Apr 26, 2010
Brazilian Senate Contemplating Law Limiting Land Purchases By Foreigners
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Foreign investors are rushing to finalize the purchases of rural land in Brazil before a potential limit on land purchases is passed by the upper chamber of the Brazilian Congress. The proposed legislation would limit the amount of land a foreign entity is allowed to purchase to 3,800 hectares. The limit would be imposed in what is called in Brazil the Amazonia Legal region which is essentially the Lowland Amazon Rain Forest. This region encompasses the states of Amazonas, Acre, Rondonia, Roraima, Mato Grosso, Para, Amapa, Tocantins, and parts of Maranhao. The bill, which was already approved by the lower house, is awaiting a vote in the upper chamber. Properties that were purchased before any potential limits are imposed will remain legal as long as the properties remain productive.
The original legislation limiting foreign purchases was actually introduced in 2001, but it has taken on an increased sense of urgency in recent years as foreign investment money pours into the country. This was especially evident during the recent visit of the Chinese President, Hu Jintao, who was in Brazil to participate in the so-called Bric meetings involving Brazil, Russia, India, and China.
Accompanying the president were officials from the state-owned Chongqing Grain Group that is proposing purchasing land in western Bahia in order to grow soybeans. Sixty percent of the financing would come from the China Development Bank with the remainder from the state-owned company.
China is the main destination for Brazilian soybean exports accounting for 55% of the total exports and Chinese importers have long wanted to bypass the intermediate grain companies such as Cargill, Bunge, ADM, Dreyfus, and Maggi. Since 2004, Chinese importers have been attempting to purchase soybeans directly from Brazilian farmers with limited success. By purchasing land and producing their own soybeans, they hope to have direct control of the product without having to deal with the international grain companies.