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Uruguay Land Prices Double as Farm Policies Lure Soros, Marfrig

July 24 (Bloomberg) -- Uruguayan farmer Alberto Gramont
interrupts a family lunch to answer the telephone. The call, he
says as he returns to his plate of beef, was from a Brazilian
meatpacker offering to buy his land.
``I'm not selling any of my farms, but I have always gone
against the grain,'' says Gramont, 66, whose land covers an area
the size of Manhattan. ``Here everyone is selling their land.''
A third of Uruguay's agricultural property may now be owned
by foreigners, according to Uruguay's Rural Association. They
include farm companies PGG Wrightson Ltd. of New Zealand and
Buenos Aires-based Adecoagro, which is backed by billionaire
investor George Soros.
International buyers, seeking to take advantage of rising
global food prices, are attracted by the South American
country's relatively cheap land, policies that encourage foreign
investment, and no tariffs on farm exports, said Roberto Vazquez
Platero, a former agriculture minister. As a result, farm prices
have more than doubled in three years.
Prime land near Uruguay's western border with Argentina now
costs $7,000 a hectare (2.47 acres), compared with $3,000 a
hectare in 2005, said Michael Thomas, general manager of NZ
Farming Systems Uruguay Ltd., which is managed and part-owned by
Wrightson, New Zealand's biggest agricultural services company.
On Argentina's fertile Pampas plains, a hectare costs as
much as $10,700, according to farm industry newsletter Margenes
``The west has priced up with the Argentines coming across
and planting soy,'' Thomas said in a telephone interview from
Christchurch, New Zealand.

Iowa Corn Belt

Some Pampas land is now more expensive than in the Iowa
corn belt, where, according to Iowa State University in Ames,
Iowa, prices averaged a record $9,657 a hectare in 2007.
Farm prices have been pushed up by rising world consumption
of cereals, oilseeds and meat. As a result, global food values
rose more than 43 percent in the past 12 months, according to
the Rome-based United Nations Food and Agriculture Organization.
In Uruguay, Argentine farmers don't face the same taxes and
price controls as they do at home. After four months of
protests, Argentina's producers forced President Cristina
Fernandez de Kirchner to cancel a March 11 increase in oilseed
export taxes to more than 45 percent from 35 percent. The
scrapped tax would have made it unprofitable for many farmers,
already stretched by the 35 percent levy, to grow soybeans, said
Eduardo Buzzi, head of the Argentine Agrarian Federation.
By contrast, Uruguay, whose population of 3.3 million is
less than a tenth of Argentina's, charges farmers a flat 25
percent tax on their income.

`Investment Was Welcomed'

``What Uruguay did was simply not to interfere,'' Eduardo
Blasina, an agriculture analyst, said in an interview in
Montevideo. ``Investment was welcomed.''
Argentine regulations that force meatpackers to sell three-
quarters of their output to the domestic market at capped prices
may cause the nation's beef production and exports to drop, said
Hugo Biolcati, vice president of Argentina's Rural Society. The
controls are causing ranchers to send increasing numbers of
breeding cows to slaughter, which will cause the country's
cattle herd to decline in coming years, Biolcati said.
At the same time, rising investment will lead to an
expansion of the herd in Uruguay, whose territory covers an area
smaller than the Argentine province of Buenos Aires.
It's ``only a matter of time'' before Uruguay overtakes
Argentina as a beef exporter, Biolcati said.
Argentina was the world's fifth largest beef shipper in
2007, while Uruguay ranked eighth, according to the U.S.
Department of Agriculture.

Rising Exports

Uruguay's beef exports may rise to 430,000 metric tons this
year from 381,000 tons in 2007, Uruguayan Meat Institute
agronomist Felipe d'Albora said.
Argentine beef exports fell 3.6 percent to 532,000 tons in
2007 from the previous year, according to the agriculture
Uruguay sells most of its beef to Europe, Russia and the
U.S., which has banned imports of fresh meat from Argentina and
Brazil on sanitary grounds.
Marcelo Civelli, who manages La Esquina Criolla butcher and
restaurant in Queens, New York, started importing from Uruguay
to meet demand for grass-fed beef after an outbreak of foot-and-
mouth disease in Argentina led to a U.S. ban in 2001.
``People didn't realize there was another country just
across the River Plate that produces basically the same thing,''
said Civelli, whose father is Argentine.
Sao Paulo-based Marfrig Frigorificos & Comercio de
Alimentos SA, the world's fourth-biggest meatpacker, has
acquired four Uruguayan slaughterhouses.
``They have four head of cattle per person, so they have
plenty to export,'' said Ricardo Florence, Marfrig's director of
investor relations.

Gaucho Pants

The presence of foreign investment is barely noticeable on
farms around Young, a town of 15,000 inhabitants where cowboys
on horseback wear gaucho-style baggy pants, red neck-scarves and
black berets.
Gramont, who works from a two-room office in Young, which
was named after an English settler, said he expanded his farms
after receiving a personal assurance from President Tabare
Vazquez that the government wouldn't tax grains and oilseeds.
``Uruguay is so small that if you want to speak to a
minister you just ring him up,'' Gramont said. ``You try doing
that in Argentina.''

Source: With reporting by Carlos Caminada in Sao Paulo and Jeff Wilson


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