The Federation of Brazilian Banks (“FEBRABAN“) has recently approved Regulation No. 026/2023, setting forth guidelines and procedures for Brazilian banks when financing the beef industry, particularly slaughterhouses. Pursuant to the new self-regulation, as of 2025 financing should only be available to slaughterhouses that put into place a due diligence system for tracing and monitoring the activities of direct and indirect suppliers, certifying that no illegal deforestation has occurred in its supply chain. The self-regulation only applies to slaughterhouses located in the states that compose the “Amazônia Legal” and the state of Maranhão.
The self-regulation provides that adhering Brazilian banks must implement a protocol for their lending and financing to slaughterhouses, and that such a protocol should be able to mitigate the risk of financing illegal deforestation, meeting certain criteria set out in the self-regulation. Compliance with this protocol will be mandatory for slaughterhouses in order to gain access to credit from adhering financial institutions.
In summary, the protocol is expected to force slaughterhouses to trace information regarding their direct and indirect suppliers, taking into account, for example, existing embargoes on their rural properties, overlapping with preserved areas, authorizations for the suppression of vegetation, and the Rural Environmental Registry (CAR). In addition to relevant environmental aspects, the tracing systems will also have to consider certain social aspects, such as verifying whether the supplier is flagged on forced labor databases.
FEBRABAN’s announcement was received with backlash from the Brazilian Association of Beef Export Industries (Abiec), which pointed out that producers in the beef industry have been implementing innovative due diligence techniques throughout the past decade. According to Abiec, this new self-regulation is an attempt by financial institutions to transfer the burden of their own due diligence responsibilities to the beef industry.
According to FEBRABAN, 21 Brazilian financial institutions have already committed to the rules set forth in the self-regulation, including the Bank of Brazil (Banco do Brasil) and the Brazilian Development Bank (Banco Nacional do Desenvolvimento Econômico e Social – BNDES).