Resolution CMN No. 2164 — Provisions on Financial Charges and Renegotiation of Rural Credit Debts

RESOLUTION NO. 2164

Dispenses on financial charges and renegotiation of debts in rural credit.

The CENTRAL BANK OF BRAZIL, in accordance with Article 9 of Law No. 4.595, of December 31, 1964, makes public that the President of the NATIONAL MONETARY COUNCIL, by act of June 16, 1995, based on Article 8, paragraph 1, of Provisional Measure No. 1.004, of May 19, 1995, "ad referendum" of that Council, and considering the provisions of Article 4, item VI, of the cited Law, Articles 4 and 14 of Law No. 4.829, of November 5, 1965, and Articles 2 and 5 of Provisional Measure No. 1.023, of June 8, 1995,

R E S O L V E D:

Article 1. Operations contracted during the period from June 9, 1995, to July 31, 1996, under the auspices of controlled resources of rural credit, are exclusively intended for financing of operating expenses and Federal Government Loans (EGL), granted directly to the producer or passed on through their cooperatives, and are subject to an effective interest rate of up to 16% p.a. (sixteen percent per year).

Paragraph 1. Controlled resources of rural credit are considered those arising from the exigibility referred to in MCR 6-2, Official Credit Operations (OCO) under Supervision of the Ministry of Finance (MCR 6-6), destined for the mentioned purposes, and others that may be specified.

Paragraph 2. The EGL is restricted to products of future harvests, including the winter harvest in progress, admitting the inclusion of seed intended for planting the 1995/96 harvest.

Article 2. The amount of credit to each beneficiary, under the conditions established in the preceding article, throughout the National Rural Credit System (SNCR), is subject to the following limits and criteria:

I - R$300,000.00 (three hundred thousand reais), when destined for operating expenses or EGL/SOV of cotton, in which case:

a) if the limit is used in full, the beneficiary is prevented from obtaining the credits provided for in items II and III;

b) if the limit is used partially, the beneficiary may obtain the credits provided for in item II, observing the criterion established therein;

II - R$150,000.00 (one hundred and fifty thousand reais), minus half the values of credits granted for cotton, when destined for operating expenses or EGL/SOV of rice, beans, cassava, corn, and/or wheat. If the limit is used in full, the beneficiary is prevented from obtaining the credits provided for in items I and III;

III - R$30,000.00 (thirty thousand reais), when destined for any operating expense (agricultural or livestock) and EGL, provided it is granted to a producer with at least 80% (eighty percent) of annual gross income derived from the agricultural activity, observing that:

a) financing destined for operating expenses of products covered by the Minimum Price Guarantee Policy (PGPM), up to this limit, may be formalized with a product equivalence clause, at the option of the borrower, observing the provisions of Article 3 of Resolution No. 2,100, of August 24, 1994;

b) the use of credit with product equivalence, in any amount, or for operating expenses of crops other than rice, cotton, beans, corn, cassava, or wheat, prevents the beneficiary from using the credit limits provided for in items I and II;

IV - the limits established in this article are not cumulative and must be observed according to each harvest and purpose (operating expenses and EGL);

V - the financial institution must require the producer, at the time of credit formalization, under the penalties of law, a detailed declaration regarding the amount of credit obtained in other institutions under the auspices of controlled resources;

VI - the EGL limit destined for a product classified as seed will be established in the operational norms of the Minimum Price Guarantee Policy (PGPM).

Article 3. Rural credit operations under the auspices of other sources of resources, not considered as controlled, contracted during the period from June 9, 1995, to July 31, 1996, are subject to financial charges freely agreed upon between the parties.

Sole Paragraph. Excluded from the provisions of this article are operations formalized based on resources administered by the National Bank for Economic and Social Development (BNDES) or subject to their own regulation.

Article 4. Financing for operating expenses of rural activities is admitted under the revolving credit modality, upon presentation of a simplified budget.

Sole Paragraph. Revolving credit under the auspices of controlled resources is restricted to miniproducers and small producers and to a maximum limit of R$30,000.00 (thirty thousand reais).

Article 5. Authorize the renegotiation, for a minimum term of 1 (one) year and maximum of 2 (two) years, of a minimum installment of 20% (twenty percent) and maximum of 30% (thirty percent) of the value of installments due in 1995 and still unpaid or due until December 31, 1995, resulting from rural financings - admitting the inclusion of EGL installments contracted until the publication of this Resolution and due until January 31, 1996 - observing the following conditions:

I - excluding the value of due EGL installment, requirement of payment of, at least, 70% (seventy percent) of the value of the installments referred to in this article, calculated by applying the originally agreed-upon charges;

II - application of a discount on financial charges, equivalent to 1% p.m. (one percent per month) on the values to be paid and renegotiated, calculated from June 1, 1995, until the date of payment/renegotiation;

III - from the date of formalization of the renegotiation, the renegotiated debt becomes subject to financial charges limited to the Long-Term Interest Rate (TJLP).

Paragraph 1. The percentage to be renegotiated must be defined through a case-by-case examination, according to the debtor's payment capacity, and the maximum admitted may still be raised, at the discretion of the financial institution, when dealing with special situations provided for in MCR 2-6-9.

Paragraph 2. In the case of operating expense financing with a product equivalence clause, the payment referred to in item I may be made through the delivery of a document representing storage of units equivalent proportional to the required percentage, ensuring the debtor the mechanism of equivalence for settlement of the renegotiated percentage, with the delivery of product from the following harvest.

Paragraph 3. The renegotiated portion of EGL must be maintained under the original modality (COV or SOV) and, in the case of EGL/COV, the corresponding quantity of product may be released to the borrower, for replacement upon delivery of the same quantity of product from the following harvest.

Paragraph 4. The original maturity term must be maintained for the demand of the non-renegotiated portion of due EGL.

Paragraph 5. There will be concession of economic subsidy by the Union against the specific cost of the source of resources used in the operations, including to cover the financial effects resulting from the discount on charges, as authorized by Provisional Measure No. 1.023, of June 8, 1995.

