July 14, 2011

Brazil to Re-register All Land Purchases

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

As part of its effort to better regulate the purchase of land in Brazil by foreign individuals, companies, or governments, the Brazilian Attorney General recently announced that the government will begin a huge project of re-registering all the rural land in the country. The goal of the project is to determine who exactly owns the land and what is the land actually used for.

The Attorney General feels this effort is needed in order to establish a baseline of land ownership in the country. Many land titles in Brazil are in dispute with multiple owners and the problem has become worse in recent years as foreign investors viewed the purchase of farmland in Brazil as a good investment. Some of these foreign purchases were conducted through dummy corporations set up in Brazil as a way to obscure the true ownership of the land. One of the goals of this new project is to establish the true identity of the landowner and to verify the titles to the land.

This effort will involve 330 million hectares (825 million acres) and 5.2 million landowners. No timetable has been established as to when this project is expected to be completed.

Part of the problem is that no single governmental agency knows exactly the extent of foreign ownership of land in Brazil. All the information provided by various government agencies are just estimates. Prior to 1994, foreign ownership of land in Brazil was very restricted, but between 1994 and 2010, many of the restrictions were lifted and as a result millions of hectares of land in Brazil were purchased by non-Brazilians.

Once this effort is completed, the Attorney General says that it is possible that some of the purchases may be annulled depending on if the land appeared to be purchased just for speculation and not purchased to actually produce an agricultural or forestry product. In contrast, current restrictions on foreign ownership may actually be eased depending on the type and land purchased, the location of the land, and the intended use of the land.

In August of 2010, the entire process of foreign purchases of land was thrown into disarray when President Lula instructed the Justice Department to re-interpret laws that have been on the book for decades. Since then, the government has struggled to develop a plan that allows foreign investment in Brazilian agriculture while maintaining some type of control over the process.