MAY 2019: A Brazilian Senator has introduced a bill to change the law for foreigners buying agricultural land in Brazil. Additional information about this new law was sent out to Newsletter subscribers.
NOTE: The INCRA database, which is out-of-date, says that 4.5 million hectares of land in Brazil are owned by non-Brazilians or 0.53% of national territory. (Agência Câmara)
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 18 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.
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.