Banco do Brasil Launches Campaign to Address Agribusiness Bankruptcies, According to Reuters

By Marcela Ayres

Brazil’s state-owned bank, Banco do Brasil, the second-largest lender in the country by assets, initiated a campaign in June aimed at addressing the increasing number of bankruptcy filings within the agribusiness sector, as reported by a high-ranking executive on Wednesday.

The agriculture retailer AgroGalaxy recently declared bankruptcy, contributing to a growing trend in Brazil’s agricultural industry, which is facing challenges from falling commodity prices and extreme weather, including record flooding and drought conditions.

Felipe Prince, Banco do Brasil’s vice president of internal controls and risk management, expressed concern over the bankruptcy process for rural producers, stating, "It jeopardizes their assets, which are primarily their land, and restricts their access to new credit." He highlighted the cyclical nature of agribusiness, emphasizing the need for resources to kickstart new crops.

Prince advocated for aiding clients through alternatives like extending debt and improving credit management. As the leading lender in the agricultural sector, holding a market share of approximately 50% among rural producers, Banco do Brasil has been proactive in engaging superintendents in vital production areas to caution borrowers about the long-term risks associated with bankruptcy.

While acknowledging the uptick in bankruptcy filings, Prince noted that the total remains relatively low; out of more than 700,000 producers in the bank’s portfolio, only 150 are presently under bankruptcy protection.

According to credit bureau Serasa, 321 companies linked to agribusiness filed for bankruptcy last year, marking an 82% increase compared to 2022. Additionally, data released recently indicated another 82 filings in the first quarter of this year.

In a phone conversation from New York, where Banco do Brasil was hosting an investor event during Climate Week, Prince mentioned the bank’s efforts to position itself as a key player in the carbon credit market to offset emissions. The bank also reported securing $800 million from multiple financial institutions to finance small and medium-sized producers implementing low-carbon agricultural methods.

Following the issuance of $750 million in sustainable bonds in March related to environmental, social, and governance (ESG) initiatives, Prince suggested that another issuance is not anticipated for this year. "If the opportunity arises later, we’ll tap the market. This is an ongoing strategy," he added.