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Nº 2 | October 2013

Family Farming and the BNDES: Towards a Strategic Policy In Brazil food production depends directly on family farming, which – unlike agribusiness – centres on production for household consumption. Although small rural producers and family farming occupy only 24.3% of agrarian land, family farmers produce around 60% of the food consumed by Brazil’s population. As percentages of Brazil’s output, family farming accounts for 87% of cassava, 70% of beans, 46% of maize, 38% of coffee, 34% of rice, 21% of wheat and, in animal husbandry, 60% of milk, 59% of the swine herd, 50% of the poultry and 30% of the beef. Fundamental in this context are policies to encourage and assist that production, which faces major difficulties owing to strong competition from export agriculture. Also needed are actions to support its growth, through either credit or subsidies. Recently, in addition to traditional government credits and funds, Brazil’s national economic and social development bank, the Banco Nacional de Desenvolvimento Econômico e Social (BNDES), has started to earmark funds specifically for family farming and extend credit to small farmers, either as individuals or through cooperatives. Are these signs of change in the bank’s funding priorities? Can one think in terms of a new line of funding for family farming? This and other questions will be addressed in this article, which examines the role of the BNDES in the process of encouraging family farming in Brazil, by analysing the funds disbursed to this sector. We thank the MST for the discussion and debate.

Photo: Marcos Nunes

Photo: Marcos Nunes

Photo:Gilvan Barreto / OXFAM


BNDES and Family Farming

1. Introduction According to Brazil’s most recent agricultural and livestock census, the 2006 Censo Agropecuário, 4.4 million establishments (84% of all agricultural establishments) were classified by the official statistics agency, the Instituto Brasileiro de Geografia e Estatística (IBGE), as being family farms. On those farms there were 12.3 million people, corresponding to 74% of all those on establishments in rural areas. Their participation in the total value of agricultural and livestock output is less substantial: the same 2006 agricultural census places it at 38% of the total, with certain staples, such as beans, milk and cassava, featuring most prominently. These data reveal overall characteristics of family farming in Brazil: by wide margins, family farming accounts for the majority of rural establishments and of persons gaining rural livelihoods. It also plays an outstandingly important role in food production for the domestic market. In terms of financial worth, it is less significant than the value of output from establishments connected with agribusiness, which is intended mainly for export. Although there are many definitions for family farming in Brazil, the official definition is established by the national programme to strengthen family farming, the Programa Nacional de Fortalecimento da Agricultura Familiar (PRONAF). The corresponding law sets out the following requisites: those involved may be proprietors, squatters, leaseholders, or beneficiaries of the agrarian 1 reform, living on the property or nearby, holding at most four “fiscal units” of land, or at most six units if these are used for ranching, where 80% of gross annual family income is derived from agricultural or non-agricultural activities, provided these take place on the establishment, engaging at most two permanent employees and with possible occasional help from third parties. Family farming is far from being a homogeneous whole. Not only is it extremely diverse regionally, but it is also differentiated in terms of degree of capitalisation, ranging from very poor farmers with practically no income through to quite highly-capitalised family farms generally engaged in activities integrated with agribusiness and/or industry. Importantly, at this time when Brazil is striving to eradicate so-called “extreme poverty”, public policies directed to the poorest must turn their focus towards those family farmers who are in such a situation. According to the IBGE, in 2011, 7.6 million people lived in rural areas of Brazil in families with monthly per capita income of R$70, which, on the criterion applied by the Brazilian government, placed them in the situation of extreme poverty. That group represented 25% of the rural population and 47% of the poorest people in Brazil. One significant part of it, although classified as family farmers, is made up of landless rural workers and their families, traditional populations and those engaged Direct Operations in activities with extremely low remuneration. BNDES Farming - 2012 Farming, whether for income or to provide for family farmers’ essential self-consumption needs, requires 13% investment at the stage prior to production, at harvest time and in commercialisation. The same is true for 20% animal husbandry. In addition, these activities are fraught with natural and market-related risks, which can prevent the endeavour from prospering. That is why financing for family farming is an essential component of the process. Historically, family farmers have always had limited access to credit, particularly as compared with the magnitude 67% of what is made available to large-scale farming. The main reason for this difficulty has been the difference in political strength between the two parties, aggravated by Large Corporation MSMEs the fact that family farmers very often cannot provide the Direct Public Administration guarantees that financing agencies require, besides not Source: the authors from operations declared by “BNDES having a past history as borrowers. In many cases, they Transparente” for the activity ‘Agropecuária’ and in the area of Agriculture and Social Inclusion are even unaware that such financing is possible. 1


The “modulo fiscal”, which varies by municipality depending on the predominant crop or activity, is intended to represent the minimum allotment required for a viable farm.

