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Réforme agraire impulsée par le marché en théorie et dans la pratique: le cas du Brésil

Comment peut-on définir exactement la réforme agraire impulsée par le marché? Dans quelle mesure a-t-elle été effectivement mise en œuvre et avec quel résultat? L'article répond à ces questions fondamentales en prenant pour hypothèse que ces réponses peuvent, à leur tour, contribuer à un débat plus rigoureux sur ce thème. L'article cherche à présenter de façon plus accessible les concepts théoriques et pratiques de base de la réforme agraire impulsée par le marché et à donner accès à des données empiriques importantes concernant le programme pilote mené au Brésil.

Reforma agraria impulsada por el mercado en la teoría y en la práctica: el caso brasileño

¿Qué es exactamente la reforma agraria impulsada por el mercado? ¿Hasta qué punto se ha aplicado y con qué resultados? El presente artículo responde a estas preguntas básicas en la creencia de que las respuestas pueden, a su vez, contribuir a un debate más riguroso sobre el tema. Pretende también presentar de forma más accesible los conceptos fundamentales, tanto teóricos como normativos, de la reforma agraria impulsada por el mercado, así como proporcionar acceso a datos empíricos importantes relacionados con el programa piloto de Brasil.

Towards a better understanding of the market-led agrarian reform in theory and practice: focusing on the Brazilian case

S.M. Borras Jr

Saturnino M. Borras Jr is a candidate for a Ph.D. in Development Studies at the Institute of Social Studies,
The Hague, the Netherlands (borras@iss.nl).1

What exactly is market-led agrarian reform, or MLAR? To what extent has it been implemented, and with what outcomes? This article responds to these basic questions believing that the answers to them can, in turn, contribute towards a more rigorous debate on the topic. This article hopes to provide a more accessible presentation of the basic theoretical and policy concepts of MLAR, and to provide access to important empirical data related to the pilot programme in Brazil.

INTRODUCTION

Despite the series of land reform initiatives that occurred over the past century, effective access to land by the rural poor remains a serious problem in most developing countries today.2 State-led land reforms have been perceived to be too problematic and too costly to implement, and their strategic impact has been questioned. Thus, an alternative market-led agrarian reform (MLAR) has been theorized. It is based on the "willing-seller, willing-buyer" principle. Pushed by the World Bank, MLAR has been pilot-tested in Brazil,3 and is being implemented on a nationwide scale in South Africa.4

Policy-makers and researchers, non-governmental organization (NGO) activists and academics alike put forward various criticisms of MLAR, ranging from outright rejection to tentative and cautious endorsement of some components of the proposed scheme. In general, however, the criticisms are speculative. Among the reasons why the debate on MLAR is not as rigorous as might be desired are i) most of the existing literature on MLAR has been written by experts in such a way that it is not easily accessible to ordinary policy-makers, researchers, NGO activists, and even some scholars and ii) the lack of access to existing empirical data directly relevant to MLAR implementation hinders efforts to move the debate beyond speculation and "analysis of intentions". Hence, many interested parties remain confronted with the basic questions: What exactly is market-led agrarian reform? To what extent has it been implemented, and with what outcomes? These are the same questions that this article responds to, believing that the answers to such enquiries can contribute to a well-informed debate - one that is beyond speculation and polemics, and can draw in more active participants to the debate of this highly important policy question. The article utilizes mainly the same set of empirical materials used by MLAR proponents and is organized as follows: the pro-market critique of the state-led agrarian reform is presented, followed by an overview of the land question in Brazil together with the theoretical foundations and policy components of the MLAR model in Brazil. The subsequent section examines the initial MLAR outcomes in Brazil, while pointers for future debates are suggested in the final section.

PRO-MARKET CRITIQUE OF STATE-LED AGRARIAN REFORM

The MLAR model has emerged out of the pro-market critique of the classic state-led approaches to agrarian reform. This critique revolves around the issues of access to land, post-land redistribution farm and beneficiary development, and financing strategy. According to this critique, the state-led approach is coercive, supply-driven, and statist-centralized - making it undesirable as a policy. Guided by the concept of "land-size ceiling", the state-led approach allows landlords to own land only under a maximum farm size. According to Deininger and Binswanger (1999: 263), however, "ownership ceilings have had only a marginal effect ... Ceiling laws have been expensive to enforce, have imposed costs on landowners who took measures to avoid them, and have generated corruption, tenure insecurity, and red tape." Moreover, landlords are usually paid less than the market price and through a combination of cash (smaller portion) and government bonds (bigger and staggered portion), so that time erodes the real value of the money. Pro-market advocates believe that landlords' resistance to reform has been provoked primarily by this "confiscatory nature of land reform" (Binswanger and Deininger, 1996: 71). In turn, this conservative reaction has led to landlords subverting the policy, evading coverage by subdividing their farms, or retaining the best parts of the land - leading to the less successful outcomes of most state-led land reforms (see de Janvry, 1981; de Janvry and Sadoulet, 1989).

Moreover, according to this critique, the state-led approach has been "supply-driven": it starts either by first identifying lands for expropriation then looking for possible peasant beneficiaries, or by first identifying potential peasant beneficiaries then looking for lands to be expropriated. This leads to greater economic inefficiency when productive farms are expropriated and subdivided into smaller, less productive farm units; when environmentally fragile lands are distributed by the state; or when peasant households "unfit" to become beneficiaries (i.e. lacking the potential to become efficient producers) are given land to farm (see World Bank, n.d.c: 2). Furthermore, the pro-market critique maintains, the state-led approach has been implemented only in areas where peasants are organized and are relatively vocal politically. It has neglected the unorganized section of the peasantry that usually comprises the poorest of the rural poor.

Meanwhile, the state-led approach relies heavily on the state and its centralized, huge bureaucracy for programme implementation via top-down methods and corruption-ridden processes (see Gordillo, 1997: 12). According to the critique, this approach not only fails to accommodate the diverse conditions characterizing local communities, but also reduces transparency and accountability. In addition, the centralized methods (and strong landlord resistance) of the state-led approach slows the pace of land redistribution, which is further hindered by lengthy legal and political conflicts. Binswanger (1996a: 141) explains that "public sector bureaucracies develop their own set of interests that are in conflict with the rapid redistribution of land". He elaborates that "expropriation at below market prices requires that the state purchase the land rather than the beneficiaries. While not inevitable, this is likely to lead to the emergence of a land reform ... agency whose personnel will eventually engage in rent-seeking behaviour of its own" (ibid: 142).

