Archive for January 5th, 2005

Land intervention by the Venezuelan Government: It’s all about populism

January 5, 2005

The Governor of the State of Cojedes announced yesterday that on Saturday they will begin the “intervention” of the Hato El Charcote farm, owned by British company Vestey, under the decree issued by that Governor in mid-December.  The concept of “intervention” does not exist in Venezuelan jurisprudence, so that it is unclear exactly what it means. According to the Governor: “The intervention will be performed with all of the machinery of the State to establish the first beachhead of the “Free land and Men Mission…With the aid of all of the Armed Forces and police forces and the authorities of the Governor ….”. According to that State’s Attorney General, the term intervention “means to make use of all the power of the State o solve a problem” and “the farm will be intervened without affecting its operations”


Since the whole issue is by now obscured in the details, it is a good time to step back a little and ask what is the fuss all about?


First of all, while many want to make this an economic or social issue, it is really simply a very emotional and political issue, not an economic one. Land issues were important in Venezuela 50 years ago, when over half of the country’s population was rural. Since then, Venezuela has seen the same migration to the urban centers seen in the rest of Latin America, perhaps even more intense, thanks to the oil revenue which has allowed the country to import a large fraction of its agricultural needs.


 


By now, almost 90% (89% is urban according to 2003 statistics ), so that on the scale of the social and economic problems of the country, this is not a huge issue. But it is an emotional one. Three quarters of all Venezuelans have some direct connection to a recent rural past, of failed efforts or lack of land or the absence of sufficient funds to make the land or family projects self-sufficient.


 


The story is one known all over the planet, but intensified in Venezuela: Large agricultural projects using modern techniques produce at such low costs, that small and medium size farms do not have the productivity and competitive factors required. The result is that in most of Venezuela, agricultural products are produced at prices which are higher than those of the equivalent import. The main exception to this is cattle. Meat can be produced at competitive prices and profitability, but the Government prefers agricultural products over cattle raising and calls many large cattle ranches a waste of land.


 


Proving the poor productivity and competitiveness of our lands, is the fact that the Chavez administration has created a chain of “popular” markets run by the Government and the military, which by now have become the first food distribution entity in the country. Over 80% of the products sold at this company, called Mercal, are imported and in no way has this company been involved in promoting local production or giving preferential treatment to local producers.


 


The land issue has four separate components all of which were considered in the original Land Bill of 2001, which in some sense propelled the opposition movement against Hugo Chavez, which saw that bill as a threat to the right of private property provided by the 2000 Chavez Constitution. There were four different components to that bill: Attacking the large farm states (Latifundios, defined by law as farms above 10,000 Hectares or 25,000 acres), promoting the use of unused lands, putting order in land ownership and introducing an element of Government planning into the type of crops that could or could not be grown.


 


According to the Land Bill, a new institution was created The National land Institute (INTI) which would be in charge of issuing new regulation required by the scope of the law, inventory the land and begin certifying which lands had rightful ownership and were being devoted to the right type of crops. Separately, the Land Institute would be in charge of  administering those lands under Government ownership.


 


Unfortunately, like much in the Chavez era, progress has been extremely slow, despite the fact that Chavez’ own brother was named as the first President of that Institute. The law stated that any expropriation could not begin until the full inventory of land was completed. That inventory is yet to be finished.


 


In November, after the sweeping victory of his party in the gubernatorial elections, Chavez held a closed door meeting with his party’s Mayors and Governors in which he said that the problem of large farm states should be the responsibility of the Governors. This is contrary to the Land Bill.  On December 19th., right before Christmas, the Governor of Cojedes decreed the intervention of 16 farms, including British owned Hato El Charcote. This was followed the next day by nine Governors pledging to issue similar decrees, clearly following Chavez’s orders. So far, two other Governors have followed suit.


 


At the beginning some saw this as simply another legal misstep by an overeager regional Governor in his efforts to please Chavez. I disagreed. Too many times I have seen this Government start something only to gauge reaction and see whether to move forward or not. Coming after the Fuerte Tiuna meeting, this seemed to be no innocent move by a regional Governor. Unfortunately events have proven me right. Where I did make a mistake was in thinking that the British farm had been included for “balance” and that it would be Venezuelan owned farms that would be the target of the first interventions. Nothing has been further from the truth, which may be interpreted as the beginning of a new stage in this “revolution” with the Government ready for the first time to ignore international opinion.


