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Page last updated at 12:04 GMT, Thursday, 26 June 2008 13:04 UK

Foreign buyers eye Uruguayan land

By Veronica Psetizki
Montevideo, Uruguay

Uruguayan farmland
Land in Uruguay is on average much cheaper than in Argentina

Foreigners are buying up Uruguayan land at a fast pace.

Between 2000 and 2006, overseas buyers snapped up a quarter of Uruguayan territory, according to the latest figures from the Ministry of Agriculture.

And real estate analysts believe there is no end in sight to this trend.

"Foreigners, especially Argentines and Europeans, are showing a strong interest in Uruguay," said Lucia Canepa, a real estate operator.

So why is this South American country, sandwiched between Argentina, Brazil and the Atlantic Ocean, so attractive to foreign investors?

"Uruguay is a small area in the broader region where buyers find better prices and political and economic stability," said Eduardo Caldeyro from Caldeyro-Stajano, a land sales broker.

"Curiously enough, for the first time we are receiving enquiries from Americans; within South America we get calls from Argentines, Brazilians and a few Colombians. From Europe, it is mostly Spanish real estate investors, who are facing a sharp slowdown there."

Sovereignty

The government, which is actively encouraging foreign investment, is nonetheless worried.

Ernesto Agazzi, the agriculture minister, wants parliament to consider a ban on land sales along the borders with Argentina and Brazil to non-resident foreigners.

map

"This is to preserve our sovereignty, to avoid smugglers holding land on both sides of the border () and to prevent foot-and-mouth disease from entering the country.

"We all know that Brazilian farmers have lands on both sides, and nobody controls movement on that border," Mr Agazzi told Uruguayan media.

Uruguay uses vaccines to stay free from foot-and-mouth free but struggles to maintain this status every time there is an outbreak in the region.

During the last episode, in Brazil in 2005, Uruguayan cattle escaped infection, thus ensuring beef remained Uruguay's top export.

Other politicians believe there is another reason to regulate land sales.

"The land belongs to our grandchildren. We depend on it for our future food supply," said Jorge Saravia, senator and member of the left-wing Broad Front, the governing party.

He believes the country needs to limit land sales in order "to avoid losing our sovereignty".

The agribusiness community sees matters differently.

"Our country needs foreign investment. It would be silly to limit it based on ridiculous nationalism," said Eduardo Preve, an agribusiness consultant.

Argentine crisis

Uruguay, whose main exports include beef and grains, has benefited from the rise in commodity prices.

Protesting farmers block roads near Rosario
Uruguayans have been following the Argentine farm crisis closely

The dispute between the government and farmers in neighbouring Argentina, which dragged on for more than 100 days, has brought gains to Uruguay.

"We are filling gaps in international markets where Argentina failed to deliver", says Octacilio Echenagusia, president of the Rural Federation, the largest farmers' organisation.

"I would hate to think that if they lose we gain, but this is what has happened with beef exports: Uruguay is selling more beef, filling in for Argentina."

Last March, Argentine President Cristina Fernandez de Kirchner raised taxes on food exports, triggering nationwide strikes and roadblocks.

The Argentine Congress must now debate the contentious export tax increases, but some farmers have warned that they will resume the roadblocks should Congress ratify the tax rises.

For some Argentine agricultural producers, shifting at least a portion of their production to Uruguay seems a sensible way of increasing profits and avoiding export taxes.

"We are receiving more and more inquiries from Argentine investors and producers who want to buy land, in search of risk diversification and fiscal certainty," says Ms Canepa.

Lower taxes are not the only reason - agricultural land sells for an average of $2,000 (1,000) per hectare in Uruguay compared with up to $10,000 in Argentina.

Boom time

An increasingly popular alternative to buying land is to lease it.

Argentine group Ceres Tolbas has been producing wheat, soy, maize, barley and sorghum in Uruguay for two years.

Grain silos in Uruguay
Agricultural products form a key part of Uruguay's economy
"Most big Argentine companies are already producing here, financed by European and American funds," says Ceres Toblas's local representative, Santiago Bono.

His firm leases land and develops partnerships with local landowners, providing agricultural supplies, training and professional management.

"It is quite difficult for us because landowners are not deeply involved in the agricultural business. They are not up to date with the latest technologies. We start by renting their land and once we get to know them better we can develop businesses together."

For all the disagreement on limiting land sales, there is one thing everyone involved can agree on.

"We are experiencing an agricultural boom," says Mr Echenagusia, "and it looks like it is going to continue this way."


SEE ALSO
Argentina's beef with its farmers
05 Apr 08 |  From Our Own Correspondent
Country profile: Uruguay
06 Feb 08 |  Country profiles
Timeline: Uruguay
06 Feb 08 |  Country profiles
Q&A: Argentina farm protests
01 Apr 08 |  Business
Why are wheat prices rising?
26 Feb 08 |  Business
Country profile: Argentina
01 Apr 08 |  Country profiles

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