Introduction on who can buy agricultural land in Brazil?: Brazilian agriculture has historically been one of the principal bases of the Brazilian economy. Agriculture is an important industry in Brazil, as the country has abundant agricultural resources. Its main products in this field are coffee, soybeans, wheat, rice, corn, sugarcane, cocoa, lemons, and beef. The ground beneath the gardens and the landfall temporarily and land left as a result of transplantation has been removed. Permanent pasture has been used for fodder for five years or more, including natural and cultivated crops.
For agriculture purposes, Brazil is the top target country for land investment deals with the potential for high yields. According to the World Bank’s collection of development indicators compiled from officially recognized sources, agricultural land in Brazil (% of land area) was reported at 28.34% in 2018. The country has been an attractive destination for investors who buy farms to diversify their portfolios and make a steady profit. Investment in agriculture has become popular due to the growing demand for food, especially the increasing per capita consumption of meat that requires protein-rich animal feed. The total area of Brazil is 8.5 million square kilometers. Agricultural land covers 31% of the land area.
A guide to how to buy agricultural land in Brazil and who can buy farm land in Brazil, can foreigners buy agricultural land in Brazil?
Brazil has changed its rules to make it easier to use federated lenses on agricultural land as a security interest. Agricultural lands are the most valuable lands in Brazil, but due to existing laws restricting foreign ownership of rural lands, there were legal doubts as to whether future lenses can be provided on agricultural lands. Agriculture is a major driver of national development, accounting for about a quarter of Brazil’s GDP. In rural areas, where agriculture is the main source of livelihood and food security for the people, protected land rights are more important than ever. The fulfillment of these rights will allow rural landowners to use, control, and invest in their land and its resources, and provide additional economic and social benefits. Overall, increasing or decreasing the amount of land available for agricultural production will directly change land use and land cover. The minimum price for the sale of agricultural land to the government should be fixed at the market level.
Two main agricultural areas in Brazil
The country has two major agricultural regions;
Southern Brazil – Southern Brazil is characterized by a temperate, or temperate, climate and makes up about two-thirds of the country. The soil is fertile and high rainfall ensures that the crops are well irrigated and fed. The area is home to farmers with more advanced farming methods and extensive experience in the natural resources of southern Brazil.
Northeast Brazil – This agricultural area is much drier and less equipped. It often suffers from drought, and lack of infrastructure, capital, and good soil due to minimal rainfall. The area is mainly occupied by subsistence farmers (who survive on their produce).
Advantages of investing in agricultural land in Brazil
Agricultural land can guarantee long-term returns. For agricultural purposes, several state governments are planning a land polling policy for areas where the city is expanding. If you become a Land Polling Policy owner, you will be guaranteed a regular return from the polls. Agricultural land investment saves you from spending all that money and also gives you the option to use the land for various purposes in the future within the limits of the law. Brazil is self-sufficient in basic foodstuffs and is a leading exporter of different crops that are grown in the south and southeast.
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Farmers’ investments in agriculture – Based on the analysis framework literature, investments are defined as changes in capital stocks. Capital refers to physical goods such as machinery, buildings, storage facilities, livestock, fertilizers, pesticides, and high-yielding types that are not used in the manufacture of any product. This combination of physical objects with this feature is known as fixed or physical capital. Therefore, investment can be thought of as spending on fixed assets (physical capital) to produce goods for future consumption. In addition to the above, there are other types of capital such as human, social, intellectual, and institutional capital. All of these are important for economic growth and development. However, considering these different types of capital will involve an analytical effort that is beyond the scope of this study. Thus, the focus will be on investing in farmers’ physical capital. Despite this aspect, policy measures such as investment in agricultural research and provision of extension services will also be considered, which help in enhancing farmers’ skills, encouraging technological innovation, and improving labor productivity.
Tips for finding the perfect agricultural land in Brazil
Learn about previous land use – You may intend to use agricultural land for several uses like a farm, field, vineyard, orchard, or possibly timber forest. Past use of agricultural land can affect whether you want to buy a property. Many nutrients may not remain for crops in the land that has not been used for decades. An area that was used for industrial purposes may contain toxic chemicals in the dirt and water. So, you can avoid hazards and focus on finding farms with healthy soil if investigate past land use.
