A Land-Grabber’s Loophole
By Paula Lopez-Gamundi & Winston Hanks
August 8, 2011
• Due to the global food crisis, a trend has developed in food-insecure countries to outsource food production to
lesser developed countries.
• Current stipulations regulating the purchase of farmland by foreigners can be undermined by renting land.
• Exemplifying this trend, the Río Negro-Beidahuang agreement was signed without the consent of the indigenous
residents of the region and may threaten the environment.
• Latin American governments should focus on developing sustainable food programs for their own populations; this
will include protecting the inherent territorial rights of their indigenous groups and safeguarding their environment.
The acuteness of the global food crisis has forced overpopulated and arid countries, such as China, India, Saudi Arabia
and Egypt to desperately scour the globe, looking for land on which to cultivate their staple crops. In an effort to
secure food sources and financial returns, food insecure governments are increasingly outsourcing their food production
to more fertile and usually less-developed countries, including Pakistan, Uganda, Argentina and Brazil. While some of
these land-selling states have welcomed the foreign revenue, others have begun to rightfully resist these “agrifood”
The MERCOSUR (Mercado Común del Sur) countries of Argentina, Uruguay, and Brazil have decided to regulate foreign
powers’ ability to purchase large tracts of land. In response to these mild initiatives, various foreign corporations
have begun to set up negotiations to rent, rather than purchase, arable land from less-developed countries, treating
land usage rights as merely one more commodity.
Case Study: Argentina
Exemplifying the leasing trend, the Chinese food corporation Heilogjiang Beidahuang State Faros Business Trade Group
Co., Ltd. made arrangements with the provincial government of Río Negro, Argentina to rent large tracts of land for the
production of genetically modified staple crops for exportation to China. Protected by their own governments, these
agrifood leases may be quickly becoming the face of neocolonialism in Latin America.
The contract between Beidahuang and the government of Río Negro was signed in October of 2010, yet was made public, in
English and Chinese, only in early 2011. Behind closed doors, the governor of the Patagonian province, Miguel Saiz,
agreed to lease out a total of 320,000 hectares (ha) of land to the Chinese company over the course of twenty years for
the production of genetically modified (GM) soy, corn, wheat, barley, and sunflowers.
At first glance, the Beidahuang-Río Negro agreement seems equitable—the Chinese pay USD 1.45 billion to the government
of Río Negro and, in turn, win the right to build a badly-needed irrigation system to secure a food source for the next
20 years. However, excessive tax exemptions, environmental hazards, lack of legislative restrictions, and continued
neglect of Río Negro’s indigenous population demonstrate ways in which the agreement inevitably will favor the Chinese
The Beidahuang-Río Negro business deal grants generous tax exemptions and handouts that end up pampering the Chinese
company. Excused from having to pay provincial income taxes, patent fees, and other charges on aspects such as gross
revenues and stamps, Beidahuang Food Company is also exempt from having to adhere to the national standard of “reserve
requirements”. The contract even requires the people of Río Negro to provide free office space and discounted housing,
transportation and office equipment for Chinese workers and engineers. Additionally, the Argentine province is required
to reserve five ha of land for the construction of exclusive Beidahuang port facilities, allowing the Chinese investors
to have access to parts of Río Negro’s San Antonio Este port, free of charge, until the new harbor is complete.
All together, these overwhelming handouts and tax exemptions bias the agreement in favor of the Chinese company and, in
turn, diminish Río Negro’s economic power. Furthermore, Saiz is allowing Beidahuang to bring its own hydro engineers to
design the USD 20 million irrigation system. The use of Chinese engineers and the highly mechanized nature of soya
cultivation would predictably create a small number of jobs for Argentines living in the region.
Environment Under Attack
Patagonia is infamous for its dry and arid climate, which is home to expansive cattle grazing. While grazing alone
significantly alters the environment, the introduction of a Chinese-designed irrigation system and the use of
genetically modified seeds have justifiably angered residents. Chinese irrigation practices are notably problematic, as
almost 40 percent of China’s total land is plagued by soil erosion. Worried that these practices will be transferred to
the Río Negro valley, environmentalists and concerned citizens have begun to protest.
Leading the resistance, Nobel Prize winner and president of the Environment Defense Foundation (FUNAM), Dr. Raúl
Montenegro, has accused the government of Río Negro of violating the Ley Provincial de Impacto Ambiental n° 3266 and the
Ley Nacional del Ambiente n° 25675 — national and provincial laws requiring transparency and studies on the
environmental impact of new projects. Taking their complaints to the courts, a group of 24 concerned citizens from
Viedma (a city in Río Negro) presented their case to Supreme Court Judge Sodero Nievas, on June 26, 2011. The plaintiffs
demand a halt to the Beidahuang agrifood project due to the agreement’s violation of the Río Negro constitution and the
high potential for water contamination through the use of genetically modified soy, corn, and other cereal seeds.
