Agrarian Property and Stability
There is no one property problem. The problems are many an complex when it comes to agrarian properties. They are all related to one another and affect very diverse groups. The solution that prevails should not be one that favors only the most powerful ones.
Agrarian property in Nicaragua has been subjected to numerous upheavals since 1979. By diverse methods, the Sandinista government came into possession of and/or redistributed over 1.5 million acres of farmland, equivalent to 32% of the country's total. During the Chamorro administration, just under 600,000 acres, or 12%, changed hands, three fourths of it through the privatization of previously state owned land. To all this must be added another 20% that was deeded to tenant farmers during the 1980s, and nearly 180,000 acres that were occupied de facto over the whole period. Today, only 29% of the exploited agricultural area has escaped all of these processes.
For better or worse, the changes that took place before the 1990 elections had major consequences for the economy and society. Although the figures were known, their significance was not deeply analyzed and virtually never publicly debated. There is near consensus about the terrible results of the national economy in the 1980s, but no clear, complete and publicly disseminated assessment of what those land tenure changes meant.
To critically assess the changes as a whole, at least three aspects must be considered:
1) how and by what criteria the lands were affected;
2) what level of legal consolidation the process had;
3) what criteria were used to redistribute the affected
These three questions have different answers depending on the stage of the Sandinista government being considered. Its handling of the land issue can roughly be divided into four stages. The first began with the confiscation of Somoza properties and lasted until the 1981 agrarian reform law, leading to the consolidation of the state as an agrarian business owner. The second concluded with the second agrarian reform law in 1986, and was characterized by collectivization as a condition of providing land and credits. In the third stage, the government recognized the need to respond to the demand for individual plots, in at least some regions, and to be more flexible in its policy toward production cooperatives by allowing certain plots within them for family consumption crops. Meanwhile, with the economy falling apart, agrarian reform was put on hold. The fourth stage was the government's two month lame duck period after losing the 1990 elections, when it passed blanket legislation to legalize all these changes ex post facto.
Criteria for Affecting LandsExcept for the expropriation of Somoza's lands (Decree 3), arbitrary political criteria often dominated in the choice of lands actually affected, particularly in the application of Decree 38, which permitted confiscation of the properties of "Somoza allegados" (family, friends and allies).
The social philosophy underlying the first agrarian reform law was based on production criteria, not size. But this, too, lent itself to capricious and arbitrary interpretations. For example, an extensive cattle ranch may appear much less "exploited" than a cotton plantation, but a cotton grower's influence in the economic inequalities of a given zone is not necessarily less than that of a cattle rancher.
De facto occupations of thousands of acres, without later intervention by the state, also took place during the Sandinista administration. And as late as 1988 a decree was issued that, in the best style of absolutist governments, allowed the confiscation of lands belonging to the political opposition.
In such a climate, which further exacerbated the existing polarization, it was nearly impossible to forge a national consensus that would provide lasting legitimacy for the agrarian reform, particularly after the change in the correlation of forces that had made the revolution possible.
Level of Legal ConsolidationIt is estimated that some 70% of the agricultural properties affected by the Sandinista government were never legally registered as state property. Most were incorporated into state companies and later into corporations by decree, or were transferred to agrarian reform beneficiaries without the state going through the chain of legal actions established by the existing law for acquiring a property. When the FSLN lost the elections, it had to push a law through the National Assembly, which it still dominated, to protect those properties. Law 88 states that "the provisional or definitive agrarian reform titles that have been provided to the assignees of agrarian reform as of this date [March 30, 1990] constitute a legal instrument that provides ownership of the land to them free of charge.... In consequence, they may sell, cede, transfer, will or effect any other form of disposal."
It is relevant that Law 88 permits "any form of disposal" of the agrarian reform properties, when that had been frontally rejected by Sandinistas in previous years. The key aspect of the law, however, is its tacit recognition that the agrarian reform lacked legal status. This reflects a way of thinking that the Sandinistas shared with other left movements in Latin America that political decisions have the privilege of ignoring any other consideration in any other sphere of power. This thinking places more value on taking power than on transforming the state and sets the executive branch above all others.
Criteria for Assigning LandsThe selection of agrarian reform beneficiaries could have created a broad base of social consensus in the countryside, which would have helped attenuate the war and political tensions, as well as the legal complications that such unsatisfactory handling created. But instead, it had an anti rural and anti economic skew.