Check soil acidity and nutrients – Before buying a farm for sale, you should make sure that the soil has the right nutrients and acids to grow your preferred crop. Nutrients you should learn about include;
Too much or too little of these nutrients can determine whether your crops thrive or fail.
Observe farmland soil drainage – Most crops prefer soil that loosens quickly after rain. Well-drained soil helps protect plants from many diseases like stem rot, root rot, blight, and mold. Standing water also makes breeding grounds for troublesome insects, including mosquitoes, aphids, and beetles that eat the leaves. Soil modification will require time and money. If you want to start agricultural farming right away, buy a farm for sale that is already running out.
Analyze the topology of agricultural land – In agricultural land, topology plays an important role in the success of the farm. Farmers avoid steep hillsides as water can wash away necessary nutrients under the slopes. If you want to buy land for sale in a barren area, it doesn’t make much difference to the topology.
Research access to resources – Most of the agricultural lands sit in the middle of suburbs of densely populated cities and most of the farming is done in rural areas. You could not have access to resources such as water, electricity, and natural gas depending on the agricultural land location. Some features can give you a leg up when resources are required. For example, a large pond farm can give you access to all the water you need for your crops. If you cannot connect to the electrical grid or natural gas you will have difficulty using some machinery and growing crops in the hothouses during the winter. In some cases, you can extend water and natural gas lines from municipal sources to farms. Although the farm project can cost a lot of money.
Find out if the existing infrastructure meets your needs or not – Generally, agricultural land is more involved than healthy soil and you need farm infrastructure to help you grow and sell the crop. The most important types of infrastructure are divided into four types;
Carefully think beyond having a good warehouse that protects the grass from rain. Make sure irrigation infrastructure can range from drip irrigation systems to overhead systems that run along rows of crops that spray crops automatically. For crops growth, it has an efficient irrigation system that will provide the right amount of water.
Types of agricultural land in Brazil
In each of the 15 regions of Brazil, agriculture and land use are modeled separately, with different agricultural mixes. This regional detail captures the vast differences in soil, climate, and history, which is why special lands are used for special purposes.
Land area data in Brazil distinguishes between three broad types of agricultural land use, pasture, and afforestation. Between one year and the next, the model allows land to move between these categories, or allows unused land to be converted into one of these three, initially driven by a transition matrix. The supply of land for agriculture changes over the years. These possibilities are modified in the model according to the average unit rent of each land type in each area.
From a distribution point of view, in the absence of compensatory technological change, increasing land supply reduces food prices in Brazil, indicating a positive impact on the well-being of the poorest people, which is Contrary to the benefits and is caused by deforestation.
Can foreigners buy agricultural land in Brazil?
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The agriculture sector is one of the fastest-growing sectors in Brazil. At present, foreigners cannot buy farms, so they purchase minority shares with local firms to gain exposure to a sector.
Key findings to buy agricultural land in Brazil
Ten foreign investors own more than 1.5 million hectares of Brazilian farmland. Despite strict restrictions on international land acquisition, Brazil is one of the top four target countries for international land deals. Investing agencies provide limited transparency on farmland. Cerrado, a large tropical savanna biome that covers more than 20% of Brazil and has seen high rates of deforestation, is the center of investment growth in the fields. Eight companies, backed by foreign investors, occupy at least 868,488 hectares of farmland in Matopiba, accounting for 18% of the total agricultural land. With high productivity and productive capacity, Brazil has been an attractive place to invest in the fields. Thus, institutional investors set up rural real estate corporations. The main source of income for these companies is the purchase, conversion, and sale of agricultural land.
Given Brazil’s strong agricultural sector, some of the more valuable real estates consists of rural lands. Under Brazilian law, foreign ownership of rural land is subject to many restrictions and limits. While Brazil has begun serious work to develop its border farming areas, millions of hectares remain to be developed. Brazil’s total arable land is close to 600 million acres and is currently cultivated on only 170 million acres. One side of the coin indicates that there is ample scope for developing viable agricultural land to meet growing demand. Agriculture land prices are an attractive part and are the main reason for foreign investment by groups such as the Brazilian Farmland Development Fund.
