Participation People

Towards sustainable food security

Land markets in Latin America

Prepared by the Land Tenure Service (SDAA)
FAO Rural Development Division

ECONOMIC LIBERALIZATION, and the application of structural adjustment measures in the agricultural sector, have led many Latin American countries to consider land markets as a suitable strategy for addressing both access to land and the more efficient and productive use of land.

Countries such as Mexico, Ecuador, Colombia, Honduras and Bolivia, have already enacted - or are in the process of enacting - land laws that leave agrarian reform concepts and strategies behind, and are promoting land markets as a key strategy for making the agricultural sector more efficient. In doing so, some countries are changing social land tenure schemes into private ones. This new trend has raised questions about the effects of these changes, especially on landless people and small farmers, and whether the approach can work in the bimodal tenure structures that characterize Latin America.

Very little research has been carried out in Latin American countries on land markets. There are several hypotheses about how land markets should work but very little is known about their real characteristics and dynamics. In order to learn more, FAO initiated a programme on land markets in Latin America in 1992. The objectives of the programme were to:

The programme conducted field studies of land markets in five countries - Bolivia, Chile, Colombia, Ecuador, and Mexico. The studies found coexistence of segmented markets in rural areas. These markets are determined by the economic and political situation of the landowners, tradition and family bonds and the economic activity that is carried out. In Colombia for example, small peasants have no access to the market of large land owners because of economic and social constraints. In Colombia, there are no intermarket transactions, as land property also means control of territory.

On the dynamics of land markets, FAO found that segmented land markets are usually closed - there are virtually no intermarket transactions, most of them being intramarket. The more small farmers were tied to the traditional and subsistence economy, the less buying/selling transactions were found. In general, these farmers prefer to rent or to share-crop their land, instead of selling it. The studies found that land markets become more open and dynamic when land prices rise due to increasing use of technology, changes in agricultural activity (e.g. to export crops or cattle raising), improvement of infrastructure or change of land use (e.g. from rural into urban or tourist use).

The studies found that, for small peasants, land has a social as well as economic significance. On the one hand, land is considered an asset that helps them to assure their economic subsistence. On the other, it is a source of social and political recognition in their community. Land transactions are usually controlled by the communities and involved no transaction costs. Small peasants sell their land during emergencies, and the people who buy it must be known and approved by the community. In general, land in these communities is rarely sold or rented as a whole, creating minifundios as a consequence.

Large land owners were found to make formal transactions to sell their lands, using intermediaries (agencies or land brokers) to find a buyer and conduct the transaction. They usually sell large units. Renting of land is also a common phenomenon within large rural properties. Very few countries have land credit schemes for small peasants or landless people. Access to land markets is restricted to those who have either the capital or access to a bank credit. Not all banks provide credit for land acquisition.

The study of Chile evaluated the results of some 20 years of application of a neo-liberal approach in the economy, concluding that a high percentage of agrarian reform beneficiaries (57%) had sold their land. They did so due to debts contracted for the payment of the privatized land, the lack of working capital, lack of access to credit and technical assistance, the crisis experienced by the agriculture up until 1983, or because of repression during the period of military rule.

Those beneficiaries who were able to preserve their land did so because they counted on working capital, had agriculture and management knowledge and experience, or had received capital and technical assistance from NGOs. Demand for land usually arose from modern agricultural entrepreneurs, usually linked with export crops such as fruits and wood. In fact, land concentration is mainly found in areas under export crops, mainly plantations for wood extraction.

The Chile study found that "with land market policies, peasants have lost the control of access to this natural resource. The elimination of protection measures, unbalanced market competition, the lack of technical assistance support, the lack of access to credit, and the high increase in land prices, were the reasons of such loss."

Nevertheless, the study argues that the restructuring and modernization of the agricultural sector has benefited the economy as a whole, because productivity has increased, together with sectoral GDP, especially since Chilean agriculture is mainly focused on exports.

The comparative analysis of the results of the studies is being prepared. The document will analyse the results of the five studies carried out by FAO, together with the results of studies that have been undertaken by other institutions or agencies in other countries in Latin America. This information will be analysed in the light of the different theoretical approaches, and measures suggested to make land markets work. The document will assess, in particular, the role of land markets in providing small farmers with access to land.



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