Another consequence of the state-led approach is distortion in the land market. According to MLAR proponents, the land market is a mechanism through which more efficient producers can acquire or accumulate lands, while it facilitates the exit of inefficient farmers (Deininger and Binswanger, 1999). A more developed land market brings land prices to their proper (lower) level. However, according to the critique, most developing countries are plagued with distorted land markets primarily because "[g]overnments ... maintain regulations that restrict land use and transfers" such as restrictions in land sales and rentals by land reform beneficiaries and by landlords already marked for expropriation. Deininger and Binswanger assert that "a review of these policies finds that they have rarely achieved their goals" (ibid). This has prevented more efficient producers from acquiring or accumulating land, blocked the entry of potential external investors, prevented inefficient and bankrupt beneficiaries from moving out of production and has therefore prevented a more efficient and productive use of the land (ibid: 262-263). These prohibitions have led to informal land market transactions that, in turn, breed corruption within state agencies and drive land prices upward, thereby distorting land markets further (see Gordillo, 1997: 12-19).

Moreover, according to the pro-market critique, the state-led approach has been implemented usually without prior or accompanying progressive land taxation (i.e. the bigger the landholding, the higher tax imposed). The absence of such a tax measure contributes to land price increases beyond their proper levels and encourages landlords to practise "land-banking" (i.e. speculation). The state-led approach has also usually been implemented without a prior or simultaneous programme of systematic land titling, leading to complex and competing claims over land - that, again, leads to land market distortions (see Bryant, 1996). Another critical issue is that laws in state-led agrarian reform prohibit the sale or rent of land by the beneficiaries (see Banerjee, 1999).

According to the state-led approach, after the redistribution of land among peasant beneficiaries, the state initiatives to develop the farms begin. For the pro-market critique, this raises a number of interrelated issues. According to the critique, state-led agrarian reforms have generally been carried out within the context of inward-oriented development policies. Exemplified by the Import-Substituting Industrialization (ISI) of the 1950s through the 1970s, this development policy strategy has protected the national agriculture sector from global competition through production- and trade-related subsidies. However, it has been the large farmers' and landlords' sectors - with the political power to lobby for special subsidies - that have actually benefited from these explicit and implicit state subsidies. Furthermore, under this type of national development policy regime, in order to finance the drive towards national industrialization, agriculture is squeezed of its surplus factors of production through export taxes imposed on agricultural products, import taxes on farm inputs, overvalued currency, etc. For these reasons, according to the pro-market critique, this policy can be seen to be biased against agriculture. Hence, small farmers have no chance to develop under an inward-oriented development policy (see Binswanger and Deininger, 1997). It is within this context that the pro-market critique of the state-led approach to the post-land redistribution development process must be understood.

Moreover, the pro-market critique laments that the sequence within state-led agrarian reform is "land redistribution before farm development project plans". This has led to programmes that are essentially "land redistribution-centred" because, in most cases, according to the critique, the state has failed to deliver appropriate support services to beneficiaries. Where support services have been available, these are mainly via production and trade subsidies that are universal in nature and thus, in reality, large farmers have benefited more than small farmers. In addition, the agricultural extension service has been characterized by a centralized and beaurocratic structure and has therefore been largely ineffective and inefficient. Thus, Deininger and Binswanger conclude that "[c]entralized government bureaucracies - charged with providing technical assistance and other support services to beneficiaries - proved to be corrupt, expensive, and ineffective in responding to beneficiary demands" (1999: 266-267). As a consequence, post-land redistribution development has been uncertain and less-than-dynamic, without widespread efficiency gains, and has "resulted in widespread default [in repayments] and nonrecoverable loans" by beneficiaries (ibid: 267).

Furthermore, the pro-market critique maintains, the state-led approach has driven away credit sources because expropriation pushes landlords (a traditional credit source) away from farming, while formal credit institutions do not honour land award certificates from beneficiaries because of the prohibitions against land sales and rentals. For the same reasons, potential external investors are discouraged from entering the agricultural sector. As Gordillo (1997: 13) argues, "the removal of these obstacles and constraints is a vital precondition for the encouragement of further private investment in the rural development process, and in particular, investment from the non-agricultural sector". Meanwhile, by banning land sales or rentals, and by neglecting off- and non-farm complementary and/or alternative projects, state-led land reform has not provided systematic exit options to beneficiaries.

Finally, according to the pro-market critique, the fiscal requirement of the state-led approach is too costly on the part of the state, which buys land from the landlords. Moreover, landlords are paid whether or not the beneficiaries repay the state for the land. This is the same concept of "sovereign guarantee" that has been applied in government-sponsored credit programmes that have failed in other contexts (see Binswanger and Deininger, 1997). The production- and trade-related "universal" subsidies in state-led agrarian reforms are also too costly and wasteful on the part of the state, while the huge land reform bureaucracy eats up much of the programme budget (see Deininger, 1999).

In short, the pro-market critique of the state-led approach is captured by the conclusion reached by Deininger and Binswanger (1999: 267): "most land reforms have relied on expropriation and have been more successful in creating bureaucratic behemoths and in colonizing frontiers than in redistributing land from large to small farmers". According to pro-market scholars, the need for an alternative policy has become urgent - hence, the market-led agrarian reform model.5 This model has been developed primarily by Hans Binswanger and vigorously promoted by Klaus Deininger - both of the World Bank.

