Land Grabs and the World Bank

By Joshua Pringle

The United Nations estimates that the global population will grow to 9.2 billion by 2050 (from 7 billion now), 70 percent more food will be needed to feed everyone, and food prices will rise with demand. Climate change threatens to exacerbate the challenge of food production as droughts, fires and floods damage arable land with increasing frequency and magnitude. Thus, fertile land is becoming more valuable by the day.

Public and private investors, both foreign and domestic, are buying or leasing large tracts of fertile land from developing countries in deals commonly referred to as "land grabs." Countries concerned about their own food security, particularly in Asia and the Middle East, are seeking to obtain offshore farms from which to export food crops (often exporting their food insecurity to the country whose land they are utilizing in the process). Private investors see an opportunity to make a large profit by exporting food crops or biofuels, often enticed by tax incentives, low labor costs and giveaway prices. In most cases, the governments selling this land do not consult the local population that has been subsisting off the land for generations. Farmers get kicked off their farms, sometimes compensated, sometimes not.

Since the financial and food crises of 2008, the World Bank Group has incentivized and facilitated land grabs in several countries in Africa, Latin America and parts of Asia. Through its private-sector arm, the International Finance Corporation, as well as its Foreign Investment Advisory Service and program to Remove Administrative Barriers to Investment, the World Bank has worked to reform land laws and offer tax holidays that attract investors to farmland, while also providing technical assistance and advisory services to the governments of developing countries that are in need of foreign direct investment.

The World Bank claims that it works to help countries overcome inequality and ensure that new land investments offer benefits shared by local populations. Its Principles for Responsible Agricultural Investment (RAI), a list of voluntary principles for investors in agriculture, specifically lays out principles that are meant to protect the food security and natural resources of the public. The World Bank not only fails to comply with its own principles regarding agricultural investment; the Bank's policies actually accomplish the opposite of its stated goals, facilitating land deals that have deleterious effects on local populations.

World Bank Principles

In May 2008, the World Bank responded to the financial and food crises by creating the Global Food Crisis Response Program (GFRP), which led to a 54 percent increase in the next fiscal year in World Bank loans, grants and equity investments. In October 2009, the Bank acted as the central organizer in establishing a multilateral trust fund to support a multibillion-dollar food-security initiative with the G-20. Joan Baxter, a research fellow at the Oakland Institute, notes that, in 2009 alone, the Bank estimates that foreign investors acquired approximately 56 million hectares of farmland—"an area about the size of France"—by long-term lease or purchase in developing countries. "The investment promotion agencies are developing and advertising a veritable smorgasbord of incentives not just to attract foreign investment in farmland, but also to ensure maximum profits to investors. … Investors may pay just a couple of dollars per hectare per year for the land, and in Mali, sometimes no land rent at all."

The Bank has continued to defend the RAI principles that it drafted jointly in April 2010 with the International Fund for Agricultural Development, UN Food and Agriculture Organization, and UN Conference on Trade and Development. The RAI principles encourage, but do not mandate, that existing rights to land and associated natural resources are recognized and respected; investments do not jeopardize food security but rather strengthen it; investments are transparent, monitored and ensure accountability by all stakeholders within a proper business, legal and regulatory environment; all those materially affected are consulted and agreements from consultations are recorded and enforced; and environmental impacts are minimized and mitigated.

None of these standards are being met. Because the principles are not legally binding—and because the Bank, in purporting to hold apolitical status, asserts that securing property rights is a matter to be left to governments—the Bretton Woods project argues that the RAI principles merely "legitimize land grabbing from smallholders."

Ethiopia

In June 2009, a policy brief by the Food and Agriculture Department of the United Nations stated, "The agricultural sector in developing countries is in urgent need of capital," and in order to halve the number of the world's hungry by 2015, "at least $30 billion of additional funds are required annually." It is because of this urgent need, and because an estimated 70 percent of the demand for farmland is in Africa, Baxter says, "that low-income and food-deficit African countries, some still struggling to rebuild after long conflicts, such as Sierra Leone and Liberia, find themselves competing with each other to offer foreign investors ever sweeter deals on their arable land, so desperately needed for local food production."

The Oakland Institute (OI), which has done extensive investigative research in seven African countries where land grabs are taking place (Ethiopia, Mali, Mozambique, Sierra Leone, South Sudan, Tanzania and Zambia), finds that Ethiopia has been the largest recipient of the World Bank's GFRP program. Between early 2008 and January 2011, OI research finds, the Ethiopian government transferred at least 3.6 million ha of land to investors, although the actual number could be higher. "Ethiopia has created a very attractive investment climate in recent years by providing potential investors with various tax breaks, access to affordable land, and a relatively efficient investment process."

