Warren Buffett's tie-up with sugar magnate Rubens Ometto Silveira Mello over alleged plans for a farmland buying spree in Brazil may avoid the US tycoon falling foul of a drive to keep out foreign investors.

Brazil's president, Luiz Inacio Lula da Silva, has put the brakes on a wave of foreign investment in the country's farmland, estimated by Brazil's central bank at $2.4bn between 2002 and 2008, by approving a rule that restricts the ownership by foreigners.

"Considerable uncertainty surrounds the force of the new rule and how it may be applied," Stephen Johnston, a Canada-based farmland investor, said.

While some observers have dismissed the move as pre-election posturing, others "believe there is a possibility that all farmland acquisitions since 1988 could be made null and void".

Three-way deal?

The clampdown comes amid reports that Mr Buffett is planning to join in the foreign buying splurge which has helped drive Brazilian farmland prices up to R$50,000 ($28,600) a hectare for good quality land in areas with good transport links.

AgraFNP, the Sao Paolo-based farm consultancy, has estimated the jump in farmland prices in frontier areas of the north east over the last three years at 54-70%.

However, Mr Buffett's tie up with Mr Mello and oilseed magnate Blairo Maggi to buy up soybean and sugarcane farmland may allow him to sidestep Lula's restrictions, which are limited to foreign individuals, or companies owned more than 50% foreign-owned.

Mr Buffett, whose investment record has earned him the title of the Sage of Omaha, is proposing to invest $400m as a minority partner in the venture, Rio de Janeiro-based newsletter Relatorio Reservado said.

'Brazil for Brazilians' 

Brazil's relatively open ownership, until now, and huge agricultural potential – the country is already the world's top coffee and sugar producer, and second ranked soybean grower – have made it a magnet for foreign investors.

However, the scale of investments, by buyers from hedge funds to state-baked Chinese companies, has prompted a local backlash.

"Brazilian land must stay in the hands of Brazilians," Guilherme Cassel, Lula's agrarian development minister said.