Combating tying in agricultural credit should reduce costs for producers

Minister Tereza Cristina (Agriculture, Livestock and Supply) and the Minister of Justice and Public Security, Sergio Moro, signed this Wednesday (16) a technical cooperation agreement with the aim of preventing the occurrence of so-called “tying” at the moment that rural producers obtain agricultural financing from banks.

At the signing ceremony, at Mapa's headquarters, the minister highlighted that the measure had been expected for years by Brazilian rural producers. According to Tereza Cristina, although the legislation already provides measures against tying (a practice considered abusive), the farmer feels constrained to purchase other financial products in order to access credit with a subsidized interest rate. The minister highlighted that the fight against tying will mean a reduction in costs for the producer and an improvement in the competitiveness of Brazilian agriculture. 

"It's one thing to buy a capitalization bond, insurance. Another thing is to take resources that the Public Authorities equalize the value to reduce the interest rate, but then there's the tying up that intimidates and increases the cost because instead of paying 6% 7%, 8%, he [producer] has to buy this and ends up increasing his cost to 10%, 12%, 14%", he said. 

Interest equalization was established to provide more accessible interest rates and payment conditions to rural producers, with the aim of boosting the development of the country's agricultural activities. This year, the federal government made R$10 billion available to subsidize interest within the 2019/2020 Harvest Plan financing lines.

"We cannot have restrictions here that inhibit rural producers. Agribusiness, the numbers are there to prove it, is the engine of our economy. With these small things that we have been doing in these 10 months of government, facilitating, reducing costs, taking This built-in cost means that we are going to make Brazilian agriculture increasingly competitive and more sustainable for the world", he added. 

 Minister Sergio Moro said that the idea is to protect the producer's free choice. Moro asked producers to report the practice so that the federal government knows the scale of the problem and can adopt appropriate measures. "This is a simple initiative that aims to protect rural producers from abusive practices when they are credit consumers. At the same time, franchise the platform consumer.gov.br to seek conflict solutions,” he said.

According to the deputy secretary of the Mapa Agricultural Policy Secretariat, José Ângelo Mazzillo Júnior, there are countless reports that banks require the contracting of financial products, such as capitalization bonds, consortiums, insurance and maintenance of term deposits, so that the producer have access to financing. He explained that the cooperation agreement, lasting two years, will have two stages: assessing the extent of the problem and adopting coercive remedial actions.

The National Secretary of Consumer Protection of the Ministry of Justice, Luciano Timm, reinforced the need for producers to denounce the practice and informed that sanctions for those who engage in tying could reach R$9 million. “There are several channels for us to work together,” he said.

In addition to improvements in www.consumidor.gov.br, the agreement provides for the establishment of new channels so that producers can make anonymous complaints through trade associations. According to reports, many do not report tying for fear of being prevented from taking out loans. 

The Brazilian Agriculture and Livestock Confederation (CNA), the Organization of Brazilian Cooperatives (OCB), the National Confederation of Agricultural Workers (Contag) and the National Union of Family Farming and Solidarity Economy Cooperatives (Unicafes) signed as signatories of the agreement and will provide mechanisms for producers to make complaints without being identified. 

The vice-president of the CNA, José Mário Schreiner, said that the institution created a space on its portal for complaints. Schreiner considers the measure a historic moment in the fight against a “harmful practice”. “We are going to face what happens in the real world head on,” he said.