Les résultats finalement décevants des précédentes réformes visant à la redistribution des terres ont conduit les décideurs politiques d'Amérique latine à rechercher des alternatives. Ces dernières années, la possibilité de transformer les tenures foncières au travers des mécanismes de marché a été mise en avant. Cet article souligne qu'il est très utile d'approcher le sujet par une perspective institutionnelle. L'institution de droits de propriété est importante pour le débat. De nouvelles questions émergent: comment les transactions se déroulent-elles véritablement dans le cadre des zones rurales? Quel est le rôle joué par les coûts de transaction et les institutions correspondantes telles que les droits de propriété? Quelle influence les externalités ont-elles? Une analyse pertinente sur le fonctionnement des marchés fonciers ne peut être conduite à partir d'un scénario néoclassique conventionnel. L'environnement économique rural est caractérisé par le dysfonctionnement des marchés, par une information asymétrique et par l'incertitude. De plus, le comportement économique est souvent guidé par une logique intrinsèque à l'exploitation paysanne, qui diffère considérablement de la façon dont l'agriculture commerciale fonctionne. Aucun régime foncier n'a de valeur universelle. Une gamme d'institutions émerge en réponse à des paramètres économiques différents et changeants. La complexité des marchés fonciers doit être prise en considération dans l'élaboration de politiques efficaces.
Los resultados finalmente decepcionantes de las pasadas reformas redistributivas han provocado la búsqueda de alternativas por parte de los nuevos responsables de la formulación de políticas en América Latina. En años recientes, el tema de la transformación de la estructura de tenencia de la tierra a través de mecanismos de mercado se ha convertido en centro de atención. En el presente trabajo se argumenta que es muy útil enfocar este asunto desde una perspectiva institucional. La institución de los derechos a la tierra es fundamental para la discusión. Se plantean nuevas preguntas: ¿Cómo se llevan a cabo las transacciones en el medio rural? ¿Qué papel cumplen los costos de transacción y las instituciones correspondientes, tales como los derechos de propiedad? ¿Qué influencia pueden tener las externalidades? Un análisis significativo acerca del funcionamiento de los mercados de tierras no puede realizarse utilizando un escenario neoclásico convencional. El ambiente económico rural está caracterizado por mercados imperfectos, información asimétrica e incertidumbre. Además, el comportamiento económico está generalmente guiado por la lógica intrínseca de la unidad campesina, que difiere marcadamente de la manera en que opera la agricultura comercial. Ningún régimen de derechos de propiedad es universalmente válido. Toda una gama de instituciones agrícolas emerge como respuesta a diferentes y cambiantes parámetros económicos. Las complejidades de los mercados de tierra rurales tienen que ser consideradas en el diseño de políticas efectivas.
Frank Vogelgesang
Agricultural
Development Unit
United Nations Economic Commission for Latin America
and
the Caribbean (ECLAC)
The ultimately disappointing results of past redistributive reforms caused contemporary policy-makers in Latin America to search for alternatives. In recent years, the issue of transforming tenure structure through the market mechanism has moved into the spotlight. This paper argues that it is extremely helpful to approach the topic from an institutional perspective. The institution of property rights is central to the discussion. New questions emerge: How are transactions actually being carried out in the rural setting? What role do transaction costs and the corresponding institutions such as property rights play? What influence may externalities have? A meaningful analysis of how rural land markets work cannot be done in a conventional neoclassical scenario. The rural economic environment is characterized by imperfect markets, asymmetric information and uncertainty. In addition, economic behaviour is often guided by the intrinsic logic of the peasant farm which differs markedly from the way commercial agriculture operates. No one property rights regime is universally valid. A whole array of agricultural institutions emerges as a response to different and evolving economic parameters. The complexities of rural land markets have to be considered in the design of effective policies.
In rural areas land performs an economic function of
paramount importance. It is the primary production factor, source of employment
and repository of personal wealth. Thus, social status and power relations in
rural societies are often largely determined by the structure of landholdings.
Although this frequently still adequately describes the situation in
contemporary Latin America, a modernization process has clearly begun. With the
emergence of agro-industry and modern, well-managed, mostly medium-sized farms,
the polarization in land distribution is not as stark as it has been in the
past.
