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Source: Wall Street Journal
By: Matt Moffitt

BUENOS AIRES—Argentina's Congress is gearing up for a debate on a bill to limit the amount of farmland foreigners can buy, amid a surge of interest in land deals triggered by rising food prices.

The proposal by President Cristina Kirchner would bar individual foreigners from owning more than 2,500 acres and would limit aggregate foreign ownership to 20% of Argentina's total rural land. President Kirchner has touted the bill as her top legislative priority for this fast-growing agrarian economy, which was the world's second-largest corn exporter and third-largest soybean exporter last year.

A lower house committee slated a hearing to discuss the bill on Wednesday, but legislators say it could take time to iron out the differences between the government's plan and 14 previously submitted bills regulating foreign land acquisition. There aren't firm statistics on foreign land holdings in Argentina, but a study by a think tank affiliated with the conservative Republican Proposal party estimated that foreigners hold between 3.4% and 9.9% of total rural land.

For years, Argentine nationalists and indigenous rights groups have raised concerns about purchases of large tracts in the southern Patagonia region by wealthy foreigners, including media mogul Ted Turner, clothing entrepreneur Douglas Tompkins and the Benetton Group.
But eyebrows are now being raised over recent deals in several regions that are focused on ensuring food security for foreign governments amid rising commodity prices. For instance, the government of the Rio Negro province recently announced a deal to lease as much as 800,000 acres to China's state-run Heilongjiang Beidahuang Nongken Group. The provincial government said the Chinese have pledged to invest $1.5 billion in irrigation and other infrastructure, and plan to export food to China.

Details of the plan are still fuzzy, and it has caused controversy, in part because the province doesn't own all of the land involved, says Maria Magdalena Odarda, a provincial congresswoman, who has led opposition to the proposal. In an interview, she said many growers are resistant to shifting from cultivating fruit to soybeans, as the Chinese want them to do. The local government says the deal will bring badly needed investment to the region and create jobs. It didn't respond to a request for further comment on the deal.

Earlier this year, the government of the northern province of Chaco announced a deal with Saudi Arabian investors to lease up to 500,000 acres for farming. Gov. Jorge Capitanich said the Saudis will initially invest $400 million to upgrade infrastructure, providing "an increase in the future value of the land and the state patrimony."

Mrs. Kirchner has indicated that her law wouldn't be applied retroactively, meaning that current investments wouldn't be affected. One of the provisions of her proposal would be to create a unified registry of land ownership to define who owns what land. Records are now scattered among provincial and local land offices.

The range of land deals underscores the complexity of Congress's challenge in crafting the bill, says Nieves Pascuzzi, an economist at the Argentine Rural Society, a group representing agrarian interests here. She said legislators need to iron out whether they intend to regulate only land purchases or also land leasing and other arrangements. The draft proposal itself also isn't clear about whether restrictions would apply to all foreign investments, or only those in which foreigners hold a majority stake, she said. Finally, Congress needs to make allowances for the diversity of agrarian investments, ranging from sprawling sheep ranches in Patagonia to smaller soybean farms on the pampas.

Last year in neighboring Brazil, there was an immediate chilling effect on the rural land market when the government imposed limitations on foreign land ownership, said Kory Melby, a Minnesotan who does agrarian consulting from the western Brazilian town of Goiânia. "It has inhibited a lot of land deals in the last 12 months and slowed things down," he said.

Latin America's more restrictive posture to land purchases stands as a contrast to the position of Africa, which has been offering attractive longterm leases and tax incentives to Chinese and Arab investors, said Irma Mosquera, a specialist in law and investment at the University of Utrecht in the Netherlands.

"I think Africa is where Latin America was 20 years ago in saying, 'We need foreign investment. We are opening to the market.' " Ms. Mosquera said.

"In Latin America, governments are no longer so willing to encourage investment without conditions."

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