Major land investment uptick expected following Brazil law change

An upcoming law change relating to foreign land ownership in Brazil has been tipped to unleash a major surge in investments across the country.

President Luiz Inacio Lula da Silva’s government shocked local people and investors in 2010 when it announced the prevention of international investors from purchasing large pieces of agricultural land located in Brazil. The government said that the legislation was being rolled out due to concerns regarding Chinese investors’ plans to buy enormous swathes of land, something which the president felt could harm national sovereignty.

Following the suspension of Lula’s successor, president Dilma Rousseff, interim president Michel Temer has announced plans to lift the limitation on foreign investment in the hope that the stagnant economy will enjoy an uptick thanks to international investment into farm land.

Jose Vicente Ferraz, director of analysts Informa Economics FNP, made mention of the fact that, since 2010, investors have been forced to team up with Brazilian firms and take on minority stakes if they wished to invest in the country’s land: “Some funds, investors and families don’t want to be tied up in partnership with a Brazilian firm. So, they are waiting for a loosening of legislation. We know, there have been consultations with our company, that many investors are waiting with their fingers on the trigger. A few months after the rules change, these investments should start to gel.”

The easing of farm land ownership restrictions will be rolled out as part of a series of measures aimed at boosting the economy over the coming months. It is thought that large funds hunting down long-term returns will be especially interested in investing in Brazilian land, and it is also thought that this renewed interest will help to reignite parts of the country’s flat real estate sector.

According to a government source, there will be certain measures included in the roll out that will guard against undue speculation taking place in the farm land arena.

Investors from across the globe are now turning their attentions to Brazil and are looking to snap up undeveloped land and transform it into successful and profitable farmland. As Brazil is a world leader in terms of sugar, coffee and beef production, as well as being a major contributor to the world’s stocks of soybeans and corn, the gains that international investors stand to make from Brazilian land look positive.

Chief executive of land management firm BrasilAgro, Julio Piza, said that many asset and wealth management funds were keener than ever to track down safer investment bets against the backdrop of a turbulent global economy. “You have pension funds for example that are worried about guaranteeing future value and are seeking long-term investments like land.”

The easing of foreign investment will benefit sectors including timber and pulp and paper, all of which need high levels of capital for long-term investments.

According to Elizabeth Carvalhaes, executive president of the Brazilian Tree Industry (Ibá): “It’s an industry of great scale. You need a free and open market. We have multinational firms with repressed demand and national companies with distorted market valuations.

The region tipped to see the highest amount of investment interest is the ‘grain belt’, which stretches across the north eastern states of Maranhao, Tocantins, Piaui and Bahia.

GWD Forestry spokesman James Barrett said: “This easing of restrictions on foreign ownership of land in Brazil will undoubtedly be positive news for the country’s timber sector, as more and more investors seek out high returns on a low risk basis. Money flowing into the country will help to boost Brazil’s economy and ongoing demand for food stocks such as coffee and soybeans will ensure that land investment goes from strength to strength over the coming years.”

 

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