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The brakes put on Brazilian Land Prices

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The brakes put on Brazilian Land Prices

An update on rural land prices in Brazil from Stuart Donald

The current lack of definition over the foreign land investment laws in Brazilin land has put the brakes on strong rises in the prices of rural land in 2011. In some regions prices for larger areas have stagnated and even dropped. One land agent believes prices have dropped from the previous year in the region of Ribeirão Preto by 16%, Cascavel by 14%, Pouso Alegre (MG) by 12% and in Luis Eduardo Magalhães by 19%.

This stagnation has been put down largely to the holding back of investments by foreign funds and multinationals.

However, local companies and investors have continued to acquire larger tracts of land, taking advantage of the lull in foreign investment.  Companies like SLC Agricola have been very active in the market buying large areas to add to their portfolio. SLC is anticipating a run on land when the foreign investment law is finally revised and a subsequent increase in land prices.

The foreign investment land law is being debated and it is hoped that some revision will be made towards the end of this year or at the latest in the first half of 2012. The law will no doubt attempt to restrict the acquisition of land by sovereign funds and land for purely speculative purposes. The aim will be to encourage investment in the land that is acquired. There are strong signs that many funds and other foreign investors are positioning themselves structurally, by setting up companies and investment vehicles to make a move when the all clear is given for foreign investment to resume!

So in summary,  the population has now reached 7 billion and there is an undeniable demand for food and good agricultural land. Brazil has some of the most productive land in the world due to deep free draining soils and an unbeatable climate with abundant water, which can be used to grow the most diverse range of crops and livestock. The domestic market for products is enormous and growing and the export market is endless. It is an obvious place to invest.

When the restrictions on foreign investment in land in Brazil are lifted, we will see a jump in sustained acquisition activity and with this, land prices will move to a new higher level. Expect to see a flurry of activity in 2012-13. Those with interests should position themselves now to take advantage of the opportunities.

Stuart Donald – AgriFrontiers

Management, Consultancy & Investment in Agribusiness

Sao Paulo – Brazil


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