Paragraph 6. The renegotiated values may be computed to satisfy the exigibility that will back them.

Article 6. The renegotiation referred to in the preceding article must be requested and formalized:

I - until August 31, 1995, in operations with maturity in the period from January 1, 1995, until the date of publication of this Resolution and in due EGL;

II - until 30 (thirty) days after the maturity date, in other due operations until December 31, 1995.

Article 7. Alter to May 31, 1996, the term established in Article 4, item I, of Resolution No. 2,080, of June 22, 1994, and admit a term until July 31, 1995, for renegotiations based on the aforementioned Resolution.

Article 8. For new EGL operations of the 1994/95 harvest, the operational norms published through Resolution No. 2,146, of March 2, 1995, prevail, and the previously effective charges.

Article 9. The Secretariat of Economic Monitoring, of the Ministry of Finance, and the Secretariat of Agricultural Policy, of the Ministry of Agriculture, Supply and Land Reform, are authorized to adopt measures and promote adjustments, including regarding the products to which the controlled resources are destined, indispensable for the implementation of the provisions of this Resolution, which will be published by the Central Bank of Brazil.

Article 10. Items 3-2-7, 3-2-8, 3-3-13, 3-3-15, 6-2-13 to 17, 6-2-19, 6-2-25, 6-6-6, and 6-6-7 of the Rural Credit Manual (MCR) and Resolutions Nos. 2,102, of August 24, 1994, 2,133, of December 26, 1994, and 2,160, of May 5, 1995, are revoked, without prejudice to the provisions codified in the aforementioned Manual.

Article 11. The pages necessary for the update of the Rural Credit Manual (MCR) are annexed, including the changes promoted through Resolution No. 2,132, of December 21, 1994, which is also hereby revoked.

Article 12. These provisions do not prevent the use of the stock of operations computable up to this date to satisfy the exigibility percentages, under the previously established conditions.

Article 13. This Resolution enters into force on the date of its publication.

Brasília, June 19, 1995

Gustavo Jorge Laboissière Loyola
President

TITLE: RURAL CREDIT
CHAPTER: Preliminary Provisions - 1
SECTION: Beneficiaries - 4

1 - Is a beneficiary of rural credit:
a) rural producer (natural or legal person); b) cooperative of rural producers.

2 - A natural or legal person who, although not qualifying as a rural producer, engages in the following activities linked to the sector may also be a beneficiary of rural credit:
a) research or production of monitored or certified seedlings or seeds; b) research or production of semen for artificial insemination; c) provision of mechanized services, of an agricultural nature, on rural properties, including for soil protection; d) provision of artificial insemination services, on rural properties; e) commercial fishing exploitation; f) crop measurement.

3 - The silviculturist may be a beneficiary of rural credit, provided that, if not emancipated, he is assisted by the National Indian Foundation (FUNAI), which must also sign the credit instrument.

4 - Is not a beneficiary of rural credit:
a) foreigner residing abroad; b) rural union; c) partner, if the partnership contract restricts access of any of the parties to financing.

5 - The granting of rural credit by official or mixed-economy financial institutions for fixed investments is prohibited:
a) to a branch of a company headquartered abroad; b) to a company whose majority of capital with voting rights belongs to natural or legal persons residing, domiciled, or headquartered abroad.

6 - The restriction of the preceding item:
a) does not apply to external resources that have been placed at the disposal of a financial institution by a foreign government, its agencies, or international organs, for pass-through to previously indicated persons; b) extends to private financial institutions, regarding applications with resources from development funds and programs; c) may be waived by the Ministry of Finance, in projects of high national interest.

7 - The beneficiary is classified as: (*) a) miniproducer - when having no annual gross agricultural income exceeding R$7,500.00 (seven thousand and five hundred reais); b) small producer - when, surpassing the parameter indicated in the previous letter, having no annual gross agricultural income exceeding R$22,000.00 (twenty-two thousand reais); c) other producers - when having annual gross agricultural income exceeding R$22,000.00 (twenty-two thousand reais).

8 - For the purposes of the preceding item:
a) annual gross agricultural income is considered as that predicted for a period of 1 (one) year of normal production, encompassing all agricultural activities explored by the producer, based on the minimum price on the date of classification or, in its absence, the market price determined by the operating agency; b) classification as miniproducer and small producer is conditioned on the fact that, at least, 80% (eighty percent) of their annual gross income must be derived from agricultural activity; c) gross income from poultry farming, horticulture, dairy cattle farming, pisciculture, sericulture, and swine farming must be discounted by 50% (fifty percent); d) in the case of co-owner or partner, only the gross income proportional to their participation in the co-ownership or partnership must be considered.

9 - The classification of cooperatives is done based on parameters established in a specific chapter of this manual.

10 - Subsequent reclassification of the beneficiary does not affect already formalized operations.

11 - The classification of the beneficiary is the exclusive responsibility of the financial institution, which must carry it out by means within its reach, keeping in its files the appropriate proofs, for inspection purposes.

TITLE: RURAL CREDIT
CHAPTER: Basic Conditions - 2
SECTION: Expenses - 4

1 - Rural credit is subject to the following expenses:
a) financial remuneration; b) tax on credit operations; c) cost of service provision; d) commission on Federal Government Loans - EGL; e) additional of the Program for Guarantee of Agricultural Activity (PROAGRO); f) monetary sanctions.

2 - No other expense may be charged to the borrower, except the exact value of expenses incurred on his account by the financial institution or resulting from express legal provisions.

3 - The financial remunerations are the following, according to the origin of the applied resources: (*) a) controlled resources: effective interest rate of up to 16% p.a. (sixteen percent per year); b) uncontrolled resources: freely agreed upon between the parties.

4 - Credit granted to a cooperative for pass-on to members is subject to the same remuneration provided for sub-loans, minus the remuneration to which the cooperative is entitled.

