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Brazil, the South American agribusiness giant and the world’s eighth largest economy, has suffered several political and economic changes in the last two years. After long political crisis, a new government with liberal tendency and pro-market oriented is leading the country until the next presidential and legislative elections in October of 2018. Consequently, Brazil returned to the attention of investors to consider and explore business opportunities.
Agribusiness is essential for the economy and the balance of payments in Brazil. This sector represents 23% of the Brazilian Gross Domestic Product. The estimates of the Organization for Economic Cooperation and Development (OECD) and the United Nations Food and Agriculture Organization (FAO) said that Brazil will take the lead of world exports of the agricultural sector in 2024.
The continued growth of the crop by 2024 will be based on improved productivity and expansion of crops. The plantations will occupy a total area of 69.4 million hectares in 2024. Much of this expansion will occur through sugarcane, cotton and soy. Soybeans will remain the main agricultural product of Brazil, currently second largest exporter after the United States. However, some current activities such as sugar (1st world’s producer), coffee (1st world’s producer), orange juice (1st world’s producer), beef (2nd world’s producer), ethanol (2nd world’s producer), poultry (3rd world’s producer), pork (4th world’s producer), cellulose (4th world’s producer) and corn (4th world producer), will continue to have considerable importance.
An obstacle to foreign direct investments in agribusiness concerns restrictions on the purchase or lease of rural land by foreign companies and Brazilian companies with majority foreign capital. Since 2010, through a Legal Opinion of the Attorney General, it was established some restrictions that become more bureaucratic the acquisition of rural land. In last months, Brazilian authorities acknowledged this mistake made by the previous administrations, pledging to review these restrictions and bureaucracy. Thus, we encourage investors to consider prospects on land purchases and leases, to conquer the front in future opportunities.
However, these restrictions do not apply to agricultural partnership contracts and the trading of commodities produced in Brazil. In fact, agricultural partnership agreements have been the main structure under which foreign companies and investors have engaged in agricultural activity in Brazil. Important foreign companies have been successful in their operations in Brazil and strongly contributed to the Brazilian record grain harvest in 2017, which exceeded 242 million tons and grew 31% percent.
Undoubtedly Brazil is the last great agricultural frontier and has abundant lands, water and technology adapted to tropical zones for the success of agribusiness, which should be considered by any investor or companies in this sector around the world.
Wagner Garcia Botelha, partner of Mattos Engelberg Law Firm.
