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Financing
and Credit
There is essemtially no long-term credit for
land purchases available from Brazilian financial entities. Yet
most land is sold on terms. The terms reflect the expected returns
on land as discussed above. Most land sold in the cerrados is sold
with seller financing.
Financing arrangements vary, but terms typically run three to five
years. For example, land sold at a price of 40 sacks of soybeans/ha,
might be paid off in 4 equal installments of 10 sacks per year.
This is a simple, straightforward way to buy and sell land, and
fair to both buyer and seller; land value is based on the market
value of the output produced over four years.
Land may be sold on terms of more than four or five years when the
title is held by a banking institution. Banks holding the paper
on land may finance that land over period of twelve years or more.
There are also cash sales of cerrado land. The discount for cash
varies considerably from sale to sale, but discounts of 20 to 30
percent or more are not uncommon.
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