The Federal Supreme Court (STF) is nearing a decision on the rules governing the acquisition of rural land by Brazilian companies controlled by foreign capital. Although the final ruling is still pending, the current voting trend indicates a strong likelihood that the existing restrictions will be upheld.

The decision could affect foreign investment structures involving rural land, particularly in agribusiness, energy, infrastructure, long-term leases, joint ventures, and project finance transactions.

The dispute centers on Law No. 5,709/1971, which restricts the acquisition of rural land by foreign individuals and legal entities and extends those restrictions to Brazilian companies whose majority share capital is held by foreign investors.

Under the current regime, foreign buyers may be subject to:

• Territorial limits per acquisition
• Prior authorization from the National Institute for Colonization and Agrarian Reform (INCRA) for acquisitions above certain thresholds
• Restrictions on the concentration of rural land by foreign buyers of the same nationality within a single municipality

For years, the application of these restrictions to Brazilian companies controlled by foreign capital has been uncertain. In the 1990s, the Federal Attorney General’s Office (AGU) took the position that the restrictions did not apply to companies incorporated in Brazil, regardless of the origin of their controlling capital. In 2010, the AGU reversed that position, reintroducing the restrictions and creating long-term uncertainty for investors.

Current Status

Two cases before the STF are expected to settle the issue. One challenges whether Law No. 5,709/1971 remains valid under the 1988 Federal Constitution. The other seeks to confirm whether the restrictions must be applied by registry offices in acquisitions made by Brazilian companies controlled by foreign capital.

The judgment has not yet been concluded. However, five of the eleven justices have already voted to uphold the restrictions. A simple majority of six votes is required, meaning that one additional vote in the same direction would be sufficient to form a majority.

Key Legal Implications

The justices who support the restrictions have relied mainly on national sovereignty and the strategic nature of rural land as a productive asset. Their position is that Brazilian law does not prohibit acquisitions by foreign-controlled companies, but imposes administrative conditions on certain transactions.

The opposing view is that Brazilian companies should not be treated differently solely because their controlling capital is foreign, particularly in light of constitutional changes adopted after 1988.

For companies and investors, the key issue is practical: if the restrictions are upheld, foreign-controlled Brazilian companies may need to reassess rural land acquisitions, corporate structures, leases, and project arrangements that depend on access to rural properties.

Recommended Next Steps

Companies and investors with exposure to rural land in Brazil should:

• Map ownership, lease, joint venture, and financing structures involving rural properties
• Assess whether existing or planned transactions may require INCRA authorization
• Review corporate structures involving Brazilian companies controlled by foreign capital
• Evaluate potential impacts on agribusiness, energy, and infrastructure projects
• Monitor the conclusion of the STF judgment and its effects on existing contracts

The current voting trend suggests that the restrictions are likely to remain in place. Companies operating in rural areas should review their structures now to anticipate regulatory risks and avoid delays in future transactions.