February 2, 2012

Brazil Developing Database of Foreign Owned Land

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The Brazilian government is in the process of developing new regulations regarding how foreign individuals or companies may purchase rural land in Brazil. In August of 2010, President Lula essentially put a halt to land purchases by foreigners until new regulations could be passed by the Brazilian Congress. One of the goals of the new legislation is to consistently identify the amount, the location, and the use of rural land that is under the control of foreign individuals or companies.

When Congress started to debate the new legislation, they quickly learned that there was no data concerning the amount of land in Brazil that was already in the hands of foreign individuals or companies. Therefore, as part of the process, the government is trying to determine how much land is already under the control of foreigners. The National Institute of Colonization and Agrarian Reform (Incra) was assigned the task of compiling a database tracking these purchases. Officials at Incra feel they will have the database complete by the end of the first semester of 2012.

The database will not only list foreign individuals or companies that own rural land; it will also identify Brazilian companies that purchase land but obtained the majority of their capital from foreign sources. The use of a Brazilian front company to purchase the land has been a common practice in recent years as a way to obscure the actual controlling interest of the company.

In March of this year Incra will also launch a program called the National System of Land Acquisition by Foreigners (Sinat) that will track and update the data of foreign owned land on a continuous basis. Under this new system, private title companies will be required to report every three months on any land that had been purchased by foreign individuals or companies. Once fully implemented, Incra will be required to report to Congress annually the amount of rural land under foreign control.

This entire issue came to the forefront when it was revealed in early 2010 that the Chinese government had purchased huge tracks of land in the state of Bahia for the purpose of producing soybeans and cotton that would be exported to China. Foreign individuals have been purchasing land in Brazil for decades, but the relatively new phenomenon of foreign governments purchasing land convinced the Brazilian president to take action.