South American Real Estate News

Brazil considering leasing farm land to foreigners to circumvent sales restrictions

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MercoPress South Atlantic New Agency Report

Brazil may start leasing farm land to foreigners to find a way around new legal restrictions on land sales and attract more foreign investment, the agriculture minister said.

Last year, foreigners seeking to buy large plots of land began running into legal roadblocks, after the attorney general’s office reinterpreted real estate law amid concern over property speculation by overseas investors.

But President Dilma Rousseff, who took office in January, is looking for ways to ease the restrictions on foreign investment in the farm sector. Rousseff, who seems more pragmatic than her predecessor Lula da Silva, wants to encourage productive foreign investment while still fending off speculators.

“It’s important that they come and make these investments,” Agriculture Minister Wagner Rossi said, citing the paper and cellulose industry as one among many which would benefit from new investment and know-how.

Brazil is the world’s top producer of coffee, sugar, beef and orange juice, and the world’s No. 2 exporter of soybeans.

Although agricultural exports have boosted Brazil’s strong economic growth, Rossi said a lack of foreign capital has deprived the country of foreign expertise to raise efficiency and competitiveness.

Rules on foreigners buying land tightened last year after officials grew concerned about large purchases by sovereign wealth funds, particularly from the Middle East, and by Chinese buyers.

The changes do not affect prior sales and foreigners can still buy land between 250 hectares and 5,000 hectares, depending on the region. Still, the new rules have already had an impact.

At least 15 billion US dollars of foreign investment in Brazilian land has been halted since reinterpretation of real estate laws, according to two local agricultural analyst groups.

Rossi pointed to Australian legislation, which allows land leasing for 99 years, as an example of the system Brazil wants to introduce. The terms may be closer to 50 years but details still need to be worked out, he said.

The government is also looking at setting up an inter-ministerial commission to study outright foreign land purchases on a case-by-case basis, to determine whether they would be beneficial to Brazil.

“If it is approved, there won’t be a problem. You just go ahead and buy your land,” he said, adding that the attorney general’s office is studying legal options along with other ministries and will recommend a joint government position

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