In the first stage, the FSLN did not support the spontaneous peasant land takeovers, even in areas where the peasants had fought with Somoza's National Guard to gain access to land and thus live a bit better. Arguing that dividing up the farms would lead to a drop in agricultural supply, particularly of crops for export, the government elected to create centrally managed state farms. But these huge enterprises were particularly inefficient and very costly, since they followed a technological model that was irrational under the conditions of Nicaragua's economy.
Later, the government felt obliged to respond to the pressure from the peasantry, even though many political cadres and even leaders refused to recognize the advantages of small family properties. Access to land was thus conditioned to creating collective forms of work: the production cooperatives. Since these cooperatives were decreed from above, the majority of them never became truly cohesive. Members came and went, with no incentive to invest since they had no security over their property. Life for many cooperative members remained as poor as before they received the land. Some cooperatives showed signs of growth because they received huge state subsidies to acquire imported machinery and hire temporary workers. That allowed them to copy in the best of cases the productive process of the intensive plantations.
The top down bias of the process and the desire to copy the technological "modernization" recommended by the agronomy manuals also imported had a very negative effect on the efficiency of the reassigned lands: costs rose and supply dwindled.
Lands were also assigned to individual peasant families after 1986, mainly due to the pressure of the war, but even then in insignificant amounts: 2% of the farmland. That shift paralleled a loosening up of the cooperative model, which allowed some land on the collectives to be individually cultivated. But both changes were too little, too late: the FSLN had already lost the 1984 elections in the rural areas by percentages similar to those of 1990. Furthermore, by not resolving the essential problem of land security for peasant families, this new flexibility only created more tensions within the cooperatives.
The agrarian reform's influence on production systems was far less than the 32% of farm lands affected. According to estimates made by a European Community mission in 1993, farmland in the hands of peasants with under 30 acres only grew from 17% to 22% during the revolution, and that in the hands of farmers with between 30 and 120 acres grew even less: from 30% to 32%. This meant that participation in land tenure by these two sectors, which are the real standardbearers of economic development and contribute to more equitable rural income generation, only increased by 7%.
The social base that was thus created was too small and weak to fend off the enormous destabilizing potential of the agrarian changes. That potential came directly from those adversely affected, and indirectly by comparing those benefitted and those not, as well as from the overall macroeconomic costs they caused.
Transition: New ProblemsThe consequences of all the agrarian changes that the Sandinista government had pushed through did not cease when it left office. Their defects and lack of legal consolidation sparked new rural tensions after February 1990.
The agrarian upheavals increased the instability of the economy and of society, despite the new government's efforts and its massive spending for "peace," which was essentially covered by foreign aid. The contradictions between the logic of macroeconomic stabilization (which requires restricted spending) and that of pacification (which requires increasing it) became manifest. A democratization that confused privatization with the market, and the market with democracy, did not help in striking a balance between these two logics.
A consultant of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) concluded that "with its ambiguities, the government of Violeta Chamorro did not resolve the property problem generated by the Sandinistas, but complicated [it] even more. At the end of this whole process, the government left no important sector of society satisfied."
The first tension to emerge in the Chamorro period resulted from the FSLN's attempt to legally consolidate all it had done in the 1980s prior to handing over power. Tolerance of this sweeping legalization process and the continuation of Sandinistas at the head of the police and army were part of the transition protocol signed by representatives of the incoming and outgoing governments. Independent of any economic, legal and social assessments that could be made of these agreements, it is obvious that this "solution" to the property problem was a key piece in the political chess game of the moment. Given Nicaraguan society's long non democratic tradition, the first democratic transfer of power could not be expected to occur without high political costs and some tribute to the departing administration.
Under Protection of Law 88Rural properties were already being transferred to private hands before the 1990 elections, but the process accelerated in the two months of transition. The problem before 1990 was that these individual assignments were not made with any expressly enunciated political program in favor of peasant families, and official policy never altered its priority on state farms and collectives. This obviously lent itself to major arbitrariness and to the buying and selling of political favors. After February 1990, the moment also seemed appropriate to return some properties to certain "patriotic producers" who had given them to the revolution.