Land development can be very costly, requiring either independent wealth, foreign investment, or debt financing, most of which are no longer an option. Wealthy Brazilians do not count on such a large population to make a significant impact on growth figures. Investors need to strike a balance between opportunity and risk in deciding to invest in Brazil’s agricultural sector. Although Brazilian agricultural prices are now more attractive than in previous years, owning land in Brazil as a foreign investor is still difficult and highly regulated.
The agricultural sector as a whole has seen steady growth despite the economic downturn, but a steady slide towards slower growth or further political turmoil will inevitably begin to affect the sector. There are currency factors that can be either a hindrance or help depending on your underlying currency and type of investment. For every positive, there is a direct response point to consider. Direct investment in land in Brazil is not for beginners. It requires an investor with a high level of international experience. To the extent that a foreign-controlled company was offered a security interest in rural lands before the law was changed, the only device that was available on a risk-free basis was a mortgage.
The farm’s natural resources mainly include soil quality and slope, land area volume, water availability, and climate system. These features of the earth are usually internal and often require considerable capital to replace them. All of these factors influence the choice of food or fiber and the technical package to be adopted, which in turn explains the need for inputs and the expected productivity. The more suitable these factors are for investment, the more likely it is that the investment will be profitable and the more attractive the investment will be for the landowners.
Land tenure and protection is also an important factor for the return on investment of food or fiber. An important source of uncertainty in many countries is the rights of landowners to the benefits of the land they are cultivating and the consequences of poor management. The terms land tenure, property protection, and the existence of well-functioning land markets provide socially needed incentives for investors to access land resources and make investment decisions in their agricultural production. Keeping in mind is important for long-term planning and resource conservation. These conditions are needed to ensure that land resources are managed sustainably.
Government policies that address these issues lead to higher profits and investment in agricultural production and more sustainable use of land. In addition to influencing farmers’ decisions to invest in the purchase of agricultural land, government policies, among other factors, affected their choice of resource utilization. Land use modelers exploring Brazil’s case generally pay little attention to the influence of legal aspects, namely how Brazil’s regulations affect agriculture, including the size of the expansion potential and the local distribution. As a result, they provide little insight into how such regulations could shape potential agricultural expansion. Nevertheless, changes in land use are related to changes in government policy and regulation of agricultural activities.
Evaluations and recommendations for buying agricultural land in Brazil
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Agricultural loans at preferential interest rates represent a significant portion of agricultural support. The concessional lending system can lead to a gradual reduction in concessional loans for working capital to commercial farms in Brazil. Given the overall decline in market interest rates in Brazil, access to credit by rural lenders could be further facilitated by simplifying the rules and procedures for accessing commercial credit.
Agricultural credit support could be further attracted to on-farm investments that fund innovative and innovative farm management and environmental practices. The temporary measure on rural loans, introduced in 2019, aims to facilitate the transition to a more independent rural credit market in which some credit providers further target credit support to small and medium farmers. Then, the transition does not modify the infrastructure of the National Rural Credit System (NRCS) and maintains the mandatory resource quota system established by the central bank. Using public funds effectively, it is important to strengthen the information base for insurance products, monitor the effects of insurance subsidies, and ensure that they do not crowd out market solutions. Insurance and credit support are subject to environmental standards and zoning rules that encourage environmental improvement.
Specific long-term sustainability and environmental outcomes should be reviewed to improve environmental policy design and to inform strategies for mitigation and adaptation to climate change. Access to export markets is essential for Brazilian agriculture. The agreement between Mercosur and the European Union will open up new opportunities for Brazilian exports. In this regard, efforts should be continued to improve the health and detection capacity of animals, while good environmental performance can also facilitate market access.
The government acknowledges that 5 hectares in urban areas is equivalent to an average size weekend retreat, but says 50,000 square meters will be used only for expatriates who want to invest.
“If the purchase involves investment, the government should make a strategic arrangement for the land sold to foreigners,” said an adviser to the Ministry of Agricultural Development (MDA). An adviser to the Ministry of Agriculture cited the government’s interest in “strategic management” as an incentive to increase investment in ethanol production. In this case, the “Land Council” could authorize the purchase of “thousands of hectares” in Brazil by a foreign company or a foreign-controlled national company.
Despite the growing agricultural sector, attractive agricultural land prices, and increasing foreign investment in this sector, the decision to invest in Brazilian agriculture is far riskier than reward.
