Ordinance regulates the use of the Guarantee Fund for rural credit in Rio Grande do Sul

Last week, Ordinance No. 1.018 was published, which establishes the conditions for the use of the Operations Guarantee Fund (FGO) to cover rural investment credit operations contracted until December 31, 2024, within the scope of the National Strengthening Program of Family Agriculture (Pronaf) and the National Support Program for Medium Rural Producers (Pronamp).  

The FGO will be used exclusively to cover operations contracted by producers from Rio Grande do Sul who suffered material losses in areas affected by extreme weather events, which occurred in the months of April and May, in Rio Grande do Sul. 

“This emergency line should leverage R$4 billion to help rebuild agriculture in the state”, explains the Minister of Agriculture and Livestock, Carlos Fávaro. 

According to the Ordinance, contracting must be prioritized for beneficiaries who, according to the financial institution's assessment, do not have sufficient collateral to contract the credit operation. 

Announced by President Lula in May, with the signing of Provisional Measure No. 1.226, the FGO will be able to guarantee up to R$600 million to cover operations. In other words, the government is committed to guarantees for the rural sector, aiming to reduce the risk for banks that grant accessible credit. The amount not used by the end of the year will be returned to the Union through redemption of quotas.  

Also according to the Ordinance, the guarantee will be applied to up to 100% of the value of each credit operation, after deducting the discount granted at the time of contracting, already regulated by Ordinance No. 835, plus financial charges. Coverage by the default fund will be up to 15% of each financial institution's portfolio relating to contracted credit operations. 

In case of extension of the maturity of rural credit operations, the FGO guarantee will be extended until the final date for settlement of the extended operation. 

When a default guaranteed by the FGO occurs, financial institutions can request the honor of the guarantee after 90 days of the debt's existence and after having adopted extrajudicial procedures to recover the amounts. The maximum period for this request is 320 consecutive days, counting from the date of default on the guaranteed transaction or its confirmation.