The process of quickly divvying up state lands to individuals and massively handing out agrarian reform titles was sanctified by Law 88, which protected all agrarian reform titles and all land assignments, whether collective or individual, that had been provided up to the transition period. Since everything done under the protection of Law 88 has been indiscriminately labeled "piñata," the interests of poor peasants benefited during the 1980s were tarred with the same brush as those of a political clientele benefited at the last minute. "An unprecedented affair in the history of the Nicaraguan state's booty created a new landowner class," railed a La Prensa editorial of September 21, 1990, about a process in which many goods "ceased to belong to the state and passed to private hands." At that early date, it was admitted that those goods, nearly 300,000 acres, belonged to the state, and the manner by which the state had obtained them was not discussed. Nor was much importance given to whether the state had registered them or not. Later on, the discourse would change.
The State LandsThe increased pressure for land triggered by the end of the war brought a second tension to the Chamorro government. There were more veterans of peasant extraction among the Nicaraguan Resistance "contras" than among the discharged soldiers of the drastically reduced Sandinista Popular Army, but the best path to reconciliation was thought to be providing land to all of them. Part of the land fund still under state administration in the Area of Peoples Property was used to deal with this sudden increase in demand for land. It is hard to know what proportion of the 444,000 acres not included in the piñata were distributed to former combatants in the 1991 privatization process by the state holding company CORNAP. Negotiated agreements with the various sectors demanding the 87 agricultural businesses grouped into 10 corporations spoke of privatizing 25% to each sector the workers, old owners, and veterans on each side but there are indications that this was not uniformly met.
The majority of state lands were grouped into the following corporations: CAFENIC (coffee), HATONIC (cattle), CONAZUCAR (sugar), NICARROZ (rice), TABANIC (tobacco) and AGROEXCO (cotton). Overall, 9% of the privatization favored new businesses, 41% went to the old owners, 28% to veterans as a whole and the remaining 22% to the workers in the enterprises. According to a preliminary CORNAP report, however, 30% of the nearly 250,000 acres of the three most important corporations (AGROEXCO, CAFENIC and HATONIC) was returned to its owners, 38% went to the veterans and 32% remained in the hands of the workers.
This privatization has been criticized for its lack of transparency regarding the payment mechanisms established for acquiring the properties. This murkiness is reflected partly in the declared and proven fact that the process generated net losses for CORNAP. For their part, the veterans and workers who were benefited have repeatedly charged that they have not been granted their property titles, making access to credit nearly impossible and in turn leading their companies into ruin. The accumulation of unpayable debts on their assets is obliging them to sell the lands they received at low prices, thus guaranteeing a stealthy and silent reversal of the agrarian reform by way of "market forces."
Just over 14,000 acres 3% of the total privatized were transferred to the veterans of the Resistance in the first months of the new government, but this sector's needs were much greater. More than 22,000 Resistance members, including combatants and civilian rearguard, demobilized in June 1990. By 1993, they had received almost 180,000 acres, of which over 160,000 were acquired through state purchase of private lands, and the Nicaraguan Agrarian Reform Institute provided agrarian reform titles to the beneficiaries. An important footnote to that chapter is that many foot soldiers in the Resistance complain that the leadership distributed the land very unequally, leaving many of those veterans still landless.
Claims of the ConfiscatedA third tension came later, as claims mounted by all those who had been adversely affected by the various phases and forms of the agrarian changes. With the transition over and power firmly in new hands, different groups began, in the name of their injured rights, to demand that the changes be reversed or that they be compensated. Some impugned the legitimacy of the entire confiscation process and even of the agrarian reform itself. Of those, a number were actively backed by US congressional members on the grounds that they had become US citizens albeit after their properties were confiscated. Others took refuge simply in the lack of legal paperwork for most of the transfers. Some have tried to recover their properties by force, but the majority, even after exhausting administrative formalities, still favor judicial recovery. An estimated 6,000 cases in dispute are still in the courts. Given the shape that the judiciary is in and the traditional foot dragging of justice, these cases could remain unresolved for up to 10 years. The political cost of the agrarian reform's lack of transparency and legal solidity has been extremely high: in some cases, at least four claimants are fighting over the same piece of land with some legal basis.
