lent claims made by the companies. This, in effect, denies to such companies the use of the U.S. mails. Mail addressed to these firms is not delivered and is returned stamped "fraudulent". In an attempt to circumvent this action, many of the firms operate under several names. It is therefore advisable, before dealing with any real estate firm (U.S. or foreign) offering land in Brazil, to contact such organizations as the Better Business Bureau in your city, the Chamber of Commerce, Field Service Offices of the U.S. Department of Commerce, the Commercial Intelligence Division of the Department of Commerce in Washington, the Mail Fraud Investigation Branch of the U.S. Post Office Department, and especially your banker. World Trade Directory Reports on many Brazilian firms can be obtained for $1.00 from the U.S. Department of Commerce or its Field Offices throughout the country, as can lists of Brazilian attorneys. Among firms which have been mentioned in foreign fraud orders are the following: United Farm Cooperatives; United Finance and Production Cooperative, Inc.; Cooperative Reunidas de Financa e Producao S.A.; United Co-op; United Farm Co-op; Pan American Land and Development; Companhia Pan-Americana de Terres e Desenvolvimento no Brasil; Commercial United Co-op, Ltda. The following documents about Brazil may be obtained from the Commerce Department Field Offices at the prices indicated: Overseas Business Reports: Basic Data on the Economy of Brazil, OBR 64-75 ($0.15) Foreign Trade Regulations of Brazil, OBR 66–28 ($0.15) Handbook Series: Brazil, Information for United States Businessmen, Nov. 1961 ($1.75). ITEM 6-HYNES EXHIBIT INFORMATION FOR PROSPECTIVE INVESTORS IN BRAZILIAN REAL ESTATE (American Embassy, Rio de Janeiro, Brazil, June 1965) Inquiries concerning the possibilities of purchasing land in Brazil for homesteading, agricultural purposes, investment and retirement have recently been increasing. This is apparently due to a growing awareness and interest in Brazil, spurred by many newspaper and magazine articles about the country, acquisition of tracts of land by movie stars and other well-known persons, and, of prime importance, a number of advertisements often glowingly portraying land for sale both by American and Brazilian companies. While there are some offers which may merit serious consideration, many of these advertisements are exaggerated or tend to be highly misleading. Land, at all levels of desirability, is available for purchase in nearly all parts of Brazil, from the highly industrialized south to the primitive forests of the Amazon, from cities of over 4,000,000 people to interior states with populations of one or two persons per square mile, from well-watered fertile agricultural soils to dry-barren or totally leached land, from areas of moderate or good transportation to vast regions that are practically isolated, and from the very expensive to the perhaps ridiculously low. The majority of current advertisements for Brazilian real estate concern lands in the interior, in particular the States of Mato Grosso, Goiás, and Amazonas, which are available at seemingly very low prices. Although the initial cost of purchasing land in Brazil may seem to be reasonable, prospective purchasers should exercise caution before making commitments. This need for caution cannot be overly emphasized. When considering the purchase of land in a foreign country, one generally must display an even higher degree of caution than if buying unfamiliar real estate in the United States, in ascertaining such factors as the value of the land, the validity of the title, tax requirements, restrictions upon foreigners, and rights, such as minerals and access which accrue to the buyer. Anyone contemplating such a purchase, should, at the very least have clearly reliable and knowingly experienced counselors or, preferably, go to Brazil and visit the site under consideration. Due to the tremendous size and diversity of the country, it is virtually impossible in almost every instance to know what is actually being sold without seeing the property and inspecting the titles and rights of ownership. Among the many factors to be considered before buying land are general development in the area, such as roads, water, power, etc., language and cultural problems, distinctive business methods, import and monetary exchange restrictions, and what possibilities exist for re-sale of the property if that becomes desirable. Already mentioned are the great differences that exist throughout the country, such as the state of natural resources, soil and climatic conditions, actual and potential development, laws, and accessibility. Purchases of lands in the interior generally should be considered speculative for many reasons, including questionable or unclear land titles, squatters "rights", unsurveyed boundaries, availability, if any, of transportation and communications facilities and the large distances which are usually involved. Many of the municipalities (somewhat similar to counties) are less than 20 percent held by private owners. In states such as Pará and Amazonas, much of the land may be well-watered and accessible to rivers which could be used for transportation, but development is completely lacking leaving only the tropical rain forest. In other