Attorney’s Office calls for end of agreement to purchase Eldorado and talks about restrictions on land for foreigners – 02/07/2024 – Market

The MPF (Federal Public Ministry) requested the 1st Federal Court of Três Lagoas (MS) to annul the 2017 agreement that transfers control of Eldorado, a pulp and paper company from the J&F conglomerate, to Paper Excellence, citing restrictions on ownership of lands by foreigners.

Prosecutors cited concerns about “sovereignty” and “national security” as grounds for blocking the R$15 billion transaction, according to a document in the case signed on Monday (5) and seen by Reuters.

The move adds yet another twist to one of Brazil’s biggest ongoing corporate legal disputes, raising questions about foreign investment in land-intensive economic sectors.

In 2017, J&F Investimentos agreed to sell Eldorado Brasil Celulose to a Brazilian unit of Paper Excellence, but J&F and Paper Excellence soon after accused each other of violating the terms of the agreement, which was not fully implemented.

Paper Excellence, which grew through acquisitions first in Canada, then in Europe, Latin America and the United States, is owned by Indonesian billionaire Jackson Widjaja.

In December, Incra (National Institute of Colonization and Agrarian Reform) issued a technical note saying that the agreement would give Paper Excellence effective control of 14,486 hectares of rural land belonging to Eldorado.

Paper Excellence stated to Reuters that it acquired a cellulose industrial complex and that it “has no interest in buying or exploring rural land in Brazil or in any other country in which it operates”.

Eldorado, which also leases land, processes eucalyptus trees planted on 249,000 hectares, according to its website.

Incra said that Paper Excellence’s Brazilian unit is a “company equivalent to a foreign one” and, therefore, needs to seek approval from the National Congress, through the institute itself, before completing the acquisition.

On January 2, Eldorado advised shareholders to take the necessary steps to implement Incra’s directive, including potentially “cancelling the acquisition.” Eldorado did not immediately comment on the prosecutors’ request.

Paper Excellence said that Incra’s technical note “has no executive force”, and that there is still no decision on the MPF’s request for justice. Incra will analyze an appeal from Paper Excellence on February 15th.

J&F said it was ready to comply with Incra’s recommendation and return R$3.77 billion to Paper Excellence in exchange for a 49.41% stake in Eldorado.

Brazil imposed limitations on foreign land ownership in the early 1970s, but patchy public records have left uncertainty about how consistently these restrictions are applied.

At the end of 2020, the Senate approved a bill that relaxes restrictions on land ownership by foreigners, but its chances of passing the Chamber of Deputies are uncertain.

Senator Irajá (PSD/TO), author of the PL, told Reuters that current rules limit billion-dollar investments. He added that the Eldorado dispute is an example of how restrictions on foreigners can impede large investments.

“We cannot be prejudiced against foreign investment,” he said. “If foreigners are willing to respect our sovereignty and our laws, why can’t they be welcome in the rural sector?”

Almost 6.5 million hectares of Brazilian agricultural land are owned by citizens or foreign companies, according to data from the Ministry of Agrarian Reform.