Buffett May Avoid Brazil Backlash

Amid reports that Warren Buffett’s Berkshire Hathaway Inc. is seeking a partnership with Brazilian billionaire Rubens Ometto and soybean grower Blairo Maggi to buy farmland in the South American country, Agrimoney has an interesting report on how the planned venture could be structured to avoid the recent backlash in Brazil against foreign land investors.  As the article notes:

“…Warren Buffett’s tie-up with sugar magnate Rubens Ometto Silveira Mello over alleged plans for a farmland buying spree in Brazil may avoid the US tycoon falling foul of a drive to keep out foreign investors.

Brazil’s president, Luiz Inacio Lula da Silva, has put the brakes on a wave of foreign investment in the country’s farmland, estimated by Brazil’s central bank at $2.4bn between 2002 and 2008, by approving a rule that restricts the ownership by foreigners.

“Considerable uncertainty surrounds the force of the new rule and how it may be applied,” Stephen Johnston, a Canada-based farmland investor, said.

While some observers have dismissed the move as pre-election posturing, others “believe there is a possibility that all farmland acquisitions since 1988 could be made null and void”.

Three-way deal?

The clampdown comes amid reports that Mr Buffett is planning to join in the foreign buying splurge which has helped drive Brazilian farmland prices up to R$50,000 ($28,600) a hectare for good quality land in areas with good transport links.

AgraFNP, the Sao Paolo-based farm consultancy, has estimated the jump in farmland prices in frontier areas of the north east over the last three years at 54-70%.

However, Mr Buffett’s tie up with Mr Mello and oilseed magnate Blairo Maggi to buy up soybean and sugarcane farmland may allow him to sidestep Lula’s restrictions, which are limited to foreign individuals, or companies owned more than 50% foreign-owned.

Mr Buffett, whose investment record has earned him the title of the Sage of Omaha, is proposing to invest $400m as a minority partner in the venture, Rio de Janeiro-based newsletter Relatorio Reservado said.

‘Brazil for Brazilians’

Brazil’s relatively open ownership, until now, and huge agricultural potential – the country is already the world’s top coffee and sugar producer, and second ranked soybean grower – have made it a magnet for foreign investors.

However, the scale of investments, by buyers from hedge funds to state-baked Chinese companies, has prompted a local backlash.

“Brazilian land must stay in the hands of Brazilians,” Guilherme Cassel, Lula’s agrarian development minister said.”

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About This Blog And Its Author
Seeds Of A Revolution is committed to defining the disruptive geopolitics of the global Farms Race.  Due to the convergence of a growing world population, increased water scarcity, and a decrease in arable land & nutrient-rich soil, a spike of international investment interest in agricultural is inevitable and apt to bring a heretofore domestic industry into a truly global realm.  Whether this transition involves global land leases or acquisitions, the fundamental need for food & the protectionist feelings this need can give rise to is highly likely to cause such transactions to move quickly into the geopolitical realm.  It is this disruptive change, and the potential for a global farms race, that Seeds Of A Revolution tracks, analyzes, and forecasts.

Educated at Yale University (Bachelor of Arts - History) and Harvard (Master in Public Policy - International Development), Monty Simus has long held a keen interest in natural resource policy and the geopolitical implications of anticipated stresses in the areas of freshwater scarcity, biodiversity reserves & parks, and farm land.  Monty has lived, worked, and traveled in more than forty countries spanning Africa, China, western Europe, the Middle East, South America, and Southeast & Central Asia, and his personal interests comprise economic development, policy, investment, technology, natural resources, and the environment, with a particular focus on globalization’s impact upon these subject areas.  Monty writes about freshwater scarcity issues at www.waterpolitics.com and frontier investment markets at www.wildcatsandblacksheep.com.