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In that light, creation of the Pronaf – which resulted from mobilisation and demands by rural social movements – was a significant step towards access to credit for family farming.

It was set up in June 1996 by a decree which defined its goal as “to promote sustainable development of the rural segment constituted by family farmers, so as to enable them to expand their productive capacity, generate employment and improve income”. It also stipulated that the funds used by the programme would come from a diversity of public and private sources to be operated by various different institutions. Participation by the different sources has varied greatly over the course of the programme’s history. Initially it received only a percentage of compulsory bank reserves on demand deposits, but steadily began to access other sources, such as the workers’ relief fund (Fundo de Amparo ao Trabalhador, FAT), the rural savings fund (Poupança Rural), cooperative bank funds, ordinary BNDES funds, constitutional funds (Fundos Constitucionais) and even federal general budget funds. From this it can be seen that the diversity of sources feeding the programme also sets up a very particular set of dynamics. Pronaf Custeio, designed to finance the annual agricultural harvest, has always figured largest in both the amount financed and the number of contracts. It has been extended to the areas of investment, infrastructure and municipal and other services, adding new dimensions to the programme. One distinguishing feature of the Pronaf, over its whole history, is that contracts have varied in mean value by region of Brazil and, more markedly, among states, which reflects the different production systems and various products supported by the programme. Also, however, a strong spatial imbalance has been maintained, with more contracts benefiting particularly the states of southern Brazil, not just because family farming is a more substantial presence there and better suited to credit operations, but also because of the strength of the trade union and associative movements in those wealthier regions. In addition, there are the requisites for access to the Pronaf. Once family farmers decide to seek credit, they have to obtain a declaration of eligibility to the Pronaf (Declaração de Aptidão ao Pronaf, DAP) and prepare a technical project, then take the DAP and technical project to a financial agent, who will evaluate them in order for the credit to be granted. It has to be acknowledged that, since the programme started, a number of different resolutions have been applied, which have affected the various modalities of credit. Some of these have been designed to afford greater access to credit by the neediest farmers, although this has not necessarily surmounted the low levels of participation by the less capitalised among them. The first family farming harvest plan (Plano de Safra da Agricultura Familiar), for the 20032004 harvest, was launched by the government that took office in 2003, introducing a set of new modalities which greatly extended the programme’s scope. These included the food Pronaf (Pronaf Alimentos) to encourage production of rice, beans, cassava, maize and wheat; the fishery Pronaf (Pronaf Pesca), to support small-scale fishing; the agro-ecology Pronaf (Pronaf Agroecologia), to support family production free of chemical inputs and endeavours in transition to an agro-ecological model; the rural tourism Pronaf (Pronaf Turismo Rural); the women’s Pronaf (Pronaf Mulher); the rural youth Pronaf (Pronaf Jovem Rural); the semi-arid Pronaf (Pronaf Semiárido); and the plant and machinery Pronaf (Pronaf Máquinas e Equipamentos). Federal government rural credit through the Pronaf is now applied in 95% of Brazil’s municipalities. In harvest year 2011-2012, R$16 billion was allocated to the Pronaf. Of that total, R$13.5 billion in credit was granted in more than 1.2 million contracts. For harvest year 2012-2013, R$18 billion have been granted in various arrangements for current spending and investment. As the volume of funding has expanded, so the programme’s interest rates have gradually declined, making it still more attractive.


BNDES and Family Farming

PRONAF - Valued Financed and Number of Contracts Harvest Years 1995-1996 2009-2010


Valued Financed (R$ billion)







No. Contracts (thousands)





0 0 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 Valued Financed

No. Contracts

Source: Credit Pronaf data base (SAF/MDA)

Importantly, the Pronaf’s expansion – which has become more intense since 2003, the programme growing steadily from one harvest year to the next – is framed by an overall context of government policy designed to strengthen family farming by modernising and building autonomy. It is not merely a spinoff of Brazil’s economic growth.

2. The BNDES in Funding for Family Farming 2.1. PRONAF

Ever since the Pronaf was set up, The BNDES has worked with the Pronaf the BNDES has been one of the leading since the programme started in harvest financial agents offering investment credit for family farming. The funds year 1996-1997. Since then a wide range of applied in this modality of financing modifications have been introduced in how were sourced from the workers’ relief the BNDES operates with the Pronaf, from fund (Fundo de Amparo do Trabalhador, FAT), which is formed by contributions the lines of credit contemplated through to to the social integration programme the intermediary financial institutions and (Programa de Integração Social, PIS) and the civil servants’ estate formation the amounts disbursed. programme (Programa de Formação do Patrimônio do Servidor Público, PASEP). Note that, under Brazil’s constitution, 40% of the total collected through these two programmes is allocated to the BNDES. 4

