Brazilian Agriculture Legal Aspects

1. Brazilian AgricultureLegal Aspects Rua Mário Amaral, 205 – 04002-020 – São Paulo – SP – Brasil – Tel.: (11) 3218 8455 – Fax: (11) 3218 8496 / 3051 5696 Rua Conceição, 233 – 2º andar – cj. 210/211 – 13010-916 –Campinas –SP –Brasil –Tel.: (19) 3234 8155 – Fax: (19) 3233 6690 Rua Bahia, 165 – 1º andar -cj. 14– Ed. Nações Unidas – 17501-080 – Marília–SP–Brazil – Tel: +55 14 3413 9553 - Fax: +55 14 3432-4510 200 Park Avenue South – suite 505/511 – New York, NY 10003 – E.U.A. – Tel.: +1 212 697 2700 – Fax: +1 212 687 3523 website: www.peixotoecury.com.br – e-mail: pcury@peixotoecury.com.br

2. TOPICS (I) Acquisition of Land by Foreigners (II) Land Title Issues (III) Licenses (IV) Environmental Restrictions

3. Acquisition of Land by Foreigners • Law 5.709/71 sets forth restrictions on the acquisition of land by foreigners and by Brazilian companies owned by foreign capital. This was confirmed by article 171 of the 1988 Federal Constitution, which established a distinction between Brazilian companies with foreign and Brazilian capital. • Constitutional Amendment no. 6 of 1995 revoked article 171 of the 1988 Federal Constitution thus leading to the interpretation (now accepted by the majority of law scholars and professionals) that the restriction imposed by Law 5.709/71 on the acquisition of land by Brazilian companies owned by foreign capital was also revoked.

4. Acquisition of Land by Foreigners • However, the Federal General Counsel Office (AGU) has recently issued an opinion - currently under review by the Executive – that seeks to revisit the current legal framework and impose certain restrictions on the acquisition of land by Brazilian companies owned by foreign capital. • It is now uncertain to what extent the new opinion – if in fact it is accepted by the Executive – would create obstacles to foreign investment in Brazilian commercial agriculture (particularly in Western Bahia), as its main purpose seems to be to protect the State of Amazonas, where 55% of the land is owned by foreigners.

5. Land Title Issues • Need to analyze ownership certificates • Need to analyze situation of current owner • Status of the ownership certificates: • the more developed the area, the better the documentation is; • LEM and region (one of the first areas in the cerrado to be developed); • case study – CGI´s land is split in six different ownership certificates.

6. Licenses • In summary, the farmer shall obtain the following licenses with the local environmental authority (generally SEMA – “Secretaria de Estado do Meio Ambiente”): (i) License to clean the land or, depending on the type of vegetation, a “License to Deforestation shall be required (a project is developed by a forest engineer); (ii) License to operate the farm (upon approval of the farming project – e.g., soybean, cotton, corn, etc); (iii) License to use hydric resources (the use of water for supply, irrigation, energy generation, etc).

7. Licenses • Besides the licenses above, the farmer shall also apply to : (i) the IPR (Rural Producer Enrollment) before the Treasury Office of the State where the farm is located; (ii) the Certificate of Rural Property Record (CCIR) before the National Institute of Colonization and Agrarian Reform – INCRA • CCIR is a mandatory rural property document for land parceling, mortgaging or selling the land; • it is valid for 3 years (renewable) or until there is any modification in the property enrollment.

8. Environmental Restrictions • Legal Forest Reserve: Federal law defines Legal Forest Reserve as an area located within a rural property (which does not include the area of permanent conservation) required for the sustainable use of natural resources, conservation and rehabilitation of ecological processes, conservation of biodiversity and protection of native fauna and flora. They may not be commercially exploited unless by means of “forest management projects” (projetos de manejo), which require prior authorization by SEMA.

9. Environmental Restrictions • Percentage of property to be set aside for the Legal Reserve: (i) “Legal” Amazon (Acre, Pará, Amazonas, Roraima, Rondônia, Amapá, Mato Grosso, regions located North of parallel 13°S of Tocantins and Goiás and West of meridian of 44°W of Maranhão) – 80% (ii) Cerrado (Brazilian savanna-like vegetation) located in the “Legal” Amazon – 35% (iii) Forest or other forms of native vegetation located in the remaining regions of the country (including Western Bahia) – 20% (iv) Pradarias located in any region of the country – 20% • If the rural property is a virgin area, the buyer will have to include in the project to be submitted to SEMA the area intended to be set aside as Legal Forest Reserve.

10. Environmental Restrictions • Permanent Conservation Area (APP) is defined by federal legislation as the area protected, covered or not by native vegetation, with the environmental function of protecting water resources, landscape, geological stability, biodiversity, among others. It cannot be subject to exploitation. • APP are forests and remaining forms of native trees and plant life located: (i) along rivers or any other stream from its highest level in marginal strip/vereda; (ii) around lakes, ponds or water reservoirs; (iii) in water springs with 50m width.

11. THANK YOU JOSÉ RICARDO DE BASTOS MARTINS jrb@peixotoecury.com.br