Economic stagnation has Brazil’s policymakers looking for answers. One solution could come in the form of a change to the Brazilian law that bars foreign ownership of agricultural land. Interim President Michel Temer will reconsider this policy, Reuters reported.
Under restrictions adopted in 2010 by former President Luiz Inácio Lula da Silva, foreign money cannot be used to acquire farmland in Brazil, whether that money comes from individuals or companies under foreign control. Brazil has blocked foreign ownership of farmland due to concerns that too much fertile agricultural land would fall into the hands of other countries, such as China.
However, there is apparently some new thinking on the matter. In discussing with Reuters the government’s plan to lift the restrictions on foreign ownership of farmland, Secretary of Investment Moreira Franco told the news agency that the current rules are “completely unreasonable.” Though rules restricting foreign ownership of land were intended to protect Brazil, industries that produce commodities from land, such as sugar and timber, have not supported the policy.
Agriculture has long been a mainstay of the Brazilian economy. Fibria, the world’s largest pulp exporter by volume, has its headquarters in Brazil. Its eucalyptus trees grow faster in Brazil than eucalyptus trees in Europe and China, giving the company advantages over pulp producers elsewhere.
Both Fibria and Eldorado Brasil, another pulpmaker, have announced plans to expand their plants in Mato Grosso do Sul. Klabin, a paper producer, has started a new plant in Paraná. Those three projects together are expected to add 5 million tons to Brazil’s annual pulp production, Reuters reported.
But Ibá (Indústria Brasileira de Árvores), the trade association representing the pulp and wood industry in Brazil, believes that removing restrictions on foreign ownership of agricultural land will open the country to even more land investment for the industry. According to Elizabeth de Carvalhaes of Iba, lifting the land ownership restrictions could open the doors to $19 billion worth of investment as pulp producers based in other countries could expand to Brazil.
Land earmarked for agricultural and timber purposes will not reach its full potential without the investment to support it. Even if that investment comes from foreign companies, Brazil still stands to reap benefits from the jobs and revenue that industry expansion creates. Changing Brazil’s land ownership restrictions will not be a complete solution to the country’s economic woes, but it would add one more desperately needed piece to help solve the country’s economic puzzle.