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Until 2007, the BNDES operated solely with investment credit. During that period, the potential beneficiary families were those with higher income, because the bank did not operate with credit lines for the lower2 3 income A and B groups. At present the bank operates investment credit lines in various areas including Agro-Ecology, Agroindustry, Cooperatives, Renewable Energy and Sustainability, Women and More Food. Note also that, as the programme has expanded rapidly over recent years, the BNDES has contributed significantly to increasing the volume of funding. As regards the funds deployed by the bank, the portion sourced from the FAT can be applied to the Pronaf, providing the BNDES board so decides. That decision, however, is not strictly taken by the bank exclusively, but is determined largely by federal government guidelines. As the rate of interest paid by Pronaf beneficiaries is lower than the rate of return on the FAT (the official long-term interest rate, TJLP), the BNDES decision also depends on the values eligible for “equalisation” by the National Treasury to top up the difference between cost of sourcing the funds and the lower interest rates offered by the Pronaf. Note that, with the impetus given to the programme since 2003, a significant change has occurred in its relation to the FAT. That fund has been displaced from its position as the main source for the Pronaf, which has also gained a new source, the rural savings account (Caderneta de Poupança Rural). The latter involves a cost of funds higher than the return yielded by Pronaf loans and can only be used by virtue of a Finance Ministry order providing for such financial charges to be “equalised”. Meanwhile, the cost of unemployment insurance and the wage complementation allowance (abono In 2008, the bank started to operate the salarial) have risen sharply, as a result of rising levels of formal employment on the Brazilian current expenses Pronaf (Pronaf Custeio). labour market and the real increase in the value In the 2009-2010 harvest year, BNDES’ of the national minimum wage. In the BNDES’ participation in total programme funding operation of the Pronaf, the drastic reduction in allocations from the FAT has been offset with was 9%. In the present harvest, it is now at ordinary funds and the amounts allocated have 15%, comprising R$384 million for current even been increased significantly.

spending and R$1.2 billion for investment.

PRONAF - Valued Financed by Funding Source Harvest Years 1995-1996 to 2009-2010 (R$ million) Harvest Years

1995 – 1996 1996 – 1997 1997 – 1998 1998 – 1999 1999 – 2000 2000 – 2001 2001 – 2002 2002 – 2003 2003 – 2004 2004 – 2005 2005 – 2006 2006 – 2007 2007 – 2008 2008 – 2009 2009 – 2010


Special Deposits

Constitutional Funds

Compulsory Funds

Rural Savings

Federal Budget Funds

443 225 350 197 271 130 86 174 111 123 240 549 844 968

140 601 1029 1166 1563 1169 1355 1615 1339 827 3263 2647 1329 313 0.7

0.01 3 98 124 271 216 156 256 652 1343 2090 1700 1663 2007 1660

167 126 210 177 208 297 155 39 307 1525 1859 3577 3932 2914 1362

835 0.1 1654 4525 6761

0.003 246 381 329 1165 2178 223 406 371 425 403

Own Equalisable Funds Others

16 68 95 104 175 67 93 59 0.5 431.2 0.3

77 70

190 127

Source: Pronaf credit data base (SAF/MDA) and internal BNDES figures 2 3

Group A – farmers settled by the agrarian reform agency (INCRA) and beneficiaries of the national land credit programme (Programa Nacional de Credit Fundiário).

Group B – family farmers with annual gross income of up to R$ 3,000.00.


BNDES and Family Farming

2.2. Other BNDES Instruments for Financing Family Farming Although the Pronaf has become the main channel for BNDES support for family farming, it does not appear to be the most appropriate choice for all those in this category.

As mentioned earlier, the credit that the BNDES offers family farmers through the Pronaf is not suited to the less capitalised. Primarily for that reason, the bank has opened up other lines designed for those who embody different credit demands, as will be described below.

2.2.1. PRONAMP

Before presenting the credit lines extended to family farming as such, it should be mentioned that, in addition to the Pronaf, there is a line designed for medium-sized farmers. This is the national programme in support of the medium rural producer (Programa Nacional de Apoio ao MĂŠdio Produtor Rural, Proonamp), which is intended to support the rural activities of medium-sized rural producers by credit for current expenditure and investment, and whose operations are conducted through BNDESaccredited financial institutions. The programme is open to rural proprietors, squatters, leaseholders or partners where annual gross revenue is more than R$800,000 and results 80% from agriculture, animal husbandry or plant extractive activities. For this public, the BNDES offers financing for individual or collective investments in goods and services necessary to the enterprise and connected with the activity and with the capacity to produce or increase productivity or economise production costs. This line of credit was first offered in 2010. From July to December 2012, Pronamp contracts totalled R$6 billion, representing an increase of 60% over the same period of the previous year, which can be attributed to the reduction in the interest rate charged and the increase in the annual gross revenue eligible under the programme. The proportions to which the Pronamp has grown in the short time it has been in existence, as compared with credit lines designed for small farmers, corroborates the priority being given to the more capitalised among them.