An April 1995 report by the Carter Center, prepared for the United Nations Development Program, lists the many factors that make it extremely hard to find a single solution to the property problem that would satisfy the whole country. They include the fragile legal framework (including the lack of legitimacy plaguing the "piñata" laws), the multiple owners of the same land due to the generalized practice of provisional titling, the inability of the political class to reach any agreement, the gaps in an antiquated property registry system and the government's administrative incapacity.
The indemnification bonds, instead of being a solution, have ended up complicating the situation even more. To compensate those who were confiscated, the government issued 1.7 million córdobas worth of bonds with annual interest rates of between 3% and 5%, to be paid starting in the second year and cancellable in five annual installments starting in the eleventh year. But many recipients sold their bonds to speculators, in some cases for as little as 17% of their nominal value, given their low redemption value and mistrust of the government and the economy (inflation is already higher than those interest rates). Another 35 million worth of bonds were used to pay off tax debts, and an additional 455 million worth were used to snatch up state enterprises from CORNAP for a song, since CORNAP accepted the bonds at their face value, even though their recovery value was obviously devalued.
If we subtract all the bonds redeemed by the state one way or another, those still outstanding have a redemption value of about US$102 million. The government has no more assets with which to redeem them, except the monopolistic public services, particularly TELCOR, the telecommunications and postal service.
Referring to the complex linkage between the privatization process and the property problems, the ECLAC report notes that "privatization has succeeded in diminishing the participation of the state in business affairs to make way for private initiative, but has not managed to show the contribution of the privatization process to the development of the country."
The issue of privatizing TELCOR in fact constitutes another tension around property, the Chamorro administration's fourth. The interests of those whose confiscations were compensated with bonds are mixed with powerful interests that go beyond the national framework: the government's interest in complying with the International Monetary Fund "at least in something," given its marked failure to comply with the conditions of the Enhanced Structural Adjustment Facility in its first year; the interests of the powerful transnational corporations vying to purchase TELCOR; and the interests of the international financial institutions, stalwart defenders of privatization. The greatest danger to the nation in the short term is that the government authorities will make a very negative decision, using the excuse that it must revalue the indemnification bonds, even though most of those still out are now in the hands of a few powerful speculators who can exert heavy pressure on the government and the National Assembly.
All these problems overlap one another; they all make up the "property problem" in Nicaragua. It is not one problem, but many related ones affecting different segments of society.
A Serious and Silent ProblemThe fifth and largest tension is the most serious, even though those affected are not yet making much noise. The economic fragility of all the family units born of the agrarian reform, even those that were legally consolidated, is a powerful wave that could capsize the boat of the national economy.
While the debates go on, deals among politicians are still being made under the table, the economy is still awaiting the promised and always postponed take off and the cooperatives and other production collectives are being silently dismantled. In October 1993 it was estimated that 70% of the cooperatives had already been split up; in some departments of the country it reached 100%. But the problem is not parcelization. It is that the lack of a deed and of credit for the former cooperative members now holders of individual plots prevents them from having a real farm with the minimum of capital needed to get safely and productively through the agricultural cycle.
For these smallholders, becoming farmers and living on their farm means being interested in making improvements on their plots: putting up fences, getting a few chickens, building a well, doing soil conservation work, planting trees to prevent wind erosion, and the like. It means diversifying their productive activities: tending various crops at the same time and making better use of the agricultural byproducts in raising animals. And it means perennial crops: trees, coffee plants, cultivated forage, etc. It means making maximum use of their land and family labor and becoming profitable, not only for themselves but also for the country and for the bank that lends them money.
Land worked in the conditions from which these smallholders are blocked would generate more jobs and more value added per acre than the "better" worked plantations. Agrarian reforms are made precisely to achieve this kind of soil use. That is why they were made in Japan, Korea or Taiwan, countries whose economic successes are undisputed.
In 1989, the Agrarian Reform Research and Studies Center of the Ministry of Agriculture estimated that 35,000 families had received land in the form of production collectives. Assuming that those figures held true in 1990 and that those lands were still in the name of cooperatives, some 27,000 smallholders would be in hopes of consolidating themselves as small farmers. According to calculations by Nitlapán, they would need about $1,000 per family to get started as small farmers: to pay for the deed, fences, tools, working capital, chickens, etc. Adding some $500 more for a team of oxen, we estimated that $40 million in capital would be needed to capitalize this 5% of the country's economically active population and keep it from expanding the ranks of the unemployed, and to guarantee the agrarian reform that has cost the country so much in political and social terms. That $40 million is only 40% of what is being sought so avidly to redeem the bonds of a handful of power wielding speculators.
