Agrarian reform in Venezuela : defensible from a socio-economic perspective?

Abstract: The land reform in Venezuela was introduced in 2001 and will according to its proponents decrease the country's oil dependency through increasing agricultural production. The law also intends to decrease inequalities in the society by giving land to landless peasants. To achieve this, a land tax will be introduced on unproductive land and land can also be expropriated or repossessed by the state. The land reform has been criticised a lot and its opponents believe the reform will result in a major flight of capital as well as decreasing investments because of insecurity and consequently less agricultural production. The aim of this paper is to find out whether this land reform could be defensible from a socio-economic perspective. To achieve the aim the starting point has been economic theories of how an agrarian reform could be conducted in an economically defensible way and focus has been on efficiency, investments and inequality. Further an interview study in Venezuela in the autumn of 2005 has been carried through. Does the Venezuelan land reform comply with the theoretical design? There are different opinions about this. Generally could be claimed that it does not comply with the traditional theories about efficiency, however, if the models are somewhat modified and under certain assumptions the reform might be defensible from an efficiency point of view. When it comes to investments it is uncertain whether they will increase because of secured property rights for the peasants or decrease because of the insecurity that large landowners experience. The final outcome will depend on how the law will be interpreted as well as to what extent the peasants will receive support. The reform will probably reduce inequalities in Venezuela, which could be favourable for the economy but this could also increase insecurity for investors. Further some practical problems might prevent a positive development.