THE MLAR MODEL AND ITS ADAPTATION IN BRAZIL

It is necessary to provide a brief background to the land question in Brazil, before presenting the pro-market critique of the state-led approach and the alternative MLAR model - the Projeto Cedula da Terra, or PCT. Brazil is a country that did not see major land reform initiatives in the past compared to its Latin American neighbours (FAO, 1998). Hence, the unresolved land question has persisted into the 1990s, with landownership distribution extremely skewed. In 1995, small farms (below 50 ha) accounted for 82.67 percent of the total number of farms, but had a small (13.5 percent) share in the total agricultural land of the country (Censo Agropecuario, IBGE, 1995 - cited in Sauer, 2000: 1). Meanwhile, large farms (above 1 000 ha) accounted for a marginal (0.83) percentage of the total number of farms, but monopolized 43.5 percent of the country's total agricultural land (ibid). The national regime transition that began in 1985 provided a political opportunity to reinstate the agrarian reform issue within the national policy agenda (see Houtzager, 2000). The National Plan of Agrarian Reform was thus inaugurated in 1985, and was to be implemented by INCRA (National Institute for Rural Settlement and Agrarian Reform). The National Plan targeted 1.4 million families, who were to be (re)settled in farmlands to be acquired by the state from 1985 to 1989. But the law allows for the expropriation only of the unproductive land that comprised "approximately 44 percent of the country's arable land - both public and private... 80 percent of which [was] in the hands of large estates" (de Janvry, Sadoulet and Wolford, 1998: 14; Sauer, 2000).6 Guanzirole (2000: 18) explains that, "Brazil is one of the few countries, if not the only one, which in view of its agricultural area can still sponsor a redistribution of land without harming the most dynamic segment of the farm sector responsible for the country's exportable surpluses." But by the end of this period (1985-89), only 6 percent of the target families had received land in 515 settlements. There was no significant turnaround in this trend a few years after 1989, making the land reform issue almost moribund by then (ibid).

Nevertheless, as Herring (2000: 3) says, "even dead land reforms are not dead. Promises unkept keep movements alive; past misdeeds are not forgotten. Both become nodes around which politics precipitate." And rightly so. By the early 1990s, the Brazilian countryside had witnessed the nationwide conflagration of militant collective actions of the landless poor that had been scattered and isolated in the second half of the 1980s. Mass invasions of unproductive land spread like fire, originating from the south in the late 1980s and moving towards the centre, northwest and northeast in the 1990s (Petras, 1998: 125). While there have been several social movements engaged in land occupations (Sauer, 2000), the most well-known spearhead of these mobilizations is the Movimento dos Trabahaldores Sem Terra (MST, Movement of the Landless Rural Workers). These mass invasions have used the "opening" in the legal institutional framework of the agrarian reform law and have been able to mobilize wide popular support - locally, nationally and internationally. By 1997, the direct actions of the MST had benefited 139 000 families (Petras, 1997: 24). However, land invaders have often suffered violent reactions from the landlords (Kay, 2000: 24-28). More generally, since the 1990s, these mobilizations have positively influenced the pace and extent of land reform implementation in Brazil (see Guanziroli [2000: 11] for the quantity of lands expropriated and families resettled from 1927 to 1997).

Initial empirical studies of post-land-transfer farm and beneficiary development demonstrate improvements in the livelihoods of the beneficiaries' families in the INCRA-sponsored settlements. "On the average, settlers were able to increase their capital by 206 percent in relation to when they entered the settlements and were earning an average monthly income that was 3.7 times the national minimum wage" (FAO, 1994, cited in de Janvry, Sadoulet and Wolford, 1998: 17).

However, mainly in response to escalating resistance to land reform by politically powerful landlords and for budgetary reasons, in recent years the Brazilian government has been looking for alternative approaches that can either complement or even replace the ongoing expropriationary - and so, politically contentious - and financially demanding state-led land reform. In this context, the World Bank's offer to finance a pilot MLAR programme in five northeastern states has been most welcome.

The next section will explain what MLAR is and demonstrate how it has been adapted to fit the policies of the Brazilian government. It will show that the MLAR model has been almost completely translated into actual policies or project components in Brazil via the PCT (except with regard to progressive land taxation and a systematic land titling programme).

Obtaining access to land

Voluntary/willing seller. According to MLAR, to be successful and sustainable, land reform should receive the active support of landlords - thus, only landlords who voluntarily sell their land are covered by the reform. Those who are not willing to sell will not be compelled to do so. Willing sellers receive 100 percent "spot" cash under MLAR, at 100 percent of the land's market value. Deininger (1999: 663) claims that "[this will provide] a strong incentive for landowners ... to sell land". But Gordillo and Boening caution that "[MLAR] is targeted in regions with enough excess supply of land relative to the program of land purchases in order to avoid triggering an increase in land prices" (1999: 10). Deininger (1999) explains that the ideal ratio is 3:1 land supply-demand. In Brazil, PCT proponents believe that landlords are willing to sell land when given proper incentives mainly because there was a sharp drop in land prices during the past decade. The "taming of inflation, the debt crisis in the agriculture and the crisis in agriculture itself, the reduction of subsidies and the threat of land occupation by organized movements" caused land prices to fall by 60 percent between 1994 and 1998 (Buainain, da Silveira and Teófilo, 1998: 7). Thus, landlords are expected to give a "warm reception" to PCT (Navarro, 1998: 6).

Demand-driven/willing buyer. The MLAR-PCT model is demand-driven - only those poor families who explicitly demand land and only those lands being demanded will be covered by reform. A "self-selection" process among prospective buyers is undertaken in order to exclude less promising applicants, although priority is given to the rural poor, who would be provided with funds via loans and grants as discussed below (see Buainain et al., 1999: 16-17; van Rooyen and Njobe-Mbuli, 1996: 461-493). However, in order to strengthen the beneficiaries' bargaining power in the land purchase process and to achieve economies of scale in input and output markets and reduce transaction costs, beneficiaries are required to group themselves into organizations. Buainain et al. (1999: 14) explain that "participation in the Program is collective and not individual", since "[t]he associative forms would reduce errors of individual evaluation during the process of acquisition and it would permit a better matching of the features of the land, the skills of the buyers, the availability of resources, and the development project" (ibid). To ensure that the poor benefit from the programme, an income ceiling of US$240/month or US$2 880/year has been imposed (Buainain et al., 1999: 30). To ensure the PCT's success, Buainain et al. clarify that "only individuals with human capital, previous savings, and adequate knowledge of how to make use of the opportunities would make the decision to participate in the Program". The PCT will select "local people, who [have] closer relations with landowners, better access to networks of social relations and information on local market of land" (ibid: 29). Moreover, the state is barred from intervening in the selection of beneficiaries (Buainain et al., 1999: 14, 30).

