In an election year, the government should launch a record Harvest Plan

President Jair Bolsonaro (PL) is expected to announce this Wednesday (29) the 2022/2023 Crop Plan with a value of over R$320 billion to support the country’s agricultural production starting in July.

The volume of resources for the sector, which mostly supports Bolsonaro’s re-election, reaches a record level in an election year. Businessmen and parliamentarians asked for an amount of R$ 330 billion.

The agricultural policy to be announced by the president is in line with that defended by the sector and with the negotiations taken over by Minister Marcos Montes (Agriculture). Of the total amount, more than R$ 100 billion must be financed with subsidies from the National Treasury.

The previous Safra Plan was R$251.2 billion (or R$279.4 billion in inflation-adjusted values). The increase to be announced, according to representatives of the agricultural sector, seeks to meet the increase in costs in the segment in the wake of the appreciation of the dollar, commodities and also the War in Ukraine, which made the supply of fertilizers difficult.

In recent weeks, the team of Minister Paulo Guedes (Economy) acted in the negotiations in order to limit the costs with subsidies, while Agriculture resisted the increase in interest rates.

Faced with this impasse, technicians warned that the amount financed would be lower, if there was a need to pay for larger subsidies to sustain lower interest rates.

In general terms, the program must meet the main demands of Bolsonaro’s support base, but small producers were prioritized in the decision on interest. For them, interest rates will remain below 10%, although the Selic rate is currently at 13.25% per year, with the prospect of new highs.

Associations in the agricultural sector tried to negotiate that interest rates would not exceed the double-digit mark. However, rates for large producers must be between 10% and the Selic. In the previous Safra Plan, they varied between 7.5% and 8.5%.

Government officials say that this type of rural producer has access to other forms of private financing and, therefore, has access to more resources.

The best credit conditions in the Safra Plan are for family agriculture, small and medium producers through Pronaf (National Program for Strengthening Family Agriculture) and Pronamp (National Program to Support Medium Rural Producers).

The rates for small and medium producers, which varied between 3% and 6.5% in the previous program, are also expected to increase, but remain below double digits.

Bolsonaro’s allies and businessmen defended that this margin should rise to between 5% and 7.5%. But the interest of these groups should stay above these levels.

According to technicians and parliamentarians who participated in the negotiations, the Safra Plan to be announced this Wednesday should provide for interest rates between 6% (for small producers) and 12% (for large producers).​

Because of this difference between the cost of raising funds for banks and for rural producers, the National Treasury needs to disburse money for interest equalization.

The expectation is that more than R$ 100 billion in credit will be released with resources to be equalized. This should represent an expense of approximately BRL 20 billion in 2023 – an amount disbursed in equalization.

This year, the amount of subsidies for the new plan should be R$ 1.3 billion.

To meet the Safra Plan proposed by the agricultural sector, a cost of around R$ 22 billion would be required next year. Therefore, above what should be announced this Wednesday.

Although the package to be launched by Bolsonaro is not the one idealized by ruralists, the evaluation in the segment is positive in relation to agricultural policy.

There were fears that Guedes could win the battle against Montes, who has less time at the top of the government. Another factor that generated distrust in the sector is that the Safra Plan negotiated in the last year of a mandate tends to be less robust.

To launch the Safra Plan, Bolsonaro must be accompanied by Montes and more ministers at an event at the Planalto Palace this Wednesday afternoon. Despite the low activity in Congress this week, parliamentarians from the ruralist caucus are in Brasília to attend the announcement, considered the most anticipated in recent years.

The bases of Plano Safra were closed this week – the last of the month. Generally, the launch of this agricultural policy takes place in mid-June to take effect in July.

The delay, according to people who participated in the negotiations, was due to the different positions between the Ministry of Agriculture and the Ministry of Economy.

Despite the delay, the sector hopes that the release of funds will not be hampered. Representatives of the ruralist congressional caucus met with members of the Ministry of Economy to expedite the start of agricultural policy.

“We already have budget resources saved to open the Safra Plan immediately,” said deputy Sérgio Souza (MDB-PR), president of the FPA (Parliamentary Front for Agriculture)