Financialization, land prices and land grab: a study based on the Brazilian reality

Abstract

In the last years, the term “land grab” has gained international importance and has been used as a catch-all frase for (trans)national commercial land transactions mainly revolving around the production and export of food, animal feed, biofuels, timber and minerals. The main literature explains it as a consequence of the financialization process that included land as an asset. Our main proposition in this article is that for Brazil, speculative land acquisitions played an important role in the portfolio of many economical agents, but with the deregulation of financial markets and the financialization of the seventies it became more intensive. To do so, first we present the different theoretical approaches to the land grab phenomenon and add a post-keynesian view on land transactions to the debate. Second, we analyze the available data on agriculture and livestock foreign investments in Latin America with the main focus on Brazil. Third, we present the legal and institutional aspects of foreign-owned land in Brazil. In conclusion, we propose that land grabbing will always have a speculative component, but after the deregulation of financial markets, the pressure for land acquisition is larger and the efforts in regulation and control over land acquisition in Brazil have not been effective in controlling acquisitions by foreigners.

When Land Meets Finance in Latin America: Some Intersections between Financialization and Land Grabbing in Argentina and Brazil

“…The use of land, including large-scale acquisitions, as a speculative asset has a long history in many Latin American countries. Certainly, this is the case in Brazil, where land grabs date back to the colonial period [82,84]. Similar arguments could be made in the case of Argentina, where large tracts of land were given to army officers as a reward for pushing back and defeating the indigenous populations, establishing the material base of the Argentine landed oligarchy, which still has a significant role in politics and the economy.…”

“…A related issue to the reprimarization and financialization of commodity markets is the financialization of land in both center and periphery countries. Also referred to in the literature as the 'global land grab', the increase and definitive consolidation of this phenomenon-which Gunnoe [79] (p. 3) calls an "unprecedented integration between finance capital and land ownership"-is closely related to the 2007/08 global financial crisis, after which financial market investors went looking for safer, more 'real' assets [12,14,15,[80][81][82]. The unprecedented amount of farmland included into financial circuits differentiates the current rush to acquire land from other historical periods [83][84][85].…”

“…More specifically, while some authors attribute this phenomenon to the global food production restructuring [13,86], others use a broader narrative to explain the emergenceand global scarcity-of this new asset that includes mounting risk in conventional stocks, a growing world population, the preference for protein and meat in so-called 'developing and emerging' countries (especially China, South Korea and India), rising demand for biofuels or agro-fuels and the limited availability of agricultural land. All of these factors would contribute to making land a safe investment whose value is bound to increase over time [12,82,84,87]. In addition, financial-sector investments in agricultural assets enhance portfolio diversification, guaranteeing more robust returns over financial boom-bust cycles.…”

“…Increasingly, other peripheral countries have come into the scope of analysis, although Latin American countries such as Brazil and Argentina are still underexplored concerning this debate. When dealing with specific countries, or areas within countries, it is natural to take a more 'from below' perspective, analyzing the behavior of specific actors in the new global financial context [15,19,82,85,93,94]. Looking at the financialized land-grab process from below provides insights into the regional complexities of this process that a more general, macro view from above focusing on North-South financial flows misses.…”

“…During the 1990s, the administration of Fernando Henrique Cardoso operated the neoliberal transition through the closure of several government agencies, the privatization of assets worth 18.5% of the GDP in 1994 and the liberalization of domestic finance, foreign trade, exchange rate movements and the capital account of the balance of payments [133]. Land prices dropped a staggering 40% following the Plano Real in 1995, mostly due to the ending of a cycle of many years of inflation in which land was an important asset to hedge against or to speculate with [82]. This paved the ground for the attraction of Foreign Direct Investment (FDI) in the acquisition of land, but there was still a regulatory barrier preventing this.…”