Ethiopia is a member of several international agreements that reduce risk for foreign investors, such as the World Bank's Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which details international arbitration procedures for disputes with foreign investors, and the World Bank's Multilateral Investment Guarantee Agency, which insures foreign investors against potential political risks including expropriation and war damages. However, the OI says, "While there is undoubted need for foreign direct investment in Ethiopia, there are widespread concerns that these land investments are not being undertaken in a manner that safeguards the social, environmental and food needs of local populations."

Ethiopians consistently suffer endemic food insecurity and malnutrition. In 2009, some 7.8 million Ethiopians (10 percent of the population) were considered chronically hungry. The Food Security Index for 2010 counted Ethiopia as the sixth most at-risk country out of the 162 countries surveyed. The OI says, "Despite Ethiopia's endemic poverty and food insecurity, there are no mechanisms in place to ensure that these investments contribute to improved food security. In addition, there are numerous incentives to ensure that food production is exported out of the country, providing foreign exchange for the country at the expense of local food supplies."

The Ethiopian government insists that no farmers are displaced by these land deals, that the land being granted is unused—a claim the OI finds blatantly untrue. "In Gambella and Benishangul, respectively, 45,000 and 90,000 households are slated for relocation due to villagization and land investment displacements, resulting in a loss of livelihood for over 650,000 people." Displacement is widespread, and the vast majority of locals do not receive compensation. The government insists that communities are being consulted about land deals, but local populations often don't find out about them until the bulldozers show up.

Forests and wildlife habitats are cleared, and water is used without restriction. "There is nothing in place to ensure that local people benefit from the business opportunities that these investments could present," the OI concludes. The degradation to the land and "the loss of livelihood are difficult to understate. … Decreased food security, the likely increase in natural-resource-related conflict, loss of self-worth, and erosion of cultural identity are all probably outcomes of livelihood loss. Thus, the adverse impact of land investment on the lives of local people will be dramatic, long term and potentially irreversible."

If the needs of African communities were taken into consideration—not only in Ethiopia, but across the gamut of African land grabs—foreign direct investment could be directed to numerous critical areas, such as the need for roads, schools, health centers, farming equipment and technology, water wells, and general infrastructure. Unfortunately, Baxter says, "Conspicuously absent in the talk about the purported benefits of the land deals is serious discussion of protection of local people, human and environmental health, water resources, biodiversity, human rights, food security, and free prior informed consent of the affected communities."

India

In India, a country where 65 percent of the population is dependent on the land, land grabs have been facilitated by the Land Acquisition Act of 1894, which allows the government to acquire land from landowners by paying a government-fixed compensation. A 1991 World Bank structural-adjustment program reversed land reform that had created laws that kept lands under ownership of the tiller. The 1894 Land Acquisition Act was untouched, thus making it easier for the government to acquire land and sell it to foreign investors.

Vandana Shiva reports, "While land has been taken from farmers at Rs 300 ($6) per square meter by the government—using the Land Acquisition Act—it is sold by developers at Rs 600,000 ($13,450) per square meter—a 200,000 percent increase in price, and hence profits. This land grab and the profits contribute to poverty, dispossession and conflict." Not all the land is being grabbed for agribusiness; some is being bought by investors to build racetracks and expressways. To protect the interests of the POSCO Steel project, India's largest foreign investment, the government has set about destroying as many as 40 farms a day. Nonviolent Indian protestors have been fired at and killed by the government.

Elsewhere

Land grabs are happening in developing countries all over the world: China, Pakistan, Indonesia, Colombia, Paraguay, Bolivia, Guatemala, Honduras. The MERCOSUR countries of Argentina, Uruguay and Brazil have implemented initiatives that regulate foreign purchases of land. But in Argentina, President Cristina Kirchner passed a law that allows foreigners to rent land, rather than buying it, which some argue is even worse because it permits the environmental degradation of agrochemicals and large-scale farming to take its toll without any long-term accountability in place.

Chinese food corporation Heilogjiang Beidahuang State Faros Business Trade Group Co., Ltd. is investing in irrigation systems in Rio Negro, Argentina, in exchange for land rental that it will use to export genetically modified food staples back to China. The Council on Hemispheric Affairs finds, "Chinese irrigation practices are notably problematic, as almost 40 percent of China's total land is plagued by soil erosion. Worried that these practices will be transferred to the Río Negro valley, environmentalists and concerned citizens have begun to protest." As another example of the lack of free, prior and informed consent in land grabs, "The provincial government leased these lands to the Chinese corporation without ever consulting the true owners of the land—the Mapuche."

As the case of Argentina illustrates, governments clearly play a major role in protecting (or failing to protect) the rights and interests of its citizens in these land deals. However, World Bank policies have been these governments' partner in crime, exhibiting blatant disregard for local populations and contradicting the RAI principles the Bank claims to uphold. As long as the World Bank continues to act as an engine for land deals that exacerbate food insecurities of local populations, remove agrarian families from their properties without compensation or informed consent, and result in unsustainable exploitation of natural resources, the Bank cannot claim with any veracity that helping countries reduce poverty and hunger is at the core of its agenda.