4. Land Reform in Peru
4.2. Process of the Land Reform in Peru (1963-1975)
4.2.2. The Land Reform under Velasco Government (1968-1975)…
4.2.2.2. Fourth Stage: Formation of CAPS and SAIS
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
37
smallholdings into production units that are much more economically profitable and much more feasible to manage from a technological point of view.
4.2.2.2 Fourth Stage: Formation of CAPS and SAIS
The lands were adjudicated to associative enterprises, peasant’s communities, group of peasants and natural people approved by the DGRA (General Direction of Agrarian Reform). Two types of associative enterprises were created: the Agricultural Production Cooperatives (CAPS) and the Agricultural Societies of Social Interest (SAIS). The CAPS were mainly organized in the relatively modern haciendas of the coast, where the properties were collectively given to the permanent workers of the hacienda. They decided their supervisory and control bodies and various specialized
committees. According to Eguren, they had a contradictory nature since they were employees, who were looking for an increment of their salaries; and at the same time, they were also members, who had to look for the capitalization of their profits. On the other hand, the SAIS was a complex business organization created to replace the extensive haciendas. In order to organize the SAIS, the few salaried workers were organized in work cooperatives, as well as legal persons and peasant communities, with the right to receive part of the profits and some other benefits. However, in order to be incorporated in the CAPS or SAIS, they had to meet certain requirements, such as (1) work the land directly, (2) have your home nearby, (3) not sell or transfer the rights to the adjudicated property without authorization from the DGRA, before having canceled its price, and (4) comply with the technical and administrative directives of the DGRA (Eguren, 2009).
Therefore, the main difference between the CAPS and SAIS is that CAPS were composed by permanent workers, who were responsible for the administration of the
DOI:10.6814/THE.NCCU.IMAS.010.2018.A07
‧
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
38
company, meanwhile the SAIS was an association composed of diverse permanent workers from different neighboring farms, and local communities which did not contribute with any kind of land, capital or labor force, but they received part of the profits and participate of the management of the companies (Cant, 2012).
At the same time, regarding the governmental investment, the military government created an environment destined to support the agrarian sector. Public enterprises were created to be responsible for the international trade. The National Enterprise of Supply Commercialization (ENCI) was in charge of the fertilizers and other supplies for the producers, the Enterprise of Food Commercialization (ECASA) was in charge of what its name indicates. Moreover, the government gave a major emphasis to the Agrarian Bank for the agricultural financing, displacing almost totally of the private banking.
The state supported the agrarian sector by setting guaranteed prices for agricultural products, as well as granting different types of subsidies for credits and agricultural inputs. However, regarding the productive infrastructure during the reform, there was no significant investment in the agricultural sector oriented to its process, neither programs were adopted to improve the production and business management. And those few programs that were adopted were marginal with respect to the magnitude of the needs (Eguren, 2009).
For instance, the Training and Research Center (CENCIRA) was created in order to diffuse among the employees, technicians and functionaries, the necessity of a radical change. Not only was necessary to think about land reform in terms of production rising but also it was about peasant commitment with the political and cultural issues of the country. The present center had three main objectives: 1) To train all those involved in the reform process on the scope, significance, and importance of it, 2) To train the
DOI:10.6814/THE.NCCU.IMAS.010.2018.A07
‧
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
39
technical and peasant personnel in technical and administrative aspects in each stage of the reform, and 3) To evaluate the progress of the agrarian reform in order to make future decisions. As a result, CENCIRA organized a total of 1730 events with 159,000 participants among functionaries, technicians, community leaders and peasants that participated in the reform process. And even though, CENCIRA offered some short-term courses to the professionals who performed as managers of the new companies, it did not have the expected results. The short time of preparation, the difficulties to take the technicians out of their workplace and the lack of resources of CENCIRA, regarding the staff, made this important program to reduce its significance in the land reform progress (Chirinos, 1975).
On the other hand, the results on the subject of the research were less impressive, despite its importance for the future march of the process that it should guide. In four years, 21 investigations were carried out, of which only half were published. CENCIRA was criticized for the lack of decentralization, the need for training and research in micro-regions, whose presence would allow a closer knowledge of reality, with more contact with the peasant to find real solutions to concrete problems, thus generating a multiplier effect in the training carried out by state (Chirinos, 1975). According to King, the lack of education was the main cause for the deficit in the development of the highlands. The reform agencies of the government realized that cooperatives were less easy to establish with the traditional peasants of the highlands, than with the alphabetized workers from the coast (King, 1977).
