Commodity Online | March 10 2011
BRASILIA (Commodity Online) : South America’s leading economy and one of the world’s top agricultural powers, Brazil is preparing rules that will block foreign governments, state-owned companies and speculators from buying agricultural land while allowing in “genuine” private sector investors.
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.
But with global food prices hitting a record in February, Brazil is eager to attract new capital to the sector to increase its share of world agricultural exports while continuing to screen out unwelcome “sovereign investors” – or foreign government-owned entities, according to Wagner Rossi, the agriculture minister.
“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,” Rossi said.
Brazil is one of the few countries with the capacity to ramp up food production to feed an increasingly hungry world, but its agricultural sector will need enormous domestic and foreign investment to realise its full potential.
Brazil is already the world’s largest exporter of coffee and sugar, the second largest grower of soyabeans and the third largest exporter of maize. But the need for additional production from the country to help alleviate global food shortages is urgent.
The International Monetary Fund warned last week that global food prices were set to remain high for a prolonged period amid rising demand from emerging markets.
The UN Food and Agriculture Organisation’s index of global food prices rose to a record high in February, the eighth consecutive monthly increase.
The Brazilian government, under the previous president, Luiz Inácio Lula da Silva, last year 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.
The trend gained notoriety after Daewoo of South Korea attempted to purchase a large chunk of land in Madasgascar, which helped to trigger a coup d’état in the African island country.
Rossi said he planned to submit a technical paper to the cabinet as early as this month that would refine Brazil’s restrictions on foreign land ownership. He declined to name any foreign countries that were of concern, but analysts said the main target was clear.
“‘Sovereign funds’ means the Chinese,” said André Pessoa, director of Agroconsult, a consultancy.
Rossi said Brazil’s output of grains – soyabeans, rice, wheat and other crops – was expected to be a record in 2010 and would be even larger this year after rains linked to the periodic Pacific cooling known as La Niña were less destructive than feared.
Brazil’s grain yield this year was expected to reach 150m-155m tonnes compared with 149m last year, Mr Rossi said. This would include a bumper soyabean crop of about 70m tonnes.