Colombian land deals are scrutinized
Published: 28 Jun 2013
Posted in: 
Comments (0) Print Email this
Wall Street Journal | 28 June 2013
Peasants in Vichada department review their land titles. Documents suggest Cargill acquired thousands of acres from small farmers through 19 different legal entities controlled by four Cargill subsidiaries. (AFP/Getty)

Colombian land deals are scrutinized
Large firms bought out deeds distributed to farmers

    By
    SARA SCHAEFER MUÑOZ

BOGOTA—In Colombia's eastern plains, thousands of acres of federal land have been distributed to small-scale farmers through programs to reduce poverty and spur rural development.

But large corporations have ignited public anger by buying out many of the rural farmers and small cooperatives. Many Colombians say that although the farmers themselves agreed to sell the land, they view the acquisitions as a land grab from unsophisticated owners by powerful entities and an exploitation of the government's aid program.

Some politicians question whether the companies may have violated the law by surpassing strict limits over how much of the specially designated land one entity can own.

The issue highlights the challenges of the nation's broader land reform efforts, a central part of President Juan Manuel Santos's peace negotiations under way with the Revolutionary Armed Forces of Colombia, a rural insurgent group.

The concerns over the land deals also come amid an unprecedented period of growth and stability in Colombia after the government has worked to attract foreign investment in recent years.

The government is "trying to put in order property rights and figure out and resolve land conflicts, and behind the scenes, what these companies are doing is the opposite," said Absalón Machado, an economist and land reform consultant in Bogotá. "This, in some sense, generates a lack of trust in the state's ability to make progress in terms of this reform."

Among the buyers of the land are U.S. food giant Cargill Inc., Riopaila Castilla SA, Colombia's largest sugar producer, and Grupo Aval SA, GRUPOAVAL.BO -0.38% a financial firm owned by a Colombian billionaire who also owns El Tiempo, the country's largest newspaper, according to public documents and people close to the matter.

A Cargill spokeswoman said the company conducts business legally and ethically and is "confident the Colombian government will clarify and resolve the issue in a timely manner."

A Grupo Aval spokesman said none of the land that the company acquired was subject to the 1994 law—which sets limits on the amount of small parcels a single buyer can acquire—because those parcels were awarded to small farmers before the law took effect.

Riopaila declined to comment.

Colombia's attorney general has said he planned to refer the matter of the land sales to the country's anticorruption unit, which wasn't available to comment.

Through his press office, President Santos didn't respond to specific questions about the deals, but said, "No investor or land owner who acquired properties with money honestly made and in good faith should be worried.…Fortunately Colombia has enough land where peasants and companies can complement one another."

Most of the land sales took place in 2010, 2011 and 2012, and cumulatively involve the acquisition of around 300 square miles of land—about one-quarter the size of Rhode Island—that had been awarded to small-scale farmers, said a person close to the deals. It isn't clear how the three companies plan to use the land. Lawyers for the companies say it will mostly be developed for agriculture.

The uproar also involves the Colombian ambassador to Washington, Carlos Urrutia, a personal friend of President Santos and former managing partner of the Bogotá law firm bearing his name that advised Cargill and Riopaila on their land purchases.

Two opposition congressmen, Wilson Arias and Jorge Robledo, have publicly demanded an explanation of the role Mr. Urrutia's former law firm had in the deals.

A spokesman for Mr. Urrutia said he was unavailable to comment. The ambassador has said in a statement to local media that he resigned from the firm and sold his shares before becoming ambassador. He was managing partner of the firm when the deals were drafted.

A spokesman for the Brigard & Urrutia law firm said the deals are legal and bring agricultural investment and jobs to the country's Vichada department, a sparsely populated area that is home to cattle ranches and river valleys and lacks electricity and paved roads in many places.

The key question legal experts and many Colombians are asking is whether the companies involved violated the law that relates to federal lands given to poor farmers. While it isn't in all cases prohibited for recipients of the land to resell it, in most cases the law strictly limits how much a single buyer can acquire.

Critics say these limits led to the complex structures of some of the purchases.

In the case of sugar producer Riopaila, for example, the farmers sold their parcels to 27 different companies, which were transferred to Spanish firms belonging to a single holding company in Luxembourg, which is in turn is owned by Colombia's Riopaila Castilla, said a person familiar with the transaction. The company then planned to use the collection of small plots as one large tract, this person said.

The uproar deepened earlier this week when Mr. Arias posted documents on his website alleging that Cargill has acquired thousands of acres from small farmers in the same area through 19 different legal entities controlled by four Cargill subsidiaries.

Francisco Uribe, a Georgetown University-educated Colombian lawyer who advised on the Riopaila and Cargill deals, has staunchly defended their legality. Local magazine Semana quoted him as saying that the 1994 law doesn't apply to the lands in question and the purchases were made using overseas entities in order to attract European investment and offer an international jurisdiction in case the government tried to take back the land at some point in the future.

José Antonio Ocampo, a professor at Columbia University in New York and one of the architects of the 1994 law, said it was unclear if the law was violated, but "there was certainly a twisting of the law" because one of the main tenets of Colombia's land-redistribution efforts is to more equally distribute property. He called the sale structures "abnormal."

"People are outraged, especially because this coincides with the current peace process that is trying to encourage property distribution," Mr. Ocampo said.

Write to Sara Schaefer Muñoz at sara.munoz@wsj.com
Source:WSJ