Brazil, worried about food security, seeks to limit foreign land ownership
The Spectator (Montevideo) | 24 June 2010 | translated by GRAIN | Español
The government of Brazil is studying the possibility of prohibiting the purchase of land by foreigners. The eventual law, which is still being shaped, would even allow the cancellation of property titles already granted if they are in foreign hands. The issue concerns Uruguay, as about 90,000 hectares in Brazil are owned by our citizens. The Brazilian journalist Mauro Zanatta said that the government's initiative aims "to ensure that rural properties remain in Brazilian hands in order to steer agricultural policy". In a conversation with In Perspective, Zanatta flagged that, given a possible population explosion, the Lula administration wants to "guarantee cheap food for the people in order to control inflation."
Juan Andrés Elhorodoy:
This week, the president of Brazil, Luiz Ignacio "Lula" da Silva, decided to push a constitutional reform to prohibit foreigners from purchasing land.
Worried about what he sees as an abuse, Lula assigned a group of ministers and collaborators to elaborate a proposal for a constitutional admendment.
According to information revealed the day before yesterday by Valor Economico, the rule may even permit the cancellation of certain titles already in foreign hands. In the article written by Mauro Zenatta, one fact emerged that surprised many : the top foreign land owners in Brazil are the Japanese, the Lebanese, the Chinese and in fourth place Uruguayans.
Emilano Cotelo: This breakdown surprised many and, of course, it created a stir here in Uruguay. It also concerns us because the question of possibly regulating land holdings by foreigners comes up every now and again in our own political agenda.
JAE: And, paradoxically, whenever we discuss the issue here, it is always stressed how much Uruguayan land is actually in Brazilian hands.
We are going to discuss the issue for a few moments with the journalist who wrote the article, Mauro Zanatta, in order to get clarity on some doubts rasied by the data.
JAE: What are the main reasons behind this initiative?
Mauro Zanatta: The government is very worried about the food security issue. It is trying to ensure that rural properties remain in Brazilian hands so that it can steer agricultural policy and carry out its domestic programmes.
JAE: Why is food security an issue? What possible danger exists?
MZ: It's an issue because we are 200 million people in Brazil and the population is growing. The government has a central concern: to guarantee cheap food for the people, obviously to keep inflation under control.
JAE: But the fact that foreigners are buying land, is this a problem that has been growing in recent times?
MZ: Yes. In the last five years, the government has registered a burst in land aquisitions by foreigners. Right now, it is reaching 4 million hectares but that is an underestimate. The government figures that in Mato Grosso alone, the largest farming state of Brazil, Argentine conglomerates like Los Grobo or El Tejar have more than one million hectares alone. It's quite significant and it worries the government.
JAE: And which regions and states are most attractive to the investors?
MZ: Mato Grosso, Mato Grosso do Sul, Sao Paulo, Bahia and Minas Gerais are the states where you find more than half the foreign investments in Brazil.
JAE: In any case, the percentage seems low in relation to the total hectarage [of the country].
MZ: Yes. For example, if you compare the 4 million to the the nearly 50 million hectares that are sown to grains and cereals in Brazil, it's less than 10% of the territory. But as I told you before, it's underestimated. There are people who believe that more than 10 million hectares are under foreign control in Brazil.
The main concern of the government is the interest of the Chinese to invest in Brazil. The Chinese and the international funds managed from the Arab Emirates, for example, are very interested in producing food in Brazil.
JAE: What other nationalities are currently involved in these land aquisitions?
MZ: In the official register, the top investors are the Japanese, with almost 500,000 hectares in Brazil. But there are Italians, Lebanese, Uruguayans --who supposedly control 90,000 hectares--, Argentines, Paraguayans, Americans and Chinese.
JAE: In the report that you published in Valor Economico, Uruguay stands out as the fourth top source of funds for land acquisitions. That surprised a lot of people over here. What else can you tell us about it?
MZ: I don't know if they are Uruguayan citizens, because they may be companies headquartered in Uruguay that are managing investments in Brazil. That is what the government thinks. But as the whole issue is still rather obscure, since the registers are not very trustworthy, especially in the states, the government has no certainty, just an estimate, of what may really be happening in Brazil with the land issue.
JAE: Let's talk about the plan itself. On the one hand, it establishes that foreigners cannot hold land in Brazil. What other element stands out? In your report, you also mention that presently registered titles granted to foreigners may get cancelled as of some date that will need to be decided.
MZ: Yes, exactly, that is what the Minister of Agrarian Development, in the name of President Lula, said: that the government is prepared to send a proposal to Congress seeking to change the current rules on land ownership by foreigners in Brazil.
We still don't know if the proposal will only try to set new rules or if it will also have a retroactive effect.
JAE: Of course, because that could raise a debate about legal uncertainty, which very often happens when these kinds of rules emerge. Has any debate been raised, based on the information you published the day before yesterday, on the issue of current land titles possibly being cancelled under the new ruling?
MZ: Yes, the government is exploring the matter. There is a group of Ministers that are close to the President which has started to evaluate what measures could be adopted to avoid legal uncertainty or breaking contracts. But the will of the government is very clear: it wants to avoid or prohibit foreigners from going further in acquiring land in Brazil. For us, it's still not possible to assess much further what the government will do. The Minister Guilherme Cassel stated that they don't want foreigners producing in Brazil. He literally said, "This is the policy of President Lula."
JAE: What other element linked to this issue is driving the proposed constitutional amendment? Because that is what it is about, an amendment to the constitution.
MZ: Yes, what they aim for is to change the constitution, the constitutional rules. Right now, the concept of a Brazilian company with foreign capital is the same as that of a company run by non-residents or with headquarters in another country. The crux of the issue is to change concepts so we can really identify where investments are coming from -- whether from a truly Brazilan company, run by Brazilians, or from a corporate front, for instance. We have have experienced problems, as you in Uruguay know, in Rio Grande do Sul with the Finnish company Stora Enso. A number of directors of the company bought land in Brazil or registered it to their names, but in reality the land was for the company, for the paper mill. The government is intent on preventing these kinds of things from happening.
JAE: Stora Enso has pasture lands in the Porto Alegre area, in Rio Grande do Sul, no?
MZ: Yes, near the border with Uruguay.
JAE: And in this case, a company like Stora Enso, under current Brazilian law, cannot own the land for its own production?
MZ: No, it's not possible because the law prohibity foreigners from owning land within 150 kilometres of the border. The military dictatorship in Brazil dubbed this strip "the national security zone".
JAE: Going back to the proposal, which one way or another is being drawn up, because a committee has been assigned to work on it, what procedure can we expect?
MZ: The Ministers will present a proposal to the President who will then present it to Congress. But this will depend on some political positioning, because we are in the middle of an electoral period which begins now in July and will see Congress become empty. The representatives and senators will all be back in their home states campaigning. The issue is therefore likely be addressed with more intensity in November or December.
in Mato Grosso alone, the largest farming state of Brazil, Argentine conglomerates like Los Grobo or El Tejar have more than one million hectares alone.
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