states, Mato Grosso and Goiás for example, there are great tracts of land that have unfavorable conditions, such as sandy soil covered with shrub vegetation, while other areas have good soil that perhaps could become productive, if transportation made it possible to take a crop to market. First hand impressions of publicity agents or tourists may not suffice in assessing income-earning potentials. Colonization and homesteading The Superintendência de Política Agrária has a number of projects of the homestead type under its jurisdiction, although most such projects have not progressed much beyond the planning stage. Colonization under this program is limited to a participation of 30 percent Brazilians and 70 percent Europeans, with a land limitation of 15 to 30 hectares per family (1 hectare=about 2.471 acres). Due to the small size of such units, this type of colonization is not likely to appeal to most United States citizens. Another type of subsidized settlement project, which is financed on a contractual basis by interested private firms, brings in groups of Japanese immigrants who are skilled in silk and vegetable production. Land purchases Of most interest to U.S. inquirers are agricultural, ranching, and lumbering lands available from government agencies, from private individuals, and from privately owned development companies operating in Brazil and sometimes also within the United States. Federal Government.-The Federal Government of Brazil does not sell or grant lands to private individuals, except in the case of colonists mentioned in the previous section. State Governments.-Some state governments have plans through which foreign settlers may purchase and acquire title to state lands. This is not considered an easy way to become the owner of Brazilian real estate. Although the lands may be comparatively inexpensive, they generally are located in remote areas and are inaccessable to markets and communications, making clearing and subsequent development (one of the factors for acquiring title) expensive and difficult. While it is theoretically possible for a U.S. citizen to acquire state land, it would almost certainly require that he go to Brazil, secure legal and financial counsel, locate and describe the land, and make a proposal to the State Government including the price he was willing to pay. This procedure easily could take from six months to a year, and involve payments for not only travel and living expenses, but also counselling costs. In some cases, even longer delays in processing applications to purchase state lands have occurred, with some petitions reportedly on file for more than ten years. It must be recognized that several claims to the same piece of land often are on file at the same time. State laws give first preference to Brazilian nationals. The petition for the described land must first be approved by the state department of lands and public works, secondly by the state legislative assembly, and, in the case of tracts of more than 10,000 hectares, by the Federal Senate. For the first two years, only a provisional title is granted. At the end of the two years, after the land has been surveyed at the buyer's expense (a large proportion of undeveloped lands have never been surveyed) and if he has initiated development of the land, a full title may be granted; otherwise, the land will revert to the state. Such procedures may vary from state to state, but in general, are similar. Private Land Companies.-It is probably more practical for persons not familiar with Brazil to purchase land from a reputable private owner or land development company. An unlimited variety of lands would be available, and the location and degree of development could be more selective. Prospective buyers should satisfy themselves that the firm with which they propose to deal is a reliable one. In this connection, their local banker generally can obtain information on the business reputation of the sales agent. Some real estate firms offering Brazilian lands for sale have misrepresented their offerings, with the result that U.S. investors have lost substantial sums of money. Unfortunately, it usually has been the small investor who can least afford the loss who has been approached with offers of small parcels of land (50, 100, or 500 acres) at prices which appear low by United States standards, but which may be very high for the land actually involved, if, in fact, clear title can be demonstrated. Land at $1.00 an acre is no bargain unless it is worth, more or less $1.00. A "pie in the sky" often is what may be offered in advertising materials addressed to well-meaning buyers. Much land being offered by private land companies reportedly is not actually owned by the seller, and much of it is in inaccessible areas, often uninhabitable in terms of U.S. citizens. A large percentage of such land may never be of value or will be valuable only if held in large tracts (thousands of acres) for, perhaps, generations. The U.S. Post Office Department has issued fraud orders or foreign fraud orders against a number of firms due to the complaints about the fraudulent claims of the companies. This, in effect, denies to these firms the use of the United States mails. Mail addressed to these companies is not delivered and is returned stamped "fraudulent". In