Photo: IBASE / Acervo


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In 2009, the federal government set up a programme with BNDES funding to capitalise agricultural and animal husbandry cooperatives (Programa de Capitalização de Cooperativas Agropecuárias, Procap-Agro). Its purpose is to support the recovery or asset restructuring of agriculture and animal husbandry, agro-industrial or fishing cooperatives.

It pursues this goal by payingin members’ quotas 4 in the cooperatives. In addition to this purpose, it also finances these cooperatives’ working capital. It was thus very likely to become a key factor in their sustainability. The Procap-Agro can be accessed not only by farmers (physical or legal persons), members of agriculture or animal husbandry, fish farming or fishing cooperatives, and single cooperatives or 5 unions of cooperatives engaged in agriculture or animal husbandry, agro-industry, water-based production or fishing, but the federations and confederations engaged directly in manufacturing inputs and in processing and in industrialising production can also apply for credit. Finance is available to pay-in quotas in a single cooperative’s equity capital. The latter in turn can do the same towards the cooperative union and also raise financing for working capital. The cooperative union, meanwhile, receives credit for working capital and also credit granted directly for financial restructuring achieved by paying-in of its members’ quotas. For operations to finance working capital the rate of interest is 9% per year. For other operations it is 5.5%. The limit on credit to cooperative member farmers is R$40,000 and the loan can correspond to up to 100% of the quotas’ pay-in value. This is no impediment to accessing credit via other programmes. For the single cooperative, the maximum amount loaned is R$50 million. The same ceiling applies to the single cooperative or union of cooperatives wishing to finance working capital by paying up member quotas. The term for financing working capital is five years, while for the other operations there is a six-month grace period. The BNDES offers support directly (R$10 million minimum) or indirectly through intermediary financial institutions. The Procap-Agro has been steadily strengthened ever since its inception. In 2010, the national monetary board (Conselho Monetário Nacional, CMN) introduced adjustments to allow more than one credit operator per farmer or cooperative, at different harvests. In 2011, the CMN added a further R$1 billion to Procap-Agro funding to be used to finance working capital at the 2011-12 harvest. The funds were reallocated from the cooperative development programme to add value to agricultural and animal husbandry production (Programa de Desenvolvimento Cooperativo para Agregação de Valor à Produção Agropecuária, Prodecoop), because owing to strong demand the funds available under the Procap-Agro had already been committed at the start of the harvest. It also authorised an increase, from 70% to 80%, in the percentage of funding earmarked for working capital. To offset this, the interest rate for this type of credit rose from 6.75% to 9.5%. Some analysts see this growth in demand from the cooperative system as simply reflecting the dynamics of the economy and agricultural and animal husbandry activities in Brazil. Behind this bolstering of the programme, however, lay the cooperative system’s ability to organise. An example of this was the formation, in 2009, of a technical committee comprising representatives of the cooperative movement, financial agents – including representatives of the BNDES – and specialists from the Ministry of Agriculture, Animal Husbandry and Supply and the Ministry of Finance, which was decisive in later gains. 4 5

On entry to a cooperative, the member purchases quotas. That purchase can be done all at once or in instalments. The paid-in capital is what has already been paid and the capital receivable is what remains to be paid in of the subscribed capital.

Credit cooperatives are divided into: single, which provide financial fund-raising and credit services solely to their respective members, and can receive on-lending from other financial institutions and make applications on the financial market; unions, which provide services to their member single cooperatives and are also co-responsible for supervision; and confederations of unions of cooperatives, which provide services to unions and their member cooperatives (see http: //ção/ coopcred.asp).


BNDES and Family Farming

Even the Procap-Agro, although directed to family farmers and their cooperatives, deals with a more highly-capitalised public that does not include the most vulnerable.

The dynamism mentioned above has resulted partly from the so-called “high commodity prices”, i.e., from benefits reaped by farmers who are part of Brazil’s export agriculture process. With financing for working capital, such farmers bought more inputs, made more use of storage services and increased their participation in crop commercialisation strategies. Since the end of 2011, Procap-Agro has performed another function by activating an emergency credit line for single agricultural or animal husbandry cooperatives whose members in the states of Paraná, Rio Grande do Sul and Santa Catarina suffered significant losses from drought. The consequences covered were liabilities past due or to fall due from 1 January 2012 to 30 June 2012. Cooperatives were granted credit, to a limit of R$10 million per cooperative, conditional on their lending on to their members. Interest was set at 5.5% and contracts had to be signed by 30 December 2012. The total term of the financing was five years, with up to one year’s grace period. Repayment instalments were scheduled to be six monthly or yearly.

