Limits Are Imposed on Rural Land Ownership by Foreigners

The initiative, which received strong support from President Cristina Fernández de Kirchner immediately after her re-election, was included in the agenda of the Federal Congress’ “extraordinary sessions” and was approved by both houses in just two weeks.

Although various bills on the matter had been submitted by congressmen from different political parties, the new law mostly follows the bill sent in April 2011 by the Executive Branch (the “PEN”, after its acronym in Spanish), with a few changes.

The main provisions of the bill submitted by the PEN were outlined in our article “Argentine Congress Discusses Proposals to Limit Rural Land Ownership by Foreigners”, published in edition # 109 of Marval News, to which we refer.

The most important amendments introduced in the text finally passed by Congress and promulgated as Law No. 26,737 are the following:

1. The new law explicitly limits “ownership” and “possession” by foreigners. References to “tenancy” or “occupation” (that also appeared in the bill submitted by the PEN) have for the most part been eliminated).
2. The following foreign individuals are excluded from the limitations: (i) those who have a 10 year residency in the country; (ii) those who have Argentine children and have a 5 year residency in the country; (iii) those who have been married to Argentine citizens for at least 5 years prior to the transfer of the property rights over rural lands and have a 5 year residency in the country.
3. The following subjects have been added in the list of those encompassed by the prohibition: (i) foreign public law-governed legal entities; and (ii) simple associations or de facto corporations in which foreigners hold shares in the percentage set forth by the new law in relation to corporations or which are controlled by foreigners.
4. Foreign ownership of rural land shall not exceed 15% of the total amount of “rural lands” in the Argentine territory. This percentage is to be calculated also in relation to the territory of the province or municipality where the relevant lands are located. In the bill submitted by the PEN this limit was 20% and it was calculated in relation to national territory only.
5. Ownership by the same foreign owner shall not exceed 1,000 hectares of the “core area”, or the “equivalent surface” determined according to the location of the lands. The Interministerial Council of Rural Lands (Consejo Interministerial de Tierras Rurales) shall define the location of the “core area” and the “equivalent surface” to 1,000 hectares in the different regions of the country, taking into consideration (i) the location of the lands, (ii) the percentage of the surface they occupy in the relevant Province, Department or Municipality, and (iii) the quality of the lands for use and exploitation.
6. Foreign legal entities or individuals shall not be owners of rural lands that comprise or are located beside permanent and significant bodies of water.
7. The National Registry of Rural Lands (Registro Nacional de Tierras Rurales), as the enforcement authority of the new law, shall be charged with the tasks -among others- of: (i) granting the authorization certificates to approve any act by which ownership or possession over rural lands is transferred; and (ii) controlling compliance of the new law, with standing to act before administrative and judicial authorities.
8. A temporary clause has been included, which provides that any transfer of land to foreign individuals or legal entities performed between the law’s effective date and the effective date of its implementing regulations are subject to the prohibitions set forth in the new law, and they shall be null and void if not performed in accordance with the terms of the new law.

The objections and questions raised in connection with the bill submitted by the PEN apply, for the most part, to the final text approved by the Federal Congress. They were outlined in our article titled “Argentine Congress Discusses Proposals to Limit Rural Land Ownership by Foreigners”, published in edition No. 109 of Marval News.

In addition to these objections and questions, it is important to consider the issues that arise from the amendments introduced by the Federal Congress when considering and passing this initiative.

In particular, the determination of the location of the “core area” referred to in Law No. 26,737, where the ownership limit for a foreign individual or legal entity will be of 1,000 hectares, will be very important.

Moreover, the implementing regulations should define the scope of the “authorization” certificates to be issued by the National Registry of Rural Lands and the way in which the extension of the “equivalent surface” will be determined in the different regions of the country. Other concepts that appear in the new law, such as that of “permanent and significant bodies of water”, should also be clarified.

It is precisely due to the ambiguous nature of many of the terms used, that it will be convenient to keep track of the way in which the new law is implemented by the relevant administrative authorities, in order to know the ultimate scope of the limitations imposed on foreign individuals and legal entities.