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<EU FARMLAND GRABBING: Limit on Free Movement of Capital for Farm Land Purchase

A big part of the perceived 'problem' fuelling this political movement is that many of the land purchases are being made by institutional investors - banking groups, pension funds and insurance companies (the European Parliament's study cites Rabobank in Poland and Romania, Generali in Western Romania, Allianz in Bulgaria and KBC in East Germany and Lithuania). These investors are characterised as 'speculators'.

How did this happen? The main factors:

  • The scale of the phenomenon: One estimate for Romania is that 10% of farm land is now in the hands of third country (non-EU) investors and a further 20-30% is controlled by EU investors. In Hungary, one million hectares have been acquired in 'secret deals' using 'EU capital', and the Chinese have bought 100 vineyards in the Bordeaux, etc.
  • Political pressure to help farmers. Recently, the Commission allowed farmers to form cartels to shore up prices (an Internal Market heresy) and drew up rules to boost farmers' bargaining power by formalising their supply contracts with supermarkets (despite the retail lobby);

Who is to say the EU won't start tinkering with free movement of capital? That won't be easy concerning intra-EU capital flows, but could easily be done for third countries (the Treaties facilitate that). Indeed, in this context, the Commission points to its new EU Investment Screening policy (see epf17-82 of 10.10.2017).

In Parliament's study "Extent of Farmland Grabbing in the EU": The view is that non-agricultural investors are speculators, entering the game because the extreme mechanical increase in farmland prices outperforms returns in their 'normal' business, especially when they get politicians in politically unstable new member states to let them sell or develop the land for non-agricultural use.

Full EPF Secretariat report under epf17-91 of 17.11.2017