2.3. PROCAPCRED The credit cooperative capitalisation programme (Programa de Capitalização de Cooperativas de Crédito, Procapcred) is another BNDES credit line in support of cooperatives. It is designed to strengthen the asset situation of credit cooperatives by financing their members directly. For that purpose, the BNDES accredits other financial institutions, then lends through them. This credit can be accessed by physical persons (farmers, fishers, entrepreneurs, independent service providers and micro-entrepreneurs) or legal persons (engaged in farming, fishing, industrial, commerce or service activities). Accordingly, family farmers and their cooperatives are only one group among candidate borrowers. The Procapcred finances the purchase of quotas in single credit cooperatives. The funds so obtained by the cooperative can be used freely, in compliance with the sector’s specific regulations. The total financial cost for borrowers comprises the long-term interest rate (TJLP), plus 1% annual remuneration for the BNDES and 3% annually for the accredited financial institution. The total term of the operation is six years and guarantees are determined by the financial agent. Credit is only granted if the accredited financial institution approves a project that meets the programme’s requirements. 8

Photo: Pablo Vergara

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2.4. BNDES Social Fund The BNDES Social Fund (Fundo Social) is the most important source of funding in support of low-income ventures. This type of policy, a recent development, followed on strong reformulation at the bank in 2008. The set of arrangements previously in place obeyed the bank’s normal guidelines, which resulted in very little demand from borrowers of this kind.

The social fund, which is non-reimbursable, is constituted partly from the BNDES’ annual profits. It supports social projects, including those connected with rural development. The bank offers permanent, nonreimbursable investments for social inclusion projects. The fund can be accessed by for-profit or not-for-profit legal persons constituted under Brazilian domestic public law or private law. Ventures eligible for support are social in nature and in sustainable areas, with the potential to maintain the project or activities that will continue supported even after the BNDES funding has terminated. Also supported are ventures that have no borrowing capacity, providing they are sustainable, and also ventures intended to strengthen production clusters, by financing collective equipment, and other arrangements also of a social nature. The BNDES’ participation can reach 100% of the financeable items. In the modality of continuing support complementary to government interventions, it can total 50% of the total amount of funding involved.

With a view to expanding the amount of funding going to low-income borrowers, the BNDES opted to operate jointly with other partners. These can be from the federal government – including certain ministries, among them the agrarian development ministry (Ministério do Desenvolvimento Agrário, MDA) and the social development ministry (Ministério do Desenvolvimento Social, MDS) – state and municipal governments, cooperatives and also private, non-profit institutions connected with major economic groups, such as the Fundação Banco do Brazil, Fundação Odebrecht, Fundação Vale, Instituto Votorantim and Instituto Camargo Corrêa and others.

Timeline of Investment Contracts in Employment and Income Generation Projects Using the BNDES Social Fund and Partners 400 350 300


R$ million

250 200 150 50 0



100 3








BNDES Social Fund Source:AS/DESOL











BNDES and Family Farming

3. Prominent Ventures in BNDES Family Farming-Related Operations As seen above in the description of BNDES credit lines offered for family farming, in recent years there has been a growing willingness to support family farming, in terms not just of the various alternative arrangements offered, but the expanded volume of credit funding available. Some of the operations that have gained greatest stature in this field will be described and assessed here. The first are operations relating to the system of credit cooperatives with solidarity interaction (Sistema das Cooperativas de Credit Rural com Interação Solidária, CRESOL). The CRESOL system, which operates in the states of Espírito Santo, Minas Gerais, Paraná and Santa Catarina, has established a strong presence in credit for family farming through cooperatives for that specific purpose. Since 2006, the BNDES has conducted six operations with the CRESOL system (CRESOL BASER and CRESOL CENTRAL SC/RS) through a microcredit programme totalling R$59 million. These funds are directed to what are known as “advance operating costs” relating to farmers’ needs that have to be met before the harvest year. The CRESOL system has also always been a prominent borrower through the PRONAF to finance harvest costs, corresponding to the funding immediately subsequent to the microcredit requested from the BNDES. In terms of BNDES funding earmarked for family farming, the bank considers the CRESOL system to be, by a wide margin, the largest creditor. The second relates to credit extended through the Social Fund to less capitalised family farming and particularly to agrarian reform settlements.