DOI:10.6814/THE.NCCU.IMAS.010.2018.A07
‧
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
40
According to King (1977), other aspects of the Velasco’s land reform are the following:
The non-compliance of agricultural labor laws was also a cause for expropriation.
This allowed the government to ignore the limits mentioned above and to expropriate lands in conflictive areas.
This time, the compensation for the landlords were the half offered in 1964, the rest was paid in bonds with expiration within 20, 25 or 30 years; and with an interest rate of 4%, 5% or 6%, according to the type of land and the criteria for expropriation.
Tenants were allowed to own not only the lands they were occupying but also to increase their plots up to the family unit size (3 hectares minimum), taking more lands from their landlords.
Finally, a water reform law was enacted, where the entire surface water was under the national ownership in order to be distributed to the best public interest.
DOI:10.6814/THE.NCCU.IMAS.010.2018.A07
‧
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
41
CHAPTER 5
LAND REFORM COMPARISON BETWEEN TAIWAN AND PERU
5.1 First Phase of Evaluation: Land Reform Effects
In this section, we will study the effect of the land reform implementation in Taiwan and Peru, according to its performance in each economic and social indicator. Those indicators are the ones considered in the definition of land reform success in the theoretical framework section.
5.1.1 Effects of the Land Reform in Taiwan
As we mentioned before, with land reform in Taiwan, about 140,000 hectares of land were sold to 195,000 new owner-farmers, which generate the increment of the proportion of owner-farmers from 56% to 86% of the total farmland between 1948 and 1959. Apart from this new land distribution, the following economic and social effects were observed in the development of Taiwan.
5.1.1.1 Economic Effects
Production
According to Yu Kang & Schive, during the runaway inflation after the war period, food prices in relation to general prices increased rapidly. This situation generated the increment in farm prices, which accompanied with a constant supply of input, generated the increment of farm production by 19.2 % annually between the years 1946 and 1950.
There were three main factors that contributed to the rapid agricultural reactivation
DOI:10.6814/THE.NCCU.IMAS.010.2018.A07
‧
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
42
during the period 1946-1950. Firstly, the rapid increase in labor input, crop area, and multiple-crop diversification; secondly, the introduction of better production techniques, rehabilitation of irrigation facilities, and reorganization of farmers' associations; and finally, the implementation of a land-rent reduction program in 1949, which encouraged tenant farmers to increase production. The rise in the crop from 832,000 hectares to 874,000 for cultivated land, and from 975,000 to 1.5 million for total crop area, increased the multiple cropping indexes from 117 to 172 over the period 1946-1950 (Yu-Kang & Schive, 1995).
Productivity
According to Chen, land and labor productivity continued to grow rapidly in the initial stage of agricultural development in Taiwan, when land resources were limited and farm labor was abundant, since the increase in capital investment could raise both land and labor productivity. During the period 1960 -1970 and thereafter, the industrial sector absorbed many of the farm labor, which improved the labor productivity even more. As a result, the annual growth of labor productivity (5.7 %) was higher than the percentage of land productivity (4.9 %). During this period, the cultivated area remained constant, the consumption of chemical fertilizer showed a continuous increment, and the number of agricultural workers and man-days of agricultural labor increased until 1965 and then started to fall. This situation of decreasing inputs reflects the growing use of mechanical energy instead of human and animal energy. In conclusion, the increase in Taiwanese agricultural production in the postwar period was due to a rapid increase in capital investment and a reduction in surplus labor. As a consequence, the capital-land and capital-labor ratios increased significantly, creating an increment of land and labor productivity (Chen & Wang, 1980).
