Brazil Takes a Step Toward Clarity

Brazilian Congressman Beto Faro presented his preliminary report on foreigners owning farmland here—he doesn't plan to have a final version done for a couple of weeks yet. But the outlines of the subcommittee's eventual bill appear to be taking shape. One of the key items is a national registry of Brazilian lands in the hands of foreigners.

Right now, the country's land reform agency guesses there are 34,371 farm properties owned by foreigners in Brazil, coming to  9.9 million acres. But that's a guess, the agency indicates, and the actual number could be greater. For comparison, the USDA's FSA said foreigners were holding 23 million acres of U.S. ag and forestry land in February of last year.

Jargon

When the administration here talks about farmland, it talks in terms of units called fiscal modules.  The size of a module varies by region and even by county. A module is 50 to 300 acres, for example, down in Paraná, but it's 150 to 250 acres up in the enormous state of Mato Grosso.

According to Faro's likely proposal, any foreign individuals owning up to 50 modules—as long as it doesn't exceed 6,000 acres—would be off the hook for going back to get permission to keep on owning it. Foreign companies wouldn't need any special permission to buy up to 100 modules in Brazil, as long as the total size of the property doesn't exceed 12,350 acres.

Those foreign people or companies that want more land could still get it—but they'd have to get permission from the federal congress. And that would likely come with all the raging speed of a glacier.

So the new rules wouldn't likely change much for farm investors of a size less than that of Blairo Maggi. The effects of the proposed limits could, however, put a crimp in the activities of foreign-based soybean processors who make cropping cost loans to farmers, and can't get much land as collateral.

Brazil's attorney general's office, which threw things up in the air when it slapped new limits on foreigners owning farmland, isn't likely to want Faro's bill—if the final version in two weeks' time ends up looking at all like the preliminary version—to pass.

But a consensus may be emerging—that the rules need to become clear, now, and that it's up to the legislature to establish the rules. After all, there have been virtually no ag real estate transactions by foreigners reported since last August, when the attorney general's office stepped on the brakes. And Brazil needs lots of investment in its agriculture—particularly in long-neglected sugarcane fields.