 Buying Land in Brazil
Our main goal on this site is to offer Guide and Consulting services for those interested in Brazil. This can range from, an infra-structure tour for the 1st timer to Brazil, to an in-depth Ag business tour focusing on setting up a project in Brazil. This can include meetings with CEO´s of companies, law offices, accountants, and various government agencies and banks.
Investing directly in land in
Brazil is not for the beginner. It requires an investor with advanced
international experience. Ideally the investor should be fluent in
Portuguese. I have spent 12 years in Brazil developing contacts that I
can trust. It is not easy.
I look for investors that are willing to partner or cooperate with
established Brazilian farmers. With a heated land market at the moment,
it is better to work with Brazilians than try and compete with them.
An investor in Ag real estate should be prepared for several visits to
Brazil. Travel is not cheap.
Legal structure is paramount for
buying land in Brazil. At the moment it is legal for a foreign entity to
buy 5000 ha of land in the Cerrado states. We are waiting and overturn
of the opinion of the Attorney General of Brazil. If this happens,
foreigners should be able to own up to 25% of a given county in Brazil.
The prerequisite will be that the land be used for production and create
jobs and commerce with the capital invested in the country.
The most common legal form for buying land in Brazil is a LTDA. This in
essence forms a partnership with a Brazilian or a Permanent resident
with a CPF#(Social Security#) that is the in country responsible party
for the entities activities. The surprise for most investors is the cost
of start up to get Legal in Brazil. This can cost several hundred
thousand dollars to get set up and get the first parcel of land ready
for transfer to the new entity.
Thus one needs to reach a “critical mass” in the size of investment to
justify the start up costs.
I am not a real estate broker in Brazil. I am a liaison. I am an
introducing broker, I put people interested in Brazil in contact with
other people in Brazil that are operating on the same frequency. A
trusted confidant in Brazil is my friend
Simao Rodrigues. He has
been a real estate broker for 7 years. Priory to this, he was a Banco do
Brazil manager in Mato Grosso. His background knowledge of previous
owners, environmental concerns, and local finesse is something that is
not easily replicated in Brazil. Who one knows in Brazil trumps what you
know.
HOW IS LAND SOLD?
-
Land is sold in sacs of
soybeans per hectare between Brazilians. 1 sac = 2.2 bushels of
soybeans.
-
Historically pasture land has
sold for 150 sacs per ha.
-
Reserve land has sold for about
75 sacs per ha.
-
The prime farm land with double
crop potential has sold for 300 to 400 sacs per hectare. Normally
these asking prices have a term of 5 to 7 years.
-
On a “cash deal” one can deduct
about 8% per year of contract for deed term from asking price.
Brazilians prefer the 5 to 7 year
payment plan because it allows the buyer and seller to avoid some
capital gains taxes and annual income tax exposure. It is just a
transfer of elevator receipts between buyer and seller. The person
holding the soybeans can sell them whenever they like. Clear title is
passed to new buy at the end of the payments of soybeans.
A new investor to Brazil does not have this option per sey. The
investment group wants a clear title as soon as possible. Thus a cash
price is usually agreed to in either REALS or US Dollars and the
contract stipulates the exchange rate because it may take 6 to 8 months
or longer to close the deal. Given these valuations and the size of
these farms, the transactions are for many millions of dollars. The
investment needs to be registered with central bank. All of these things
take time.
I give 200% to those investors that are serious about Brazil. For those
that are curious and are looking for cheap land in the middle of
nowhere, I am not your guy. I do not think you are prepared for this
type of investment. It takes a special person to be able to do the
remote Brazil tour. Isolation, language and cultural barrier, lack of
first world comforts.
For those that have a solid capital base and are willing to pay fair
market price for prime farm land and can tolerate a 3% ROI combined with
the likely increase in valuation of land over time because of improved
infrastructure and cycle TWO economic development in the Mato Grosso
region, please fill out my Real Estate consult form.
If you do not understand some of the points made in this cover page, I
would highly suggest you subscribe to my
newsletter and get yourself up to speed on the reality of Brazil
before you contact me directly. I tend to screen out non-serious callers
in about 5 minutes.
Kory Melby
|
Ag Land