 


The issue is simply political and emotional; who can disagree with the Government promoting production in unused lands, the minimization of large land states and determining the rightful ownership of land in Venezuela? But the truth is the Government is the biggest lawbreaker in Venezuela. According to a recent study by the Venezuelan Ministry of Agriculture, there are only 2.1 million productive hectares of land in Venezuela. But the Venezuelan Land Institute (INTI) owns 8.6 million hectares of arable land in 1,492 properties across the country. Thus, if the Government distributed this land among the estimated 660,000 rural families, it would give each one 13 hectares of land or 32.5 acres to each rural family. If this were an economic issue it would start right there. In fact, the cost of producing one season of crops is probably larger than the cost of the land for most crops.


 


To make maters even worse, of these 1,492 states, 53 of them have a total of 5.9 million hectares giving them an average of over ten times the definition of what a large farm state or latifundio is. Thus, if the Government really wanted to be revolutionary, it could give away only 30% of its own land and that would represent land equivalent to all of the productive land in Venezuela today!


 


But the whole process is simply a mockery, as legalities are simply set aside or in the words of the Governor of Cojedes “social needs are above legal technicalities”. Not only do Governors not have the legal power to do what they are doing according to the Land Bill, but other aspects of the law are also being violated. First of all, not all of the farms “intervened” in Cojedes are above 10,000 hectares in size. Second, ownership is sometimes being questioned, but only partially, but the whole farm will be intervened; some of the intervened lands have ownership and crop certification by the land institute and “unused” land is being defined as land invaded by squatters over three years ago without the Government making any effort to remove them.


 


Agroflora, the British company that owns Hato El Charcote actually published a full page ad in today’s newspapers saying that: 1) The old Agrarian Institute recognized in 1972 and 1978 the private nature of this farm. 2) The new Land Institute (INTI) recognized in 2003 the “clear and uninterrupted” chain of ownership of Hato El Charcote. 3) The land known as “El Charcote” owned by Dictator Juan Vicente Gomez was recovered by the Venezuelan Government in 1936 and is not related to Hato El Charcote. 4) The chain of ownership of Hato El Charcote has been uninterrupted since 1830. 5) They aim to prove the land is in use or invaded with the process.


 


This is probably all true, but in the end it does not matter to a Government that cares little about legality or economics. This is simply about gaining popularity via the use of highly charged emotional and complex issues, which are hard to explain or understand. This is what populism is all about.

Land intervention by the Venezuelan Government: It’s all about populism

January 5, 2005

The Governor of the State of Cojedes announced yesterday that on Saturday they will begin the “intervention” of the Hato El Charcote farm, owned by British company Vestey, under the decree issued by that Governor in mid-December.  The concept of “intervention” does not exist in Venezuelan jurisprudence, so that it is unclear exactly what it means. According to the Governor: “The intervention will be performed with all of the machinery of the State to establish the first beachhead of the “Free land and Men Mission…With the aid of all of the Armed Forces and police forces and the authorities of the Governor ….”. According to that State’s Attorney General, the term intervention “means to make use of all the power of the State o solve a problem” and “the farm will be intervened without affecting its operations”


Since the whole issue is by now obscured in the details, it is a good time to step back a little and ask what is the fuss all about?


First of all, while many want to make this an economic or social issue, it is really simply a very emotional and political issue, not an economic one. Land issues were important in Venezuela 50 years ago, when over half of the country’s population was rural. Since then, Venezuela has seen the same migration to the urban centers seen in the rest of Latin America, perhaps even more intense, thanks to the oil revenue which has allowed the country to import a large fraction of its agricultural needs.


 


By now, almost 90% (89% is urban according to 2003 statistics ), so that on the scale of the social and economic problems of the country, this is not a huge issue. But it is an emotional one. Three quarters of all Venezuelans have some direct connection to a recent rural past, of failed efforts or lack of land or the absence of sufficient funds to make the land or family projects self-sufficient.


 


The story is one known all over the planet, but intensified in Venezuela: Large agricultural projects using modern techniques produce at such low costs, that small and medium size farms do not have the productivity and competitive factors required. The result is that in most of Venezuela, agricultural products are produced at prices which are higher than those of the equivalent import. The main exception to this is cattle. Meat can be produced at competitive prices and profitability, but the Government prefers agricultural products over cattle raising and calls many large cattle ranches a waste of land.


 


Proving the poor productivity and competitiveness of our lands, is the fact that the Chavez administration has created a chain of “popular” markets run by the Government and the military, which by now have become the first food distribution entity in the country. Over 80% of the products sold at this company, called Mercal, are imported and in no way has this company been involved in promoting local production or giving preferential treatment to local producers.