5 - Financial remuneration is due together with principal installments, proportionally to the nominal values of each.

6 - The Reference Rate (TR) is used in the manner of the regulation applicable to active and passive operations practiced within the scope of the financial market, issued by the Central Bank of Brazil, and the time and method of calculation of the fixed interest portion and free agreement between financed and financier.

7 - The granting of rural credit at rates lower than those practiced in financings with mandatory resources is prohibited, except in the case of:
a) express norm of the Central Bank of Brazil, in a specific program or credit line; b) operation backed by fiscal resources transferred to the financial institution by the federal or state public treasury.

8 - The tax on credit operations is due, calculated, and collected according to rates and form established in the Manual of Norms and Instructions of the Central Bank of Brazil - MNI.

9 - The borrower may be charged the cost of:
a) technical guidance at the enterprise level; b) technical study (plan or project), evaluation, examination of writing, expertise, and prior inspection; c) other third-party services.

10 - In the case of group technical guidance at the enterprise level, its cost cannot exceed:
a) 0.3% (three tenths of a percent) of the value of the budget or Basic Operating Value (BOV), due at the time of opening the credit; b) 0.3% p.a. (three tenths of a percent per year), due on June 30, December 31, and at maturity or liquidation of the debt, if early, incident on the balances of the linked account after the first year of operation validity, plus proportional own resources, corrected by the same criteria applicable to rural credit granted with mandatory resources.

11 - In the case of individual technical guidance at the enterprise level, its cost cannot exceed:
a) 2% (two percent) of the value of the budget or BOV, due at the time of opening the credit; b) 2% p.a. (two percent per year), due on June 30, December 31, and at maturity or liquidation of the debt, if early, incident on the balances of the linked account after the first year of operation validity, plus proportional own resources, corrected by the same criteria applicable to rural credit granted with mandatory resources.

12 - Total expenses of isolated technical study (plan or project), evaluation, examination of writing, expertise, and prior inspection are limited to:
a) 0.5% (five tenths of a percent) of the value of the budget or BOV related to the proposed operation; b) 0.5% (five tenths of a percent) of the outstanding balance of the ongoing operation, plus proportional own resources, corrected by the same criteria applicable to rural credit granted with own resources.

13 - The cost of the technical study (plan or project) is covered by the remuneration of technical guidance at the enterprise level, when its provision is required.

14 - The cost of isolated technical study regarding successive operating expenses applies only to the budget of the first year.

15 - Registration, portfolio-level technical advisory, inspection, or crop and pasture measurement expenses cannot be charged to the borrower, unless explicit permission in this manual.

16 - Reimbursement of the cost of crop or pasture measurement, when due from the borrower or PROAGRO, cannot exceed the limits fixed in document No. 28 of this manual, prohibiting the charging of additional expenses (transport, lodging, food, and similar).

17 - Payment of service to third parties depends on:
a) evidence of its necessity; b) prior written authorization of the borrower.

18 - It is permitted to capitalize in the account linked to the operation, on the due date, the cost of service provision.

19 - The norms regarding the PROAGRO additional charge and commission on EGL are contained in specific sections of this manual.

20 - Monetary sanctions, regardless of the origin of resources, are agreed upon between financed and financier based on the same parameters applicable to common banking operations.

21 - Unless express provision to the contrary, when due from financial institutions, monetary sanctions in rural credit consist of:
a) updating daily the values in debt, based on the Reference Rate (TR); b) applying on the updated values in the manner of the previous letter an effective interest rate of 24% p.a. (twenty-four percent per year).

22 - By delegation of the National Monetary Council, the Central Bank of Brazil may, at any time, establish new parameters for monetary sanctions, if it considers that market conditions recommend it.

23 - Charging undue or excessive expenses constitutes a serious offense, for the purposes of Article 44 of Law No. 4595, of December 31, 1964.

TITLE: RURAL CREDIT
CHAPTER: Basic Conditions - 2
SECTION: Inspection - 7

1 - Inspection of rural credit is mandatory.

2 - Inspection must be carried out:
a) in agricultural operating credit: at least once during the operation, before the expected time for release of the last installment or until 60 (sixty) days after the use of credit, in the case of single installment release; b) in Federal Government Loan (EGL): as provided in the Minimum Prices Operations Manual; c) in other financings: until 60 (sixty) days after each use, to prove the realization of works, services, or acquisitions.

3 - It falls to the inspector to verify the correct application of budgetary resources, the development of financed activities, and the situation of guarantees, if any.

4 - Any omission or negligence in verifying the correct application of budgetary resources constitutes a serious fault, subjecting the offender to regulatory sanctions.

5 - The result of the inspection must be recorded in a specific report, with portfolio-level technical advisory noting in a proper field or in an attached document, part of the report, the measures adopted by the agency to remedy any irregularities found.

6 - Inspection may be carried out by an element of the financial institution itself or by a specialized natural or legal person, through agreement.

7 - Inspection is prohibited:
a) by a natural or legal person hired directly by the borrower to provide him with technical assistance at the enterprise level; b) by a company in which the borrower participates directly or indirectly.

8 - Sampling inspection is permitted in credits of value not exceeding R$6,500.00 (six thousand and five hundred reais), without prejudice to indirect controls. (*)

9 - Sampling consists of inspecting directly at least 10% (ten percent) of the credits indicated in the preceding item, approved in each agency in the last twelve months.

10 - The agency must select credits for sampling based on criteria of wide diversification of borrowers, purposes, and regions.

11 - Direct inspection of all credits approved for the same borrower is required when the sum of their values exceeds R$6,500.00 (six thousand and five hundred reais). (*)

12 - It falls to the beneficiary cooperative for pass-on credit to inspect sub-loans, and the financier may also exercise it, if deemed convenient.

13 - Measurement of the crop or pasture is mandatory, as an integral part of inspection, when the area of a culture financed by the same financial institution exceeds 1,000 hectares on the same property, unless the financing is destined exclusively for the isolated acquisition of agricultural pesticides and their respective application.