The Viedma plaintiffs, amongst other groups such as the Asociación Biológica del Comahue, the Grupo de Reflección Rural,
the Asamblea de Vecinos y Organizaciones del Alto Valle Movilizados por la Soberanía Alementaria and numerous university
students, are concerned that the toxins in genetically modified seeds—products long held to be detrimental to one’s
health—may contaminate the water, affecting livestock as well as humans. While the effects of genetically modified (GM)
seeds are contested, there is a large body of scientific evidence indicating that long-term exposure to GM soy and corn
can strengthen defenses against cancer and heart disease, increase allergic reactions, and reduce fertility in men.
Since the agrifood contract trial period only tests yields and not environmental effects, it seems that the people in
the Río Negro region will be serving as human guinea pigs, potentially sacrificing their health to provide a secure food
source for the Chinese.
The Continued Marginalization of the Mapuche
Work will continue as planned and in August, the Chinese company is scheduled to begin sowing in the middle and lower
Río Negro Valleys, that serve as the traditional home of the indigenous Mapuche people. The provincial government leased
these lands to the Chinese corporation without ever consulting the true owners of the land—the Mapuche.
Not surprisingly, the Beidahuang-Río Negro agreement was met with immediate uproar and public rejection from the Consejo
Asesor Indígena (CAI), Viedma and the Mapuche people. Existing legislation requires the government to specifically
acknowledge and respect indigenous peoples and their land rights. Amendments enacted to article 75(22) of the Argentine
constitution in August 1994 mandate the government to guarantee respect for cultural identity and to recognize and
secure all indigenous peoples’ rights to land. Furthermore, in 2006, the Argentine government ratified the International
Labour Organization (ILO) Convention No. 169, thereby incorporating the global standard of indigenous peoples’ rights
into Argentine law (Law 24.071). Currently, the Mapuche people are considering taking legal action to halt the
Beidahuang project on the basis that the provincial government never asked for informed consent prior to signing the
agreement—a right that is guaranteed in Law 24.071.
The recent agreement between the provincial government of Río Negro and Beidahuang is simply one example of territorial
abuse against the indigenous peoples of Argentina. The state carries out development plans on indigenously owned land
without consultation, causing displacements, evictions, expropriations, harassment, and permanent discontent. Federal
courts have historically protected violations of constitutional article 75(22), as in the case of a forced eviction of
families of the Quilmes Indigenous Community this June in the northern province of Tucumán. With no way to seek
reparations or rectitude from the national government, the indigenous people of Argentina are left with no defenses to
fend off neo-colonial menaces that wish to sequester their land.
Simply put, the Argentine government has taken a hypocritical stance in respecting the indigenous in their country. On
one hand, it cordially tips its hat to the international community by incorporating international laws and codes
protecting indigenous rights; on the other hand, the Argentine government routinely infringes upon the territorial
rights of its indigenous peoples, thereby breeding domestic discontent.
Legislation to the Rescue?
Current Argentine laws do not limit foreign ownership of land in any way, shape, or form. On April 27, 2011, President
Cristina Fernández de Kirchner submitted a bill to the Argentine Congress “For the Protection of the National Dominion
Over Rural Land.” The proposal caps foreign ownership of land to 20 percent of Argentina’s 40 million hectares of rural
land. In addition, persons or companies from foreign countries are limited to owning up to 1,000 hectares of land,
equivalent to 6 percent of the allotted land designated for foreigners. Moreover, foreigners are required to report
details of their land ownership to an Inter-ministerial Board of Rural Property.
However, the proposed bill leaves many issues, such as workers’ rights, environmental protection, and indigenous
territorial rights, unaddressed. The bill lacks clarity in its clauses about national oversight and definition of
‘foreigners’ or a ‘foreign company’. One clause labels a company as foreign once 51 percent of the company’s capital
stock is in the hands of foreigners, while the second requires only 25 percent. A further limitation is that if
implemented, the bill would not be applied retroactively, thereby excluding the Beidahuang-Río Negro contract from any
reforms. The challenges associated with this bill will involve not only drafting and passing an effective bill, but
abiding by its rules once it passes—something the Argentine government has failed to do with existing legislation
dealing with indigenous lands. The establishment of a regulatory committee mandated to oversee the details of any
private land agreement, similar to the U.S. Government Accountability Office, would allow for stricter adherence to
environmental and human rights norms. This committee could establish trial periods for land sale agreements to monitor
the environmental effects on lands sold and investigate the effects of such agreements on the environment and the
indigenous inhabiting the area.