For its part, the Banco do Brasil is to make R$300 million available in credit for cooperatives to invest in agroindustries, bringing the total funding to R$600 million. Terra Forte is designed to support the introduction and modernisation of collective agro-industrial enterprises in agrarian reform settlements established or recognised by the INCRA anywhere in Brazil. The programme began to be tested in 2009, with the participation of ten agrarian reform cooperatives, most hosted by landless movement (MST) settlements. These submitted agro-industrialisation proposals, on the basis of which a protocol of intentions was drawn up between the Paraná State technical assistance and rural extension agency (EMATER/PR) and the cooperatives, with a view to preparing, executing and reporting on the projects. The beneficiaries are rural workers’ families on settlements appropriately registered with the INCRA and organised into cooperatives and associations. Provision is made for the funds to be applied over a five-year timeframe, with the expectation that some 200 cooperatives and associations will be contemplated with a mean amount of R$1.5 million per cooperative for a total of 80 projects, benefitting 20,000 families. The goal is to ensure the conditions for the settlements to respond satisfactorily to the federal government policies, the food procurement programme (Programa de Aquisição de Alimentos, PAA), introduced in 2003, and the national school meals programme (Programa Nacional de Alimentação Escolar, PNAE), which under a 2009 law guarantees family farmers the right to supply at least 30% of food procurement under this programme.

Notable as part of this purpose on the bank’s part is its engagement in the agrarian reform settlement agroindustrialisation programme (Terra Forte – Programa de Agroindustrialização em Assentamentos de Reforma Agrária). This programme deploys R$300 million in funding, R$150 million from the BNDES Social Fund, R$20 million from the Fundação Banco do Brasil and R$130 million from the remaining partners – MDA, MDS, the national colonisation and agrarian reform institute (INCRA) and the national supply enterprise (CONAB).


Série - BNDES Sem Segredos Nº 2

In its overall funding for agrarian reform settlements from October 2008 to December 2012, BNDES credit totalled R$37 million in support of 55 projects. Until then, R$22.3 million had been disbursed, benefiting 8,337 settlers. At present, the BNDES has a portfolio of another five operations with the potential to meet settlement families’ needs; these are either at the analysis stage, approved or already contracted but pending release of funding, which may total R$96.4 million. The fact that this support is granted to the settlements, each one of which comprises a significant number of families, ensures support for large numbers of beneficiaries per project. This aligns with the strategy of the BNDES’ agriculture and animal husbandry and social inclusion sector by fostering greater capillarity in the bank’s operations and at the same time situating it within the productive inclusion dimension of the plan Brazil Free of Extreme Poverty (Plano Brasil sem Miséria). Photo: IBASE / Acervo The BNDES has also partnered through the Social Fund with the national union of family farming and solidarity economy cooperatives (União Nacional das Cooperativas de Agricultura Familiar e Economia Solidária, UNICAFES). Unicafes defines its primary role as serving as an instrument for family farmers, with a view to ensuring that actions to support members are sustainable. Unicafes’ nearly 1,100 member-cooperatives, spread across Brazil’s five regions, are organised into 17 state-level Unicafes in the states of Paraná, Rio Grande do Sul, Santa Catarina, Rio de Janeiro, Espírito Santo, Maranhão, Bahia, Pernambuco, Rio Grande do Norte, Minas Gerais, Mato Grosso, Mato Grosso do Sul, Alagoas, Pará, Goiás, Sergipe and Ceará. In December 2011, the BNDES partnered with Unicafes to structure collective employment and income generation ventures, under a call for proposals totalling R$ 21 million, 50% of which was sourced from the Social Fund, 10% from the cooperatives selected under the call and 40% from other sources.

The severe drought that has affected Brazil’s semiarid for the past two years led President Dilma Roussef to call directly on the BNDES to contribute to measures to address the problem. Petrobrás was similarly called on. As a result, a partnership was set up among the BNDES, Petrobrás and the MDS to assure larger volumes of funding to expedite the policy on access to water in the region.

That partnership will ensure R$ 350 million in investment to expand the concrete panel cistern programme (Programa de Cisternas de Placa). The programme has been supported by the federal government since 2003 and to date has built more than 500,000 cisterns. The intention is to attenuate the effects of prolonged drought on family farmers’ production in the semi-arid and restore their productive capacity. The strategy is to set up the necessary infrastructure so that when the rains do come the conditions will be in place for production to be resumed quickly.


