MONTEVIDEO, Uruguay, Nov. 13 (UPI) -- Uruguay will bar foreign companies and individuals from buying land in the country under new legislation before the country's Legislature.
Opinion in Montevideo is divided over the measure. Business community leaders see the coming legislation before the General Assembly as a wrong signal to investors focused on Uruguay's free market economy. Officials in defense of the intended ban cite detrimental effects of large-scale "land grab" by corporations and sovereign funds in other regions in Central and South America, Africa and Asia.
An official statement outlining the bill said the government of President Jose Mujica wants to avoid foreign interests threatening the country's sovereignty through large-scale land acquisitions, as has happened elsewhere.
Analysts said the government also worried that soaring land prices would undermine its approval ratings in Uruguay's powerful agribusiness sector, a major national earner. Published data shows land prices in Uruguay rose nine-fold in 12 years, frustrating farmers and other citizens' groups aspiring to climb on the property ladder.
Officials particularly are leery of sovereign funds investing through proxies, including Uruguayan shell companies. The bill stipulates local companies known to be acting for foreign interests will also be barred from land purchases.
Analysts say the law won't be enough on its own to achieve the government's declared purpose. Elaborate investigation and due diligence procedures will need to be in place to prevent foreign interests from capturing land in Uruguay.
Uruguay's advanced agriculture, dairy and livestock farmers are attractive investments for foreign entrepreneurs, including those acting to implement multibillion dollar food security programs. The list of potential investors is long and includes unlikely bedfellows, from China to the Middle East's oil-rich countries.
Uruguayan officials say they're drawing on lessons learned in Australia and New Zealand, Argentina, Brazil and the less developed countries in Central America and the Caribbean, Africa and Asia.
High levels of inward cash investment is already seen as a headache for governments and monetary regulators in the region. Cash inflows push up local currencies and make exports less competitive, officials say.
Land prices in Uruguay have also soared in response to the rise of a middle class and increased local demand for land, real estate and urban properties. Land prices per hectare command more than $6,000, well out of reach of most local farmers.
Analysts say Uruguay's free market commitments make unlikely an Argentina-style mass nationalization of private business assets, but events may force a future government to resort to similar measures if a preponderance of foreign land ownership becomes an unpopular political issue.
The government plans contrast with a continuing surge in an active real estate market in Uruguay offering land and buildings for sale to foreign investors, Internet advertisements accessed by United Press International indicated.