On January 11, BNDES announced a credit line of US$ 2.25 billion (R$ 4 billion) available until December 31, 2012, called Prorenova, to finance the renewal and/or expansion of approximately 2.5 millio
THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY
USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT
GAIN Report Number: BR12003
Post: Sao Paulo ATO
GoB Support to the Sugar-Ethanol Sector - Prorenova
Fred Giles, Director
Sergio Barros, Agricultural Specialist
On January 11, Brazil’s National Bank for Social and Economic Development (BNDES) announced a credit line of
US$ 2.25 billion (R$ 4 billion) available until December 31, 2012, called Prorenova, to finance the renewal
and/or expansion of approximately 2.5 million acres (1 million hectares) of sugarcane fields.
Government Support to the Sugar-Ethanol Sector
The Brazilian National Social and Development Bank (BNDES) is the main financing agent for development in
Brazil. The Bank was founded in 1952 and has played a key role in encouraging the expansion of industry and
infrastructure in Brazil. BNDES operations include support for exports, technological innovation, sustainable
socio-environmental development and the modernization of public administration. The bank offers several
financial support mechanisms to Brazilian companies of all sizes as well as public administration entities,
enabling investments in all economic sectors. In any supported undertaking, from the analysis phase up to the
monitoring, the bank states that three strategic factors are taken into account: innovation, local development
and socio-environmental development.
On January 11, BNDES announced a credit line of US$ 2.25 billion (R$ 4 billion) available until December 31,
2012, called Prorenova, to finance the renewal and/or expansion of approximately 2.5 million acres (1 million
hectares) of sugarcane fields.
The Government of Brazil (GoB) expects that the new credit is likely to support domestic ethanol production
which sharply dropped from 27 to 22 billion liters during 2011/12 due to climate issues and low renewal rates of
sugarcane fields in center-southern Brazil, and attractive sugar prices that diverted sugarcane crushing for sugar
production. The GoB expects that Prorenova will encourage additional production of 2 to 4 billion liters
between 2013 and 2014.
Prorenova will target medium to large-size companies with gross revenue over US$ 50.8 million (R$ 90 million),
who will use commercial banks for the loan transactions. The interest rate will include the BNDES’ long-term
finance interest rate (TJLP) of 6 percent per year plus a basic remuneration rate of 1.3 percent, plus 0.5 percent
for fixed costs, totaling 7.8 percent. In addition, the commercial bank will add its spread which will vary
according to each bank and participating company, thus resulting in a final interest rate of approximately 10
percent per year.
The program will provide financing for up to 80 percent of investments with loan terms limited to 54 months
plus a grace period of up to 18 months, for a total term of no more than 72 months.
Industry reaction to the announcement is positive. However, many consider it a half-measure that will mainly
address the renewal of sugarcane fields and the recovery of production levels lost over the last two to three
years; expansion into new fields is not likely to occur. Industry sources have commented that the GoB should
have taken this measure a year ago in order to see a more immediate impact in the current year. Based on past
experience, industry expects the BNDES credit requirements to be strict and prohibitive, which will deny many
companies the ability to benefit from the new program.
BNDES already has a special credit line to finance micro, small, and medium-sized enterprises, including
agricultural operations. The program is called BNDES Automático/MPME Investimento and supports investment
projects under US$ 11.3 million (R$ 20 million). The interest rate includes the BNDES’ TJLP of 6 percent per year
plus the basic remuneration rate of 0.9, plus the commercial bank spread. The program finances up to 90
percent of investments and the grace period and total term depend on the commercial bank and the enterprise.
Interest Rate for Prorenova
On a regular basis, the Brazilian Central Bank (BACEN) sets the SELIC rate (Special System for Settlement and
Custody – “SELIC - Sistema Especial de Liquidação e de Custódia) which is the reference for the market interest
rates used by different financial agents.
In December 2011, BACEN set the goal for the SELIC rate at 11 per cent per year. Thus, the minimum market
interest rate is 11 percent plus the spread from financing agents.
This would make the interest rate for Prorenova below market rates. However, the program’s interest rates are
in line with other government programs for agricultural activities such as those announced in the 2011/12
Brazilian Crop Plan. See last column on the table below for different rates applied to different programs.