DOI:10.6814/THE.NCCU.IMAS.010.2018.A07
‧
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
43 Income
According to the estimates of Koo, one major economic consequence of land reform has been the increase in the income of tenant farmers. Between 1949 and 1960, the production of paddy rice increased by about fifty percent, while the net income of the farmers tripled during the same period. The reason behind this different increments on production and income is related to the rent reduction. The increase of production in 50% is also confirmed with the aggregate net farm income, which increased from T$305 million in 1950 to T$450 million in 1960, both expressed in the constant purchasing power of the 1935-37 monetary unit. However, the net income estimate of the tenant farmers should be taken with caution, because the calculation is based on paddy rice field. Farmers who cultivated dry land have seen less benefit in increasing their income. Furthermore, much depends upon the size of the land holdings. With the public land sale program, 83 % of the purchasers bought under 0.1 ha. The two above qualifications taken together means that for a representative farm household the percentage increase of his income cannot be as high as indicated, as his holdings would probably include some dry land (Koo, 1966).
Employment
Since land reform encouraged to the farmland owner to accept new technology and invest more capital in their lands, productivity tended to increase and therefore create that landholding in each class interval has to move up to the next larger interval. In this way, land reform reduced unemployment, but not underemployment. The only solution to reduce underemployment was out-migration. The people with more education level started to move to the cities in order to find a better job opportunity. The post-reform environment provided the conditions that encouraged the expansion of family mobility
DOI:10.6814/THE.NCCU.IMAS.010.2018.A07
‧
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
44
strategies, increasing family entrepreneurship, which promoted a certain pattern of macroeconomic and demographic change. This pattern implied relatively rapid economic growth, diversification, and a rural-urban equilibrium in response to changes in the requirements of families' socioeconomic success (Greenhalgh, 1989). So, as a consequence, of the land reform in Taiwan, the employment in the agrarian sector decreased, to move to other sectors as the industrial sector.
Investment
Between 1951 and 1960, as the new landowners increased their production and income, the proportion of savings from agriculture, with regard to the total savings of the economy, grew from 26% to 59% (Koo, 1966). With the increase in saving, tenants were willing to invest more money in agricultural equipment and improved farming methods. This new situation of the farmers, with the provision of land ownership and a higher income, encouraged farmers to start making long-term investments and improvements in their land (Chang, 1965).
In conclusion, the effects of the land reform in Taiwan reflected on the previous economic indicators, showed that Taiwan developed its agricultural sector. The guaranteed ownership over the land produced an increase in the agricultural output, farmers’ income, and the long-term investment in their land. Moreover, the government support through technical assistance and provision of agricultural infrastructure generated an increment on the labor and land productivity. However, due to the development of the urban area which absorbs labor from the rural area, the employment in the agrarian sector decreased to move to the manufacturing industry.
DOI:10.6814/THE.NCCU.IMAS.010.2018.A07
‧
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
45 5.1.1.2 Social Effects
Political and Social Stability
Ho argued that farmers, who own the land they cultivate, even if they are poor, tend to support more the existing political order than do tenants and the landless, and so a rural society based on the owner-cultivator system is likely to be more stable. The land reform of 1949-1953 contributed to the country's political stability, by increasing the number of owner-cultivators. As land reform improved the economic welfare of a large number of rural families, it became politically feasible for the government to introduce, in the following years, an efficient mechanism to extract the surplus from the agricultural sector (Ho, 1987). Another result, according to Cheng, is the impact of land reform on social stability. After the peasants acquired ownership of the land, they showed more interest in maintaining peace and order in the community. As a consequence, the peasants increased their productivity and improve the economic development of Taiwan (Chen, 1961).
However, it’s necessary to specify that, according to Ho, during the colonial period in 1945, the rural sector of Taiwan enjoyed of stability and agricultural growth, being a well-organized society with little signs of social unrest or disintegration. The decision to carry out a land reform was more in response to the crisis on the mainland China than to rural problems in Taiwan itself. It is for that reason that KMT wanted to establish a solid political base among the Taiwanese peasants, giving priority to agricultural development and social justice, in order to help its own political survival (Ho, 1987).
DOI:10.6814/THE.NCCU.IMAS.010.2018.A07
‧
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
46 Decision making and Peasant Participation
With the land reform, peasant participation in civil society was much enhanced. By having an organizational structure with the rent committee and the establishment of an efficient local tenancy, land reforms encouraged the emergence of a greater voice for the peasantry in local and national affairs. According to Smith, the success of the Taiwanese land reform on the peasant participation seemed to be due to the combined pre-war conditioning by the Japanese military government, post-war quasi-governmental required participation in farmers' associations, and extensive programmed efforts by the JCRR (Smith, 1973). This integral reforms of Taiwan involved that peasants acquired control of the land in the form of family farms (Janvry, 1981).
