On March 30, 2021, Law No. 14,130 was published in the Federal Official Gazette, which creates the Agribusiness Investment Fund (Fiagro).
Until today, most investments in the Brazilian agribusiness sector, especially those with foreign capital, were made through private equity investment funds (FIP), Agribusiness Receivables Certificates (CRA) or, on a lower note, real estate investment funds (FII), according to the investment strategy. However, these options are subject to some regulatory limitations that make them insufficient to exploit the potential that the agrobusiness sector has to offer.
The FII, for example, is obliged to have its profitability exclusively bound to real estate revenues, which reduces investment alternatives in a sector as diverse as agribusiness. The FIP, however, is obliged to keep most of its portfolio allocated to companies in which it exerts an effective influence on the strategic decision, which makes it difficult, for example, to use this vehicle for investors who prefer to allocate their risks in a more dispersed manner. The CRA is a fixed income instrument that, despite having already been subject to an expansion of its applicability in the sector, not being only restricted to the financing of rural producers but reaching all of the agribusiness chain, does not provide the possibility of a variable return on income and is normally concentrated in large agroindustry producers.
Faced with such a scenario, Fiagro aims to expand the access of Brazilian agribusiness to fundraising, mainly from institutional investors, through the creation of a new type of fund, which seeks to provide alternatives that are more directed to the realization of investments in the sector.
Fiagro may invest its assets in:
- rural land;
- participation in companies that explore activities that are part of the agro-industrial production chain;
- financial assets, credit securities or securities issued by individuals and companies that are part of the agro-industrial production chain;
- agribusiness credit rights and securitization bonds backed by agribusiness credit rights;
- real estate credit rights relating to rural properties and securitization securities backed by these credit rights; and
- quotas of investment funds that invest more than 50% of their equity in the assets referred to in the first three items.
The list of assets makes Fiagro a versatile investment instrument, with access to the entire agro-industrial chain and capable of allocating resources in debt securities, credit rights, interests in companies and rural land.
In addition, Fiagro becomes a new alternative for foreign investors to be able to invest in rural land in Brazil, expanding the possibilities of investing foreign resources in national agriculture. It is also a new alternative for families and agribusiness investors in wealth planning, since Fiagro’s shares may also be paid up in assets such as rural land.
Fiagro must still be regulated by the Brazilian Securities and Exchange Commission (CVM) so that it can be effectively introduced into the Brazilian capital market, which will bring great progress to the Brazilian agribusiness sector, increasing security and flexibility for investors in the sector and reducing costs to access capital for its participants.
By Raphael Pereira Arantes Pires, lawyer at Candido Martins Advogados.