14 - The provisions in the preceding item do not prejudice the requirement for measurement resulting from specific regulations of the Agricultural and Livestock Activity Guarantee Program - PROAGRO.

15 - Measurement must be carried out in a timely manner to determine the extent of the planted area.

16 - Proof that the area does not exceed 1,000 hectares must be provided as part of normal inspection services, using routine methods.

17 - The Central Bank of Brazil may require measurement of crops or pastures whenever, in its judgment, the analysis of data from the Common Registry of Rural Operations (RECOR) indicates this is appropriate.

18 - The presentation of spreadsheets, maps, sketches, or similar documents, with characterization of reference points and proof of the methodology adopted in the measurement, is required whenever the measured area exceeds 1,000 hectares.

19 - Measurement may be carried out by a service provider company, a professional hired specifically for the purpose, or by the staff of the financial institution.

20 - Measurement by a professional from the staff of the lending cooperative is admissible for the purpose of supervising sub-loans.

21 - Except in PROAGRO expert assessments, the measurement of crops or pastures constitutes an inspection service, with expenses borne by the financier.

22 - In the case of measurement requested by the Central Bank of Brazil, its cost must be shared among financial institutions, proportionally to the financed area in each.

23 - The borrower may be required to reimburse expenses incurred with inspection or measurement of crops and pastures in the case of:
a) failed inspection or measurement due to their fault; b) extraordinary inspection or measurement, carried out due to irregularity in their conduct; c) inspection or measurement where a reduction of more than 20% (twenty percent) in the planted area is proven, compared to that declared in the credit instrument.

24 - The Central Bank of Brazil is authorized to inspect rural credit operations carried out by financial institutions, including with borrowers, and the credit instrument must contain an explicit clause to this effect.

25 - The financial institution must designate an inspector to carry out inspections at the rural property level, jointly with representatives of the Central Bank of Brazil, without cost to the latter, whenever such designation is requested by that Agency's inspection.

26 - The Central Bank of Brazil grants interest of 12% p.a. (twelve percent per annum) and adjustment based on the Reference Rate (TR) on collections required from financial institutions in administrative proceedings and similar, regarding rural credit, when their return occurs due to the provision of an appeal lodged. (*)

TITLE: RURAL CREDIT
CHAPTER: Operations - 3
SECTION: Working Capital Credits - 2

1 - Working capital is classified as:
a) agricultural working capital; b) livestock working capital; c) processing or industrialization working capital.

2 - Working capital credit may be intended to meet normal expenses:
a) of the production cycle of periodic crops, the off-season of permanent crops, or the extraction of spontaneous vegetable products, including primary processing of the obtained production and its storage on the rural property or in a cooperative; b) of livestock exploitation; c) of processing or industrialization of agricultural and livestock products.

3 - For the purposes of working capital credit, apiculture, aviculture, pisciculture, and sericulture are considered livestock exploitation.

4 - The amount of working capital credits backed by controlled resources, for each borrower, non-accumulative, in each harvest and throughout the National Rural Credit System (SNCR), is subject to the following limits and criteria: (*) a) R$300,000.00 (three hundred thousand reais), when intended for cotton, in which case:
I - if the limit is used in full, the beneficiary is prohibited from obtaining the credits provided for in items "b" and "c"; II - if the limit is used partially, the beneficiary may obtain the credits provided for in item "b", observing the criterion established therein. b) R$150,000.00 (one hundred and fifty thousand reais), reduced by half the value of credits granted for cotton, when intended for rice, beans, cassava, corn, or wheat. If the limit is used in full, the beneficiary is prohibited from obtaining the credits provided for in items "a" and "c"; c) R$30,000.00 (thirty thousand reais), when intended for any working capital (agricultural or livestock), provided it is granted to a producer with at least 80% (eighty percent) of annual gross income from the agricultural and livestock activity, observing that:
I - loans intended for working capital of products supported by the Minimum Price Guarantee Policy (PGPM), up to R$30,000.00 (thirty thousand reais), may be formalized with a product equivalence clause, at the borrower's option; II - the use of credit with product equivalence, in any amount, or for working capital of crops other than rice, cotton, beans, corn, cassava, or wheat, prevents the beneficiary from using the credit limits provided for in items "a" and "b".

5 - The budget may include funds for:
a) meeting small expenses conceptualized as investment, provided they can be settled with the product of the exploitation in the same cycle (repairs or renovations of production assets and facilities, acquisition of draft animals, clearing, stumping, and similar); b) maintenance of the beneficiary and their family, except when it concerns a large producer (acquisition of animals intended for production necessary for subsistence, purchase of medicines, clothing, blankets, clothes, and household utilities, construction or renovation of sanitary facilities, and other expenses indispensable to family well-being).

6 - The portion of the budget intended for the maintenance of the producer and their family cannot exceed the equivalent of R$100.00 (one hundred reais) per month, and is further limited to:
a) 15% (fifteen percent) of the credit amount, when there is payment of third-party labor; b) 30% (thirty percent) of the estimated production, when there is no payment of labor.

7 - It is admitted that a rural credit cooperative, with its own resources, grants isolated working capital financing to small producers for the purchase of medicines, clothing, blankets, household utilities, and satisfaction of other fundamental expenses for family well-being. (*)

8 - In the granting of agricultural working capital credit for products with Basic Working Capital Value (VBC), the presentation of an analytical budget is waived, and it is up to the borrower to allocate the resources to the normal expenses of the exploitations, according to their peculiarities.

9 - In the case of consortium, the financing limit applies to the sum of the VBC attributed to each crop.

10 - For the definition of the VBC according to the productivity range, according to documents No. 2 and 3, the following criteria must be observed:
a) cultivation of the same species, conducted with technical assistance: the highest productivity actually achieved in one of the last three normal harvests with technical assistance is considered; b) initial cultivation, conducted with technical assistance: the regional average productivity is considered, admitting that provided in the project, when technically justified; c) cultivation of the same species, conducted without technical assistance: the highest productivity achieved in one of the last three normal harvests is considered; d) initial cultivation, conducted without technical assistance: the regional average productivity is admitted as the maximum.