Nevertheless, the distribution of the vital resource land within the
region as a whole must be characterized as highly inequitable even when we take
into account that "Lumping all parcels of land together in an economic analysis,
by counting acres, certainly violates every rule of aggregation" (Schultz, 1953,
p. 141). Wide tracts of huge holdings are underutilized or lie idle while
significant portions of the rural population are struggling for access to land.
Not only has this predicament led to civil unrest in the past but it continues
to do so at present 1. Additionally, environmental degradation as peasant farmers
penetrate the fragile frontier in search of land has become a source of
concern.
Thus, the demand to change the skewed land tenure structure has
stayed alive. Over the last few decades attempts have been made, for equity as
well as efficiency reasons, to alter the existing tenure structure through
redistributive land reforms. The results thus achieved have failed to bring a
decisive change, however. Beside the fact that the reform efforts in individual
countries differed in the initial political resolve and extent of the programmes
(compare, for example, the extensive reforms in Mexico in the 1930s or Bolivia
in the 1950s with the much weaker efforts in Brazil), the post-reform situation
suffered from such factors as the poor quality of the land redistributed,
insecure titles, a lack of farming expertise on the part of the beneficiaries,
plus a number of policy distortions. These experiences led to the search for
alternative solutions.
The question today is how agrarian structures would evolve if land property rights were marketable and land markets active. In other words, will competitive market forces break down and reform a bimodal tenure structure, shifting land to the landless and land-poor? Will small-scale producers end up selling their parcels, thus creating either further land concentration, or maybe allowing the emergence of a new, efficient subsector, made up of medium-sized operational holdings with the characteristics of commercial agriculture? Or will the outcome be altogether different?
"The world operates, at best, in a second best
framework."
Erik Thorbecke
Rural markets in developing countries have their specific characteristics related to multiple imperfections not only in land markets but also in the markets for capital and labour as well as in risk-management (insurance). It is worth while to quote de Janvry, Sadoulet and Thorbecke (1993, p. 569) at length:
"The rural community is characterized by highly imperfect markets, with low transaction costs within the community but high with the outside, asymmetrical information, fragmen-ted oligopolies, lack of formal collateral, and highly covariant risks. The result is that transactions within the community are highly complex: some transactions occur within the household itself without any visible price; some occur through contractual arrangements among independent parties such as interlinked transactions between labor and land and between credit and labor, or by sharecropping contracts; some occur among members of organizations such as cooperative networks; and finally some occur via market exchange, with markets assuming a variety of configurations and transactions eventually spilling over across markets, from regulated to parallel. Market and non-market exchange configurations depend on the nature of the items traded, the actors and organizations involved, and the structure of the environment, including most particularly state intervention."
Furthermore, the way in which transactions are carried
out depends, among other things, on the relative power position of an individual
in society, or institutions such as cultural norms and the legal system. As a
result of this environment, rural transactions can be highly complex. Therefore,
it may be grossly misleading to conceptualize transactions in the rural
community as though perfect markets existed.
The basic conclusion here is
that whether an organized, formal market or a non-market configuration to carry
out transactions for a certain good emerges will depend, in a world of imperfect
and asymmetric information and multiple imperfections in associated markets, on
the transaction costs (TCs) involved. Likewise, it is important to see that
different market and non-market configurations that do exist in an economy do
not operate independently from one another, but interact.
It has to be made
clear in this context that non-market operations should not be conceived of as
taking place in some vacuum, standing outside the economic sphere. The very
existence of a certain economic rationality (minimizing TCs) explains this type
of configuration to carry out transactions.
The crucial question is whether more or less free transactions between economic agents will be better able to process all the necessary information and thus accomplish more than past redistributive reforms.
Property rights in land - an institutional perspective
"We often apply the simple `laws' of
market supply and demand without being fully conscious of the complex of
institutions on which contracts in actual markets crucially depend."
Pranab Bardhan
This article is intended to illustrate that it can be
immensely helpful to analyse the issue of rural land markets within an
institutional economics framework. For this it is sufficient to describe
institutionalism in terms of two central premises, both showing that the
analytical focus differs from that of conventional neoclassics. The first point
is the belief that institutions matter in shaping economic behaviour as well as
performance. Second, it is crucial to realize the evolutionary aspect of the
concept. Institutions change over time, responding to changing economic
circumstances.
