mobilizing capital to scale responsible expansion of crop livestock in brazil

24 Focus on the key role of supply chain companies: Meatpackers, traders, input suppliers Throughout the value chain, there are many companies in close contact with producers, with high potential for partnerships. Input companies (seeds & agrochemicals) and traders could play a relevant role, not only in mitigating risk but also in supporting the origination of new transactions to scale the agenda: Brazil boasts extensive experience and a robust financial sector capable of backing the agenda Brazilian regulation and financial market are already mature enough and provide appropriate and secure frame for lenders and investors. Many producers and supply chain companies in Brazil are already familiar with obtaining credit to finance their operations, (especially for soy), through a variety of financial actors. Brazil can leverage this significant experience in providing financial support to agriculture to develop innovative financings, whether through bank lending or public securities issuance for agribusiness, such as CRA and LCA, in addition to other general-purpose instruments like Investment Funds in Credit Rights (FIDCs) and Bonds (Debentures). Having a financial structure using a securitization vehicle is fundamental to diversifying risk and working with a portfolio approach, and well-established instruments can meet these needs:Offer technical support: Provide expert assistance at scale and disseminate technical knowledge widely to ensure effective execution while reducing credit and agricultural risks Monitor implementation progress: Consistently and closely track advancements in the implementation process, leveraging local expertise and technology Originate credit: Initiate credit facilities tailored to specific needs leveraging the enhanced risk assessment capabilities gained through closer proximity to the producer Partner: Reduce default risk by involving commercially relevant actors to producers Offtake contracts: Long-term offtake contracts will reduce the credit risk for small and medium producers Distribution of financing sources for soy Mato Grosso - Brazil, 2022/2023 48% 33% 19% Value Chain Financing Self-financing Banks CPRs4, CDCAs5, CDA/WA6, Duplicates, and Promissory Notes arising from the commercialization of agricultural productsLoans backed by agribusiness credit between financial institutions and rural producers/ cooperativesCombination of various investors pooling resources into an investment where over 50% of the net equity must be allocated to Credit RightsCRA1 LCA2 FIDCs3Source: IMEA, BCG analysis 1. Certificado de Recebíveis do Agronegócio - Agribusiness Receivables Certificate 2. Letra de Crédito do Agronegócio - Agribusiness Credit Bills 3. Fundo de Investimento em Direito Creditorio – Investment fund in Receivables 4. Rural Product Notes 5. Agricultural Credit Rights Certifi- cates 6. Agribusiness Receivables Certificates/Warehouse Receipts.