Brazil STF upholds 1971 farmland limits

Brazil’s Supreme Federal Court ruled on April 23 that foreign-controlled Brazilian companies remain subject to Brazil’s 1971 limits on buying or using rural land. (stf.jus.br) The unanimous decision came in two cases, ADPF 342 and ACO 2463, and upheld Article 1, paragraph 1, of Law 5.709/1971. The court also said the federal government keeps authority to authorize those transactions. (stf.jus.br) (gov.br) That provision treats a Brazilian company controlled by foreign capital the same way as a foreign company for rural land rules. In practice, the restrictions cover both acquisition and use of farmland. (stf.jus.br) (demarest.com.br) Brazil’s land law sets aggregate caps by municipality. Foreign individuals and companies together cannot hold more than 25% of a municipality’s area, and one nationality cannot exceed 10%. (valorinternational.globo.com) (camara.leg.br) The fight was partly about whether Brazil’s 1988 Constitution and a 1995 constitutional amendment had erased the old distinction between domestic companies and foreign-controlled ones. The court said they had not erased Congress’s power to impose differentiated rules for rural land. (stf.jus.br 1) (stf.jus.br 2) Justice Alexandre de Moraes said in the resumed hearing that current geopolitics showed the importance of preserving Brazil’s internal and external security through territorial policy. Chief Justice Edson Fachin said the Constitution requires a specific legal regime for this area. (stf.jus.br) The Brazilian Rural Society, known as SRB, had asked the court in ADPF 342 to strike down the restriction for Brazilian companies with majority foreign capital. It argued that equating them with foreign companies could reduce financing for agriculture and discourage investment. (valorinternational.globo.com) The federal government and the National Institute for Colonization and Agrarian Reform, or Incra, brought ACO 2463 to void a São Paulo state court administrative opinion that had told notaries and registrars not to apply the rule in some cases. The Supreme Court sided with the Union and restored the stricter nationwide reading. (stf.jus.br) (demarest.com.br) The ruling also locks in the legal interpretation the Attorney-General’s Office revived in 2010, after years of dispute over whether foreign-controlled Brazilian companies were outside the law’s reach. Demarest, a law firm, said the judgment ends that uncertainty and preserves the model already used by regulators and registries. (demarest.com.br) (gov.br) For now, Brazil has kept a sovereignty-based farmland regime from 1971 in force, even for companies incorporated in Brazil if foreign investors control them. The practical result is that foreign farmland deals still run through the same federal limits and review that existed before the case reached the court. (stf.jus.br) (demarest.com.br)