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Venezuela: Your Land Is Worthless

By Tomas Sancio | Venezuelan Politics

27.07.05 | There's something that's really not working in the so-called war against large estates. The government's idea is that by delivering land to peasants, the production is democratized and social peace is achieved. There's a not-so-small practical issue with this theory: land by itself is worthless (at least in Venezuela). If you don't have money to buy cattle or seeds and pay workers (before-hand) to produce for you, you will not be able to make a nickel. To achieve the minimum scale to overcome poverty, you need to request a medium-sized loan. This loan could be in the ball park of Bs. 20 MM (US$ 9302 at the official rate) for crops and Bs. 100 MM (US$ 46511) for cattle. In theory (especially the theory supported by people who have never worked in agriculture), your land could be used as a guarantee to request the loan.

Unfortunately, this is not true. I personally visited two important Venezuelan banks and offered my family's land as a guarantee for a cattle loan that we want to request and said guarantee was rejected. Although I have all the documents that show our ownership of the land, both banks were requesting bank deposits or a property such as a house that we could mortgage. The explanation is fairly easy: it's much easier to sell a house or apartment than land. The government has increased the land supply (and thus lowered its value) by creating at atmosphere in which people with ownership documents have to justify (and fight) for the right to keep their land. If you add all the unused land in both the State's hands to the idle land in private hands, you will see that the buyers have too much to pick from (i.e. a buyer's market). What would a bank do with more acres to sell?

Then why does the government insist on land distribution? Maybe because it's the easiest thing to do and nothing beats a picture of the President giving ownership titles to a smiling peasant, even if that person is later trying to find somebody to sell to. However, if you spend enough time in the countryside, you will find out that much more important than the land itself, is having knowledgeable people willing to work it. For example, I have a cousin that was just out of college (he's a Agriculture Technician or "Técnico Agropecuario") and looking for something to work on. After trying for period of approximately 1 year, he was able to secure a government loan to buy cattle. At first, he had the animals in a land of his brothers' property in a certain section of the Cojedes state. However, this area was unsafe and full of cattle hustlers. So he decided to borrow land from cousins to keep the cattle there. He currently lives off his work in a respectable fashion (at least for Venezuelan small town standards) and he doesn't own the land where his cattle's on. On the other hand, I know other people who own land but don't have the time, capital and/or skills to work on it. Land can be compared to a bulldozer: if you don't have the skills and interest to work with it, you won't make money.

The government's agriculture strategy is flawed in principle although not completely in practice. Its idea of agriculture is based on the days before the industrial revolution and on failed communist policies. Chávez and his yes-men imagine a country full of peasants or small-scale producers feeding the rest of the inhabitants. If something was learnt from the industrial revolution is that economies of scale do work and they reduce the price of the goods that are produced. Obviously, catering to landowners and to farming professionals is not so popular as giving away worthless land to peasants, but neither is having the food prices increase every day.

Additionally, you cannot talk about agriculture in Venezuela and ignore the importance of personal security within the land premises. Nobody's going to invest time into a farm if he/she is risking being kidnapped. This is specially true in the states closest to the Colombian border in which the Colombian guerrilla acts although there are Venezuelan groups that also collect ransom from kidnapping.

Hence, improving farming output in Venezuela is much more complex than just splitting large estates and handing out the land to first-comers. The recipients are fooled into thinking that they will prosper because they have their small lots and the rest of the Venezuelans are fooled into thinking that food will become plentiful and cheap.



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