Government seeks BRL 3.1 billion in the Budget to fund the Safra Plan subsidy

The government has mapped the need to reallocate BRL 3.1 billion from the Budget to cover additional spending on subsidies to agribusiness producers under the Safra Plan and other subsidies funded by the National Treasury.

The extra bill stems from the significant increase in interest rates, which increased the expense of the so-called equalization – the government pays the difference between the rate charged to producers, lower, and the effective cost of the financial institutions that lend the money.

The impasse was the subject of a meeting of the JEO (Budget Execution Board) on Monday (7).

Given the urgency, a first reallocation of about R$ 800 million should be done in the next few days through ministerial decrees, according to technicians heard by the leaf.

The money must be redirected from other Ministry of Agriculture appropriations that are often underutilized. The other R$ 2.3 billion will depend on the submission of a supplementary credit request, which will need to be approved by the National Congress.

To apply for this credit, the government will have to make cuts in other areas, an always arduous and politically delicate task.

In January, President Jair Bolsonaro (PL) had to veto R$ 3.18 billion in resources to recover expenses with civil servants’ salaries. The cut fell mainly on education and INSS funds, causing wear and tear.

However, as long as the government does not have sufficient resources to pay for the subsidies, no new financing can be granted, according to the understanding of government technicians and the TCU (Union Court of Auditors).

After the condemnation of former president Dilma Rousseff (PT) for the so-called fiscal pedaling, the government does not see any space to risk delaying its commitments with banks.

Therefore, the understanding already consolidated, including in the court of accounts, is that financing can only be contracted if there is all the money needed in the Budget to fund the corresponding subsidy.

Representatives of the Ministry of Agriculture and the ruralist caucus are closely monitoring the negotiations due to their potential impact on crops.

The suspension of financing coincides with the off-season period, when the first crop has already been harvested and crops are renewed for the cultivation of grains such as corn.

There is concern that producers will be led to seek more expensive financing to avoid delays in their schedules, or that production will be hampered.

According to a survey by Conab (National Supply Company), corn production in the off-season should account for 86.3 million tons, about 76% of the country’s total grain.

The 2021/2022 Crop Plan was launched in June last year, in a ceremony attended by Bolsonaro and ministers. R$ 251.2 billion were made available to producers, with resources to finance investments and costing and marketing activities.

Interest rates, in turn, rose. For small producers, the increase was from 4% to 4.5%. For medium, there was an increase from 5% to 5.5%. The rate charged for large companies went from 6% to 7.5%.

Still, the fees for the Safra Plan are lower than those charged for other types of financing.

To give you an idea, at the time of the announcement of the plan, the basic interest rate, the Selic, was at 4.25% per year, with a high perspective. Since then, the Central Bank has had to tighten the pace of monetary tightening.

Earlier this month, the Copom (Monetary Policy Committee) raised the rate to 10.75% per year. When submitting the 2022 Budget proposal, in August of last year, the government estimated that the average Selic would be 6.63%.

In this scenario, the total allocation for subsidies, grants and Proagro (another program aimed at the rural area) was R$ 13.7 billion. The widening of the differential increases National Treasury spending.

Subsidies associated with other programs, such as the PSI (Investment Support Program) and financing for cereal farmers, will also be more expensive, although the main factor for the increase is the Safra Plan, according to government technicians.

The president of the FPA (Parliamentary Front for Agriculture), deputy Sérgio Souza (MDB-PR), criticized what he called government precipitation.

According to him, the resources are necessary to finance the equalization of operations already carried out, but they should not compromise new hires. The biggest concern is with the risks to the safrinha.

Souza also said that the bench asks the government to expand the resources of the Safra Plan, since the R$ 251.2 billion is considered insufficient.

“We are working to increase the resource, as a tractor that used to cost R$ 400,000 today costs R$ 800,000. The cost of production has tripled,” he said.

According to him, the resource available for the purchase of machines has already been exhausted. “The government is not able to support the demand for financing,” said the president of the FPA.

In the economic area, the expansion of the total value of the Safra Plan is considered unlikely, since this would require an even greater allocation of subsidies and new cuts in the Budget.