11 - The VBC does not include technical assistance expenses, which may be fully financed as an additional portion of the financing limit, regardless of the size of the producer or cooperative.

12 - It is prohibited to approve credit to meet expenses whose times or cycles of realization have already passed, although it is admitted to consider as own resources expenses already incurred.

13 - The granting of financing for working capital of subsequent crops, in areas conducive to two or more harvests per agricultural year, should not be conditioned on the settlement of the debt related to the previous cycle, unless the time between successive crops is sufficient for the harvest commercialization process.

14 - The livestock working capital budget may include funds for cleaning and restoration of pastures, haymaking, silage, and formation of periodic forages with a cycle not exceeding two years, for consumption by the own herd.

15 - Credit for processing or industrialization working capital:
a) may be granted separately or as an extension of agricultural or livestock working capital; b) may only be approved for a cooperative when more than half of the raw material to be processed or industrialized is of own production or from members.

16 - Working capital credit may have the following maximum terms:
a) agricultural working capital ................................. 2 years b) livestock working capital ................................. 1 year c) processing or industrialization working capital .... 2 years

17 - The term of processing or industrialization working capital credit cannot exceed 180 (one hundred and eighty) days from the end of the utilization period nor the beginning of the next harvest, except in special cases, with express justification.

18 - For the granting of working capital credit, special norms contained in document No. 4 of this manual must also be observed, when applicable, which prevail over those in this section if they conflict with them.

TITLE: RURAL CREDIT
CHAPTER: Operations - 3
SECTION: Investment Credits - 3

1 - The following fixed investments are financeable:
a) construction, renovation, or expansion of permanent improvements and facilities; b) acquisition of machinery and equipment with an expected useful life exceeding five years; c) irrigation, dam construction, drainage, soil protection, and recovery works; d) clearing, stumping, afforestation, and reforestation; e) formation of permanent crops; f) formation or recovery of pastures; g) rural electrification and telephony.

2 - The following semi-fixed investments are financeable:
a) acquisition of small, medium, and large animals for breeding, rearing, fattening, or service; b) facilities, machinery, and equipment with an expected useful life not exceeding five years; c) acquisition of vehicles, tractors, combines, implements, vessels, and aircraft; d) acquisition of equipment used in crop measurement.

3 - The budget may include funds for:
a) project or plan expenses (working capital and administration); b) maintenance of the beneficiary and their family, except when it concerns a large producer (acquisition of animals intended for production necessary for subsistence, purchase of medicines, clothing, blankets, clothes, and household utilities, construction or renovation of improvements, and other expenses indispensable to family well-being); c) recovery or renovation of machinery, tractors, vessels, vehicles, and equipment, as well as acquisition of accessories or replacement parts, unless resulting from a loss covered by insurance.

4 - The financed machinery, tractors, vehicles, vessels, aircraft, equipment, and implements must be specifically intended for agriculture and livestock:

5 - The following types of vehicles are financeable:
a) trucks, including refrigerated, insulated, or bulk carriers; b) cargo vans and mixed or multiple use; c) jeeps and other rural utilities; d) motorcycles suitable for rural conditions, when technically and economically recommended for small or medium producers.

6 - Credit for the acquisition of trucks is conditioned on proof of the possibility of their full employment in the agricultural and livestock activities of the buyer for at least one hundred and twenty days per year.

7 - Financing of a vehicle classified as a passenger vehicle, by type or finish, is prohibited.

8 - Credit is classified as investment when it has a predominance of funds for fixed and semi-fixed investments, backed by an integrated project, even if the budget also allocates resources for working capital expenses.

9 - Credit is conceptualized as investment when intended for:
a) foundation or expansion of sugarcane crops, including preliminary works, planting, and subsequent treatments until the first harvest (sugarcane plant); b) renewal of sugarcane crops in areas previously occupied by sugarcane fields with an exhausted production cycle (sugarcane plant, ratoon, and second ratoon), including all necessary expenses until the first harvest, according to the previous item.

10 - It is the responsibility of Banco do Brasil S.A., at the time of granting "warrantage" loans or paying other credits arising from production or commercialization, to withhold the portion of the value of the sugar sack or liter of alcohol necessary for the redemption of financing for the formation or renewal of sugarcane, granted to mills and distilleries in the Northeast by other banking establishments.

11 - The beneficiary of investment credit related to livestock must:
a) adopt prophylactic and sanitary measures to defend herds; b) mark animals, with strict observance of legal norms.

12 - It is prohibited to grant credit for the acquisition of potato washing equipment.
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13 - Financing is subject to the following maximum terms, which include the grace period:
a) fixed investment............................... 12 years; b) semi-fixed investment .......................... 6 years.
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TITLE: RURAL CREDIT
CHAPTER: Special Purposes - 4
SECTION: Federal Government Loans (EGF) - 1

1 - Federal Government Loans (EGF) comprise:
a) with sales option (EGF/COV) - intended to provide the beneficiary with conditions to commercialize their products at a time of more favorable prices, also allowing them to sell the financed product to the National Supply Company (CONAB); b) without sales option (EGF/SOV) - intended to provide financial resources to the beneficiary, allowing them to store and conserve their products for future sales under better market conditions.

2 - The Central Bank of Brazil has no authority over Federal Government Acquisitions (AGF), being exclusively responsible for exercising activities of norms, inspection, and control related to EGF.

3 - As a result of the provisions in the preceding item, it is incumbent upon the Central Bank of Brazil, without prejudice to other legal or regulatory duties:
a) establish general norms applicable to EGF, in accordance with deliberations of the Monetary National Council or due to its specific duties; b) coordinate with CONAB, with a view to monitoring and improving the granting and conduct of loans by financial institutions.

