”.
(iii) “Green” CPR: Federal Law dated 2020, known as the “Agro Law”, was responsible for creating the Green CPR, later regulated by a Decree of 2021.
The regulation expanded the list of rural products that may be subject to the CPR, including those obtained through activities related to the conservation and recovery of native forests and their biomes that result in: (a) reduction of greenhouse gas emissions (GHG), (b) maintenance or increase in forest carbon stock, (c) reduction of deforestation and degradation of native vegetation, (d) conservation of biodiversity, (e) conservation of water resources and soil, and (f) other ecosystem benefits.
Decree of 2021 also brought a third agent to whom plays a fundamental role within the scope of Gree CPR, the certifying entity, responsible for certifying the object of the banknote, its characteristics and, mainly, its “green” attribute. Currently, in the absence of more objective regulatory criteria, it is the market itself that has been selecting and giving credibility to certifiers, which is still a sensitive point.
The evolutionary process of CPR and the regulatory environment in general evidences the promotion of a sustainable economy, which emerges as a win-win policy, in which producers gain in productivity and access to credit, and financiers gain in risk reduction, compliance and attractiveness of the assets eventually offered to investors.