A distinction is often made between old and new
institutionalism. In short, followers of the old school reject the neoclassical
assumption of rational behaviour, while new institutionalists are at most
willing to modify it. While in much of what follows the underlying premise is
the abstraction that institutions derive from optimizing decisions of
individuals and respond to changing sets of relative prices, it is not suggested
that factors such as status, group identity or power, which may clearly
influence behaviour in a rural environment, should be completely
disregarded.
The fundamental idea being posited is that markets are nothing
other than the transactions between economic agents, and that transaction costs2
matter enormously in shaping the way these transactions take place. One of the
reasons for the emergence of social and economic institutions, such as property
rights (PRs), is to reduce TCs. Lipton (1993, p. 642), who refers to this body
of ideas as the "new paradigm", describes its fundamental premise - the
existence of endogenous, transaction-cost-reducing rural institutions - "in four
words, that transaction costs endogenize institutions".
This new
understanding of agrarian institutions constitutes a body of knowledge which was
not available for the land reform efforts of the 1960s and 1970s. It will help
to understand past failures and provide guidelines for future
intervention.
Typically, there have been three ways in which economists treated agrarian (or rural) institutions:
While not intending to discard the contributions of neoclassical and structuralist economics, the author suggests that institutionalism attempts to bring parts of the three approaches together. Of central importance in this last approach is the institution of property rights (PRs). To understand rural land markets it is helpful to shift the analytical focus from the physical ownership of land to the prevailing system of property rights. This means that control over an asset such as land has to be seen as a web of entitlements between persons, rather than merely the possession of something. "Property" is defined by the "bundle of rights" of one individual in relation to others. In the words of Hoff (1993, p. 231):
"Little economic activity would occur in the absence of rights, or powers, to consume, obtain income from, and transfer assets. The level of economic development of a region will therefore depend on its system of property rights."
Land is a special commodity; it is completely immobile, it can be put to different uses and used by various parties simultaneously. What governs the use of this resource is a system of PRs. Land property rights have some peculiar features, they can be very complex and they vary over space and time, requiring policy-makers to adjust their instruments to the situation found in specific cases. Feder and Feeny (1993, p. 242) illustrate this point:
"Uses of land may include hunting, passage, gathering, grazing, cultivation, the mining of minerals, the use of trees, and even the right to destroy the resource. For instance, in medieval England and contemporary South India, rights to the crop are private, while rights to the stubble after harvesting are communal. Similarly, in many parts of sub-Saharan Africa land and tree tenure are separate."
Property rights are so important because their actual
nature determines resource allocation in a world of conflicting user interests.
It has been noted that only on Robinson Crusoe's island there was no need for
defining PRs - at least not until the arrival of Man Friday. This is to say that
also the outcome of land (re-) distribution via market transactions will depend
on the prevailing system of PRs. Why, then, do they often get so little
attention? The answer is that economic analysis usually assumes Western-style
systems of PRs which are exclusive, transferable, alienable and enforceable. In
such an environment, it is acceptable not to include PR issues in the analysis.
But to make such an assumption for developing countries is often incorrect and
the results of a study that does not consider the impact of the existing system
of PRs are therefore misleading.
Any attempt to alter the inegalitarian
pattern of landholdings found in Latin America necessarily implies shifting
individual PRs in land, plus their associated rents, from the relatively rich to
the relatively poor. It is important to note that an analysis of these issues
often "... fails to recognize the subtlety and complexity of property rights in
land, so that the question of what, precisely, is being transferred is often
obscured." (Bell, 1990, p. 148). This was one of the reasons for the
unsatisfactory results achieved by redistributive land reforms. They were often
ignorant of the hugely complex economic realities involved.
According to Feder and Feeny (1993), PRs should be thought of as a social institution. The authors distinguish three basic categories of institution:
"Although the formal legal system may provide for alienability of land, the transfer of land to persons from another clan or ethnic group may represent a violation of cultural norms. Similarly, although the constitutional order may make provisions for private property rights and there may formally be laws establishing such rights, the corresponding registration and enforcement mechanisms may be largely absent."
