Chinese investors look to Brazil for farmland, water

Here’s more news that in the new global economy populous China and commodity-endowed Brazil may become inextricably linked: well-financed Brazilian land investment group Agrifirma, backed by UK-based investors Ian Watson and Jim Slater, along with Jacob Rothschild, has secured major backing in Hong Kong.

Why does this triangulation make sense?

Because Hong Kong investors see a future for land and water-rich Brazil as the world’s breadbasket, and recognize China’s need to have its eye on foreign sources for foodstuffs. Here is a piece of the FT story that broke this news:

Ian Watson, Agrifirma Brazil’s London-based chairman, said: “The wealth in the developing world is going to cause foodstuffs to go up in price.” He noted that Brazil had 14 per cent of the world’s freshwater resources, while China’s populous northern provinces and cities were perennially parched. “When you export agriculture you are exporting water.”

(Agrifirma) has raised $179m to date, including investments from two Hong Kong tycoons – Raymond Kwok and Adrian Fu – and Lake House, an investment group.

“There is a shortage of farmland in China itself,” said Mr Fu, a hotel developer. “Eventually China will have to go abroad to source crops.” The Kwok family controls Sun Hung Kai Properties, Hong Kong’s largest property developer.

Agrifirma, which already controls some 70,000 hectares in western Bahia state (about one-fifth the size of Rhode Island), was considering an IPO in Hong Kong, the FT story reported. But a subsequent statement on Agrifirma’s website says the IPO, when it comes, could be held in Hong Kong, Toronto, São Paulo, London, or elsewhere.

Here’s the rest of the statement from Watson, chairman of Agrifirma:

Our recent visit to the Far East has been very productive. Given the rising demand for foodstuffs across the developing world, there is a lot of interest in our strategy of transforming undeveloped land in Brazil into productive farmland. The company’s operations are making good progress … No decision about where or when to list the shares has yet been made however.

It’s tempting to raise immediate questions about whether these UK and Hong Kong-based investors scooping up swaths of scrub-land for agricultural use are bulldozing the environment in the process. But a prior FT story on Agrifirma quotes a representative with The Nature Conservancy in Brazil praising the firm as a “new act” that “wants to do the right thing.”