4 - It is incumbent upon CONAB:
a) elaborate and publish specific operational norms applicable to EGF; b) exercise control over financed stocks, being able to inspect them, at its discretion; c) promptly communicate to the Central Bank of Brazil any irregularity of which it becomes aware, regarding EGF; d) within the limits of its duties, determine to financial institutions, with notice to the Central Bank of Brazil, the appropriate adjustments and corrections in the granting or conduct of loans.

5 - It is incumbent upon the financial institution:
a) formalize the loans and exercise control over them, including regarding the inspection of guarantees; b) institute a special system of accounting and statistical control of the loans; c) provide the Central Bank of Brazil with the information requested.

6 - EGF is classified as commercialization credit.

7 - Loans may be granted to:
a) rural producers or their cooperatives; b) other categories of natural or legal persons, when of interest to the Minimum Price Guarantee Policy, with authorization from the Monetary National Council.

8 - The amount of EGF credits backed by controlled resources, for each borrower, non-accumulative, in each harvest and throughout the National Rural Credit System (SNCR), is subject to the following limits and criteria: (*) a) R$300,000.00 (three hundred thousand reais), when intended for cotton, in which case:
I - if the limit is used in full, the beneficiary is prohibited from obtaining the credits provided for in items "b" and "c"; II - if the limit is used partially, the beneficiary may obtain the credits provided for in item "b", observing the criterion established therein. b) R$150,000.00 (one hundred and fifty thousand reais), reduced by half the value of credits granted for cotton, when intended for rice, beans, cassava, corn, or wheat. If the limit is used in full, the beneficiary is prohibited from obtaining the credits provided for in items "a" and "c"; c) R$30,000.00 (thirty thousand reais), when intended for any product, provided it is granted to a producer with at least 80% (eighty percent) of annual gross income from the agricultural and livestock activity, observing that the EGF beneficiary for a product other than rice, beans, cassava, corn, or wheat, is prohibited from using the limits provided for in items "a" and "b".

9 - Except when granted to rural producers or their cooperatives, EGF is subject to a commission of 1.25% (one whole and twenty-five hundredths percent) in favor of CONAB, incident on the total value of the financing.

10 - In the case of EGF related to products linked to working capital financing, the released resources must be transferred by the financial agent to the creditor financial institution, up to the value necessary for the settlement of the outstanding balance.

11 - EGF/COV can only be transformed into AGF at the time of amortizations or settlement provided for in the credit instrument, unless express authorization to the contrary, retransmitted by the Central Bank of Brazil.

12 - Although freely agreed upon by the parties, EGF guarantees must incorporate the pledge of stored products.

13 - Financeable products are indicated in document No. 15 of this manual.

14 - At the time of EGF amortization, interest on the amortized value must be calculated and demanded, counted from the last capitalization.

15 - By the third business day of each ten-day period, the financial institution must provide the Department of Organization of the Financial System (DEORF) of the Central Bank of Brazil with the information indicated in document No. 16 of this manual, covering operations formalized in the year, cumulatively, up to the previous ten-day period.

16 - The following apply to EGF:
a) the general norms of this manual, which do not conflict with the special provisions of this section; b) the norms elaborated by CONAB, which do not conflict with the provisions of this manual.

TITLE: RURAL CREDIT
CHAPTER: Resources - 6
SECTION: General Provisions - 1

1 - Rural credit may be granted with resources:
a) mandatory, as conceptualized in the following section; b) from capture in time deposits linked to rural activity financing (Law No. 8.023, of 12.04.90); c) from the rural savings account; d) from the free savings account; e) from funds, programs, and specific lines; f) free.

2 - The financial institution must indicate in the credit instrument the source of the resources used in the financing, observing the classification of the preceding item, registering the name of the fund, program, or specific line, if applicable.

3 - Mandatory resources of rural credit are considered to be those from mandatory applications, those from Official Credit Operations under the Supervision of the Ministry of Finance, and others that may be specified. (*)

4 - The use of the Interbank Deposit Linked to Rural Credit (DIR) is admitted as a complementary instrument for applications in the rural sector.

5 - The relevant regulation for interbank deposits applies to the DIR, except regarding limits, which are subject only to the excess of applications of the depositing institution under the conditions established for mandatory resources.

6 - The transfer of debt backed by mandatory resources or Official Credit Operations is prohibited, except when:
a) indispensable for the recovery of the credit or the preservation of the assisted enterprise; b) resulting from the division of a rural property, donation, inventory, judicial separation of spouses, or divorce; c) the assignee is a company in which the original debtor participates predominantly.

7 - When the sole basis is the purpose of recovering the credit or preserving the assisted enterprise, the debt transfer provided for in the preceding item is subject to the condition that interest rates are raised to the levels current for operations of the same nature and purpose on the date of its effective implementation.

8 - It is up to the financial institution, in any case and with specific justification, to decide on the request for debt transfer.

9 - The definition of norms, procedures, and operational conditions for the application of resources from regional financing constitutional funds is the responsibility of the financial institutions managing the resources.

10 - Regardless of the origin of the resources, their application in the agricultural and livestock sector is only considered rural credit when the norms established in this manual are observed, except for the provisions in the preceding item.

TITLE: RURAL CREDIT
CHAPTER: Resources - 6
SECTION: Mandatory Resources - 2

1 - Mandatory resources are conceptualized as the requirement for applications in rural credit, calculated in the manner of the following items.

2 - Financial institutions are obliged to maintain a daily average balance of applications in rural credit not lower than 25% (twenty-five percent) of the daily average balance of accounting items subject to compulsory collection.

3 - For the calculation of the average balance of accounting items and applications, non-business days are disregarded.

4 - The calculation period for the requirement begins on the first business day and ends on the last business day of each month.

5 - The adjustment period is understood as the period in which the requirement calculated in the calculation period must be fulfilled.

6 - The adjustment period begins on the first business day and ends on the last business day of the month following the calculation period.

