Protection of national dominion over rural land ownership, possession and holding

As we mentioned in previous issues, we shall discuss the regulation on land purchases by foreign persons in Argentina.

Land purchases by foreign persons are limited to 15% of all national territory. Foreign natural and artificial persons of the same nationality shall not hold more than 30% of the above-mentioned 15%; landholdings owned by foreign persons are limited to 1,000 hectares (2,471 acres) in the area defined as the core zone, or equivalent area, depending on the territorial location.

Core zones are areas representing the most fertile agricultural lands and are established by section 10 of Decree 274/2012, which regulates the Law on the Protection of the National Dominion over Ownership, Possession and Holding of Rural Lands. More than 30 districts in the provinces of Córdoba, Santa Fe and Buenos Aires are listed as being part of the core zones in the decree.

For purposes of the law and all the bilateral investment treaties signed by Argentina, the purchase of rural lands will not be considered an investment. Rather, rural lands are considered non-renewable natural resources contributed by the host state.

The law also creates the National Registry of Rural Lands under the Ministry of Justice and Human Rights. The registry is tasked with generating statistics on foreign ownership of land without infringing upon provincial autonomies or federal rights, maintaining and sharing this information, improving Argentina’s legal security, and contributing to Argentina’s economic development.

Context

The Law on the Protection of the National Dominion over Ownership, Possession and Holding of Rural Lands was enacted in December 2011. The law strengthens Argentina’s national sovereignty by protecting the country’s strategic resources.

The main purpose of the law is to avoid the emergence of a concentration of land ownership resulting from the purchase of extensive amounts of land by foreign persons. The law is not designed to affect foreign investment or capital inflow into Argentina; it simply establishes a limit on the transfer of rural lands to foreign persons.

National food security

The law is in line with the 2010-2020 Participative and Federal Agro-Food and Agro-Industry Strategic Plan launched by the Argentine national government. This plan puts forth the need to pass legislation on highly sensitive issues considered to be key to the sovereignty of decision-making process of both the government and local producers.

Projections for the immediate future suggest a scenario where the current demand for foods, sustained and rampant, is on its way to consolidate itself over time as a result of the increase in the world’s population.

The 2010-2020 Participative and Federal Agro-food and Agro-industry Strategic Plan seeks to deepen and consolidate a virtuous model of production with the highest consensus possible, ensuring the mechanisms of permanent institutionalization of the policies of the sector with a long-term perspective.

Avoiding land concentration

Land concentration has a negative effect on the strategy of national productive development. This is a core aspect of progress in countries like Argentina, which are abundant in attractive natural features such as fresh water, humid and fertile plains, and rich mountain ranges, among other advantages.

The definition of land as a non-renewable resource is at the core of understanding this new legislation. The Ministry of Agriculture, Livestock and Fisheries has noted that demographic growth projected worldwide places Argentina in a uniquely advantageous position by 2050 in terms of food. Consequently, arable lands are expected to be a strategic target for countries striving to guarantee their agrifood safety, as well as for investment funds and agrifood multinationals aiming to boost their profits.

Many countries have passed similar laws. In Brazil, as of August 2011, foreign persons are not allowed to hold more than 25% of a territory and their rural lands holdings must not exceed 5,000 hectares, depending on the region. Similar legislation is being discussed in Uruguay. In the United States, regulations are set by individual states, whereas in Canada, restrictions are imposed by the provincial governments and vary from one to another. In both the US and Canada, regulations range from total prohibition to no restrictions at all.

Limits and regulatory oversight

The law limits land purchases by foreign persons to 15% of all national territory. Section 11 of the law sets out that “the purchase of rural lands shall not be considered an investment, since rural lands are non-renewable natural resources contributed by the host country”.

In line with the conception of a modern, interdisciplinary and multi-agency state sought by the government, Argentina created an Inter-Ministerial Council to regulate foreign land ownership and enforce the law.

Each province must inform the enforcement authority of its total area as calculated from the districts, municipalities or equivalent divisions which compose it, including a breakdown of total area by rural and urban lands. The area that constitutes rural lands is determined by subtracting the total urban land areas as determined in the relevant provincial constitutions, laws or decrees, or municipal charters or ordinances, from the total area of the province, district, municipality or equivalent division.

The provinces must report the total area of rural lands owned by foreign individuals or legal entities according to the relevant provincial registries. They must also report on the area of rural lands held by such foreign persons, organized by district, municipality or equivalent division. Each province must submit a complete list of owners and holders appearing on such records.

María Lucía Belliz is the director of the Investors Assistance Office of the Argentina Ministry of Foreign Affairs and Worship