Importance of land title for buying agricultural land
Property title will provide all important data on the land, such as;
- Transfer of land from former owners to current owners;
- liens and encumbrances;
- Execution recovery;
- Registered Lease Agreement;
- Ease of condemnation; and
- Construction and property improvements.
Laws and rules for buying agricultural land in Brazil
Apply restrictions on both rural land ownership and rural lease rights in Brazil:
- Foreign individuals.
- Foreign entities.
- Ownership or control of Brazilian entities by foreigners or legal entities headquartered abroad.
- Some restrictions apply differently to individuals and companies.
To engage in agricultural projects, acquisition of rural property in Brazil is available to foreign entities or individuals and always be subject to approval by federal government agencies and Permission from INCRA (except the acquisition of foreigners in areas up to three Unidentified Exploitation Module Units (MEI); MEI is an area unit as defined by the location of INCRA.
Generally, the acquisition of agricultural land in Brazil is governed by a set of laws. There are important rules;
- Federal Law No. 10,406/2002 (Civil Code).
- Federal Law No. 6,015/1973 (Public Registry Act).
- Federal Law No. 4,504/1964 (Rural Land Act).
- Federal Law No. 5,709/1971 (Government property on the acquisition of rural lands by foreigners, foreign entities, and foreign-owned or controlled Brazilian entities).
Acquisition of ownership needs the transfer document registration in Matricula, for example, a contract of sale and purchase or the Corporate Transfer Act. To be accurate and enforceable, most real estate transfers require a deed to be performed before a public notary and then registered with Matricula.
Acquisition of rural property ownership in Brazil also depends on compliance with the requirements of the INCRA registry of property. Federal Law No. 10,267/2001 acquires rural land subject to a valid certificate of Rural Land Record (CCIR) with INCRA and specifies the scope of the area with certified geo-reference. Acquisition of agricultural property can also be done using adverse possession, i.e., acquisition of property by occupying real estate for an indefinite period without being challenged by the current owner. Depending on the type of land use and other legal conditions, the time required to acquire land through negative occupation is 5 to 15 years.
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Usage rights in Brazil for the agriculture sector are divided into two groups
Rights that remain attached to real estate regardless of further transfer of ownership. Liability rights that have been agreed upon between the contracting parties. Rights are subject to prior registration and include usability, superficial rights, usage, and convenience.
The type of liability for the use of liability for the rural property is governed by the law of rural lands and consists of two types;
- Rural Lease (arrendamento rural).
- Rural Partnership (parceria rural).
Both are obtained by following the relevant agreement without the need for further registration.
Rural Lease (arrendamento rural) – For agricultural purposes, it is the common structure used by large corporations in Brazil. Rural lease refers to an agreement by which a rural landlord gives a rural tenant the right to use rural real estate for a fixed period for an annual rent. The amount of rent should be adjusted based on monetary standards (indexes or other), but the rent can be paid in kind (i.e., in agricultural products). Rural lessees have the right to first refuse the acquisition of leased land.
Rural Partnership (parceria rural) – Rural partnerships consist of different sets of partnerships from each party (land, equipment, crops, structures, and labor), with one party responsible for providing agricultural land. At the end of the specified crop, the partners share the produce, goods, and benefits from the agricultural activity. This is within the maximum provided by law and ranges from 20% to 75% (depending on the shared structures).
Understanding the risks for buying agricultural land in Brazil
Brazil offers a compelling opportunity for agricultural investors, there are some unique challenges to operating within the country. To be successful, investors must be aware of these risks and be satisfied with the potential impact or be confident that they have a strong mitigation strategy. Although agricultural investment around the world is subject to fluctuations from a variety of sources, including weather and commodity markets, investing in Brazil carries a uniquely unusual risk, especially the political climate, foreign exchange fluctuations, and Due to liquidity issues.
Currency risk plays another role, especially when it comes to agricultural investment. Agricultural investment is attractive for the operating income that creates the asset. Although many investors who choose agricultural investments are looking for long-term opportunities, sooner or later they want to get out of investing. At this point, liquidity concerns can come in handy with farm assets. An asset is only worth as much as one is willing to pay for it, the pool of potential investors can be limited. To limit the impact of this risk, investors will be wise to maintain the value of their investment by taking the necessary care and making improvements to protect the operation. Also, for an investor with the flexibility of time, staying close to the market can help identify the ideal moment to sell.
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