7 - For fulfillment of the requirement, applications are computed based on the debtor balance of the operations.

8 - The following are not subject to the requirement:
a) investment banks; b) development banks; c) Caixa Econômica Federal; d) National Bank for Economic and Social Development; e) credit cooperatives; f) credit, financing, and investment companies.

9 - Credits granted for working capital and commercialization (EGF) may be computed for satisfaction of the requirement. (*)

10 - The following may also be computed for satisfaction of the requirement: (*) a) capitalized interest on rural credit operations carried out with resources from development programs, transferred by the National Treasury, provided they are backed by resources of the financial institutions; b) excess applications in rural credit operations carried out with resources from Remunerated Special Deposits (DER), until their extinction, provided they were formalized by 09.06.95 and directed toward the purposes provided for in this section; c) by the depositing financial institution, regardless of proof of the directions now established, which are the responsibility of the depositary institution, the value of the Interbank Deposit Linked to Rural Credit (DIR), with a minimum term of 180 (one hundred and eighty) days, its negotiation in the secondary market being prohibited.

11 - The following cannot be computed for satisfaction of the requirement: operations or credit installments whose financial charges have been readjusted due to the borrower's default, starting from the day following the default. (*)

12 - At least 50% (fifty percent) of the requirement must be satisfied with credits granted directly, or passed on by cooperatives, to mini-producers and small producers. (*)

13 - The financial institution must present to the Central Bank of Brazil, on the fifth business day of the month following the end of the adjustment period, a control statement of compliance with the requirement, according to document No. 24 of this manual. (*)

14 - The financial institution that fails to meet the requirement is subject to the payment of costs and pecuniary penalties.

15 - The cost is due on the daily deficiency verified in relation to the following percentages of the requirement:
a) 25% (twenty-five percent), from the first to the fifth business day of the month; b) 50% (fifty percent), from the sixth to the tenth business day of the month; c) 75% (seventy-five percent), from the eleventh to the fifteenth business day of the month; d) 100% (one hundred percent), from the sixteenth to the last business day of the month.

16 - The cost on the daily deficiency, calculated as in the previous item, is due on the following business day, being calculated based on the adjusted average rate of all financing operations registered in the Special Settlement and Custody System (SELIC), regardless of the characteristics of the securities, increased by 30% (thirty percent) per year.

17 - The pecuniary penalty is due on the deficiency of the average applications of the adjustment period in relation to the total of the requirement.

18 - The pecuniary penalty is due on the business day following the adjustment period, applying to the value of the deficiency calculated, considering the number of days of the period and the adjusted average rate of all financing operations registered in SELIC, increased by 45% (forty-five percent) per year. (*)

19 - Instead of the pecuniary penalty, the financial institution may opt to pay to the Central Bank of Brazil, on the first business day following the adjustment period, the value of the deficiency calculated.

20 - The value paid in accordance with the previous item will be retained at the Central Bank of Brazil, without any remuneration, until the last day of the new adjustment period or, if in the interest of the financial institution, until the last day of subsequent periods, and may be computed for satisfaction of the requirement. (*)

21 - It is the responsibility of the financial institution to initiate the payment of the cost and pecuniary penalty, as well as the initiation of the payment of the value of the deficiency calculated, through debit authorization in the "BANKING RESERVES" account, on the due dates, regardless of any notice or collection by the Central Bank of Brazil.

22 - Omission of the measure referred to in the previous item is considered a serious offense.

23 - Late payment of the cost and pecuniary penalty is subject to the addition of the pecuniary sanctions provided for in this manual, from the date they were due until effective payment.

24 - The value to be paid must be reported by the financial institution to the Central Bank of Brazil/Department of Organization of the Financial System/Rural and Agroindustrial Credit Division (DEORF/DIRAI) by 16:00 (fourteen hundred hours) on the day scheduled for payment, for the purpose of timely debit in the "BANKING RESERVES" account.

25 - The general rules of rural credit that do not conflict with the special provisions of this section apply to operations backed by mandatory resources.

TITLE: RURAL CREDIT
CHAPTER: Resources - 6
SECTION: Linked Deposits - 3

1 - Financial institutions part of the National Rural Credit System (SNCR) authorized to receive time deposits may accept deposits linked to the financing of rural activity as provided for in Art. 9 of Law No. 8.023, of 12.04.90, observing the following conditions:
a) without issuance of certificate; b) non-transferable nominative modality; c) term and remuneration freely adjusted between the parties.

2 - The total amount of deposits collected must be directed to rural credit operations, observing the following conditions:
a) at least 60% (sixty percent) under the conditions established for financing with mandatory resources; b) up to 40% (forty percent) under the conditions established for financing with free resources.

3 - The financial institution that does not wish to apply in rural credit the resources collected may transfer them to another, through the use of the Interbank Deposit Linked to Rural Credit (DIR).

4 - It is the responsibility of the depositary institution of the resources received in accordance with the previous item to apply them in rural financing, under the conditions provided for in this section.

5 - The financial institution that fails to apply the resources for the purposes provided for in this section must pay them to the Central Bank of Brazil, where they will be retained for a period of 30 (thirty) days, without any remuneration.

6 - The financial institution must maintain control of the collected resources, in a manner that allows it to provide the depositor, by January 30 of the following year, an informative document of the annual average balance of its deposits, observing the instructions issued by the Federal Revenue Secretariat.

7 - The financial institution must present to the Central Bank of Brazil/Department of Organization of the Financial System (DEORF), by the last business day of the first half of each month, a control statement of the values collected and applied in the previous month, according to document No. 26 of this manual.

8 - The general rules of rural credit that do not conflict with the special provisions of this section apply to the operations.

TITLE: RURAL CREDIT
CHAPTER: Resources - 6
SECTION: Rural Savings Book - 4

1 - This section deals with rural credit operations carried out under the support of resources from the Rural Savings Book, collected according to the rules fixed for free savings deposits and destined for the development of agriculture.

