The Brazilian government is to toughen up an existing law in a bid to prevent overseas investors from acquiring agricultural land. It will mean that they will be unable to buy controlling shares in companies that own large amounts of land in the country.
A law was passed in 1971 which severely limited the outright purchase of rural farmland by foreigners or overseas companies, and under it no one was able to own more than one fourth of a county, and no more than 10% nationally which was meant to protect food security.
In fact this new law is to be passed due to fears that foreign governments such as China were likely to be interested in purchasing agricultural land in emerging markets to increase their own food security, especially with the worry of increasing food prices throughout the world. World food prices hit an all time high in February.
The Brazilian government has watched China, Korea and the Gulf States buy up land in Africa and does not want to allow this to happen here.
While Brazil is interested in attracting capital investment in order to increase its world exports it does not wish to relinquish control to other countries and views this as being a sovereign risk. It is estimated that foreigners currently own 4.5 million acres of land in Brazil, and this has grown by 11.5% since just 2008.
It is not yet known when this law will be implemented as the process has been ongoing since President Lula da Silva asked ministers to tighten it up last year.
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