Decentralized approach - for transparency and accountability. The MLAR approach to implementation is decentralized in order to enhance its speed, transparency and accountability. "It privatizes and thereby decentralizes the essential process [of land reform]", explains Binswanger (1996b: 155). Nevertheless, the MLAR-PCT model still needs local government for land purchase mediation, infrastructure and information provision, and tax collection. Indeed, it is more likely that transparency and accountability will be achieved at the local government level because local government, by its nature, is thought to be nearer to the people. In Brazil, local governments "establish general criteria and provide funds to aid the beneficiaries' own initiatives. They set a limit on the price of land acquisition and on the total financing, leaving to the beneficiaries themselves the decision regarding land selection, the negotiation of land acquisition, and the definition of the productive ventures to be implemented." Projects are approved at the (regional) state level (Deininger, 1999: 663).

Faster pace and cheaper land prices. The MLAR model is faster than the state-led approach because, as Binswanger (1996b: 155) explains, "[i]t avoids years of delays associated with disputes about compensation levels". Binswanger (1996a: 143) further argues that "[t]he speed with which eligible communities would get access to land would then depend on the level of annual appropriations, rather than on the speed of expropriation proceedings for specific farms they are waiting to obtain." Moreover, land prices will be radically reduced as a result of the 100 percent spot cash payments to landlords, who would, in turn, factor away the transaction costs that are usually incurred in the traditional cash-bond staggered-payment schemes. In Brazil, the PCT hopes for "[a] swift process of emancipation of beneficiaries" because it is free from protracted legal complexities (Buainain et al., 1999: 13). Furthermore, it hopes to bring land prices down to US$3 000 per beneficiary, compared with the much higher price level under the state-led land reform (Deininger, 1999: 663; Buainain et al., 1999: 7-8).

Stimulates land markets. Moreover, "in a clear departure from the traditional approach, the new model would stimulate, rather than undermine, land markets" (Deininger and Binswanger, 1999: 267). The various state regulations relating to the land market (e.g. subsidies and tax advantages) "further increase land prices above the net present value of agricultural profits" (ibid: 252-253). MLAR proponents explain that "closing the gap between agricultural land values and market values of the land makes land more affordable and enhances repayment ability because buyers of land will now find it easier to repay a loan from the productive capacity of the land itself" (van Schalkwyk and van Zyl, 1996: 333). This can be done partly through subsidy withdrawal (from large farmers), progressive land taxation, systematic land titling, land sales and rental liberalization, and better market information systems. Carter and Mesbah (1993: 1085-88) explain that the policy about "[t]axation with progressively higher rates as size of ownership holding increases has been argued to provide large land-owners with the incentive to sell part of their land in order to escape the higher tax rates. This market reform measure is anticipated to increase the amount of land available for purchase by different strata of producers." Deininger and Binswanger explain that "[l]and taxes have proven very useful in a wide range of urban contexts in developing countries and - if accompanied by appropriate institutions to help with accounting and implementation - should be feasible in rural ones as well" (1999: 265).

Moreover, the MLAR-PCT model has better chances of success if there is an efficient land titling system. Bryant (1996: 1543) explains that "[a] `willing-buyers, willing-sellers' formal land market requires that the sellers can certify that boundaries have been demarcated and that the land in question is legally owned by the seller. Buyers are not as willing to buy land unless those characteristics pertain. In general, formal ownership of land is recognized through registering a land purchase and obtaining a title." The model also requires the creation of localized land market information systems in order to level the playing field for all players. Deininger and Binswanger explain that "[b]y reducing asymmetric information about landownership and quality, land transactions are less costly to implement, thus increasing the liquidity of the land market and making it possible to transfer land from less productive to more productive individuals" (1999: 250). Prohibitions on land sales and rentals should be abolished to allow for a more fluid land market (Deininger and Binswanger, 1999: 269; see Banerjee, 1999). Finally, "[t]he introduction of land markets would allow better farmers to replace older or less skilled farmers, inducing a slow process of social differentiation. This process would gradually concentrate land towards the most competitive farm sizes and the better farmers" (de Janvry, Sadoulet and Wolford, 1998: 24).

Post-land purchase farm and beneficiary development

Sequence and pace of development plus extension service. Contrary to the sequence in state-led agrarian reforms, the MLAR-PCT model adopts the process of "farm plans before land purchase". Under this scheme, post-land transfer development is thought to be assured because no land can be purchased unless willing buyers are able to present viable farm plans that emphasize diversified, commercial farming. Moreover, because the beneficiaries are given a cash grant (discussed below), post-land transfer development is further assured and accelerated (Deininger, 1999: 666). A portion of this cash grant must be spent on extension services, which are privatized under MLAR. The beneficiaries can hire consultants (e.g. NGOs and cooperatives) to assist them in the preparation of project plans and proposals. A privatized extension service system is thought to be more efficient because accountability between beneficiaries and service providers is more direct and the process more transparent.

Credit and investment. Under the MLAR-PCT model, it is expected that credit and investment will enter agriculture quickly and on a wide scale, mainly because land is acquired through outright purchase and land titles will therefore be honoured as collateral for bank loans. Moreover, the direct financial risks faced by the peasants under the scheme will encourage them to strive to be more efficient in farm production (Coetzee, Mbongwa, and Nhlapo, 1996: 514-538). Finally, the obstacles to investment encountered in state-led land reforms, such as prohibitions against land sales and rentals by beneficiaries, do not exist in the MLAR model (see Gordillo, 1997: 13). This is thought to encourage investment (see Buainain et al ., 1999: 89).

Exit options. It is expected that some beneficiaries may subsequently opt to withdraw from farming for various reasons. The MLAR-PCT model offers systematic exit options to beneficiaries. As van Zyl and Binswanger (1996: 418) explain, "exit packages for non-viable farmers who are likely to go bankrupt have as their objective the increase of the supply of land to the market. These packages can take various forms, including exit bonuses, training for other careers, alternative employment, increased foreign currency allotment and pension schemes." Allowing beneficiaries to rent out land is another option (Banerjee, 1999).

Programme financing

Funding mechanism. The MLAR-PCT model adopts a flexible loan-grant financing scheme. Each beneficiary is given a fixed sum of money (U$11 200) with which to finance a project. Whatever portion is used to buy land is considered as a loan and has to be repaid in full (with interest at prevailing market rates). Whatever is left after the land purchase is given to the beneficiary as a grant to be used for post-land transfer development projects and need not be repaid. This flexible mechanism is intended to reduce the possibility of peasant-landlord connivance in distorting the process by overpricing the land, and to instil the value of "co-sharing" of risks thereby avoiding a "hand-out mentality" among beneficiaries (see Deininger, 1999). This mechanism is also thought to be a key factor in reducing the cost of land because peasants will opt for the best bargains.

