April 6, 2017

Brazil Congress Considers Rules for Land Purchases by Foreigners

Proposed legislation was introduced this week in the Brazilian Congress that would lift some of the restriction on land purchases by non-Brazilians. The legislation was introduced by Senator Newton Cardoso Junior from the state of Minas Gerais. The biggest change would be the elimination of the 100,000 hectare limit per investor (247,000 acres) with the possibility of leasing more than 100,000 hectares. Included in the proposed legislation would be increased requirements detailing the true nature of the foreign investors.

Not all types of land in Brazil would be opened up for purchase by foreigners. Non-Brazilians would not be allowed to purchase land in the Amazon Biome that contains more than 80% designated as nature preserves. Land on Brazil's borders would also not be available for purchase.

Potential foreign investors must join with a Brazilian partner in order to purchase the land, but they may retain controlling interest in the land. The Brazilian Minister of Agriculture, Blairo Maggi, wanted to exclude foreigners from purchasing land that could be used to produce annual crops such as soybeans and corn, but those restrictions were not included in the proposed legislation.

Up until 1998, only foreign companies or individuals with operations in Brazil were allowed to purchase land under a law passed in 1971. In 1998, the Brazilian Attorney General interpreted the law to mean that Brazilian nationals and foreigners could not be treated differently, thus opening up land purchases for all individuals, both nationals and foreigners, regardless if they had operations in Brazil or not.

The Attorney General's action launched a "land rush" of foreign companies and individuals purchasing so much Brazilian land that critics of the action referred to it as a "foreign invasion". Critics also complained that the true nature of the foreign investors was often hidden by shell companies set up specifically to hide investors. As a result, in 2010 the Brazilian Attorney General placed new limits on foreign purchases of Brazilian land prohibiting foreigners from obtaining controlling interest in any land purchases. This prohibition on obtaining a controlling interest basically shut off land purchases by non-Brazilians.

Since then, the Brazilian Congress has been debating how to move forward on lifting these restriction, but the whole issue gained little traction. With the installation of Brazil's new president, Michel Temer, and the introduction of this new legislation, the issue of land purchases by foreigners has once again came to the forefront.