New Era of Investment in Timberland and Forest Industry in Brazil

February 28, 2017

Since last September, President Temer and Minister of Finance have been taking several measures to improve economic conditions, aiming to regain economic growth and attract investments. Minister of Finance, Mr. Henrique Meirelles, declared last week during an interview with Globonews (Brazilian News Agency) that the Brazilian Government is preparing a new regulation, to be released in the next months, authorizing land acquisition by foreigners. Agribusiness and forestry are among the fastest growing sectors in the country and those sectors need investments.

The restriction against foreign investment in land was introduced in 2010, after the publication of Attorney General Office’s Statement. This statement gave a new interpretation to the terms of a Federal law from 1971, resulting in a lack of foreign capital in agricultural and forestry sectors.

To relax these restrictions, a commission created by Brazilian politicians, called Parliamentary Front of Forestry (FPS), started its discussions with the National Congress to have a new bill revised and approved, proposing a new regulation on the theme in 2015.

According to Agriculture Minister, Mr. Blairo Maggi, the proposed regulation seeks to avoid land speculation and large foreign investment funds buying vast areas only to leave it idle if commodity prices fell. The Minister also stated that these reforms will support foreign investments in agricultural products with longer production cycles, such as oranges, sugar cane, coffee and forestry. Restrictions could apply to soy, corn and other crops which are harvested within a year.

The current text of the bill provides that foreign investors may, through their Brazilian subsidies, purchase up to 100,000 hectares of suitable land in rural areas, and may also lease another 100,000 hectares. Companies registered with the Brazilian Securities and Exchange Commission (CVM) will have no limits on the acquisition or lease of land in Brazil. An important point to be defined is whether detailed information on the project to be developed in the rural property will be required or not, and, later, the proof of its effective implementation.

The proposal also supports the legal security for Brazilian financial institutions, and allows them to accept rural areas controlled by foreigners as collateral for credit operations. On the other hand, in the current draft of the Bill, there are severe restrictions on the acquisition of rural property by sovereign wealth funds and foreign state-owned companies.

The text of the Bill does not affect the lands of the Amazon region and national border areas.

This means that a new era of timberland and wood processing investment is about to start in Brazil. Indufor is following closely this development.

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