segunda-feira, 20 de maio de 2013

No to purchase of land by foreigners. Uruguay joins Brazilian sad club

Sometimes, you only need to observe the supporters of an idea to know whether or not it is a good one.

Take restrictions on land purchase by foreigners. It is ardently supported by the noble group of Venezuela, Argentina and Brazil.

Uruguay, which, otherwise, seemed a nice place, now joins this sad sad camarilla.

I hate such restrictions. I have written about it on many occasions:

Brazil and Argentina have restricted land acquisition by foreigners

Unconstitutional regulation in Brazil

To think I was contemplating buying a second home in Uruguay....

Mr. Mujica, I have a steeled soul, hardened by all the government injustice I must bear, being a lawyer in the 3rd world.

Still, you broke my heart. 

8 comentários:

  1. This is problematic. BBC has reported for over a decade that interests connected to the Unification Church have large lanholds over acuifer in Brasaguaio and Pantanal areas. Also, Korean organizations have owned substantia properties in center of Montevideo. After Hollywood started buying up the best old American cars in Uruguay the government declared old cars a national patrimony.

    1. Dear Rick,

      Controversial, indeed. But not problematic. What is the problem? Allowing a free market for land would benefit poor countries a lot.

  2. Mr. Adler, I believe you should explain what this restriction really is. Unfortunately your comment sounded like a head line on a media news. The way I see it is not a restriction but a limitation because of sovereignty reason. Nothing wrong with that.

    1. Dear Reader,

      There is no conflict between sovereignty of a country and the economic freedom such country gives to its citizens or to those who invest in it, foreigners or not.

      The idea that only naturals of a country are entitled to explore its riches is outdated, medieval.

      Nowadays, you can see that foreign companies conduct mining in Brazil, Brazilian companies explore iron in Africa, etc. The exchange between Europe and America on this regard is extensive. British oil companies are all over the world, Canadian gold companies are in Europe, etc.

      Of course, any country could say that the exploration of its oil, gold, iron, etc must be performed exclusively by its own citizens, due to security reasons, sovereignty, faith or any other ideal.

      But, since it is proven that the attraction of foreign investment is beneficial for the invested country, and since there are no major examples of such investments causing loss of sovereignty or power (on the contrary, closed countries that protect themselves too much are the ones invaded), I must conclude that claims like the ones described above are a piece of propaganda.

      In other words, governments seeking to expand its hold over the economy will usually argue that the activities of foreigners should be prohibited in the country.

      Land, in this context, is just another resource being apprehended by the government, just like oil and gold could be (and have been, a couple hundred years ago).

      Therefore, Uruguay's move does not represent a protection of its sovereignty, but a proof of the totalitarian inclinations of its regime. Which is in line with similar moves in Latin America.

      You might remember that sovereignty claims were used in the recent expropriation of Brazilian company's assets in Bolivia and in the recent clash between Brazil and Paraguay, regarding Itaipu dam.

      In both cases, there is no evidence of Brazilian intentions towards invading or destroying either Bolivia or Paraguay. One must conclude, thus, that the sovereignty claim was standing as a replacement or cover for a pure economic interest.

      In conclusion: Uruguay is not fearing any loss of sovereignty. It is more likely that Uruguay's government is looking for more control over the economy.

      And this is sad.

  3. Dear Adler,
    I understand your rationale and I think your explanation was very persuasive but I also think that you missed the main issue. The issue is not whether a foreigner can or can not but real estate in brazil, which we all well know that foreigners can and do, but the issue is how much of a rural area the Constitution and the law should allow a foreigner to purchase real estate.
    There is a big different between rural and urban areas. Foreigners can but as much as urban real property they wish but they face limitations in rural areas.
    You mentioned oil, gold and iron exploration as means for security and sovereignty and that is exactly what the constitution and the law intended to protect.
    Of course, the Paraguaian expropriation was an absurd and outrageous but not because of public policy reasons but because it was illegal and supported by socialist left wing movements.
    Again, I think your ideals are on the right track but you should distinguish rural real property protection from the urban one.

  4. Interesting point, Adler. But please clarifiy that restrictions are for rural land, and therefore aim at limiting foreign control over our food resources, which is more than justifiable for security and sovereignty reasons. Whether limitations went too far and are jeopardizing economic development is another matter. Brazil is known for imposing excessive protectionist measures to its economy. On the one hand goes against all international trade agreements we are part of, while also keeping afloat an industry that otherwise could never compete with foreign companies and would bring the country to bankruptcy. On the other hand, however, pretectionism is the exact reason why Brazilian industry is not modernizing.
    There are always to sides to the same story. Land purchase limitations is not any different. I am not defending this or that point of view, but from the many experiences we see around the world of countries who have widened its doors to foreign investors in any and every sector of the economy, although economic development may have followed, native populations were most likely better off taking care of their own business. So, to whom is it benefitial that no limitations are imposed to purchase of rural land for foreigners? I certainly do not have enough data to answer that question just yet.


  5. Dear Natália,

    You are right about rural land. City property has not been purchased.

    The discussion about development x economic openness is an old one. I'm convinced that the countries with higher levels of economic freedom are richer. There are plenty of statistics and studies about it. Some studies also indicate that economic openness tend to limit the disparity in wealth concentration, but this is not absolute.

    Anyway, given that the State can always expropriate land in order to produce food, and given that the market will usually produce food faster than the State can expropriate land, if the demand for food is high enough, I can't see a true economic reason for such limitations. They seem to be a political statement rather than a rational precaution.

    For example: a Latin American country has recently expropriated Petrobras' assets, claiming sovereignty issues. This was widely considered a political move, since neither Petrobras nor the Brazilian government had any colonialist intentions.

    If you check my post again, there is a good discussion about it in the comments.


  6. Natalia points out correctly that we need to know the extent of the restrictions. Do they apply to leases? Do they apply to corporations organized under Uruguayan law with foreign ownership (of any percentage)? This type of restriction for agricultural land is widespread, particularly in all the former Soviet states. I was heavily involved in land reform for Armenia and they imposed a similar restriction on agricultural land. When I said it was absurd - precisely because no one was going to haul away the soil in suitcases and expropriation was always an option - they said they didn't want Georgians buying agricultural land. However, corporations were permitted to do so as long as the majority of ownership was local - the same is true in Ukraine where agricultural land has enormous value.

    It may not even be an issue for urban land - where values far exceed agricultural land - if there is strong legal protection. Moscow's development was not impeded in the least by the inability of investors to own the land (but only the building).

    Most of the time, these laws are politically driven if not culturally rooted. Tanzania is not doing so badly with all land owned by the state - but the leases (called certificates of title) are protected and in urban areas last 33 years (66 and 99 in peri-urban and everything else respectively).

    Having said that, erecting barriers to investment just because of the perception that some sort of sovereignty will be affected by selling ownership interests to foreign investors is short sighted and ineffective. Governments can control land use to prevent waste and to promote agricultural production. Who owns what is an irrelevant component of the economic equation. Rule of law is not.


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