I get e-mails from people everyday asking about Brazil farmland. There are many websites that feature parcels of land for sale. Some feature large tracts of land at very cheap prices. These tracts of land (if they even exist) often are located in very remote areas of Brazil. Even if one could get clear title, take possession, and form a Brazilian company to hold the land, how does one plan to administrate the land once you have it?
Too many investor types assume the American business model will work in Brazil just like it does on the Great Plains. In developed areas of Brazil that have been farmed for 20-30 years one could buy a piece of land and rent it to a neighbor with few problems. However, land in these areas is circa 3,000 dollars an acre. The land that is for sale from $100 dollars to $500 dollars an acre can have an incredible amount of problems associated with it. When a person contacts the realtors, please ask the following questions:
1. Has a vintenaria been completed?
2. Has the land been Geo-referenced?
3. Can a title insurance policy be issued? (with American company)
4. Is the land in compliance with Ibama?
5. Does the land have any Incra projects, if so in compliance?
6. Are irrigation permits available? Are existing wells legal?
7. Is there a defined physical border to the land? i.e. fence, road, river?
8. Has the previous owner been in possession of the land for the last 5 years?
9. Is a satellite map of the property available?
10. Since I (the buyer) do not speak Portuguese, what are my options for local management?
The above are 10 good questions. I could think of 50 more to ask.
There are so many stories of land that has been sold that does not exist. Yes, the land exists in physical form, but when you research the legal description, the previous owner was in possession of a fake title. Geo-referencing is being done on all land in Brazil but at a very slow pace. This will give you exact GPS coordinates of the land. The problem is that if the new GPS coordinates do not match the old legal description, one must start from scratch and re-register the whole farm. This takes time and money. It’s up to the previous owner to do due diligence on this.
Ibama is the equivalent to the EPA and National Forestry Service in USA. In Minnesota we also have the DNR which monitors the states natural resources. Those of us that farm in the USA are very familiar with FSA office. In Minnesota the SCS part of the office can be very powerful with regards to sod busting and swamp buster activities. I know what it is like to have government payments withheld because of a swamp buster violation. The point I am trying to make is that all the aforementioned agencies are equal to an IBAMA at the federal level and all its bureaucracy.
In the USA, we can be in violation of a federal program payment and can still sell the land. The new owner will assume the problem. In Brazil, if there is an environmental issue, one cannot even sell the land. Imagine going to the FSA office and getting them to sign off on an abstract or title opinion in USA. This is why I always tell my clients, you must leave your American business model at home. Come to Brazil with open mind and learn the system first. If you are unable to change your mindset, there is no reason to come to Brazil for investment reasons. I am not promoting the Brazil business model. They are slowing evolving towards global standards. The key will be complete transparency in the banking system. There are still many old debts on properties that go back to the 1980’s. Two and Three currencies also are common. This debt must be discharged to allow clear title transfers.
Why do I bring all of this up? It sounds like I am anti-Brazil? I am very pro-Brazil and embrace all the challenges and opportunities it presents.
To the first timer to Brazil, no one mentions the above problems. Upon multiple trips to Brazil and commitment to a project is when the complex details start to reveal themselves. The above problems are commonplace in the interior of Brazil where the land does not have a long history, where land is cheap, and environmental issues abound.
This is why I preach to newcomers to Brazil. Take some time, see the old Brazil, see middle Brazil and then see how fast the new frontier areas of central Mato Grosso are vertically integrating. Until one grasps what Brazil can be, one cannot understand how cheap land in the interior will have a future. The opportunities are there, but one must comprehend the “monolith” your about to tackle.