By Brian Winter and Caroline Stauffer
BRASILIA/SAO PAULO (Reuters) - Brazilian President Dilma Rousseff has ordered her government to stop confiscating farmland to create new Indian reservations, government officials say, a policy reversal with major implications for one of the world's top agricultural producers.
Brazil has in recent decades set aside about 13 percent of its territory for indigenous tribes. Vast additional areas, including prime territory for the production of soy, beef, sugar and other commodities, are under consideration for possible transfer.
That policy has been hailed as one of the world's most progressive but had caused mounting clashes in recent months as thousands of farmers were evicted from land they had been cultivating, in some cases for decades.
Rousseff, a pragmatic leftist facing re-election next year, has often favored pro-development interests over more humanitarian concerns and now believes the Indian affairs agency that determines which lands to set aside has gone too far, according to two senior government officials.
Following a technical change to land management rules last week, Rousseff has told her government to refrain from approving new applications for Indian lands for the foreseeable future, the two officials told Reuters on condition of anonymity.
Applications already under study will also be examined with greater rigor than before, which will have the effect of slowing the land-grant process down dramatically, they said.
"She has decided to do whatever is possible to shield the farmers," one official said. "It's a total shift."
That shift diminishes a major threat to the continued expansion of the farm belt, a driver of Brazil's prosperity in recent years and a critical source of commodities to China, the Middle East and elsewhere.
The chain of events that led to the surprise shift began on April 29, when Rousseff was due to make a seemingly routine speech in the farming state of Mato Grosso do Sul.
As she stepped to the podium in the city of Campo Grande, many in the crowd of some 2,000 farmers began to jeer and whistle at her. The leftist leader looked surprised for a moment, then managed a smile.
"People, I think it's fine for you to scream, really, because that's what democracy is about," Rousseff said, as many continued to roar in disapproval. "There's no problem at all."
Privately, though, Rousseff was disturbed - and caught off-guard. "What was that about?" she asked upon leaving the stage, according to an aide who was present.
She demanded a report on what had angered the crowd by the next morning. Within a week, the government's policy changed.
RISK OF DEATHS
Tensions between farmers and Indians have simmered for years, but boiled over in recent months as both groups, for different reasons, sought more territory for themselves.
About 0.4 percent of the population is officially considered indigenous, although many more have at least some Indian blood. Brazil's liberal 1988 constitution gives Indians the right to "lands they traditionally occupy," and says the state is responsible for setting them aside.
Successive governments have obliged, and the allocations have been far more generous in terms of area than in the United States or most other Latin American countries.
However, until recently, most of the land set aside was in relatively sparsely populated jungle areas, often deep in the Amazon. Some tribes complained they were being shut out of prime acreage where they had just as strong a historical claim.
Meanwhile, Brazilian agriculture has boomed in recent years, thanks largely to rising appetite for its commodities in Asia. The area for soy planting alone has grown about 40 percent in the last decade.
The two competing agendas have led to clashes in places like Marãiwatsédé, a soy-producing region in central Brazil that Reuters profiled last month.
Violence erupted there in December and January after the government evicted some 7,000 people. Officials bulldozed schools and other buildings so the land could be given back to the Xavante Indians in its natural state, in a case that went all the way to Brazil's Supreme Court.
Scared by such events, which have been repeated under varying circumstances throughout Brazil, some farmers began postponing or canceling investments.
Hundreds of Indians, many wearing face paint and shaking maracas, stormed Congress on April 16, hoping to stop it from changing the rules for how reservations are set aside. Farmers responded with their own protest last week.
TAKING BACK LAND, 150 YEARS LATER
Rousseff was aware of the disputes but the strength of last month's protest in Mato Grosso do Sul convinced her they had reached a new level of urgency. The subsequent report from her advisers painted a clear picture of overreach by Brazil's Indian affairs agency, called Funai, the government officials said.
One of the officials said Rousseff was "outraged" to find anthropologists at Funai had been given almost free rein to determine which land to confiscate, without consideration for whether the land was used for productive purposes.
In the grains-producing state of Rio Grande do Sul, Funai is studying the confiscation of some 30 plots of land, including one that European-descended settlers have controlled since 1872, according to Irineu Orth, director of the state chapter of Brazilian soy lobby group Aprosoja.
"I assure you that in 1988, when the state was told it had to set aside Indian lands, there wasn't a single Indian in most of these areas," Orth said.
In Mato Grosso, which is rich in soy, corn and cattle ranches, the government has set aside 14 million hectares of reservations for 52,000 indigenous people - 269 hectares per person, according to Funai data. An additional eight new reserves are currently under study, the agency said.
Seeking to halt the process, Rousseff last week stripped Funai of the ability to make such decisions by itself.
The agriculture and environment ministries as well as the agricultural research agency Embrapa will now have input on which Indian lands to set aside. "We need to listen to other voices," Rousseff's chief of staff, Gleisi Hoffmann, told a contentious session of Congress in announcing the change on May 8.
'A HUGE STEP BACK'
Funai's central office in Brasilia declined repeated requests for comment but its employees' association issued a statement on Friday "repudiating" Rousseff and accusing her of usurping Funai's right to delineate Indian lands.
Uilton Tuxá, chief of the Tuxá tribe in northern Bahia state who participated in last month's protest in Congress, said by telephone that Rousseff's decision on Funai was "a huge step back for the indigenous peoples of Brazil."
He said he would meet with local leaders of her Workers' Party to try to get the change overturned.
Some non-profit groups say Rousseff has consistently favored business interests over "softer" considerations such as the environment. The pace of deforestation, for example, accelerated toward the end of last year after years of declines, according to preliminary official data.
The rate at which Rousseff's government was handing over land to Indians was already slower than her two predecessors, even before she ordered the policy shift, government data show.
The implication "is that only unproductive lands should be left for the Indians," said Marcio Santilli, founder of the Brazilian environmental group Socio Ambiental and a former president of Funai. He said Embrapa and other parties are "not qualified" to be making decisions on the issue.
Others, however, argue that what started as a noble effort to address historic wrongs veered out of control in recent years. "I am standing and applauding" at the policy change, said Eliana Calmon, a high-profile federal judge. She said the previous system left judges with little room to challenge Funai's rulings, even when they resulted in obvious injustices.
"When it arrives here, what can we say? We aren't anthropologists. It left our hands totally tied," she said.
It's unclear whether Rousseff's decision on Funai - which was highly technical, and not widely publicized - will be enough to convince all sides to stand down.
Just two weeks ago, some 70 farmers in Marãiwatsédé tried to forcefully take back their land, said Paulo Roberto de Azevedo Junior, coordinator for Funai's regional office.
"Some of the invaders tried for a return," said Azevedo Junior, without providing details. "They were stopped."
Calmon said she sympathized with the challenge that policymakers face.
"You're dealing with five centuries of history," she said. "Really, you could say that everything in Brazil belongs to the Indians - so where do you stop?"
(Editing by Todd Benson, Kieran Murray and Claudia Parsons)