Government pays over 24000% more for land than it received for it

SEJUP (Servico Brasileiro de Justica e Paz), News from Brazil, No.293, 20 November 1997

The government has been buying back land to settle landless families for as much as 24801% more than it received for it in the 1970s and 80s according to a report in the 'Folha de Sao Paulo' of November 16 last. The land is found on the so-called agricultural frontiers in remote regions of the North and Center- West.

A typical case is the Promasa ranch in the municipality of Santa Lucia do Tide, State of Maranhao. In September of 1979 the state government sold the 4498 hectare ranch for just under US $7 thousand. In 1995, INCRA (the federal government land agency) made an offer of just over US $1.6 million for the same area. Also in the State of Maranhao the Cacique Group bought the Tucuma ranch (20481 hectares) and the Cacique ranch (21822 hectares) during 1978 and 1979. The first ranch was bought for approximately US $61 thousand and the second for just under US $47 thousand. In 1995 INCRA decided to purchase back the Tucuma ranch for just over US $4.2 million (a difference of 6925%) and the Cacique ranch for US $6.1 million ( a difference of 12742%). While both properties were in the hands of the Cacique company the forest coverage on the Tucuma ranch had been reduced to 35% of the total area and to 30% on the Cacique ranch. The ranches were purchased back in order to settle landless families.

In the 1970s many such ranches were sold for low values in order to bring economic development to remote areas. This fact is recalled by the Cacique lawyers in a document in which they negotiate the price of the Tucuma and Cacique ranches with the government - Around 1979 attending insistent and urgent appeals from the government of Maranhao to collaborate with the agricultural development of the state and believing in a very clear promise of support, large fiscal incentives and other advantages, the owners (of the ranches) bought these properties.

In the State of Mato Grosso even though the federal government had a stock of 2.13 million hectares (just over 22 thousand square kms) which could be used for projects of agrarian reform it bought a further 2.07 million hectares between December 1996 and October 1997. State prosecutor in Mato Grosso, Jose Pedro Taques has demanded that the state superintendent of INCRA explain where exactly the land exappropriasted in the 1970s and 1980s is located. The prosecutor is also investigating the purchase of 41 thousand hectares by INCRA during 1995 and 1996 at a cost of approximately US $31 million. Figures show that up to US $1400 were paid per hectare in the latter cases when land in the region is worth at most US $630 per hectare.

Land value has decreased 50% since 1994.

The value of farm land continues to decrease in practically all of Brazil according to the most recent survey carried out by the Center of Agricultural Studies of the Getulio Vargas Foundation. For example between mid 1996 and mid 1997, the value of land used for pasture had an average decrease in value of 11.65% and land used for tillage had a similar decrease of 14.1%. Since the introduction of the Real Economic Plan in mid 1994 the decrease in the value of land has been approximately 50%.

Maria Jose Cyhlar Monteiro who was involved in the Getulio Vargas Foundation study pointed to a number of reasons to explain the sharp drop in rural land values. One reason is the economic stability and the high interest rates since the introduction of the Real Plan Because of this the use of land as an investment dropped enormously and it (land) is now seen as of use for production. The interests of speculators have moved from land to financial investments which are more liquid and profitable commented Ms. Monteiro.

Economist Fernando Homen de Melo of the State University of Sao Paulo (USP) points to two other factors which have contributed to the fall in land values - the fear that many ranchers have that their lands will be occupied by the landless and the debts of large land owners.