By Luis Peyser

Wouldn't it be great if the fund could be multi-purpose, being able to own land, lease it, make rural partnerships or even farm it directly?

The last few months have been full of debates, webinars, meetings, committees and presentations about Fiagro and how the vehicle can help the agribusiness production chain.

They are producers, investment banks, lawyers, investors, regulators and self-regulators, all preparing to understand what potentials to exploit.

The initial vision of using an investment fund as an operational vehicle has greatly motivated the market. Wouldn't it be great if the fund could be multi-purpose, being able to own land, lease it, enter into rural partnerships or even farm it directly?

The decision on the use of agricultural land would be in the responsibility of the investment fund manager, i.e. exactly the figure already known to the market, formally organised, approved, registered and supervised by a federal autarchy, the Securities Commission (CVM).

Article 20-A of Law 8,668/93, which lists the assets that may be included in Fiagro's investment portfolio, does not provide in its paragraphs the possibility of direct investment in the preparation of crops, implementation of plantations, construction or operation of industry, development of irrigation projects or even the raising of animals.

Although all items were clearly included as being part of the agribusiness supply chain, the rule was not precise in this regard.

"So Fiagro cannot directly participate in projects?"

To answer this question, it is worth looking at real estate investment funds, Fiagro's siblings, and their legal and regulatory development.

Law 8,668/93 itself, which also regulates real estate investment funds, does not provide how these funds should participate in real estate developments.

This has not been a hindrance to the FIIs having various possibilities of investing in real estate ventures, whether directly, through companies, investment funds or by means of credit securities and other securities.

Such possibilities have been reviewed and readjusted from time to time, as, for example, in the amendment of subparagraphs of Article 45 of CVM Instruction 472/08, and later in 2015, through CVM Instruction 571.

The absence of an express legal provision should not prevent the sector-specific regulator (i.e., in this case the investment fund regulator, the CVM) from determining additional forms of investment in agribusiness.

In this sense, as it did for FIIs, including by providing specific rules for investments in credit and securities titles or especially in projects under construction, it does not seem wrong to us that CVM should regulate the investment, by Fiagro, in agribusiness development projects directly.

For now, with the provisional rule of CVM Resolution 39/21, Fiagro-Imobiliário, as they follow CVM Instruction 472/08, may follow the rules of article 45, §1 and §2, which deal with construction and, in this sense, build the industries, warehouses and other structures necessary for the production chain of agribusiness.

Who knows, when drafting the resolution for Fiagro, CVM may provide the market with a specific and clear description, along the lines of the treatment attributed to FIIs, allowing Fiagro to directly develop plantations and operations, provided it complies with certain risk mitigation rules?