For analytical purposes, PRs in land may be classified
into four ideal types:
"... property rights develop to internalize externalities when the gains of internalization become larger than the cost of internalization. Increased internalization, in the main, results from changes in economic values, changes which stem from the development of new technology and the opening of new markets, changes to which old property rights are poorly attuned. A proper interpretation of this assertion requires that account be taken of a community's preferences for private ownership. Some communities will have less well-developed private ownership systems. But, given a community's tastes in this regard, the emergence of new private or state-owned property rights will be in response to changes in technology and relative prices." (Demsetz, 1967, p. 350, emphasis added.)
Finally, PRs also play an important role in providing
incentives for efficient land use and investments in that they reduce asymmetric
information (as well as the associated inefficiencies and uncertainties) and
thus facilitate transactions in financial markets. Asymmetric information in
land markets can emerge in the course of (agrarian) development of a society. In
the early stages, land transactions will largely be carried out among members of
the same community where information is still mostly symmetric. The individuals
know who they are dealing with and which tract of land belongs to whom. As the
mobility of individuals and capital increases in the more advanced stages, more
and more transactions take place with outsiders of the community resulting in
problems of imperfect information and, therefore, land disputes. This can lead
to efficiency losses since in such a scenario the market price of land will move
away from its shadow price and the extent of land transactions will be
suboptimal. This is nautrally assuming that land transactions generally increase
efficiency because they allocate resources according to their (potential)
marginal productivity.
It is important to note that "changes in economic
relations and in power structures that characterize the development process
generate changing needs for property rights and the institutions to regulate or
enforce them" (Feder and Feeny, 1993, p. 242). Factors such as population
pressure or technological change that make investments in land quality more
attractive call for more precisely defined PRs. The demand for institutional
arrangements to do just that is strong in many of today's developing countries
where these factors are at work.
It can now be argued that, even though the "optimal" PR system in a given situation is not necessarily equivalent to the institution of private property, in the course of "modernization" of a society private property becomes ever more important. The economic history of European countries, for example, indicates that with progressing development, as the division of labour increases, economic interaction between agents becomes more complex, and factor markets slowly emerge, the institution of common ownership in land has to give way to private property arrangements (Barlowe, 1958).
An analysis of the countries in this sample reflects the
recent preoccupation of regional policy-makers for market solutions. Attempts to
correct misconceived policies of the past are obvious. In some countries rural
land markets have been operating during the last two decades at a modest level
of activity and some observations on the outcomes are possible. In others, the
mechanisms to transfer property rights still lie dormant.
A look at
individual cases also highlights the complexity of the issue: the degree to
which land distribution is still monopolistic; the wide variety of existing
property rights regimes; the sorry state of cadastral systems; frequently counterproductive and inconsistent policies; the multiple factors that influence the behaviour of the rural agent; and the extent of untitled land. It also gives a sense of the diversity of conditions within a given country. The need for institutional innovation becomes evident. Rural institutions and/or configurations may differ from region to region, thus calling for diversified instruments to foster land markets.
Chile
Under the two governments preceding military rule, Chile experienced two waves of comprehensive expropriations which eventually affected 40 percent of the national territory. Economic policy after the coup d'état in 1973 prioritized private property and a process of returning land to the previous owners began. In many cases the pre-agrarian reform situation was thus reinstalled. At the end of the redistributive procedure, however, about 48 000 peasant families, the so-called parceleros, had received tracts of
land fit for agricultural production.
Subsequently, about 45 percent of the land distributed to the parceleros was sold again by
the new owners. An analysis of the background of this process allows some
valuable insights into the workings of a considerably liberalized rural land
market.
