Pension providers including Sweden’s AP2, Canada’s Caisse de dépôt et placement du Québec and TIAA-CREF have been heavily criticised in a report claiming their Brazilian farmland investments are linked to a local businessman accused of land-grabbing and suspected of involvement in money laundering.
The report also says farms have been acquired through a company structure that avoids Brazil’s tight regulations on foreign investment.
The research was carried out by the NGOs GRAIN, which supports small farmers in working for community-controlled and biodiversity-based food systems, Rede Social de Justiça e Direitos Humanos, Inter Pares and Solidarity Sweden-Latin America.
The investments were made through the TIAA-CREF Global Agriculture fund (TCGA), which launched in 2012 with $2bn (€1.9bn) committed to investing in farmland in “major grain-exporting nations” – the US, Australia and Brazil.
The researchers said their investigations revealed that some of the farms TCGA acquired “were owned by the companies of a Brazilian businessman [Euclides de Carli], who is the subject of several criminal investigations, before being sold to TCGA. This businessman is accused of resorting to an illegal and often violent process of land grabbing.”
They added: “The pension funds buying Brazilian farmland through their investments in the TCGA are now directly involved in the country’s serious land conflicts.”
The researchers also said TCGA funds were invested through a separate company, Tellus Brasil Participações Ltda, managed by the Brazilian sugar company Cosan.
According to the report, TCGA ultimately owns 49% of Tellus, with Cosan owning the other 51%.
Tellus acquires farmland on behalf of TCGA but is not subject to Brazilian regulations restricting foreign ownership of farmland, since it is 51% owned by the Brazilian company Cosan.
However, according to the report, Tellus raises funds for its acquisitions by issuing debentures to two companies controlled by TIAA-CREF.
The report says: “By acquiring these farms through the purchase of debentures from Tellus, TCGA can effectively ensure complete control over its farmland acquisitions without surpassing the 49% ownership of Tellus that would subject the company to Brazilian laws restricting foreign ownership of farmlands.”
It continues: “This expansion of agribusiness also spreads a disastrous model of agriculture. The plantations growing commodity crops, like sugarcane and soybeans, deplete soils and water sources, pollute and poison local communities with pesticides and provide few jobs to a desperate and exploited rural workforce.”
It concludes: “TCGA’s cash inflows are fuelling an expansion of plantations across many states in Brazil, which is destroying the environment, facilitating labour exploitation and generating severe land conflicts.”
AP2 and TIAA-CREF are both founding members of the group of international institutional investors that launched the Principles for Responsible Investment in Farmland in September 2011.
These principles aim to improve sustainability, transparency and accountability of investments in farmland.
AP2 told IPE: “Sustainability factors are central to AP2’s investments in farmland. Our strategy is to invest in large-scale agriculture real estate in countries that possess clearly defined legal structures.
“We do not acquire small family-owned farms in Brazil. We are confident in the due diligence process TCGA has in place.”
Last August, TIAA-CREF announced it had raised $3bn for TCGA II from 20 investors, including AP2, Cummins UK Pension Plan Trustee, Environment Agency Pension Fund, Greater Manchester Pension Fund, New Mexico State Investment Council and the TIAA general account.
The fund will invest in farmland across North and South America and Australia.
The report is available here.