Brazil Restricts Foreign Ownership of Farmland

Brazil's President Luiz Inacio Lula da Silva has signed a document altering a 1971 law and establishing new and highly restrictive rules on foreign ownership of farmland.

Brazil 's President Luiz Inacio Lula da Silva has signed a document altering a 1971 law and establishing new and highly restrictive rules on foreign ownership of farmland.

In recent months, Lula and other top government officials have become increasingly critical of foreign ownership of farmland in Brazil , referring to this question as a matter of national security. The document signed by Lula is a reinterpretation of the 1971 law, which in effect changes the legislation in a manner that will complicate foreign purchases of farmland.

The new rules state that foreigners cannot collectively own more than 25 percent of the farmland in any given rural municipality. This also applies to Brazilian companies controlled by foreigners. The 1971 law also set a 25 percent limit but foreign investors have been able to get around this by setting up companies in Brazil which they controlled from abroad. This will no longer be possible, according to the new interpretation which took effect Aug. 24.

The new rules also include a size limitation on individual foreign purchases of farmland ranging from 617 acres to 12,350 acres, depending on the state. Foreign land purchases now must also be approved by the agrarian reform ministry. Foreign companies will not be allowed to buy farmland without first explaining how they plan on using the land and this activity will only be permitted if it is contained in the companies' statutes. Any land transaction involving foreigners must be registered separately in real estate registries and reported on a quarterly basis to the agrarian reform ministry.

Over the last decade, Brazil has emerged as an agriculture superpower. It is the world's second largest producer and exporter of soybeans, a leading corn producer and the largest producer of sugar which it uses to produce ethanol. Brazil 's biofuels program is the largest and most successful in the world and the country is the global leader in ethanol production and exports.

The world's fifth largest country, Brazil still has vast areas of vacant land that can be used to raise crops, a fact that has not been lost on international investors. According to government statistics, foreigners own only 0.97 percent of the total of registered rural properties but purchases have been expanding at a rapid pace in recent years. Between 2002 and 2008, Brazil's central bank registered $2.4 billion in foreign investments in the country's agriculture sector, including land purchases. 

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