2 - The following financial institutions are authorized to grant credit with resources from the Rural Savings Book:
a) Banco da Amazônia S.A.; b) Banco do Brasil S.A.; c) Banco do Nordeste do Brasil S.A.

3 - At least 65% (sixty-five percent) of the resources collected in the Rural Savings Book must be destined to rural credit operations; excess applications occurred in other requirements may be computed for compliance with this percentage. (*)

4 - Banco da Amazônia S.A. and Banco do Nordeste do Brasil S.A. must apply in credits for irrigation at least 10% (ten percent) of the percentage indicated in the previous item.

5 - The remainder of the resources collected in the Rural Savings Book, up to the limit of 20% (twenty percent) of the total collection, may be applied:
a) by Banco do Brasil S.A. in complementary agricultural credit; b) by Banco da Amazônia S.A. and Banco do Nordeste do Brasil S.A. in agricultural credit with a term not less than 180 (one hundred and eighty) days.

6 - The provision in the previous item does not prevent the application of the cited amount of 20% (twenty percent), total or partially, in other purposes other than rural credit, according to specific regulation issued by the Central Bank of Brazil.

7 - Resources destined for rural credit and not applied in that purpose are paid to the Central Bank of Brazil, which updates them monthly by the same index of update of free savings deposits.

8 - The adjustment of positions is carried out on the 15th of each month or on the first business day following, if that date coincides with a non-business day.

9 - Monthly the financial institution must prepare a control, monitoring, and position adjustment statement, according to document No. 27 of this manual.

10 - The first copy of the monthly statement must be sent to the Central Bank of Brazil by the second business day prior to the date of position adjustment.

11 - In the event of untimeliness in the payment of values to the Central Bank of Brazil, due to delay in delivering the monthly statement or as a result of its reformulation, the financial institution is subject to the payment of the following charges:
a) Reference Rate (TR); b) interest of 30% p.a. (thirty percent per year).

12 - The charges established in the previous item apply to the values to be paid and are counted from the date scheduled for position adjustment until the second business day following the delivery of the statement.

13 - The values due by the financial institution are debited from its "BANKING RESERVES" account, by notice.

14 - Rural credit backed by resources from the requirement of the Rural Savings Book is subject to financial charges freely agreed upon between the parties, except for subsidized operations. (*)

15 - The general rules of rural credit that do not conflict with the special provisions of this section apply to the operations.

TITLE: RURAL CREDIT
CHAPTER: Resources - 6
SECTION: Development Programs - 6

1 - This section deals with operations carried out with resources destined to development programs for agriculture, consigned in the Special Programming for Official Credit Operations of the General Budget of the Union.

2 - It is the responsibility of the Secretariat of the National Treasury to manage the resources referred to in the previous item.

3 - It is up to the Executive Secretary of the Ministry of Finance to decide on the credit limit of each financial institution to carry out operations with resources from development programs, after hearing the Credit Limits Commission - CLC.

4 - It is the responsibility of the Central Bank of Brazil, in the conduct of operations with resources from development programs:
a) accredit financial institution, observing the parameters defined by the CLC, for the specific purpose of operating with resources originating from external loans, when the requirement of accreditation is provided for in the loan agreement signed with the international financial organism; b) publish norms and instructions necessary for the fulfillment of deliberations of the Monetary National Council, regarding credits granted by the financial institution; c) supervise, to the extent that the Law attributes to it, the operations carried out by the financial institution; d) supervise the fulfillment of norms regarding loans granted to the financial institution by the National Treasury, including regarding calculation of charges due and equalization of monetary update and interest; e) send to the Secretariat of the National Treasury a report on the performance of the financial institution, whenever irregularities are verified; f) make credits in the "BANKING RESERVES" account of the financial institution, upon request of the Secretariat of the National Treasury; g) make debits in the "BANKING RESERVES" account of the financial institution, for credit of the National Treasury, upon request of the Secretariat of the National Treasury, after authorization of the account holder.

5 - The Central Bank of Brazil, in the examination of the request for accreditation of the financial institution, will take into account mainly:
a) the evidence of equilibrium of its economic-financial situation; b) the efficiency of the specialized sector, of advisory at portfolio level and of technical assistance at company level; c) the distribution of its branches in view of the interest of ensuring wide dissemination of resources; d) the tradition in rural and agroindustrial credit. (*)

6 - The general rules of rural credit that do not conflict with the special provisions of this section apply to the operations.

MCR DOCUMENT No. 28

CROP OR PASTURE MEASUREMENT COST

1 - AEROPHOTOGRAmmetric METHOD:

• R$56.93 (fifty-six reais and ninety-three centavos) for crops or pastures with area not exceeding 50 ha;

• R$18.97 (eighteen reais and ninety-seven centavos) per kilometer of the perimeter of the measured area, in the case of crops or pastures with total area exceeding 50 ha.

2 - TRADITIONAL METHODS:

area tariff

up to 5 ha .............................................. R$38.21 from 5 ha to 10 ha ....................................... R$6.82/ha from 10 ha to 50 ha ...................................... R$2.87/ha from 50 ha to 100 ha ..................................... R$2.32/ha from 100 ha to 200 ha .................................... R$1.84/ha from 200 ha to 400 ha .................................... R$1.23/ha from 400 ha to 600 ha .................................... R$0.95/ha from 600 ha to 800 ha .................................... R$0.82/ha from 800 ha to 1,000 ha .................................. R$0.75/ha from 1,000 ha to 2,000 ha ................................ R$0.68/ha from 2,000 ha to 5,000 ha ................................ R$0.48/ha from 5,000 ha to 10,000 ha ............................... R$0.41/ha above 10,000 ha ........................................ R$0.21/ha

Notes: a) the classification into the various ranges is made by the total area calculated, even if the crops or pastures are located in distinct plots;

b) in any case, the remuneration corresponding to the maximum area of the immediately preceding range is assured.