Farmland in Brazil, the next HUGE opportunity

The strong restrictions on the purchase and lease of land by foreigners in Brazil have not prevented investors of various nationalities from acquiring or economically exploiting real estate in the countryside. Nor have they inhibited mergers and acquisitions of companies that rely on rural properties among their assets. While waiting for an end to the ban, international groups have found ways to circumvent the difficulty, which vary in form and also in legal risks assumed.

This year, groups interested in Eldorado Brasil Celulose, put up for sale by the Batista brothers of JBS, had to analyze what to do with the factory in Três Lagoas (MS), which is in rural area. Indonesia Paper Excellence should take control in 2018 and did not comment on the structure it will adopt. China's State Grid had to amend dozens of CPFL Energia's land leases. In the case of eucalyptus forests, the surface right has been ceded to foreign groups, but in at least one case there was a problem with INCRA.

Fairly used for foreign investment in hospitals in the past, convertible debentures are less commonly used in the case of rural land. In January, Embaúba, which holds interests in companies that own rural properties, issued R $ 1.852 billion in debentures that are progressively purchased by a fund managed by Canadian Brookfield.

The shares are remunerated at a rate of 98.79% of Embaúba's net income, with no interest payments, and must be converted into shares as soon as foreigners are allowed to purchase rural property in Brazil. In October 2016, the American pension fund TIAA became the holder of 100% of the preferred shares of Radar, an agricultural property company created by Cosan, in a transaction of R $ 1.1 billion, as a result, TIAA has a 97% economic stake in Radar, although control remains with Cosan.

So are you ready to dance some Samba?