Respect Thy Neighbor
Though Paraguay, Uruguay, and Bolivia are also experiencing their own land-grab phenomena, a large portion of their
business partners are not from overseas. Drawn by cheaper land and reduced exportation taxes, Argentina and Brazil are
buying adjacent lands from their neighbors in order to build up their respective soy empires.
In Paraguay, Argentine firms and individuals own about 60 percent of the 3 million hectares of land used to cultivate
soy. Furthermore, as of 2010, foreigners own 19.4 percent (7,889,128 ha) of all Paraguayan land. Uruguay’s status is
equally eye-opening: Argentines own almost all of the 500,000 ha of Uruguayan soil designated for soy cultivation, while
foreigners own a total of 5.5 million ha of territory, or 25 percent of the country’s total arable land. This unsettling
trend continues in Bolivia, where foreign agribusiness investors own or rent over one million ha of the nation’s land:
Brazilian investors claim 700,000 ha; the Argentine’s, 100,000 ha; Middle Easterners and Japanese, 200,000 ha. Due to
the threat of agrarian reform, it is possible that many of these agribusiness transactions are not even publicly
registered, leaving many lands unaccounted for by the Bolivian government.
Initiatives to slow the transfer of land to foreigners have proved futile thus far. Paraguay ratified the toothless Law
2.532/5 in 2005, which prohibits the sale of land to foreigners, except those from neighboring countries in areas within
50 kilometers of the border. Furthermore, after 15 years of agrarian reform, Bolivia has yet to restrict the
“foreignization” of land through any legislative means.
Uruguay has also shown limited promise in establishing restrictive legislation. Uruguayan Senator Jorge Saravia publicly
announced his plans to submit a report to the current president, José Mujica, concerning the sale of land to foreigners.
Although former Frente Amplio President Tabaré Vázquez failed to rally support for a bill that restricted the transfer
of lands to foreigners, the Frente Amplio (Broad Front) coalition’s current domination of the Uruguayan Assembly
sustains hope for the initiative’s eventual success. No current or past legislation in the region discusses restrictions
for leasing land.
The Looming Prevalence of Land-Grab Loopholes
Restrictive legislation on the selling of land will continue to be null and void so long as foreigners can rent farm
land. Regardless of any progress in creating legislation against the transfer of lands to foreigners, all efforts may be
undermined by a Beidahuang-like contract, or the ‘leasing loophole’.
Unfortunately, Argentina is not the only country in the neighborhood that has back-tracked by utilizing the lease
loophole. As one of the world’s largest agriculture exporters, Brazil has interest in protecting its agriculture sector
from foreign speculation. Last year, the attorney general’s office began to enforce the Brazilian real estate law to
restrict and oversee foreign land grabbing. Prompted by 2010’s USD 15 billion loss of foreign direct investment,
Brazilian president Dilma Rousseff is desperately looking for ways to relax restrictions on foreign investment. Rousseff
and her agriculture minister, Wagner Rossi, are contemplating leasing land out to foreign companies to circumvent the
current restrictive legislation against the purchase of land, thus ushering in a new era of neo-colonialism.
Food for Thought
The heads of indigenous people and innocent citizens of underdeveloped regions, such as the Río Negro, oftentimes
comprise the steps to the stairway of economic success. While the Beidahuang-Río Negro agreement will provide China with
a source of sustenance for the next 20 years, Argentina’s soil fertility and national sovereignty will suffer. Without
strong legislation that restricts the quantity of land available to foreigners, without regulations that protect the
integrity of their land and water sources and without institutionalized representation of indigenous interests, Latin
American countries may quickly fall down the slippery slope of foreign speculation and domination.
The redirection of food markets is particularly urgent for countries such as Bolivia, where 23 percent of the population
is listed as undernourished by the Human Development Index. Understandably, these MERCOSUR countries want to lure new
investors, but their governments should also invest in the domestic agricultural sector to spur food production for
local markets. Initiatives to increase production on domestic farms should come from the state itself. The Alliance
Against Hunger and Malnutrition has suggested that agro-ecological initiatives improve domestic crop production by
significantly reducing rural poverty, protecting farmers from the volatility of prices on the world market, and cutting
out state subsidies on foods in local markets. Essentially, the governments of these countries should teach domestic
farmers new advanced techniques and allow for fair competition in order to promote self-sufficiency.
Until they can secure food for their own populations, countries such as Paraguay, Bolivia, Uruguay, and Argentina should
strive for sustainable agrifood agreements that stimulate job creation and benefit, rather than harm, their own people.
Instead of allowing their lands to be exploited by multinational corporations, these Latin American countries must wean
themselves off foreign demands and make their own food security their top priority.