Cost of reform and sources of funding. It is argued that MLAR is much cheaper than state-led land reforms primarily because it does not involve huge, expensive government bureaucracies and that the 100 percent cash payment to landlords will radically reduce the cost of land. MLAR proponents urge national governments to bankroll the initial phase of the programme, but in the long-term it is counting on private banks providing the primary financing of the project. Multilateral and bilateral aid agencies are also expected to invest in the programme (van den Brink, de Klerk and Binswanger, 1996: 451). Specifically, the PCT hopes to reduce the cost per beneficiary from state-led land reform's average of US$15 072 to US$11 200. The total cost of the PCT is US$150 million; it has been allocated a World Bank loan of US$90 million with the rest being provided by Brazilian federal and local governments. Over the three years 1998-2000 it aimed to benefit 15 000 families and purchase 400 000 ha of land (World Bank, n.d.b). Within the subsequent five years, 2000-2005, an "expanded PCT", aiming to benefit 50 000 families per year, will cover 13 more states with a possible US$1 billion loan from the World Bank (WB, n.d.b).7

Proponents of the MLAR-PCT model are extremely enthusiastic about the outcomes of PCT implementation. Deininger and Binswanger claim that:

In Brazil, where individual states sought to increase the pace of land reform, a pilot program to allow market-based acquisition of land by beneficiaries has had impressive results, accomplishing the land reform faster than expected. The new approach is now being implemented nationwide. Because of its decentralized nature, there is ample scope for innovative ways to ensure that the program is targeted to the poor, that it is economically viable, and that it provides incentives for repayment of the land credit, all issues that are of critical importance if the program is to be replicated on a broad scale.

(1999: 268, emphases added)

Luis Coirolo, the World Bank manager for the PCT in Brazil, claims that:

[Beneficiaries] choose the land and negotiate for its purchase. They decide how to use the land, and what investment is required to make it productive, and what technical assistance they will need. Funds are transferred directly into bank accounts managed by associations ... What has moved me the most ... is the farmers' new sense of self-worth. `Now I am a real human being', people tell me. `Before, the bank manager would see right through me. Now he receives me as a respected client. I am part of the society.'"

(World Bank, n.d.b; emphases added)

Buainain et al. also claim that, "preliminary evaluation of Cédula da Terra first year yields enough information to sustain an optimistic view about its potentials" (1999: 11).

INITIAL OUTCOMES OF THE PCT

The PCT has been implemented in five states in northeast Brazil since 1998. To date, three basic documents contain the most important empirical data relevant to PCT outcomes: Buainain et al. (1999), which focuses on the socio-economic aspect of the programme; Navarro (1998), which addresses the socio-political institutions related to PCT; and Groppo et al. (1998), which highlights socio-economic and institutional aspects of PCT in one state. The first two documents were outcomes of studies commissioned by the World Bank, while the last is a joint effort on the part of different development agencies led by the Food and Agriculture Organization of the United Nations (FAO). Proponents of MLAR have used the empirical data and conclusions in Buainain et al. (1999) to support its somewhat optimistic claims, while the two other documents have not featured significantly in subsequent World Bank documents. A critical examination of the revealing empirical data in these documents is rewarding in terms of improving the understanding of MLAR - regardless of where one stands in the debate.

Obtaining access to land

Voluntary/willing seller. Neither large landlords nor owners of productive lands sold land through the PCT process. Only small-to-medium and underutilized or abandoned farms were sold (Buainain et al., 1999: 39). Specifically, underutilized and abandoned land accounted for 81.6 percent of the land sold under PCT. It should be noted, however, that it is implicit in the Buainain et al. evaluation document that the so-called well-utilized areas of land (18.4 percent) are in fact planted with crops that include old and less productive trees (cocoa and coffee) that have been plagued by disease ("witches' broom") for years and whose market price has dropped radically. In short, this so-called well-utilized land comprised bankrupt farms (ibid: 71). Furthermore, most PCT land is situated in remote and sparsely populated areas, far from local markets, with poor access to roads and no irrigation or electrical installations (ibid).8 Landlords are now demanding that PCT replace the state-led land reform (Navarro, 1998:6).

Demand-driven/willing buyer. Through the demand-driven approach, the beneficiaries are generally from the rural poor, but not the poorest of the poor because they "have not been `marginalized' or excluded from the economy" (Buainain et al. 1999: 19-30, 85). The average pre-entry (into the PCT, in 1998) annual income of beneficiaries was $R 2 057.82. This is below the maximum income limit requirement imposed by the PCT at $R 3 312/year (US$2 880), but is above the national poverty line of $R 1 383.00. Nevertheless, according to the standards set by the PCT, the beneficiaries are not the "fittest type", since "they are not experienced in the use of `modern' agricultural practices and trade" (Buainain et al., 1999: 85, 96). The average farm size per beneficiary is 27 ha.

Meanwhile, based on Navarro's account, the (self-)selection process has, to a large extent, been manipulated by local government officials, interested church personnel and elite peasant leaders. These local elites controlled the information about the project and selected the beneficiaries (1998: 19). In fact, Navarro discovered that, in some regions, "the friars are who decided who could or could not be part of the association to be formed" and goes on to describe "the manipulation of the local peasants ... induced into forming associations, not knowing the conditions ... of the process" (1998: 15, 19). In general, in the areas evaluated by Navarro, he found that the beneficiaries had "a mistaken view of PCT as a `social' project of the federal Government" and not as a market transaction (ibid). Buainain et al. have admitted the same: "the self-selection process [has not] been happening in such a `pure' way, and part of the beneficiaries was [sic] actually `selected' to participate ... the `selected' beneficiaries were those who first obtained information about the Program, either sought after to participate or were invited and stimulated to join it" (1999: 84, original quotation marks).

