June 2, 2011
China expresses interest in Brazil's farmland for soy production
Brazil's officials had indicated that China is interested in buying wide areas of Brazilian farmland for soy production.
Officials in Uruaçu would not sell the hundreds of thousands of acres needed. Undeterred, the Chinese pursued a different strategy by providing credit to farmers and potentially tripling the soy grown there to feed chickens and hogs back in China.
"They need the soy more than anyone," said Edimilson Santana, a farmer in the small town of Uruaçu. "This could be a new beginning for farmers here."
The US$7 billion agreement signed last month to produce six million tonnes of soy a year is one of several struck in recent weeks as China hurries to shore up its food security and offset its growing reliance on crops from the US by pursuing vast tracts of Latin America's agricultural heartland.
Even as Brazil, Argentina and other nations move to impose limits on farmland purchases by foreigners, the Chinese are seeking to control production more directly by themselves, taking their nation's fervour for agricultural self-sufficiency overseas.
"They are moving in," said Carlo Lovatelli, president of the Brazilian Association of Vegetable Oil Industries. "They are looking for land and reliable partners but what they would like to do is run the show alone."
While many welcome the investments, the aggressive push comes as Brazilian officials have begun questioning the strategic partnership with China encouraged by former President Luiz Inácio Lula da Silva. The Chinese have become so important to Brazil's economy that it cannot do without them so this situation is making Brazil increasingly uneasy.
"One thing the world can be sure of is there is no going back," da Silva said while visiting Beijing in 2009.
China's moves to buy land have made officials nervous. Last August, LuÃs Inácio Adams, Brazil's attorney general, reinterpreted a 1971 law, making it significantly harder for foreigners to buy land in Brazil. Argentina's president, Cristina Fernández de Kirchner, followed suit last month, sending a law to congress limiting the size and concentration of rural land foreigners could own.
Adams said his decision was not a direct result of land-buying by China, but he noted that huge land grabs in Latin America and sub-Saharan Africa, including China's attempt to lease about three million acres in the Philippines, had alarmed Brazilian officials.
"Nothing is preventing investment from happening, but it will be regulated," Adams said.
A World Bank study last year said that volatile food prices had brought a rising tide of large-scale farmland purchases in developing nations, and that China was among a small group of countries making most of the purchases.
Foreigners own an estimated 11% of productive land in Argentina, according to the Argentine Agriculture Federation. In Brazil, one government study estimated that foreigners owned land equivalent to about 20% of São Paulo State.
International investors have criticised the restrictions. At least US$15 billion in farming and forestry projects in Brazil have been suspended since the government's limits, according to Agroconsult, a Brazilian agricultural consultancy.
"The tightening of land purchases by foreigners is really a step backwards into a Jurassic mentality of counterproductive nationalism," said Charles Tang, president of the Brazil-China Chamber of Commerce, saying that American farmers had bought sizable plots in Brazil in recent years, with little uproar.
Responding to the criticism, Brazil's agriculture minister said this month that Brazil might start leasing farmland to foreigners, given the barriers to ownership.
China itself does not allow private ownership of farmland, and it cautioned local governments against granting large-scale or long-term leases to companies in a 2001 directive. China also bans foreign companies from buying mines and oil fields.
But as more of its locals eat meat, China is expected to increase its soy imports, mostly for animal feed, by more than 50% by 2020, according to the USDA. Last month, Chongqing Grains signed a US$2.5 billion agreement to produce soy in the Brazilian state of Bahia. Last October, a Chinese group agreed to develop about 500,000 acres of farmland in RÃo Negro Province in Argentina.
In both cases, Chinese officials proposed buying large tracts of land before local officials steered them toward production agreements.
"We are never going to sell the land," said Juan Manuel Accatino, the minister of production in RÃo Negro.
Brian Willott, an American farmer who came to Brazil in 2003, said Chinese interest in buying farms had not abated. "Everywhere you go to look at a farm they say, 'We are considering selling to the Chinese,' " he said.
In Goiás State, nearly 70% of the soy grown went to the Chinese last year, and the Chinese are seeking to use about 20 million acres of pastureland that has not been cultivated for decades.
"For them, the faster the better," said Antônio de Lima, Goiás' agriculture minister.
Farmers here said they share Chinese officials' goal of breaking the stranglehold of international trading companies like Cargill and Archer Daniels Midland.
But Tan Lin, a manager at the Chinese company involved in Goiás, said he doubted Chinese companies were ready to replace them.
"I do not see that the Chinese companies working here have that expertise yet," Tan said. "But if you can do that, it is good."