BNDES and Family Farming



From the Social Fund, the BNDES will finance the portion of the programme connected with the so-called “second” (non-potable) water cisterns6, intended for production purposes. The BNDES and Petrobrás will guarantee the installation of 27,000 cisterns by December 2013 and 64,000 by the end of 2014. Note that this programme arose out of a partnership between a broad group of civil society organisations, which formed the alliance of the semi-arid (Articulação do Semiárido), and the federal government, which took up the proposal of the “One Million Cisterns Campaign”. What happened differently this time was that, when President Dilma called on the BNDES and Petrobrás, the initiative came not from the civil society organisations approaching the bank and Petrobrás; rather it came from the government itself. The bank is engaging in other initiatives directed to supporting family farming in coordination with government at various different levels. One example was the partnership with Rio Grande do Sul state government in 2012 designed to support agro-industrial and commercialisation projects in agrarian reform settlements. It earmarked R$72 million through the Rio Grande do Sul State Land Fund (Fundo de Terras, FUNTERRA), which received the funds, to support the settlers’ cooperatives or associations. The BNDES contributed 50% of the funds, which were sourced from the Social Fund. A second, and even more significant, example was the partnership established with the national supply enterprise (Companhia Nacional de Abastecimento, CONAB). Building the partnership was a long process, particularly because the CONAB proposal was so novel to the BNDES. The negotiation stage, concluded in the second half of 2012, arrived at an outcome intended to strengthen production by family farming in Brazil through three lines of support. The first is directed to investment in improving the productive infrastructure of family-based rural collective enterprises with a view to setting up circuits of production, pre-processing, processing, storage and commercialisation. The second relates to development measures designed to afford family-based rural producers entry to the institutional and private food markets. The third is intended to foster innovation in the familybased rural production segment, with a view to improving product quality and increasing production efficiency. The initial amount of the support is R$23 million, but this allocation is expected to grow steadily. All funding is sourced from the Social Fund. As a result the funds are non-reimbursable, meaning that the organisations contemplated are not required to repay the funds to the supporting institutions, providing they furnish evidence that they have been applied appropriately in compliance with the project approved. The first call for proposals under the CONAB/BNDES agreement was issued in February 2013. It contemplated $5 million in funding for groups of women, agroecological producers, quilombolas, indigenous and other traditional communities. These had to provide evidence of an operation in place or at the execution stage within the scope of the family farming food procurement programme (Programa de Aquisição de Alimentos da Agricultura Familiar, PAA), the guaranteed minimum price policy for socio-biodiversity products (Política de Garantia dos Preços Mínimos para os Produtos da Socio-biodiversidade, PGPMBio) or the national school meals programme (Programa Nacional de Alimentação Escolar, PNAE). Photo: Marcos Nunes The “first water” cistern is intended for drinking water.

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Although nationwide in scope, its primary focus was the North, Northeast and Mid-West regions of Brazil, to which 70% of the funding was directed. In all, some 4,000 families benefitted. The maximum amount of support was set at R$50,000 per proponent organisation. The response to this call was overwhelming: 1,633 proponent organisations came forward, with proposals for a mean R$47,000 and totalling R$76 million, which far exceeded all expectations for the call’s reception by its target public. A second call by the BNDES and CONAB related to actions to formalise and structure informal groups of family-based rural producers (a federal government policy priority), so as to enable them to enter the food market in the context of the productive inclusion intended by the plan Brazil Free of Extreme Poverty (Plano Brasil Sem Miséria). A total of R$3 million is earmarked to carry out this strategy. The credit is to be operationalised using a methodology to map and inform the demand, which aligns with the active outreach instituted in the context of the Brazil Free of Extreme Poverty plan. That is to say, the CONAB and the BNDES, in dialogue, will define the informal groups and organisations with little institutional experience and their demands which are to be met subsequently. The key goal of the operation is to contribute to strengthening the groups socioeconomically and preparing them to become formally constituted or regularised into associations or cooperatives and thus eligible to access government market policies.

BNDES Social Fund Disbursements on Family Farming by Main Partners Client

Description of Project

Date State Constituted

Contract Amount (R$)

Goal is to strengthen production from family farming in Brazil by investing in improving productive infrastructure and fostering innovation in the rural familybased production segment.





Relocation and physical restructuring of cooperatives by implementing a coffee processing, storage and commercialisation unit, building a new centre and purchasing machinery, equipment and cargo vehicles.





Structuring production chains, reapplying social technologies and promoting territorial development.





Fostering and strengthening solidarity cooperative-building by organisational and agro-industrial improvement.





Terra Forte’s goal is to promote agro-industrialisation of agrarian reform settlements Brazil-wide. The beneficiaries are families of rural workers in projects on settlement set up or recognised by the INCRA.





Source: The authors, from BNDES Transparente data and a request for information on Social Fund operations


BNDES and Family Farming

Is Family Farming a Priority for the BNDES?

From the foregoing, family farming cannot yet be said to constitute a priority for the BNDES.

What has been happening in recent years is that more room has been made for funding for family farming, very much as a result of lobbying by rural movements and organisations that have firmly disputed access to lines of credit. However, there is still a long way to go, given the bank’s historical disregard of this sector and the lack of institutionalised lines of credit for lower-income groups.

