Brazilian Government Tightening Foreign Land Ownership Laws

As the Brazilian government looks to modify laws created in 1971 regarding foreign ownership of the country’s agricultural land, foreigners face a potential closing of the loophole allowing …

As the Brazilian government looks to modify laws created in 1971 regarding foreign ownership of the country’s agricultural land, foreigners face a potential closing of the loophole allowing them to purchase restricted land via Brazilian corporations. For more on this read the following article from PropertyWire.

The Brazilian government is tightening a law that restricts the amount of land foreigners can buy in a move that is aimed at preventing foreign investors from circumventing the interpretation of a law that restricts their direct acquisition of land.

The move comes after agricultural minister Wagner Rossi recently hinted that changes were afoot. ‘We need to distinguish properly on the one hand between speculators and sovereign funds, which are a threat to our sovereignty, and on the other side, foreign investors who come with good projects,’ he said.

It is understood that a new decree will prohibit non Brazilians from buying controlling shares of companies that own vast tracts of territory in the country. Brazilian Attorney General Luiz Inacio Adams has confirmed in a statement that a new ruling exists.

According to O Estado de Sao Paulo the Attorney General’s Office has already issued copies of the ruling to state commerce councils responsible for the registration of company agreements. It’s not clear if deals already agreed could be suspended by tribunals.

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Since 1971 the Brazilian government has limited the outright purchase of rural farmland by foreigners or companies based abroad for food security reasons. The law says that foreigners can own no more than one fourth of a county, and no one nationality can own more than 10%.

Under current legislation foreigners could purchase up to 50 modules, ranging from 250 to 5.000 hectares depending on the region and soil yield.

It is estimated that currently, foreigners own 4.5 million acres (1.8 million hectares) of Brazilian land, an increase 11.5% from 2008, according to the government agency charged with land distribution.

As one of the world’s most important agricultural powers, Brazil last year severely restricted all new farmland investment from abroad amid fears that foreign governments, led by China, were snapping up land in emerging markets to boost their food security.

However with global food prices hitting a record in February, Brazil is also eager to attract new capital to the sector to increase its share of world agricultural exports while continuing to screen out unwelcome sovereign investors owned entities.

The Brazilian government, under the previous president, Lula da Silva, in 2010 reinterpreted the law to restrict foreign investment in agricultural land after watching foreign governments including China, South Korea and the Gulf states buying land in Africa and elsewhere to increase their food security.

‘Some of these countries are great partners in other areas, but having them buying land in Brazil creates some sort of sovereign risk for us. This is not part of our plan and we are not going to allow that,’ Rossi pointed out.

 This article was republished with permission from PropertyWire.

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