The Weight of the USA and the Urban PiñataReality today is marked by intense debates over a bill that would put the "final period" to the property problem, that would finally provide the country "stability" in such a crucial issue. All those involved, whether Nicaraguans or others, agree that resolving this problem is key to social stability and to removing one of the greatest hobbles to Nicaragua's economic reactivation. But that's as far as consensus goes. Since there is not just one property problem but several a legacy of the multiple ways that agrarian property has been handled the various actors and political sectors disagree on the problem's essence. Without minimum consensus, the most influential sectors are pressuring for a law acceptable to all that is, to all political parties represented in the National Assembly and with enough consensus so that its legitimacy will not be impugned when the government changes in a year.
It will not be easy to hit this target because the debate has not been established on firm and philosophically sustained foundations. Nor has a democratic debate been undertaken on the issue. A political agreement and a legal framework to sanction it cannot be legitimate if they lack a philosophical foundation as the cornerstone of the social contract that must be built. There cannot be a secret pact among hidden forces; there must be an open contract with public and consensual terms. Several obstacles impede this.
First are the external influences: those of the international financial institutions and, above all, of the US government, which is not honoring the international law establishing that a country cannot come to the defense of its citizens over a problem they had before becoming citizens. If the US were to abide by that, the political weight of this problem would shift significantly, since only 170 of the roughly 2,000 "US" claimants were citizens of the United States at the time they were confiscated.
The symbolic aspects of the urban piñata are also an obstacle. The concept of urban property as a social good obviously cannot be applied to the urban mansions that were confiscated and used by Sandinista leaders and high level cadres in the 1980s. Those properties, transferred to their occupants under the umbrella of Law 85, are today "legally" bound up with the thousands of small urban properties justly transferred to those living in them, which seriously complicates any solution to the problem.
The unproductive nature of the big properties and their transfer's lack of redistributive impact since one owner was simply replaced by another invalidates them politically and economically. They may end up having a legal pretext, but never social legitimacy. And their eminently symbolic character destines them to being a permanent target of political struggle, the flame of discord that makes any deal about the rest of the major property problems even harder.
A Political Deal Isn't EnoughWhat are the principles of political philosophy that could help legislators, jurists, governors, those affected and those benefited, the entire population, find a balanced road that could truly put the final period to this set of property problems in Nicaragua? In the first place, it must be recognized that these problems are legal, political and economic, at one and the same time. Jurists advocating a strict legal solution in accord with pure law lose sight of the fact that a solution that fails to respect the other social balances will not enjoy legitimacy. Basing themselves on "natural law" as some extremist lawyers do is just empty rhetoric. Is not the law of the jungle the simplest and most primitive form of politics? Though some may think that Nicaraguan politics seem a lot like the jungle, it is the responsibility of people of laws to draw up a framework that regulates politics, not shirks them.
It is also erroneous to try to establish the basis for a solution on a political deal. In Nicaragua, the circle of those with political representation is so small and the power of those few pressure groups and their family connections is so great that arbitrariness always prevails in a simple political deal.
The Right to PropertyThe simultaneous boom of capitalism and of democratic aspirations led political philosophers of modern times to seek a solution to the always present contradiction between the desire for the individual freedom to undertake an endeavor and enjoy its fruits, and the desire for justice that is inherent in human beings and sanctioned by morality. Liberal thinkers tried to imagine ways to conciliate freedom and justice, recognizing that justice even if some do not consider it a good in itself is needed to maintain a certain equilibrium in the social edifice, without which it is ungovernable.
One of the underpinnings of the freedom to engage in business and assure the enjoyment of its fruits is the right to property. English philosopher John Locke considered the father of the liberal revolution in his country and one of the founders of modern political thought believed that appropriating scarce goods was legitimate as long as others' right of possession was not harmed. When he put forward the need to have "left enough and equally good to others in common," he was seeking to make the right to property compatible for all and to establish the limits of my right when it hurts the right of others. Criteria have also been formulated about these limits with the following line of reasoning: my knife is mine and I thus have the right to do with it as I will, other than sink it into the chest of my neighbor.