In an interesting publication, two Chilean researchers provide a case study of the Metropolitan Region in Chile's Central Valley (the agricultural heartland) and the VIII Region in the southern part of the country, where traditional agriculture plays an important role (Echenique and Rolando, 1991). The authors found that by 1991 about 70 percent of the previously assigned parcels had been sold in the Metropolitan Region and roughly 45 percent in the VIII Region. The level of market activity was highest in areas where the land was most fertile and the surrounding infrastructure best. This is explained mainly through the substantial demand for quality agricultural land stemming from the growth of the subsector of Chilean agriculture that produced fruit and horticultural products for export, primarily in the Central Valley of the country. While the parceleros slowly began to sell their land one or two years after it had been given to them, the bulk of the sales took place in the period from 1979 to 1982. Those four years marked a deep crisis in the country's agriculture, but around the same time fruit exports began to boom, causing a strong demand for land and resulting in 58 percent of all sales of parcelero holdings to take place within
this period.
To explore the motivations of the sellers, Echenique and Rolando carried out a survey among former parceleros and
rural agricultural leaders which produced some remarkable results. The major
reasons for selling mentioned were excess debt burden and lack of working
capital. A total of about 40 percent of the peasant farmers surveyed in the
Metropolitan Region claimed that these two factors induced them to give up their
land, with debt burden accounting for 23 percent and lack of working capital 19
percent.
But this was far from being the whole explanation. Some 19 percent of the peasants who sold their land said they did so because they had no interest in agriculture and preferred to engage in other activities, which makes this motivational factor as important in the peasants' decision as the lack of working capital and almost as important as debt burdens. In addition, some 10 percent mentioned old age and no children who were willing to carry on the farming activities as their reason to sell, while 8 percent admitted family problems such as alcoholism or plain laziness. In some cases the families were so large (ten or more children) that after the death of the father the heirs decided the only practical way to divide the inheritance among themselves was to sell the land. Legal regulations in some instances put the parceleros at a disadvantage. For example, until 1980, the sale of land that had been distributed to peasants under military rule was illegal. To circumvent this rule many campesinos
entered into long-term lease arrangements with the option for the leaseholder to
buy later. The peasants often did not understand these contracts well and in a
number of cases became victims of fraudulent practices.
The majority of
buyers of the parcels were farmers or agricultural entrepreneurs, but there were
also urban professionals and business people in this group. However, the
predominant motivation to acquire agricultural land was to put it to productive
use.
These characteristics of the Chilean case suggest that some of the
notions about rural land markets have to be evaluated cautiously. One such
contention is that the attributes typical for the economic situation of peasants
make it impossible for market mechanisms to shift land to this group. However,
without claiming to be a representative sample, the 19 percent of smallholders
in the above-mentioned survey who claim to have sold their parcels out of a lack
of interest in agriculture, plus another 18 percent who mention family problems,
old age or a lack of children to carry on farming, is surprising. A large number
of the sales were not motivated by the usually assumed lack of capital or
excessive debt, but were attributable to extraeconomic factors. The land market
transactions in Chile by and large allocated the resource according to
productive potentials, thus promoting the emergence of a modern, successful
agriculture.
Colombia
An analysis done
by FAO (FAO, 1994) of land markets in several municipalities in Colombia
illustrates the difficulties in changing ownership patterns through market
transactions. In Colombia, too, land distribution is highly skewed. In 1992, 78
percent of the holdings consisted of 10 ha or less. They covered only 8.8
percent of total agricultural land area. In contrast, 1.3 percent of the
holdings comprised 200 ha and more, and accounted for over 48 percent of the
total area. With this situation in mind, in 1994 the Colombian Government passed
the New Law of Agrarian Reform (Ley 160 de 1994). This law intends to create the
National System of Agrarian Reform and Rural Peasant Development, introduces a
subsidy scheme for land purchases by the rural poor and reforms the Colombian
Institute for Agrarian Reform (INCORA).
As to the extent of land
transactions, the report finds that in the municipalities examined, 4 percent of
the holdings, equivalent to about 9 percent of the municipal area, changed
owners in 1991. The structure of these transactions reflects the segmentation of
rural land markets. The vast majority of transactions took place between
smallholders, representing a smaller total of land transferred than through the
relatively few large holdings that were being sold. Thus the study concludes
that buyers and sellers usually belong to the same socio-economic
level.
Another important observation is what the authors call the "social
segmentation" of the market. The social norms of extended families or closely
knit rural communities often result in the exclusion of outsiders. Cases are
reported of individuals who did acquire land in such a community but had to give
it up later because they were denied certain services or could not find people
who were willing to work for them.