an attempt to circumvent this action, many of the firms operate under several names. It is therefore advisable, before dealing with any real estate firm (U.S. or foreign) offering land in Brazil or other foreign countries, to contact such organizations as the Better Business Bureau in your city, the Chamber of Commerce, Field Service Offices of the U.S. Department of Commerce or the Commercial Intelligence Division, in Washington, the Mail Fraud Investigation Branch of the U.S. Post Office Department, and especially your banker or commercial business investigation agencies. In many instances, World Trade Directory Reports on the individual firms may be obtained for $1.00 from the U.S. Department of Commerce or through its Field Offices located throughout the country. Some of the firms which recently have been mentioned in foreign fraud orders are: United Farm Cooperatives; United Finance and Production Cooperative, Inc.; Cooperativas Reunidas de Finança e Producão, S.A.; United Co-op; United Farm Co-op; Pan American Land and Development Company; Companhia PanAmericana de Terras e Desenvolvimento no Brasil; Commercial United Co-op, Ltda. Retirement. There have been recent schemes to promote Brazil as a retirement haven for U.S. citizens, picturing it as a low-cost retirement "paradise". While certain items may be less expensive in Brazil many other items are either more expensive or impossible to obtain. Other factors to consider before making such a big decision are the distances (Rio de Janeiro to New York about 5,000 miles, 4,000 to Miami) and the obvious language and cultural problems. Unless a person has family connections or previous residence experience in Brazil it is doubtful that a decision to retire in Brazil on the basis of advertising claims would result in a happy retirement. Land prices Land prices in Brazil vary greatly, reflecting the differences in soil fertility, development of an area, proximity to market, climatic conditions, and demand for property in an area. Farm land near cities is often found to be higher priced than comparable land in the United States, while prices asked for lands in the interior may seem, by U.S. standards, extremely low, if price is the only criteria considered. Some land in Goiás reportedly has recently been quoted as between $0.22 and $0.90 an acre; prices are even lower in some of the truly remote regions. Land prices in the traditional and newly developing coffee and wheat areas generally are very high. It is difficult to estimate land prices in dollar terms, as the foreign exchange rate fluctuates. Because of inflation, the Brazilian currency has depreciated drastically in recent years, and despite measures being taken by the government 66-628-66-24 to curb inflation, it cannot be expected to halt completely for some time. The impossibility of translating land values into dollars with any real meaning is indicated by the following data on the rates quoted by exchange brokers at the ends of the periods cited, in approximate terms of cruzeiros to the dollar: December 1950, 32; December 1960, 210; December 1962, 785; December 1963, 1,250; December 1964, 1,850. Transportation One of the main points to take into consideration before buying property in Brazil is its location and if it is accessible. Large areas of Brazil are isolated, and can only be reached by irregular water transportation or, overland by primitive trails. The Brazilian interior is woefully lacking in rail and highway connections, and where highways appear, they are almost certainly natural soil roads which often may be impassable particularly during the rainy seasons. Brochures put out by land development companies often state that the land they are offering for sale is near a planned highway. In such a vast country, "near" is a relative thing (often 50 miles or more), and these "planned" roads may only be built sometime in the future, or perhaps not at all. Soil fertility The relatively highly productive "Terra Roxa" soil in São Paulo, Paraná, Minas Gerais, Goiás, and Mato Grosso, generally has been brought under cultivation. Although extensive areas remain to be settled, a close study may point out problems of deficient fertility potential, poor drainage, serious erosion, recurring drought or other factors which must be considered in calculating the economic worth of the land and the crop and livestock program to be followed. Many agriculturists now hold the opinion that the tropical regions of the Amazon Valley have been overrated by explorers who predicted those soils could produce enough food to support a large population. Experience has shown that the combination of leaching, general soil erosion, and high temperature remove humus and soil nutrients from cleared land in a few years, without an extensive but seldom seen fertilizing program. Except for exploiting certain longer term forest products, it is believed that only limited Amazon Valley flood plain areas are suitable for annual crops, and the severity of recurring floods and other uncertainties of nature make permanent installations difficult. Laws affecting ownership of real estate by foreigners Except for the frontier and coastal areas, foreigners may own real property freely in Brazil. Restrictions affecting land ownership by foreigners or foreigncontrolled