The Brazil government plans to raise $2 billion for sustainable projects through a new auction as part of the Eco Invest program. The initiative focuses on recovering degraded pastures across the country.
The blended finance auction will combine public and private capital to support land restoration efforts. The government expects to mobilize external private capital and matching funds from domestic financial institutions.
Rogério Ceron, Brazil Treasury Secretary, stated the country has the capacity for a large land-restoration program. He noted strong international interest and aims to recover around 1 million hectares under the best-case scenario.
The auction involves financial institutions competing for the right to operate foreign capital loans raised via Eco Invest. They must offer matching contributions and currency hedging guarantees. Leverage ratio will be a selection factor.
Officials anticipate mobilizing $1 billion in foreign capital and $500 million from domestic institutions initially. A source suggested leverage could increase the total private contribution, potentially reaching $1 billion private against $1 billion public funding from the Climate Fund. At least 60% of leveraged capital must come from foreign sources.
The new auction supports the National Program for the Conversion of Degraded Pastures, launched in 2023. This program aims to recover low-productivity lands and expand food production without increasing deforestation.
Challenges remain regarding interest rates for farmers. The original goal of capping rates at 6.5% annually has been dropped due to changes in the Selic, Brazil’s benchmark interest rate. Rates could climb, potentially exceeding existing program lines like the Crop Plan's pasture recovery line.
Recent regulatory changes approved by the CMN expanded financial instruments usable with Eco Invest's blended finance line. These include investment fund shares and structured products like Agribusiness Receivables Certificates and Rural Product Bills. The changes also allow small-scale farmers using PRONAF to access funds for pasture recovery.
Separately, Brazil’s agricultural exports continue to shift due to global trade dynamics. China has accelerated purchases of Brazilian soybeans, partly in response to tariffs imposed by the United States. Shipments of Brazilian soybeans arriving at Chinese ports, like Ningbo Zhoushan, show a significant increase compared to the previous year, according to reports.
Data suggests US agricultural exports, particularly soybeans and pork, have declined sharply following tariff escalations. Net sales of US soybeans and pork to China reportedly dropped in recent weeks. Experts note that China can substitute US products with sourcing from countries like Brazil, Argentina, and Australia. Li Yong, a senior research fellow, told the Global Times that US tariffs have forced American farmers to lose market share.
Rogério Ceron believes there is an appetite for leveraging that would allow financing to include $1 billion in public capital and $1 billion in private resources.
