New decree could trigger foreign investment in Argentine timber and agri

Argentina has relaxed rules on foreign investment in rural land, as investors look for 'the next Brazil'.

Argentina has enacted a new decree that may increase foreign investment in rural land, according to the timberland specialist law firm Sutherland.

President Mauricio Macri made boosting agriculture and timber a central part of his campaign last year, and since then has scrapped many protectionist policies. However, investment appetite in timber has not yet been translated to dollars in the ground.

“To date Argentina has not been a significant player [in timber] at all, but that looks to change over the next five years,” Victor Haley, partner at Sutherland, told Agri Investor. His firm advises some of the biggest US timber investment management organisations, including Rayonier, Jamestown and Forestland Group.

The decree, which clarifies the 2011 Rural Land Law, should expand the amount of territory entities can invest in. Currently, there is a 1,000 hectare limit on foreign ownership, but the government will now take into account what proportion of an owner is foreign-held when using that limit.

The Rural Land Law includes a 15 percent restriction on the total amount of rural lands that can be owned or possessed by foreign individuals or legal entities, and a 4.5 percent limit on the total amount of rural lands owned entities by the same country. In 2013, about 6 percent of the total rural land was owned by foreign entities and 1.13 percent by US investors.

New incentives for investment are also expected for both renewable energy and timber. Financial incentives for re-planting forest already exist but need renewing, according to the firm.

“Our sense is that the government would be receptive to hearing what sort of regulatory regime investors in the timberland space would like to see,” said Haley.

Agri and timber investors have considered opportunities in the country since it became clear that Macri could take over last year.

The founder of an advisory firm specialising in South American agriculture ventures, Roberto Viton told Agri Investor in November: “I’ve been getting calls every week from North American and European investors.”

“The two places in Latin America that are most intriguing right now [in timber] are probably Colombia and Argentina,” said Haley. “They are virtually untapped and have great potential and so they are a lot like Brazil was in 2000. But hopefully they will present fewer impediments.”

Investment in Brazilian forestry has was curtailed in 2010, when the government imposed heavy restrictions on selling land to foreigners. Investors have said it could be difficult to predict Argentina’s long term political future.

“Foreign investors are more cautious about investing in Argentina because of the things that have happened in the past,” said Viton last year. “This is not something that can happen from one day to another.”