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April 21, 2015

Supreme Court asked to allow Non-Brazilians to Purchase Land

The Brazilian Rural Society (SRB) asked the Brazilian Supreme Court last Thursday, April 16, to remove restriction placed on the purchase of farmland by non-Brazilians. They want to keep in place restrictions on countries such as China or sovereign wealth funds from purchasing land, but they feel individual investors or businesses associated with agriculture should be once again allowed to purchase Brazilian farmland.

The current restrictions were put in place in 2010 by President Lula when it was revealed that China was in the process of purchasing large quantities of farmland in the state of Bahia. Part of the new rules concerning land purchases included the requirement that the true source of the funds for the purchase be revealed. Prior to that, a buyer could hide his or her identity by using a Brazilian partner to purchase the land even though the partner might only be a 1% investor in the venture.

The new restrictions were put in place during a time of record high commodity prices when countries such as China and Saudi Arabia were seeking to purchase land for agricultural production as well as the extraction of raw materials such as iron ore and precious metals.

SRB feels that the current restrictions have made potential investors shy away from the Brazilian market thus limiting investments in the expanding agricultural sector. They also feel the current restrictions violate the Brazilian constitution.

The National Institute for Colonization and Agrarian Reform (Incra) is responsible for approving the sale of small parcels of land to non-Brazilians. Incra started approving the sale of land to non-Brazilians in 2013, three years after the new restrictions took effect. The sale of properties of more than 10,000 hectares (24,700 acres) though requires the approval of the Brazilian Congress.

Any adjustments to the current restrictions will probably need to be accomplished through new legislation in the Brazilian Congress.