Acquisition Of Rural Properties In Brazil And The Mining Industry

There are currently in Brazil a series of restrictions for the acquisition or lease of rural real estate properties1 by foreign individuals and legal entities. These are also applicable to Brazilian legal entities the voting capital of which is directly or indirectly controlled by foreign individuals or entities. Such restrictions are set forth in Brazilian Federal Law No. 5,709 October 7, 1971, as per its most recent interpretation by the Brazilian government. The most important of such restrictions can be summarized as follows:

Foreign individuals residing in Brazil may acquire a single property with an area of up to 3 exploration units (Módulo de Exploração Indefinida - "MEI")2, but cannot acquire rural real estate properties the aggregate area of which exceeds fifty (50) MEIs. The following acquisitions are subject to the prior approval of the Brazilian agrarian reform agency (Incra): (i) a rural real estate between 3 and 50 MEIs3; and (ii) more than a single real estate property. The acquisition of rural real estate properties by foreign legal entities or by Brazilian entities directly or indirectly controlled by foreigners is conditioned upon the implementation of a project pertaining to one of the following activities: (i) agriculture; (ii) cattle raising; (iii) industrial projects; or (iv) land settlement. Any project to be developed in the country has to be previously approved by the Ministry of Agriculture. The acquisition or lease of areas exceeding 100 MEIs requires prior authorization from the Brazilian Congress. The aggregate area owned by foreign individuals and entities or by Brazilian entities subject to foreign corporate control shall not exceed 25% of the area of each municipality where such properties are located. Furthermore, should 2 or more foreigners of the same nationality be entitled to ownership of rural real estate properties in the same municipality, the aggregate area owned by them cannot exceed 10% of the area of such municipality. Any acquisition by a foreign individual or legal entity of rural real estate exceeding the limits mentioned above must be previously authorized by the Brazilian Congress. Law No. 8,629 of February 25, 1993 sets forth that all restrictions of Law 5,709 are applicable to the lease of rural real estate properties. The restrictions of Laws 5,709 and 8,629 with respect to Brazilian entities subject to foreign control were not applied in Brazil between 1994 and 2010. In 1994, Legal...