Below is a list of the many reasons to invest in Brazil’s agricultural sector:
- Brazil has many years or generations of agricultural experience and expertise, which can be seen in its production and leadership position of soybeans, cotton, coffee, cacau, orange juice, tobacco, chickens, cattle, sugarcane, fruits and vegetables, rice, and other food products.
- Brazil is generally quite democratic, politically stable, and respectful of the rule of law.
- Its climate allows for a wide range of crop production, including corn, soybeans, coffee, oranges, tobacco, and cotton to name a few.
- Brazil has immense land and natural resources and a growing commitment to sound environmental practices.
- Brazil possesses 14% of the world’s usable water resources with 3% of the world population.
Sustainable Farming Practices for the Future
Brazil now requires that new farmland is environmentally sustainable and follows both federal and local regulations. The philosophy is that to take care of the land and environment is the best way to obtain the best results from the land over the long term. Good farming techniques make the land and soil richer and healthier and preserves a farm’s potential for future generations. Sustainable farming is both good business and good ethics.
How to Acquire and Develop Land in Brazil
- Identify an area where other farm operators have successfully applied for farming licenses and achieved success in farming operations.
- Avoid areas such as the Amazon rainforest or other areas at risk of deforestation. Rather, concentrate on areas with low density scrubland (Brazilian savannah) and pastureland.
- Plan on setting aside more land than is required by law. Brazil has higher requirements for non-farmed land (20 – 35%), and there is no compensation for complying with this requirement. Build these numbers into your projections.
- Work with people and organizations that abide by the recommendations of The Nature Conservancy (TNC), one of the world’s most prominent environmental NGO’s, as they have outlined the best environmental practices.
- Use farming techniques and state-of-the-art technology, such as good fertilization techniques, crop rotation practices, intelligent irrigation, and weed control and insect pesticides that are sustainable over time.
- Do not over-till land, as this farming technique saves water and saves on machinery fuel costs. It also creates less erosion and retains natural soil nutrition. Consequently, yields increase and less carbon dioxide is released into the atmosphere.
- Add new grasses and crops on a regular basis and over the life cycle of a farm’s development. This ensures a carbon gain rather than net carbon loss. This is quite different than northern hemisphere farming practices.
- Always comply 100% with government regulations on the use of GM seeds. Brazil rigidly enforces this requirement. GM seeds are permitted but only those that are pre-approved under Brazil’s agricultural laws.
- Regularly monitor the use and condition of all water sources (rivers, ponds, lakes, and wells). This will maintain underground aquifers and not cause contamination of toxins, such as fertilizers, chemicals, animal waste, and other by-products of farming activities.
- Maintain and set aside ample and strategic land for the preservation of native plant and animal species.
Obtaining Proper Title Insurance and Documentation in Brazil
When buying property in Brazil, it is always recommended that you obtain proper title. Qualified Brazilian lawyers and title insurance companies can help with this process, and it is worth the time and money it takes to obtain a free and clear title. Once a person or entity has this, it is very difficult for another person or entity to bring a title claim lawsuit against you.
The myth exists that foreigners cannot own property in Brazil; but this is false. Property ownership in Brazil is freehold; so be weary of companies that offer other options besides freehold ownership or an accredited title company refuses to issue full title insurance. As once stated earlier, this process can take time and money, but it is a solid investment.
Once you are certain that you can obtain a freehold title of property in Brazil, consider additional reasons for buying property in Brazil:
New and better mortgage laws
- These laws create a better environment for banks to loan money.
- The banks are able to make a safer investment when lending.
- In countries without sustainable mortgage products, there is very little domestic demand for property because purchasers are forced to pay in cash for property. This creates low property prices and a low supply of money.
- Right now, lower interest rates are making mortgages more common.
- Due to the availability of mortgages, domestic demand for property is increasing.
New ownership laws that protect the buyer:
- These laws are some of the best in the Americas.
- Ownership is far more secure in Brazil than many other popular Latin American destinations.
- This creates new international demand.
Pay a little and get a lot:
- In Brazil, construction costs are much cheaper than what they are in the United States and Europe.
- These bonuses can lure property buyers who are seeking a good standard of living.
More on Title Ownership
Until the 1970’s, much of Brazil’s land was economically worthless, unproductive, empty space. Consequently, ownership was not a concern. Ownership only became important when new technologies made the land more productive.
Within this new reality, the value of free and clear titles has become much more important. Currently, there is a huge amount of land for sale, but the titles to millions of hectares are still cloudy. These titles can be cleared, but clearing land titles in Brazil is bureaucratic and takes time, money, and patience. This endeavor can thus be frustrating, but it is not overly expensive and once free and clear title has been obtained, a person or entity can move forward with their project in confidence, knowing that the land is theirs and will not be encumbered by anyone or any entity. From the perspective of non-citizens, the Brazilian justice system may seem cumbersome and time-consuming, but over time, the system does work and it does get easier.
The rule of thumb is Buyer Beware. Ownership and title documentation can be fraudulent, so great caution is urged when buying property is Brazil. Do not trust people who speak your language too well – including North Americans and Europeans – and those people who you meet in a hotel lobby or bar and who just happen to have land for sale. It is always very cheap and very easy to acquire, and of course, just as easy to lose after you have purchased the land. Land is and can be misrepresented in countless ways, so simply use credible title insurance companies or lawyers and demand a free and clear title from the very beginning.
Financing and Credit
Long-term credit for land purchases is essentially not available in Brazil, but most land is sold on terms. The terms reflect the expected costs and returns on land as discussed above. Financing arrangements vary, but terms typically run three to five years. For example, land sold at a price of 40 sacks of soybeans/ha, might be paid off in 4 equal installments of 10 sacks per year. This is a simple, straightforward way to buy and sell land, and it is quite fair to both buyers and sellers. Keep in mind that land value is based on the market value of the output produced over four years. Land may be sold on terms of more than four or five years when the title is held by a banking institution. For example, banks holding the paper on land may finance that land over a period of twelve years or more. There are also cash sales of land. The discount for cash varies considerably from sale to sale, but discounts of 20 to 30 percent can be expected.
Brazil’s Place in World Agriculture
Brazil is the first country in the world to demonstrate that it is possible to achieve world class agricultural yields from commercial farming in a tropical region. All the main food baskets of the world, such as the Mid Wests of Canada and of the United States as well as the Steppes of Europe, are currently in temperate zones. Unlike those temperate zones, where plowing is necessary to grow crops successfully, Brazilian farms are able to make much greater use of no-till and minimum-till farming methods, which produce better carbon retention and ultimately, with the addition of new grasses, retain more carbon than they use.
The Brazilian model therefore promises the prospect of a material improvement in the current imbalance between supply and demand in the global market for food with a reduced risk of serious and enduring environmental detriment. For that to be realized, however, it is important that environmentally-sustainable farming methods are both encouraged and effectively implemented. The encouraging starting point is that 60% of Brazil’s landmass retains its native landscape. The comparable figure in Europe, after several centuries of cultivation, is under 1%.