The requirement that beneficiaries form an organization has caused various problems for the programme. In most of the states evaluated by Navarro (1998: 21-22, 23) he found that "the associations merely had an instrumental orientation - to get access to the different projects ... where they were obliged to be formed into associations ... the constitution of the associations in the visited states has obeyed to a logic that clearly menaces the structure and stability of the PCT because they do not represent the interest of the people who are associated to them". If this situation continues, in Navarro's view, "the chances of sustainability of the associations will be minimum" (ibid: 28). Many, if not the majority, of the beneficiaries visited by Navarro wanted to pursue individual farming, but have been prevented from doing so. The widespread intrabeneficiary conflicts have already led to some beneficiaries deserting their land (ibid: 19). Buainain et al. are equally worried, but from a different perspective. For them, "the risk of reproduction within PCT projects [of] individual farming system does exist and is not negligible. This would invalidate many projects" (1999: 61). Hence, Navarro seems to complain that, "it seems that there exists, among the operators of the project, a presupposition about the `harmonious' functioning of the constituted associations [... and] the natural interest on the part of the farmers to integrate [into] an association and take over the new property under conditions of collective labor. In general, this ... is more the exception ... It seems that a muddled understanding exists about the need to create a collective identity (the association) for administrative effects of the project and, equally, for multiplication of the productive opportunities of the beneficiaries" (ibid: 32).

Decentralized approach - for transparency and accountability. The PCT has been implemented largely in a decentralized manner, but centralizing tendencies continue to hound the process as reflected, for example, by the fact that one of the biggest expenses among beneficiaries has been the cost of transportation to the capital where the authorities who grant the final approval have their offices (see Navarro, 1998: 36-39). Even the decentralized parts of the implementation process have not escaped bureaucratic manipulation and intervention (see Buainain et al., 1999: 35, 83-84, 93). Local government units have arbitrarily intervened in the selection of beneficiaries, the land to be purchased and its price, and the types of development undertaking. According to Buainain et al. "each participant state has its particular interpretation of the Program's general conception [in terms of] operation rules and procedures related to the creation of beneficiaries associations ... [and] selection of beneficiaries" (1999: 93-94). "Some ... left the process of self-selection of the communities free [but] imposing limits to [land] prices, censoring the distribution of important variables, imposing a maximum number of families per association or redefining the income limit of candidates." Meanwhile, in some states, according to Navarro, "it was the state officials who dictated how the associations are to be grouped and how the farms should be managed" (1998: 20). Moreover, access to crucial information about the project has been monopolized by a few elites within peasant organizations, church organizations and local government. Navarro complains that "in other places [under the PCT], the interested are farmers and local leaderships who `choose' as they will the association members, hiding from them crucial information about the PCT. Almost all the visited sites have less or greater influence of a minority group ... In Ceará ... [a PCT project] shows a case of personal control of the group, implying in the total monopoly over the information and decisions concerning the enterprise" (1998: 24-25, 41).

Faster pace and cheaper land prices. The PCT land purchase process is indeed faster than that of the state-led INCRA - requiring less than five months to complete the process. However, contrary to earlier predictions (and despite the 100 percent cash payment to landlords), the average land price per hectare under PCT projects was slightly higher than that under state-led INCRA projects (in real terms/present value), at $R 177.98 and $R  177.02, respectively (see Table 11 in Buainain et al., 1999: 57). This finding is corroborated by another evaluation (the "FAO-plus" team), carried out in the state of Ceará. In this assessment, the average PCT land price was 30-50 percent higher than that of the INCRA-purchased land (Groppo et al., 1998: 4-5).

Stimulates land markets. Unfortunately, the PCT evaluation documents do not explicitly address the programme's impact on the land market and vice versa. Nevertheless, it is known that - theoretically - there should be an ample supply of land in the market because of the sharp drop in prices (60 percent) between 1994 and 1998 (Buainain, da Silveira and Teófilo, 1998: 8). This is also reflected by what Buainain et al. have said: "though the evaluation study has not carried out a land market survey, the team learned that a number of properties had been on sale for two to three years" (ibid: 49). Despite these favourable conditions, the land prices under PCT were not as low as was earlier predicted. Moreover, the impact of the PCT land acquisitions on the land market seems to suggest an outcome opposite of what was expected - that in fact the PCT might have triggered land price increases.9

Post-land purchase farm and beneficiary development

Sequence and pace of development plus extension service. The sequence of "farm plans before land purchase" seems to have not been implemented to a satisfactory degree in the PCT, and the pace of development appears to be not as quick as earlier predicted. For one, the private extension service providers have focused on land purchase negotiations. In fact, government extension services continue to be used and are expected to play a crucial role in the future since the grant money proved insufficient.

Moreover, the immediate post-land transfer activities have concentrated instead on resettlement issues in view of the fact that the beneficiaries were moving to new land where they had not been settled previously. This has led to the the allotted grant per beneficiary becoming quickly depleted. Buainain et al. (1999: 57-58) admit that between early 1998 and mid-1999, "part of the resources ... [was] allocated to: a) subsistence expenses which consumed wholly or partly the amount of $R 130/month/family; b) construction or reform of the residences; and c) infrastructure construction: roads, installation of electric systems and installation of captioning and storage of water for human and animal consumption."10 Furthermore, the marginal character of the purchased land, its distance from local markets and the general absence of road access, electrical and irrigation facilities have made the task of farm production quite difficult if not impossible (ibid: 47-49, 71, 88). Partly because of these reasons, diversified commercial farming as required in the farm plans has not emerged; instead, subsistence crop production has dominated the actual farm projects (ibid: 96-103). It is difficult to imagine how the beneficiaries, with marginal lands located in remote areas without basic infrastructures, and in need of daily subsistence support, could successfully shift to the production of high-value crops that usually requires huge capital and a longer gestation period. This was also the finding of the FAO evaluation in Ceará (see Groppo et al., 1998: 11).

Credit and investment. In terms of credit and investment, the outcomes have not been as predicted. The beneficiaries did not use their land titles to secure bank loans despite the rapid exhaustion of their grants - and there seems to be no hint that they will use them in this way in the future, as there are no signs of external investment coming in.

Exit options. There are no indications about the existence of alternative and/or complementary off- and non-farm livelihood projects. Exit options for beneficiaries who wanted to leave the farm collectives have also been denied, as discussed earlier.

