Brazil's system of land ownership has long been a political minefield, and a new analysis from Eurasia Review suggests the stakes have never been higher. The core issue is the concept of the "social function" of property - the idea that landowners have an obligation to use their land in a way that benefits society. What this really means is that property rights in Brazil are more conditional than absolute, and that has profound implications for the country's economy and politics.
The social function principle was enshrined in Brazil's 1988 constitution, which states that property should "fulfill its social function." On the surface, this seems like a reasonable way to promote more equitable land use. But the reality is that it's created a complex web of regulations, bureaucracy and political influence that has warped the country's real estate and agricultural markets.
A Politicized Property Market
As World Bank research has shown, the social function requirement has led to a system where the government can expropriate private land if it's deemed unproductive or not serving the public good. This has created enormous uncertainty for landowners and investors, as the rules are often vague and subject to political influence.
The bigger picture here is that Brazil's property market has become deeply politicized. As researchers have documented, the rise of government housing programs and real estate IPOs in the 2000s were shaped by a complex interplay of public subsidies, lobbying power and political calculations. In effect, the social function principle has turned land into a political football, with different interest groups jockeying to influence how it's used and distributed.
Unintended Consequences
The irony is that the social function doctrine was originally intended to promote more equitable land use and reduce inequality. But as research has shown, it's had the opposite effect, concentrating more wealth and power in the hands of those who can navigate the complex regulatory landscape. This has fueled resentment among marginalized communities who feel shut out of the system.
The bottom line is that Brazil's property paradox is a cautionary tale about the risks of making land use too politically charged. When the rules of the game become opaque and subject to political influence, it undermines the basic functioning of markets and breeds distrust in the system. Brazil may need to rethink its approach to balancing property rights and social obligations if it wants to build a more stable and equitable economy.