 


The land issue has four separate components all of which were considered in the original Land Bill of 2001, which in some sense propelled the opposition movement against Hugo Chavez, which saw that bill as a threat to the right of private property provided by the 2000 Chavez Constitution. There were four different components to that bill: Attacking the large farm states (Latifundios, defined by law as farms above 10,000 Hectares or 25,000 acres), promoting the use of unused lands, putting order in land ownership and introducing an element of Government planning into the type of crops that could or could not be grown.


 


According to the Land Bill, a new institution was created The National land Institute (INTI) which would be in charge of issuing new regulation required by the scope of the law, inventory the land and begin certifying which lands had rightful ownership and were being devoted to the right type of crops. Separately, the Land Institute would be in charge of  administering those lands under Government ownership.


 


Unfortunately, like much in the Chavez era, progress has been extremely slow, despite the fact that Chavez’ own brother was named as the first President of that Institute. The law stated that any expropriation could not begin until the full inventory of land was completed. That inventory is yet to be finished.


 


In November, after the sweeping victory of his party in the gubernatorial elections, Chavez held a closed door meeting with his party’s Mayors and Governors in which he said that the problem of large farm states should be the responsibility of the Governors. This is contrary to the Land Bill.  On December 19th., right before Christmas, the Governor of Cojedes decreed the intervention of 16 farms, including British owned Hato El Charcote. This was followed the next day by nine Governors pledging to issue similar decrees, clearly following Chavez’s orders. So far, two other Governors have followed suit.


 


At the beginning some saw this as simply another legal misstep by an overeager regional Governor in his efforts to please Chavez. I disagreed. Too many times I have seen this Government start something only to gauge reaction and see whether to move forward or not. Coming after the Fuerte Tiuna meeting, this seemed to be no innocent move by a regional Governor. Unfortunately events have proven me right. Where I did make a mistake was in thinking that the British farm had been included for “balance” and that it would be Venezuelan owned farms that would be the target of the first interventions. Nothing has been further from the truth, which may be interpreted as the beginning of a new stage in this “revolution” with the Government ready for the first time to ignore international opinion.


 


The issue is simply political and emotional; who can disagree with the Government promoting production in unused lands, the minimization of large land states and determining the rightful ownership of land in Venezuela? But the truth is the Government is the biggest lawbreaker in Venezuela. According to a recent study by the Venezuelan Ministry of Agriculture, there are only 2.1 million productive hectares of land in Venezuela. But the Venezuelan Land Institute (INTI) owns 8.6 million hectares of arable land in 1,492 properties across the country. Thus, if the Government distributed this land among the estimated 660,000 rural families, it would give each one 13 hectares of land or 32.5 acres to each rural family. If this were an economic issue it would start right there. In fact, the cost of producing one season of crops is probably larger than the cost of the land for most crops.


 


To make maters even worse, of these 1,492 states, 53 of them have a total of 5.9 million hectares giving them an average of over ten times the definition of what a large farm state or latifundio is. Thus, if the Government really wanted to be revolutionary, it could give away only 30% of its own land and that would represent land equivalent to all of the productive land in Venezuela today!


 


But the whole process is simply a mockery, as legalities are simply set aside or in the words of the Governor of Cojedes “social needs are above legal technicalities”. Not only do Governors not have the legal power to do what they are doing according to the Land Bill, but other aspects of the law are also being violated. First of all, not all of the farms “intervened” in Cojedes are above 10,000 hectares in size. Second, ownership is sometimes being questioned, but only partially, but the whole farm will be intervened; some of the intervened lands have ownership and crop certification by the land institute and “unused” land is being defined as land invaded by squatters over three years ago without the Government making any effort to remove them.


 


Agroflora, the British company that owns Hato El Charcote actually published a full page ad in today’s newspapers saying that: 1) The old Agrarian Institute recognized in 1972 and 1978 the private nature of this farm. 2) The new Land Institute (INTI) recognized in 2003 the “clear and uninterrupted” chain of ownership of Hato El Charcote. 3) The land known as “El Charcote” owned by Dictator Juan Vicente Gomez was recovered by the Venezuelan Government in 1936 and is not related to Hato El Charcote. 4) The chain of ownership of Hato El Charcote has been uninterrupted since 1830. 5) They aim to prove the land is in use or invaded with the process.


 


This is probably all true, but in the end it does not matter to a Government that cares little about legality or economics. This is simply about gaining popularity via the use of highly charged emotional and complex issues, which are hard to explain or understand. This is what populism is all about.

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