Alongside these postulates, both classic and Marxist economists discovered that almost everything that can be appropriated by human beings is the product of human labor. Maintaining the principle that one always has the right to enjoy the fruits of his/her labor, they deduced that there were no limits to private property. But the situation is not quite like that, because some goods are not the product of labor, although labor can be incorporated into them. Land is the best example.
Neoliberal thinkers such as Robert Nozick set forth as an exception the example of a water fountain in the desert. It is a good that one cannot privately appropriate without harming the right of others. They are right, but they err in thinking that goods of this type virtually no longer exist because, according to them, industrial capacity has generated such an abundance of goods that appropriating as many of them as one likes will not necessarily deprive others of enjoying them. Land is again the main exception to this rule.
One of the most famous economists of the neoclassic school, Vilfredo Pareto, recognizes that "it is generally useful for land to be in the hands of those who know how to work it better." But in his typical cautious style, he also states that, unlike other forms of capital, "it is generally impossible to produce real estate capital by means of savings." What he meant was that the latter is not the product of labor, yet its appropriation always generates rent, a form of income that depends not on the merit of labor but on appropriation. The same author noted that "this capital is more important than the others on the political level."
Centuries of EstatesConsidering the arguments about the legitimacy of agrarian property in light of the contributions of economic theory, it is clear that, since the creation of huge land estates makes it impossible for others to exercise their right to property, such estates are illegitimate. In colonial Nicaragua, an empty country or to be more exact, an emptied country in which the unrestricted power of a minority social strata dominated power, great haciendas were created that excluded the poorest individuals: those of mixed Spanish and Indian blood who were left to populate the spaces left free by the hoarding estate owners if they escaped the repression that forced them to work the estate owners' lands. Small holdings, insufficient to allow their owners to generate savings to invest and develop the country, came into being before the mestizo peasants could get the capital to improve it, while the estate owners, protected by political power and the laws that ordered obligatory labor, had, with no particular competence on their part, the luxury of being profitable without being efficient.
This structure, which began in the second half of the 16th century, was already well consolidated by the end of the colonial period. Nicaraguan historian Germán Romero, after examining property titles issued by the Colonial High Court of Guatemala between 1700 and 1769, notes that 9% of these titles in Nicaragua corresponded to 54% of the titled land. Four owners alone, all from Granada, controlled 40% of the land! Estates were solidly rooted by the second half of the 19th century and the first part of the 20th century, and were reconsolidated in the 1950s.
Even before the 1970s, the situation was such that an agrarian reform law was passed in 1966, during the presidency of Luis Somoza. Its first article defended "the fundamental modification of land tenure and of its legal structuring and systems of exploitation, aimed at obtaining, with equitable distribution of the cultivable area and its rent and an increase of production, an increase in the standard of living of the peasant masses and their incorporation into the process of the development of the country and the integral development of the nation."
Four Indispensible DecisionsSince there is many a slip twixt cup and lip, history demonstrated that the Somocista Agrarian Reform Institute was better able to colonize new lands because it was politically easier to implement than to redistribute the estates. It demonstrated also that, contrary to what extremist jurists still claim, a law is not enough to be able to act. What is done badly can be put right through law, and estate or latifundista property was done badly from its historic roots. But a law that does not turn the aspirations of the majorities into reality cannot enjoy legitimacy.
The profile of land tenure distribution in Nicaragua today is one of the most equitable in Latin America. But four things are indispensible if this potential is to be taken advantage of and the social equilibrium preserved, without spoiling the economic equilibrium by incurring economically untenable costs or, to compensate for them, committing even greater errors such as privatizing TELCOR.
It is indispensable today to:
Legally consolidate small and medium productive property and remove the hobbles it has always worn as a dominated social force, so it can take economic root.
Compensate those affected for their expropriated properties, but only for the value of the improvements they can demonstrate having made or an estimate of them and for an overall amount compatible with the country's economic possibilities.
Return expropriated properties only when the change of owner really implies more efficient use of the land, in conditions of equal access to social resources and credit.
Stress the principle of compensation over devolution.
All this requires political will. Those who hope to govern tomorrow must decide today if they want to administer a governable country or prefer to use the radical rhetoric of the extremist jurists to win the votes and financial support of those affected by the changes. They must decide if they want to occupy a government or build a state.