Transactions are usually only carried out
among the members of the group. This (in addition to hereditary customs) has led
to worrying degrees of fragmentation of holdings. The report found that in 1991,
in areas dominated by peasant farming, over 50 percent of the land sales were
carried out among family members. In this environment, efforts by state agencies
to redistribute land may be frustrated. In one case, INCORA had purchased land
with the intention of reselling it to small producers of a certain municipality.
The offer was rejected because the peasants refused to give up the holdings they
owned and did not want to relocate to other regions.
Another form of denying
market access to unwanted parties is the authoritarian rule of guerilla or
paramilitary groups over an area. Coercion and the application of sheer physical
force make sure that only sales that are welcomed by those in power take
place.
As regards land prices, the study found a strong link to the
revenue-generating capacity of the land. The location of the property, the
surrounding infrastructure and the prices the produce can achieve in the
marketplace become determining factors. In one region, dominated by coffee
production, the extent of land sales was about three times less during a period
of depressed coffee prices than normal.
The investigation observed another interesting phenomenon: owners of large holdings frequently sell parts of their property to investors coming from outside the rural community, mostly urban buyers. Before the sale, improvements such as the construction of fences or (often luxurious) homes are installed and thus the parcel commands a price of up to twice the original value of the land. Apparently, some latifundistas contemplated breaking up their holdings
to sell them to a number of peasant farmers although they eventually discarded
the idea because they feared that insufficient profit margins would result from
such an arrangement. One of the conclusions that can be drawn from this is that
the organizational hurdles and bureaucratic delays together with the associated
transaction costs were considered to be prohibitively high.
In light of the
above observations the FAO report concludes that in the regions studied land
markets were relatively active. However, transactions primarily took place in
form of "intra-strata" sales. The observed transfers of property rights through
the existing market mechanisms are thus not able to shift land from one economic
group to another.
Ecuador
An analysis of
rural land markets in Ecuador, undertaken by FAO during 1992-1993 (FAO, 1995a)
concludes that the country's agriculture has experienced drastic changes over
the past three decades. Until a new law was passed in 1994 (Law of Agrarian
Development, 14 June 1994), legal and bureaucratic hurdles were such that the
vast majority of land transfers between private individuals took place outside
the framework established by governmental regulations. An investigation that
studied the Ecuadorian case before the new law came into effect (Stringer, 1989)
illustrates the effects land policies can have. It suggests that the
administrative and legal structure of the country, together with the political
regulations that go with it, worked against more active land markets in several
ways.
First, there were very specific rules for land transactions and the public Agrarian Reform Institute (IERAC, now INDA) played a crucial role. So, for example, transfers of minifundios (note that the pertinent law did not define the term minifundio,
either by area or soil type), subdivisions of farm land or sales with the
intention of changing the use of land from traditional farming to, say,
cultivation of flowers or beekeeping, could not take place without the prior
approval of IERAC.
Another hurdle was the tax system: a combination of a
capital gains tax, which was especially high because the rate set in the early
1970s had never been adjusted to inflation, and the transfer tax, national
defence tax, drinking-water tax, provincial tax and other fees defined a
situation where each sale of land incurred a tax load of anything between 25 and
30 percent of the sales price. This led to illegal transfers, wrong declarations
of the price and other problems.
However, even if two contracting parties
agreed to carry out a transaction, the process was immensely cumbersome. For
example, for each sale a petition had to be sent to IERAC requesting
authorization. This petition was to be accompanied by a map of the property, a
copy of the title, a certificate from the land registry verifying that the
property is clear of liens, a declaration by the contiguous property owners that
they do not want the parcel together with the personal identification numbers of
both buyer and seller. The petition then had to go through various departments
within IERAC and later to the directorate in the capital. Finally, the parties
to the transaction could begin drafting and notarizing the contract. It was not
uncommon for the whole process to take up to six months. And IERAC was never
able to process more than 5 percent of the solicited transactions. The new law
eliminated this process. It states that private land transactions do not require
authorization of any kind.
