Change of Fiagro brings another incentive for investments in the sector

Sanctioned in July this year, the Law 14.421 / 22 (Fiagros Law), can be considered a milestone for agribusiness financing in Brazil. The law, which has recently undergone changes, will facilitate fundraising by expanding the scope of action and could function as a true multimarket fund focused on agribusiness, as it will be able to invest its resources individually or jointly in any of the assets or companies mentioned above.

Fiagros gained the name Investment Funds in Agribusiness Production Chains (formerly Investment Funds in Agroindustrial Production Chains). With this new law, Fiagros will be able to invest resources not only in the agro-industrial chain, but on all fronts of agribusiness.

This legislative change provides conditions to further leverage the potential of Fiagro, a product with high acceptance even though it has been on the market for a short time, as it was launched this year. Fiagros' net funding reached 1 billion reais by June 2022, according to data released by ANBIMA (Brazilian Association of Financial and Capital Market Entities).

Agribusiness will be positively impacted because the new law expands the possibilities for applying Fiagros resources, by replacing the expression “agro-industrial production chain” with “agribusiness production chain”. This will allow Fiagros to allocate their resources in companies that explore any activities that are part of the agribusiness production chain. The benefits extend to financial assets, credit titles or securities, whether issued by legal entities or individuals. The fund will be able to invest its resources in members of the chain that are not directly linked to the agricultural industry, but to the entire agribusiness production chain. In a hypothetical scenario, based on Law 14.421/22, I endorse that nothing would prevent Fiagro from currently allocating part of its resources to companies whose activities are related to the agribusiness chain.

Therefore, the previous division between Fiagro Imobiliário (Fiagro-FII), Fiagro in Credit Rights (Fiagro-FIDC) and Fiagro in Participations (Fiagro-FIP) is no longer capable of encompassing the possibilities offered by the new law.

The new Fiagro does not apply to the 50% limitation on investments in credit rights, which, in practice, will mean that the new system can simultaneously be an FIP, FII and FIDC (Participation Investment Fund, Real Estate Investment Fund and Fund of Investment in Credit Rights respectively).

An example of this was the recent launch of a Hybrid Fiagro, whose portfolio will be made up of 83% Agribusiness Receivables Certificates (CRA) and 17% agribusiness properties. Furthermore, in accordance with the hybrid fund's investment policy, resources may be allocated to Agribusiness Letters of Credit (LCA), rural properties, companies that explore activities in the agribusiness chain, Real Estate Receivables Certificates (CRI) and quotas of funds that are related to the agribusiness sector. This is an initial sample of how the new Fiagros, with the advent of Law 14.421/22, will be able to invest their resources and enhance their investment portfolio.