Argentina Land Sales Face Restrictions
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 Goiania. "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 long-term 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."
Talking Points
Libya Turns To Russian Grain
Libya's new government is already turning to Russian grain to meet food demand despite initial concerns that Moscow's support of the former regime could hamper its exports.
Traders said international merchants like France's Soufflet and Glencore International PLC (GLEN.LN) are already moving to meet the needs of the desert country, which depends on imports for nine-tenths of its food supplies.
Months of violence have caused serious upheaval to Libya's import routes and the regions that supply its limited food production around the war-torn eastern port of Benghazi. United Nations agencies, including the World Food Program, have distributed hundreds of thousands of tons of food to the country to stave off a humanitarian crisis. But the private sector is now stepping up its own efforts to meet demand.
Traders said Thursday the Russian unit of commodities giant Glencore chartered two shipments of 25,000 metric tons of wheat to the North African country from the Black Sea port of Novorossiisk on Saturday. A ship broker said a vessel named the Sea Dream Bulker arrived at Benghazi port after traveling via Turkey.
Glencore's Russian unit, International Grain Co., declined to comment. But a manager at a major Russian grain exporter said he expected the company to remain a major supplier to Libya in the future, even though they had previously supplied the country under the deposed regime of Col. Moammar Gadhafi.
"I think Glencore have a good position either with the old government in Libya and also with the new power over there," he said. "They represent Western capital so they should be welcomed."
A person at industry association the Russian Grain Union agreed, adding that 50,000 tons of Russian wheat had made its way to Libya in July through Egyptian and Tunisian traders. "Although the rebel leaders there said they would punish the countries that had been slow in recognizing their regime, including Russia, China and Brazil, Russian wheat is still cheap and can be delivered quickly," he said.
To be sure, Libya is in dire need of food supplies. Guma El-Gamaty, the U.K.-based coordinator and spokesman for the National Transitional Council, said hundreds of thousands of tons of flour, oils and other foodstuffs from Turkey are being "unloaded as we speak" to provide aid for thousands of people. Abber Etefa, spokeswoman for the WFP, said they are "acting to avert a crisis."
Andree Dufois, managing editor of grains analyst Strategie Grains, said she expects the country's wheat imports to remain broadly in line with the 1.3 million tons imported in the 2010-2011 crop year, although any disruption to the country's milling sector could switch demand to wheat flour instead of grain. Traders agreed that much of this is likely to come from Russia, which has become an increasingly important supplier to Libya and other north African countries in recent years.
The release of $6 billion in frozen assets from the Gadhafi regime held in Europe's banks is also easing the passage of food exports from other parts of Europe. A person at French grain tradehouse Soufflet said the company has signed a deal to supply 60,000 tons of wheat as humanitarian aid, with the shipment due to arrive "in a few days." He declined to comment on the price but dealers said the contract could be worth around $22 million.
Shipping companies too are tentatively moving back into the country after the European Union Thursday lifted its sanctions on Libyan ports. Brokers and people nearby said aid ships were unloading in Tripoli port and shipping companies, including the world's largest container shipper by volume, Maersk Line, and CMA CGM said they will resume full services into the capital as security improves.
"The Group will continue obviously to ensure a high quality of service in Libya as soon as the situation is back to normal," GMA CGM said in a statement.
Russia's Grain Snarled In Backlog
Russia has halted grain cargoes snaking their way from the fields to a key port, underscoring doubts about the reliability of the country's supplies.
The move comes two months after Russia lifted a ban on grain exports and gives U.S. wheat growers the chance to reclaim their edge in the global market.
This week, Russia's railway authority banned further shipments of grain to the Black Sea port of Novorossiisk because a bottleneck of more than 3,500 railcars, about 40 trains, had clogged an entire branch of the network. Normally, a line of 10 trains is waiting to be unloaded.
The stoppage began on Saturday. On Wednesday, local railway managers said it is likely to last another five or six days.
Demand for Russia's grain has surged since the export ban expired on July 1, putting heavy pressure on the country's creaking Soviet infrastructure. Buyers have been eager to snap up cheap Russian wheat, snubbing U.S. exporters, whose grain comes with a higher price tag.
Any snag in Russian grain exports "bodes well for other exporters, including the U.S.," said Mike Krueger of Money Farm, a commodities brokerage in North Dakota.
Stronger demand for wheat from the U.S. would support benchmark prices on the Chicago Board of Trade. Although U.S. wheat futures trade near three-month highs, traders say the recent intense competition in the export market has weighed.
The most actively traded wheat contract, for December delivery, on Wednesday closed 0.1% higher at $7.915 a bushel on the CBOT. September wheat fell 0.7% to $7.4525.
Buyers like Egypt, the world's top wheat importer, quickly returned to procuring wheat from Russia after the export ban was lifted. Egypt is now Russia's largest customer and its purchases account for the bulk of grain waiting at Novorossiisk to be loaded onto ships.
Prior to the ban, grain dealers said Russian exports were expected to reach a near-record 3 million metric tons in September, outstripping the monthly capacity of all the country's southern ports.
Exporters had placed orders to deliver 500 to 600 railcars a day -- double the amount the port could handle, according to Russia's railway authority.
"It has taken everybody in the industry off guard that they are so aggressively selling," said Dan Manternach, wheat analyst for Doane Advisory Services, an agricultural advisory firm.
The U.S. Department of Agriculture forecasts Russia's wheat exports will more than quadruple this year to 16 million tons.
Hiccups in Russia's transportation system could convince foreign buyers to shift grain purchases to the U.S., particularly if the rail jam persists longer than expected, Mr. Manternach said.
The U.S. is the world's top grain exporter and stepped in last year to fill the vacuum created by Russia's export ban.
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