Today, through a combination of past agrarian reform, the colonization of new lands and the vitalization of formal land markets, the agrarian structure has been altered in that the dominance of the traditional latifundio has disappeared. This is all
the more remarkable if one takes into account the situation in 1954 and 1974,
the years of the last agricultural censuses. In 1954, 2.2 percent of the
holdings were larger than 100 ha, comprising 64 percent of the total land area.
Smallholders operating on less than 5 ha made up 73 percent of all holdings, but
occupied only about 7 percent of the total area. In 1974, these percentages were
still 2.1/48 and 67/6.8, respectively. In contrast, nowadays small and
medium-sized producers as well as agroindustry, engaged in modern production
techniques with activities often geared towards export markets, have
emerged.
By the same token, a different problem of polarization now exists. The modernization process has been accompanied by a substantial increase in minifundios and rural households without land. In 1991,
a survey of rural households showed that 39 percent of rural households were
landless, while about 20 percent were smallholders, operating on less than one
hectare. At the same time the composition of the rural labour force had been
altered. About 40 percent of the economically active rural population inserted
themselves into the urban labour market or found other off-farm
employment.
While in the past beneficiaries of agrarian reform have often lost their land owing to the overwhelming debt they had accumulated, today transactions in formal markets play a much more active role. The FAO study identified market transfers as the predominant mechanism for reallocation of agricultural land over the past few years. On the supply side, the peasant producers are the principal sellers, whereas demand largely stems from medium and large agricultural enterprises which add further land to their holdings. But while this development often means that peasants, many of them former beneficiaries of agrarian reform or distribution of colonized land, cease to be producers with their own holdings, the report pinpointed another very important facet: the campesinos that have to give up usually
are the most "traditional" who fail to insert themselves in the modernization
process. Thus the peasant sector splits up into two parts:
"Those campesino beneficiaries of agrarian reform and colonization which over the years have reached certain levels of accumulation, have assumed entrepreneurial behaviour and have become buyers of land and thus managed to expand their physical production base. (...) On the other hand, those campesinos which have maintained their owner-operator status without changing their traditional behaviour have fallen victim of a process of decline, with their reproductive base getting smaller." (FAO, 1995a, p. 73; emphasis in original, author's translation.)
The FAO study on Ecuador concludes that the country is experiencing a sustained transformation. Market arrangements have become the main mechanism of land transactions. While this has led to the modernization of agriculture in many cases, on the other hand a considerable number of the rural poor find themselves in a crisis situation. Many have been forced to give up their land or become part of the process of minifundización. While the process at large may be interpreted as positive in the course of economic development, it also creates new problems in dealing with those parts of the rural population that stay outside the modernization process.
Mexico
The Mexican case differs from others in many important aspects because of the considerable influence of the revolution at the beginning of this century on the institutions of the country. The agrarian land structure of Mexico is still marked by the consequences of the post-revolutionary Political Constitution of 1917. Article 27 of the Constitution established the ejido system. The ejidos are areas of communal ownership, made up of (mostly previously expropriated) land which is farmed collectively. In other words, the ejido came into existence through decree
and the way it operated was regulated by specific laws.
Currently, more than 54 percent of the total national land area is under this kind of "social property" or propiedad social (FAO, 1995b). The ejido farmers and members of other communal ownership
schemes represent 67 percent of the total agricultural population. That this
structure was in many cases conceived to be suboptimal was demonstrated by the
widespread practice of ignoring numerous legal restrictions.
Until a change in legislation in 1992, the extent to which economic activity in agriculture had been restricted was overwhelming. Article 27 provided for the right of the Federal Government to expropriate private landholdings in order to convert them into communal property. Ejido land could not be sold, rented out, otherwise transferred or obstructed in its use (embargar). Therefore it was out of reach of (legal) market transactions. Furthermore, it was illegal for ejidatarios to hire paid labour. Legal entities in the
form of companies were not allowed to own real estate.
Realizing that the
consequence of these conditions was a high degree of uncertainty and obstructed
development, in 1992 the administration passed a new Agrarian Law to introduce
legal security for economic transactions in rural Mexico. The main pillar of the
new law is the reform of Article 27 mentioned above which brings significant
changes in the governance of property rights and in the way transactions may be
carried out.