The volume of funding directed to this sector is strikingly smaller than for ventures by big capital or large government projects. In addition, the rules applied to the latter are irrelevant to those needed for small farmers, which often results in longer delays in setting the process in motion. Although the bank has been increasingly active in this area, neither can it be said that there now exists an established and institutionalised programmatic line within the bank’s operating structure. Very far from being a strategic policy, what exists are isolated programmes and activities, which – rather than complementing each other and pointing to overall development in this area – merely cater to certain conjunctural demands. The BNDES operates its support for family farmers, their cooperatives and associations, with funding in line with orientations given by the federal government. In that respect, it is an important base for the agrarian development ministry (Ministério do Desenvolvimento Agrário, MDA), particularly in financing for equipment with a view to modernising and enhancing productivity on family farms. Also, in its relation with the CONAB, it seeks to afford better conditions so that farmers who access CONAB policies can benefit more from doing so. It deploys non-reimbursable funding from the Social Fund to enable poorer farmers to achieve basic social conditions so that they can then engage in productive activities. Another challenge is the extent to which these projects are intelligible to this public. Some groups – the landless rural workers’ movement (Movimento dos Trabalhadores Rurais Sem Terra, MST), for instance – now manage to respond satisfactorily to what is required of them. They have prepared for this and are increasingly capacitated in this relationship. Other movements, even national ones, still experience difficulties. These difficulties can also be heightened depending on the geographical region where the group is located.

It is important to stress that the bank has a role to play in understanding the diversity of the beneficiaries that it is to work with. Given the nature of the beneficiaries of funding for family farming, the criteria for access to credit need to be different from those applied to large corporations and financial groups. Nonetheless, that differentiation should not be seen as a disregard for the credibility of the investment. On the contrary, new criteria and oversight mechanisms must be set up within the specific provisions for investments in family farming. 14

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The opinion of the beneficiaries of this funding made available by the BNDES is that there has been great improvement since 2008. They point to the Social Fund as being much more receptive to their demands. However, they level important criticisms at the bank’s attitude, given that other sectors of the bank still continue to be very reticent and closed to financing for social inclusion, which is preventing institutionalised lines of credit from existing in the bank. Although the Social Fund has improved, it continues to be an emergency fund. The sector of the BNDES responsible for projects directed to family farming states that there was previously relatively little demand for such funding and that it came from isolated projects. More recently, however, demand has intensified, not just on the part of small farmers, but also from the federal government, as was the recent case of the bank’s mobilising to work with the drought relief effort. The sector has only a small staff, which accordingly complains of demand stress. On the one hand, making contract arrangements and setting up mechanisms compatible with the characteristics of family farming calls for considerable extra effort. In this regard, they highlight the care necessary to meet the requirements of oversight bodies. On the other hand, available funding may soon no longer be sufficient to meet the demand. Recently, the BNDES Social Fund has played a strong role in the bank’s growing intervention in emergency social relief processes and support for areas that suffer from major social service deficiencies or are particularly important in economic inclusion processes. In 2008, the Social Fund disbursed a total of just over R$51 million; by 2012, that amount had risen to R$158 million. However, as explained above, the fund features more as a political mechanism in the bank’s activities, emphasising certain isolated sectors and periods. At present, the fund figures more as a political tool than as a strategic mechanism for the BNDES to act on development in Brazil. Appraisal of the BNDES’ activities to promote Accordingly, in spite of the family farming in Brazil shows that, despite the improvement in its activities with regard to family farming, advances and important programmes it has developed, there is – even in this specific there is still a need to set up a specific strategic policy sector of the bank – still no specific strategy for the for the area, which cannot depend on political and inclusion of small farmers. conjunctural circumstances.

Just as the various sectors of big capital are contemplated by specific credit lines and programmes, so it is high time for similar development of this sector, which is so important to Brazil’s economy and food.

Photo: Tom Greenwood / OXFAM GB


“What has been happening in recent years is that more room has been made for funding for family farming, very much as a result of lobbying by rural movements and organisations that have firmly disputed access to lines of credit. However, there is still a long way to go, given the bank’s historical disregard of this sector and the lack of institutionalised lines of credit for lower-income groups.”

Family Farming and the BNDES: Towards a Strategic Policy Production: Instituto Brasileiro de Análises Sociais e Econômicas (IBASE) Authors: Iderley Colombini and Francisco Menezes Coordinator: Maria Elena Rodriguez Layout Artist: Rafael Barreta Boza Translator: Peter Lenny MCIL Support: OXFAM / Ford Foundation

Instituto Brasileiro de Análises Sociais e Econômicas (IBASE) Avenida Rio Branco 124, 8° andar; Centro, RJ - TEL: (21) 2509-0660 / CEP: 20040-001 Produced by:


Family Farming and the BNDES: Towards a Strategic Policy