Given the situation of the purchased farms as described above, it isunlikely that development and income increases will occur in the immediate future. Buainain et al. conducted a simulation study on 14 PCT-participating regions to determine, on the basis of the initial farm production plans, the future income movements and the ability of the beneficiaries to repay their loans (1999: 96-101). They concluded that the overwhelming majority of beneficiaries (in 10 out of 14 regions) would be able to repay their debts and cross the poverty threshold. However, Buainain et al. used $R 1 383.00 as the benchmark in predicting future income movements. This is questionable because the average pre-PCT entry annual income of beneficiaries was $R 2 057.00 (ibid: 24-25). Hence, the latter amount, and not the national poverty line, would be the logical figure to use as benchmark for predicting future income movements. If the $R  2 057.82 income level is used, Buainain et al.'s own calculations show that 9 out of the 14 regions studied would in fact register income reductions, while the rest would post modest increases. In addition, 6 out of the 14 studied regions would be likely to have incomes below the national poverty line. It is probable that, in these regions, the beneficiaries would secure their subsistence needs first before thinking of repaying their debts.11 The evaluation carried out by FAO in the state of Ceará reached similar findings - most beneficiaries would have difficulty making their lands productive, let alone repaying their debts (see Groppo et al., 1998: 9-12).

Programme financing

Funding mechanism. The total cost of reform per beneficiary has proved higher than the US$11 200 pegged by the PCT. The average land cost per beneficiary was R$ 4 811.09 (US$4 200 or close to two-fifths of the total fund per beneficiary at RS 1.15 = US$1.00 in 1998 - Buainain et al., 1999: 57), which is higher than the target level of US$3 000 (see Deininger, 1999: 663). But the unanticipated expenses in resettlement activities drained the grant earmarked for farm production. For example, the daily subsistence allowance alone ate up US$115, or US$1 380 for the full year of transition before farm production started, taking 20 percent of the total grant (US$7 000) per beneficiary (US$11 200 minus US$4 200 land cost = US$7 000 for development projects). These expenses do not include costs for housing and basic infrastructures. In fact, PCT operators and beneficiaries are already demanding additional support from the state. As Buainain et al. admit, "the consolidation of the Program may eventually require additional support. The challenge is how to introduce safeguards to avoid that beneficiaries and future beneficiaries anticipate the action of the state institutions and incorporate their interference as some kind of tutelage on the Program, with well known negative consequences" (1999: 94). Hence, there are serious doubts as to whether beneficiaries can repay their debts, which carry a 4 percent interest rate per year and are payable within ten years (Sauer, 2000; Fórum, 1998).

Cost of reform. Given the empirical data drawn from the documents cited in this article, it is most likely that the PCT, if implemented nationwide, will be much more expensive than the state-led INCRA-implemented land reform. Moreover, it must be remembered that the allotment of US$11 200 as loan-grant per beneficiary under the PCT has to be produced through one-shot cash disbursement. In this context, if the PCT wished to carry out land purchases at the same level of that under the INCRA programme, then it would need US$587 753 600 per year - in cash - just to match the average yearly number of families resettled by INCRA from 1995 to 1996. (In 1995-96, 52  478 families were resettled by INCRA; see Guanziroli [2000: 11].) This means that if the Brazilian Government were to resettle some 300 000 families in the next five years, it would need US$3.36 billion - in cash - within that period (especially since there are no signs that commercial banks are interested in the PCT).

CONCLUDING REMARKS

Having presented the theoretical sketch and an empirical picture of the MLAR model, the necessity for further and closer examination of the scheme becomes more obvious. There are at least five analytic areas around which rigorous and more meaningful debates can, or should, revolve, namely, i) analysing the pro-market critique of the state-led agrarian reform, ii) re-examining the basic assumptions of MLAR, iii) reviewing the (in)sufficiency of the available data either to promote vigorously or reject MLAR, iv) identifying clearly the potential and actual dilemmas in pilot-testing the MLAR model and v) scanning alternatives to the MLAR alternative. These are briefly discussed below.

Critique of the critique?

The most basic starting point for a more useful debate on MLAR should be the latter's critique of the state-led agrarian reform. The validity - in theory and based on empirical evidence - of the pro-market critique must be scrutinized more seriously. This critical interrogation of the critique is especially necessary because it is the logic that frames the construction of MLAR as an alternative, i.e. from state-led approaches' features of "coercive", "statist-centralized", "supply-driven" and "slow and expensive" to an alternative that should be "voluntary", "privatized-decentralized", "demand-driven" and "quick and cheap". So far, current analyses of MLAR do not, in general, raise any questions regarding the (non)validity of the pro-market critique of the state-led agrarian reform.

Re-examination of the basic assumptions?

As described above, MLAR emerged from the pro-market critique of the state-led agrarian reform. However, the MLAR model is also built on a number of important theoretical assumptions: i) that peasants and landlords are "rational actors" and that given proper incentives, they will behave accordingly - e.g. landlords will sell at low prices when the terms of payment are cash at 100 percent of the market value of the land; ii) that land is purely an economic factor of production; iii) that the rural poor constitute a homogeneous social category; iv) that providing the landless rural poor with financial assistance and information to buy land automatically leads to a "level playing field"; v) that central government agencies are always inefficient and engaged in rent-seeking, and local government units are nearer to the people and thus are more responsive to poor people's interests. These assumptions - both explicit and implicit in various MLAR documents - are among the most important building blocks in the theoretical and policy construction of the MLAR model. It is thus important to re-examine their relevance and validity, both theoretically and empirically.12

Insufficient empirical data to either promote or reject MLAR?

While the broadly pro-MLAR camp argues that there is not enough empirical data to serve as a basis to reject MLAR - and thus further pilot-testing is necessary - the anti-MLAR camp argues that there is little empirical evidence to warrant any further promotion of MLAR. Both have valid arguments, but what is missed is the fact that the empirical data from the initial implementation of MLAR in Brazil, Colombia, and South Africa may be sufficient for a deeper analysis of MLAR. There are at least three relevant issues here. First, the only available empirical data (at least from the three countries cited) so far are from the studies commissioned either by the World Bank or by the implementing government agencies. The only issue in this regard is for the World Bank to make these documents more accessible to all interested parties through widespread dissemination (and translation into major languages). Second, the first type of data set may invite doubts from other parties (mainly from the NGO and peasant movement circles), especially those who are critical of MLAR; it is therefore urgent and necessary that parallel, "independent" (or alternative) data-gathering and research be undertaken in order to collect empirical data and make them popularly accessible. Finally, and related to the second, the academe has to step in immediately - through more scientific research. So far, there are no known major scholarly research initiatives that combine theoretical and empirical enquiries into the MLAR question.13 Unless these three steps are undertaken quickly, rigorous and meaningful discussions on MLAR are still far from our reach.

