TRENDS AND IMPACTS OF FOREIGN INVESTMENT IN DEVELOPING COUNTRY AGRICULTURE

BRAZIL
Trends and impacts of foreign investment in
developing country agriculture
BOX 7
Restrictions to land ownership by foreigners in Brazil
Brazil’s National Security Council does not allow foreigners to own land located within 150 km of the
national borders. In addition, the Brazilian Chamber of Deputies approved in October 2009 legislation
that would further restrict foreign ownership of land along Brazil’s borders, and within the Amazon.
This legislation is not yet binding because it requires the approval of the Brazilian Senate and that of the
President. In August 2010, the Nation’s General Attorney issued a directive, approved by the President,
which limits the size of properties that foreigners are allowed to own.
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Exchange Rates: Brazil adopted in
1998 a flexible exchange rate that
allows for a greater competitiveness
in the international markets and, as a
consequence, increased exports and
the flow of FDI for agribusinesses.
Interest Rates: The implementation of
Plan Real in 1994 put a downward
pressure on both inflation and interest
rates. Though they continue to be high
in real terms due to spreads associated
with risk premiums, their persistent
decline of the last 10 years has
stimulated investments agriculture.
Tax burden: In the last eight years the
internal public debt has almost doubled,
reaching around US$1 trillion, and
taxes have escalated. The tax burden
is considered a major factor affecting
the competitiveness of the Brazilian
businesses, and has deterred investors.
BOX 8
Forest vocational land policies
ii. Improvement in Inter-Sectorial Factors
The inter-sectorial factors that have most
affected investments in agriculture and
forestry and highlighted include economic
infrastructure, social infrastructure and
environmental restrictions.
Economic infrastructure: Transport
and energy are very relevant and het
Brazil has in general neglected its
transportation network (highways,
railroads, ports, airports, waterways)
and the energy sector (bioenergy,
hydroelectricity, oil) requires
substantial investments for prices to
remain competitive into the future.
Social infrastructure: Brazil’s
performance of the Human
Development Index is relatively low,
scoring only 0.699 points and ranking
One solution to minimizing conflicts between agriculture and environmental protection is the adoption
of a Forest Vocation Land (FVL) policy. It identifies lands that are more at risk of erosion and runoff, and
requires from landowners that want to use them, the adoption of specific measures to preserve land and
water. Lands that are not subject to risk of degradation, the so called non-forest vocation lands, may be
put to any use, including forestry. The Forest Vocation Land policy is intuitive, simple and inexpensive to
establish and enforce.