John Carroll took a chance. He traveled to Brazil in March 2001, and he and his family ended up buying a farm in the western state of Bahia.
“My family has a decent-sized operation back home, but I felt I didn't fit in after finishing college, so I came here to investigate,” he says, adding that land price was a magnet. “One acre of land in the U.S. buys eight acres of land in Bahia.”
Carroll is one of an unknown number of U.S. farmers operating in Brazil. “The whole world is looking at Brazil and its agricultural opportunities,” says William Westman, agricultural attaché at the U.S. embassy in Brasília. While data on these new investors is scarce, it's clear their numbers are growing.
Faced with complex fiscal regulations, bad roads and long distances to ports, they're betting they can make money in Brazilian production. “They feel they can overcome any impediments,” says Westman, who has briefed as many as 200 U.S. farmers visiting Brazil on tours over the past year.
One of the main attractions these days is the far western part of Bahia, where Carroll farms. Most of this region is sandy plateau, but blessed with plenty of rain during the growing season. At least 10 U.S. farmers are operating in the region, according to a representative of a local farmer's association. Only five of those Americans, however, are members. Cultural and language barriers may isolate these families.
Business practices may take some getting used to as well. Bahia farmer Walter Horita says foreigners investing in Bahia farmland “… should really investigate land prices before buying.”
Prices in the area are often negotiated on a 132-lb. sacks/hectare basis, and Horita estimates a range of 60 sacks/hectare for virgin cerrado land (roughly 54 bu./acre) up to 220 sacks/ha (198 bu./acre) for turnkey properties where soybeans have already been planted.
“Our land is cheap in comparison to U.S. Midwest farming areas,” Horita adds, “but Americans may end up paying prime turnkey prices for virgin land. This will invariably inflate prices and lead to speculation, which could create animosity against Americans.”
Every country has its idiosyncrasies, and Walter Horita points to one that may scare the American investor at the time of closing a deal. A property tax, or “imposto imobiliario,” must be withheld, and it is common for sellers and buyers to agree upon payment in a combination of official and unofficial sums. This means the buyer may get an official receipt for only 30, 40 or 50% of actual total price. It also means he will officially nationalize only a share of his foreign capital, and must therefore find other means to bring in and dispense the balance.
“A farmer's eyes and know-how will be his best consultants as far as the land itself is concerned,” Horita explains, “but a truly professional fiscal expert is a must.”
Two seasons after he arrived, Carroll is pleased with his results and feels confident about the future. But he also admits such a drastic change of environment is not for everyone, saying: “You need to have a lot of capital behind you, and you must adapt to a new culture and learn the language.”