Dilemmas in pilot-testing?

The pro-MLAR camp proposes wider pilot tests of the model in order to determine whether or not it works, but the anti-MLAR camp argues that any pilot tests will only undermine (ongoing) state-led agrarian reforms in countries where they are taking place. Given this apparent dilemma, what is to be done? A pilot test can be carried out in at least two ways. The first is the approach currently being undertaken by the World Bank, i.e. a pilot test of the entire model in specific geographic locations of a country. The danger here - as raised by the MLAR critics - is that landlords may prefer MLAR over the ongoing state-led agrarian reform, and call for the substitution of the latter by the former, as in the case of Brazil. The other possible way of doing a pilot test is by disaggregating the MLAR model and pilot-testing only some of its component policies. Two examples are: i) the World Bank may launch widespread pilot test of how policy-making and effective implementation of progressive land taxation can be achieved, and ii) the idea of preparing farm development plans first before any land redistributions can take place sounds sensible and must see widespread pilot tests within ongoing state-led agrarian reform initiatives. It may be useful to study more carefully which of the two approaches appears to be relevant in a given context - and such a study should be in an "open" atmosphere (i.e. inviting the participation of independent monitoring groups such as NGOs) and without any dangers of undermining ongoing state-led agrarian reform initiatives.

Alternatives to the MLAR model?

If one does not want the MLAR as the alternative to state-led agrarian reform, then what is the alternative - if one is necessary? Coming to a full circle, we go back to the issue of re-examining the validity of the pro-market critique of the state-led agrarian reform: if indeed there are good reasons to believe that the various state-led approaches thought about and implemented decades ago may no longer work under current circumstances, then what are the alternatives? If one disagrees with the MLAR model as an alternative, then it is important that other alternatives are constructed and proposed for analytic scrutiny. Unfortunately, there is not much of this kind of thinking at the moment. Unless the MLAR critics put forward an alternative other than the MLAR in a more coherent form and articulation - and in ways that are beyond mere ideological and political reassertion of unadulterated classic approaches - ongoing debate around MLAR is likely to become less relevant and productive toward finding workable solution to the persistent land questions in many parts of the world today.

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1 The author would like to thank Cristóbal Kay, Ben White, Peter Houtzager, Sergio Sauer, Hans Meliczek, Krishna Ghimire, Paolo Groppo, Marco Sanchez, Manuel Quiambo and Jennifer Franco for their useful comments on various earlier draft papers. Useful comments from anonymous referees have greatly improved the quality of the current article. However, I am responsible for the analysis - and any errors - in the final version.

2 Dorner (1992, 2001), Thiesenhusen (1989, 1995) and Barraclough (2001) offer useful insights.

3 Recent developments in Colombia tend to show an impasse in the implementation of both the original 1994 national land reform programme and the World Bank-supported "stricter" pilot-testing of the MLAR model in five municipalities in the later 1990s. In the current context of the peace negotiations between the government and the communist insurgents, a revised approach to land reform that is mutually acceptable to the two negotiating parties is being sought by all parties involved and interested in the peace settlement. (I would like to thank Paolo Groppo for this clarification on the Colombian case.)

4 Since 1996, the World Bank has been lobbying the Philippine government to pilot-test the model - see Franco (1999a, 1999b) and Reyes (1999), but has never been implemented there. There is, however, an ongoing state-led agrarian reform programme in the Philippines (see Borras, 2001).

5 MLAR is also referred to as "community-managed agrarian reform programme" or (CMARP), "market-assisted land reform" (MALR), land market reform (LMR), or negotiated land reform.

6 De Janvry, Sadoulet and Wolford (1998) explain that "[t]he `degree of land utilization' required for an area to be considered productive was set at 80 percent of the total arable land. The `degree of efficiency and exploitation' has been determined for all individual products and varies according to region." Moreover, lands under sharecropping have also been classified as "productive" and are therefore excluded from land reform (Houtzager, 1997: 195).

7 The US$150 million cost of the PCT comprises: US$90 million World Bank loan (payable in 15 years) + US$45 million from federal government + US$6.6 million from state governments + US$8.4 million from beneficiaries (World Bank, 1997a, 1997b).

8 Buainain et al. admit: "[T]he majority of the properties acquired by PCT projects do not have installed irrigation facilities" (p. 56). In other areas, irrigation may not be possible at all: "Projects in the state of Pernambuco face some restriction to irrigate. Water availability is only sufficient to attend to human and animal consumption and small tracts of crops in dump areas" (p. 90). "The study shows the predominance of PCT projects in stagnant regions" (p. 40). "Large PCT projects have bought very large properties, which are usually associated to poorer quality lands and dryer and farther regions" (p. 62). "Most projects are located in municipalities where population density is low ... (p. 38), hence also poor access to local markets ... `Abandoned' farms ... had clear signs of abandonment, particularly noticeable in the state of conservation of the fixed capital. This is certainly negative as beneficiaries will incur in costs of reparation and will reduce the choice of farming systems in the short run" (p. 47). "Up to now [December 1999], there are no PCT projects in the most dynamic and best endowed regions of Bahia (Oeste Baiano) and Ceará (Serra de Ibiapada and Serra do Cariri)."

9 In addition and as noted earlier, progressive land taxation and systematic land titling were never incorporated into the PCT design (for the problems relating to these policy questions in Brazil, refer to Groppo [1996] for land tax, and Bryant [1996] for land titling).

10 Refer to the extensive discussions in Buainain et al. (1999: 40, 47-49, 57-58, 71, 90, 96-101) and Navarro (1998: 40).

11 A national coalition of peasant organizations that includes the MST produced an estimate of the feasibility of beneficiaries' loan repayment. The calculation factored in loan interest, inflation rates and projected farm production. The findings pointed out that beneficiaries would have a hard time repaying the interest plus the capital value of the loan. In real terms, the debt would more than double within the duration of the credit programme (Fórum, 1998).

12 El-Ghonemy (2001) is useful in this regard.

13 For a useful start and a good road map, refer to Zoomers and van der Haar (2000).

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