5.1.2 Effects of the Land Reform in Peru
The initial objective of the government was to distributed lands to 1 million families to the year 1975. However, the expropriation of at least 7000 extensive landholdings was only enough to satisfy half a million of families. So, even though the reform progress was constant, it was below the target rate proposed by the government. According to Van der Wetering, an approximately of only 110,000 families received their ownership at the beginning of 1973. This represented 3 million hectares expropriated, an equivalent of just 10% of the total land for crop and livestock; and 17% of the total available land for distribution (Wetering, 1973).
However, as a consequence of the more drastic and rapid enforcement of the land reform performed by Velasco, the 9 largest sugar plantations, and its associated processing plants were expropriated in the coast of Peru. In total, these sugar plantations owned 380,000 hectares, which represented 65% of the total areas of the Peruvian sugar
DOI:10.6814/THE.NCCU.IMAS.010.2018.A07
‧
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
47
cane. This action was interpreted as an attempt to reduce the power of foreign corporations, Peruvian commercial class and trade unions of the sugar sector. As a consequence of the land redistribution, the old power groups gave way to the new groups of organized peasants, where the majority of land redistribution was designated to the SAIS and CAPS. In the following paragraphs we will observe the economic and social effects if this new land redistribution (King, 1977).
5.1.2.1 Economic Effect
Production
It was expected that former permanent workers, now, having control over their own land and supported by the technical assistance provided by the government, could produce more in the cooperatives. However, little improvement was shown in land use or agricultural techniques, and the disinvestment by landlords that were facing expropriations also increased the problem by reducing the rural productivity.
According to Handelman, the total production for basic food and the key export crop stagnated or declined after the reform. During the years of 1961-1965, the absolute production of beef, wheat, cassava, and cotton has declined and there has been a continuous falling in overall per capita agricultural and food production. During the first decade of the land reform, per capita, food production declined approximately 9%.
However, his study suggests that the decrease in production was not due to a bad performance of the CAPS and SAIS or the lands which remained in private hands.
Actually, most of the food produced for the cities have long been provided by units of land too small to have been expropriated. According to the ministry of agriculture, 90%
of the national potato production, 84% of the corn, 90% of the wheat and 95% of onion production comes from units that are below the law's limits of land ownership
DOI:10.6814/THE.NCCU.IMAS.010.2018.A07
‧
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
48
(Handelman, 1981). Moreover, Eguren mentioned that most of the highlands were dedicated to ranching and dairying activities while the coastal estates were mostly dedicated to sugar plantations (Eguren, 2009). Therefore, since over 80% of the CAPS and SAIS lands are composed of pasture and sugar lands, it is not possible to blame, the declines in major food crops, to the mismanagement of the cooperatives or on peasant laziness. It is more possible to think that many of the small and medium farmers may have reduced their investment levels fearing that the government would lower their lands and expropriate their property (Handelman, 1981).
Certainly, the redistribution of land generated a dislocation, which had an impact on the reduction of agricultural outputs. However, declines in productivity can be attributed more directly to decapitalization of farms and the lack of irrigation system than to the fault of the cooperatives. In the sugar estates, where direct expropriation prevented decapitalization or destruction by the former landlords, production grew by 27% from 1968 to 1974 and declined slightly since the fall of sugar prices in 1974.
Experts have observed that in the rural sector of Peru, many cooperatives started their operation with almost none of the necessary farm machinery, trucks, irrigation pumps, or even office equipment since these items had been sold, moved or sabotaged by the former landlords. So, given these unfavorable conditions in the management of large landholdings, the performance on production has not been that bad (Handelman, 1981).
Productivity
Regarding the local sugar plantations, the government decided to maintain its larger production units. In the beginning, they started to work as semi-state farms managed by technocrats from the government, who had little knowledge of the production cooperative model promised by the land reform. Only the unrest, produced by the trade
DOI:10.6814/THE.NCCU.IMAS.010.2018.A07
‧
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
49
union suppression and lack of participation of workers, made the government assign
union suppression and lack of participation of workers, made the government assign