The most important features are: the practice of granting land to peasant groups on request is discontinued; members of an ejido or a community (other land under common
ownership, not established, but recognized by the old law) may decide in their
respective assemblies to dissolve themselves, give individual property rights to
the members or associate themselves with private corporations; private
corporations are now allowed to own rural real estate; the institution of
private landownership should be extended thus creating an active rural land
market.
According to the above-mentioned FAO study, the results so far have been more than disappointing. The report does not bring to light the reasons for this failure. A mechanism to carry out the privatization of formerly social property was set up, the Program for the Certification of ejido Rights and the Titling of Urban Plots, known by
its Spanish acronym, PROCEDE (Programa de Certificación de Derechos Ejidales y
Titulación de Solares Urbanos). The programme is supposed to control and
legalize the titling process of land under communal ownership.
By October 1993, PROCEDE had carried out negotiations with 17 731 peasant agencies representing ejido and other communal ownership interests. Of these, almost 9 700 responded favourably to the privatization plans, fewer than 55 percent. The next step was the surveying of the land by the National Institute for Statistics, Geography and Informatics (INEGI). Then the respective community assemblies convened to negotiate the final demarcation. Apparently, only about 200 ejidos (out of a total of
almost 30 000), representing just over 1 percent of the total area under
social property, had completed the procedure by the end of 1993.
This
obviously stops short of the policy-makers' expectations when they drafted the
new law. The FAO study concludes that this outcome demonstrates that "land for
the peasant has a different meaning than that of a simple good" (FAO, 1995b, p.
207, author's translation) and that the basic flaw of PROCEDE was to assume that
"rural society was longing to dress itself up in the clothes of private property
in the `modern' fashion". (FAO, 1995b, author's translation). This conclusion is
not easy to understand considering that far more than half of the communities
under communal ownership agreed to privatize. Curiously, on the same page the
report states that during the discussion on the merits of privatization, the
peasants often cited the need for clarification about exact ownership in order
to avoid conflicts with neighbours and family members.
Bearing in mind the fact that privatizing formerly social property is always a daunting task, the time period that has elapsed since the reform of Article 27 in 1992 may be too short to make a final judgement on its performance in providing legal security. It is also not clear how important bureaucratic hurdles and the associated transaction costs are. The tendency of some social institutions that have been around as long as the Mexican ejido system to linger
on even though they may be inefficient probably also plays a role. It is
therefore difficult to determine why land markets in the Mexican case are by and
large still inactive.
Policy-makers in Latin America increasingly trust in
market solutions to their economic problems. Recently, the age-old issue of a
highly skewed land tenure structure has been analysed from this perspective. A
precondition for a functioning market - the mechanism to transfer property
rights - is the definition, establishment and enforcement of such rights. In
land, especially in a rural setting of a developing country, the complexities
involved in these questions are huge and identifying the appropriate property
rights regime can be a difficult task.
In the Latin American region, systems
of common property or land where no rights have been assigned are widespread. It
should be obvious that this state of affairs cannot persist if the goal is to
create or to invigorate land markets. It has been pointed out that the state
frequently may protect property rights institutions which are socially
inefficient in order to maintain its own support structures (Bardhan, 1989). But
surely an enlightened administration can help in providing the prerequisites for
(agrarian) institutions to evolve and adapt.
Development is an evolutionary process. Public policies may stand in the way, for example by prohibiting useful institutional devices such as sharecropping. An operational market system also depends on the surrounding social and legal infrastructure. It is here that an active role for the state can be found: by helping societies to proceed through the stages of development up to a point where markets, including those for land, can perform their allocative and distributive functions.
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1 For example, in an incident on 9 August 1995 in a Brazilian state bordering on Bolivia, ten people died in a dispute over land. About 500 landless farmers had occupied parts of a huge hacienda and attempts by the police to evict them resulted in a shoot-out. Reportedly, 379 similar conflicts left at least 36 people dead during 1994, making land disputes the chief cause of violence in the interior of Brazil.
2 The term here shall mean all costs associated with transfers of property rights other than direct production costs. Examples include costs of information, of negotiation, of drawing up and enforcing contracts or defining and policing property rights.