companies do apply to frontier and marine lands. Lands located in the frontier zone (within 150 kilometers of the Brazilian border) may not be transferred to foreigners without the consent of the National Security Council. Perpetual leases on marine lands, lands on the margins of rivers, and lagoons influenced by the tides may be granted only to Brazilians or to Brazilian companies unless the government specifically authorizes a foreigner, individual or corporate, to acquire such rights. For purposes of exploration or industrial development, ownership of the surface soil does not constitute ownership of mines, other subsoil riches, or waterfalls. The Brazilian government exercises a monopoly over prospecting for and developing petroleum deposits. The utilization of other mineral deposits is subject to special authorization by the Federal government, and is not freely granted to foreigners. Nationality restrictions on business enterprises are explained in the U.S. Department of Commerce publication Establishing a Business in Brazil, Overseas Business Report (OBR) No. 63-149. Taxes Real Estate taxes normally are quite low, especially in less developed areas. Income and other taxes are explained in the OBR publication cited above. Import tariff and exchange controls Under regulations currently in force, parties moving to Brazil permanently may be permitted to import farm machinery and equipment as part of their personal effects, free of regular import licenses when approved by the Foreign Department of the Bank of Brazil (CACEX) and the Central Bank. The immigrants must prove that they are bona fide farmers and the applications to import farm equipment must be filed for approval with a Brazilian Consulate in the United States. Because farm equipment not only is relatively expensive in Brazil but also often difficult to acquire, the prospective settler generally is well advised to bring at least the minimum equipment he will need to start operation. Household goods and professional equipment which an immigrant brings with him to Brazil, even if allowed entry without import license, are subject to the payment of import tariff duties. The rate of duty on household furnishings usually is very high, ranging from 60 to 150 percent of value. Agricultural equipment ordinarily is subject to lower rates, ranging up to 60 percent. Due to rapidly changing conditions in Brazil, prospective immigrants are urged to consult with offices of the U.S. Department of Commerce before making decisions to take either farm machinery or household effects to Brazil. Land titles Real estate laws and practices vary considerably throughout Brazil and it often is very difficult to obtain clear title to land. A purchaser should seek the counsel of a reputable Brazilian attorney. A list of attorneys may be obtained for $1 from the U.S. Department of Commerce, Commercial Intelligence Division, or Commerce Department Field Offices in major regional centers of the country. Titles to lands within the frontier zones, even if granted by the states, may be questioned, since several states have granted lands claimed by the Federal Government. In addition, Article 156, Section 2, of the Federal Constitution requires prior authorization from the Federal Senate before a state may legally grant a title to public lands in tracts larger than 10,000 hectares (approximately 24,000 acres). As a result, even title held by legitimate land development companies may be clouded. As a practical matter, multiple claims, apparently of equal value, to the same land are so frequent that a purchaser of lands in states such as Mato Grosso or Goiás often must take possession and actively defend the title if he expects to retain effective control of his property. No land title insurance is known to be issued in Brazil. It has been rumored that some land companies may issue title warrants, but these would be only as reliable as the company which issues them and then only as long as that company is in existence and capable of guaranteeing the warrants. Publications The Department of Commerce publishes a series of Overseas Business Reports which contains useful information about Brazil. The following documents can be purchased from the Superintendent of Documents, Government Printing Office, Washington, D.C. 20402, or from the Commerce Department Field Offices, at the prices indicated: Economic Developments in Brazil, 1962, OBR 63-70 ($0.15) Food Regulations of Brazil, WTIS, Part 2 No. 60-2 ($0.10) Foreign Trade of Brazil, 1960-61, OBR 62-23 ($0.15) Foreign Trade Regulations of Brazil, OBR 66–28 ($0.15) Living Conditions in Brazil, WTIS, Part 2 No. 62-54 ($0.10) Pharmaceutical Regulations of Brazil, WTIS, Part 2 No 60-38 ($0.10) Brazil, Information for United States Businessmen, November, 1961 ($1.75) Basic Data on the Economy of Brazil, OBR 64–75 ($0.15) ITEM 7-MATERIAL SUBMITTED FROM CALIFORNIA UNIVERSITY OF CALIFORNIA, LOS ANGELES, Senator HARRISON A. WILLIAMS, Jr., SCHOOL OF LAW, Los Angeles, Calif., August 26, 1966. U.S. Senate, Committee on Banking and Currency, DEAR SENATOR WILLIAMS: Thank you for your letter respecting the interstate land sales bill. I am pleased that our report was of assistance to you and you have my consent to use it in any way you wish. Sincerely, WILLIAM D. WARREN. |