FARMERS FINED FOR  illegal deforestation and with properties overlapping conservation units in the Amazon are listed as potential recipients of funds from Agribusiness Receivables Certificates (CRAs) issued by Genial Group. Headquartered in Faria Lima, São Paulo’s main financial district, the group manages over R$ 210 billion in assets and is currently ranked among Brazil’s top 100 banks.

The CRAs, private securities used to finance rural activities, were launched on the market in December 2023 by Genial Investimentos, part of the Genial Group. The initial offering aimed to issue up to 70,000 certificates, each valued at R$ 1,000, totaling R$ 70 million (11.6 million USD), with a 10-year maturity.

According to financial market sources interviewed by Repórter Brasil, the offering prospectus—detailing the financial product—indicates that the funds raised from the sale of these CRAs will be used by Banco Genial to offer credit and financing to 37 rural producers and cooperatives. This information is included in an appendix of the public offering, which Repórter Brasil obtained. Among these 37 clients are farmers with a history of deforestation (see cases below).

The appendix “details the rural producers or agricultural cooperatives eligible to receive funds from the operations outlined in the contract,” explained Maria Eduarda Senna Mury, legal research and litigation director at Harvest, an organization focused on climate change litigation, which reviewed the prospectus at Repórter Brasil’s request. “It functions as a specific and complete list of these beneficiaries, ensuring that the funds will only go to those pre-identified and authorized,” she said.

Repórter Brasil presented the cases of farmers with environmental irregularities listed in the appendix to Banco Genial. The institution stated that the “future allocation of funds by Banco Genial, as described in the prospectus schedule, is indicative and non-binding,” and that the bank “has a diligent operational evaluation process that considers various factors,” emphasizing that no credit or financing transactions had been made with the 37 producers mentioned in the prospectus.

Dispersed Accountability

The transaction involving these CRAs was structured based on credit rights owed to Banco Genial. These credit rights were transferred to Companhia Província de Securitização, the securitization company responsible for converting the debts into tradable financial instruments. The company did not respond to Repórter Brasil’s attempts for comment.

The fragmentation of responsibility among various financial agents—such as securitization companies, banks, and investors—makes it difficult to track the legality of the properties involved in these transactions, according to Maria Mury. “This fragmentation allows areas with environmental problems to continue generating revenue without investors or the public being fully aware of the risks involved,” she explained.

“There should be a rigorous analysis at the start of the operation, at the time the securities are structured, to ensure that the properties comply with all legal and environmental requirements,” added Leonardo Gava, senior manager at the UK-based organization Climate Bonds, which certifies international financial instruments.

From Faria Lima to the Amazon

The prospectus released by Genial Investimentos lists the state registrations of the farms owned by the 37 clients. This allowed Repórter Brasil to identify the farmers who appear on public embargo lists from Ibama (Brazil’s Environmental Agency) or Sema-MT (the Mato Grosso Environmental Secretariat) for illegal deforestation of Amazonian forests.

By law, economic activities are prohibited in embargoed areas. The properties identified by Repórter Brasil as being in embargo status are located in the same municipality and under the same names listed in the state registrations of the prospectus.

One of these properties is Fazenda Bianchin, owned by Amarildo Bianchin and Nilson José Bianchin. The property has three recorded embargoes by Ibama, from 2013 and 2016, for illegal deforestation of a total of 4,994 hectares. In 2022, Amarildo Bianchin was the subject of a Civil Public Action filed by the Public Prosecutor’s Office of Mato Grosso (MPMT) for deforestation of 908.5 hectares on the same property. Part of this deforestation, which took place between 2009 and 2017, had already been identified by Ibama. The MPMT is seeking R$ 4.6 million (776,600 USD) in environmental damages from Bianchin, who is contesting the lawsuit in court.

Bianchin also faces another action from MPMT for violating an embargo on 1,295 hectares registered by Ibama in 2013 at Fazenda Bianchin. A 2019 court order mandated that he comply with the embargo and submit a recovery plan for the degraded area.

Another environmental violation case involves Francisco Afonso Guollo, whose Fazenda São Francisco de Assis is listed in the prospectus. The farm has two embargoes for illegal deforestation: one by Ibama in 2017 for 108.7 hectares of native vegetation, and another by Sema-MT in 2021 for 1.7 hectares. In 2019, Guollo became a defendant in a Civil Public Action filed by the Federal Public Prosecutor’s Office (MPF) for illegal deforestation of 64.8 hectares at Fazenda São Francisco de Assis. The MPF is seeking over R$ 1 million (166,600 USD) in damages, and the case is still ongoing.

Guollo also owns Fazenda Bataguassu, which overlaps with the Estação Ecológica do Rio Ronuro, a state-level protected conservation unit established in 1998. Since 2016, Guollo has been seeking a court order to raise cattle and grow soy and corn on the property. According to the legal proceedings consulted by Repórter Brasil, Guollo deforested areas within the property in 2001, several years after the conservation unit was created. In such protected areas, deforestation is prohibited, as are most economic activities, except for educational and scientific purposes. In 2021, the court rejected Guollo’s request.

Both the state registration of Fazenda São Francisco de Assis and Fazenda Bataguassu appear in the prospectus released by Genial Investimentos.

Meanwhile, Fazenda Dois Irmãos has 92.4 hectares embargoed by Ibama since 2015. The penalty was recorded under the name of the property owner, Nelson Antonio Heuert. The prospectus also includes a state registration under Heuert’s name, corresponding to the farm listed. A lawsuit filed by MPMT seeks damages and reforestation of the degraded area. Heuert, who was convicted in the first instance, has appealed the decision. In 2019 and 2023, additional embargoes were imposed on Fazenda Dois Irmãos by Sema-MT, covering 28.9 hectares and 76.2 hectares respectively, for illegal deforestation.

Repórter Brasil contacted the three producers mentioned above, but none responded to the questions submitted before this report’s publication. The space remains open for future responses.

Experts Call for Regulation

CRAs are financial securities used to raise capital for agricultural financing. On one side of the transaction are investors attracted by income tax exemptions and higher returns compared to other fixed-income investments. On the other, rural property owners take out loans to finance their crops, which are then securitized—converted into tradable securities.

In Brazil, the Central Bank prohibits the provision of rural credit for properties with environmental embargoes. However, these guidelines do not apply to private debt securities like CRAs, which are regulated by specific rules from the Securities and Exchange Commission (CVM).

Maria Eduarda Mury believes that the CVM should create specific environmental regulations for agribusiness securities. “The agency needs to either establish its own regulations or apply the Central Bank’s Credit Manual subsidiarily,” she suggests.

Tasso Azevedo, coordinator of the Mapbiomas project, proposes mandatory linking of the Rural Environmental Registry (CAR) to agribusiness securities issuance, ensuring that only properties free of environmental violations can participate. “This would provide greater transparency and control, preventing embargoed areas from benefiting from financial resources,” he noted.

In response to Repórter Brasil, CVM stated that securitization companies are obligated to ensure the environmental compliance of securities issued, and that in cases of non-compliance, these companies may face sanctions. The agency also emphasized its ongoing efforts to modernize the regulation and oversight of capital market transactions.