Judicial reorganization of rural producers has become a critical issue in Brazil, driven by a surge in requests within this economic sector. According to a survey by “Serasa Experian” (Brazilian Credit Bureau), the number of rural producers seeking reorganization skyrocketed by 535% in early 2024.
The agribusiness sector faces challenges like climate change, fluctuating global market prices, and economic headwinds, leading to financial strain for entrepreneurs. However, experts note that relative to overall business volume, the sector is not in a full-blown crisis.
The Ministry of Agriculture and the National Council of Justice are tackling the so-called “judicial reorganization industry.” They are collaborating with specialized asset recovery firms to curb law firms that promote insolvency as a quick fix for debt relief, often at creditors’ expense.
A key issue in judicial reorganization for rural producers is the non-essential nature of harvests offered as collateral in Rural Product Bill of Exchange (“CPRs”). It is important to highlight the ongoing relevance and strength of the Agricultural Law (Law 13.986/20) and the implications of Law 14.112/20 for these producers.
The Agricultural Law, under Article 5, permits CPRs to use any type of collateral allowed by legislation. This includes rural pledges, which can be agricultural or livestock-based, depending on the nature of the collateral. However, Article 11 of Law 14.112/20 states that credits and collateral linked to CPRs with physical settlement are exempt from the judicial reorganization effects.
The Superior Court of Justice (“STJ”) has ruled that revenue from asset use is not essential for a rural producer in judicial reorganization. This means future harvests, even as the company’s final product, are not essential for operations to continue. Thus, the delivery of future harvests is required to meet obligations agreed upon by the rural producer and the creditor prior to the reorganization process.
It is important to note that consumable goods, such as harvests commonly used as collateral in credit agreements, are not essential fiduciary guarantees. However, the non-essential nature of the collateralized product is declared when issuing Rural Product Bill of Exchange (CPRs). This declaration allows creditors to seize these goods in case of default, bypassing the prohibition on withdrawing essential goods.
Guarantees provide legal security for creditors, allowing rural producers to use their harvests as collateral without jeopardizing their business operations. This promotes their activities and maintains credit balance.
Maintaining the security of these guarantees is paramount for a stable credit market with reasonable rates. The unchecked and unjustified rise in insolvencies harms the entire agribusiness sector by affecting the spread.
The debate on the non-essential nature of harvests as collateral for Rural Product Bills (CPRs) is key to balancing creditors’ rights and preserving rural producers’ activities. Brazilian legislation clearly addresses this issue, and its consistent application by the judiciary is essential for legal certainty and economic viability in the agricultural sector during crises.
