derek byerlee (georgetown u) will masters (tufts u) daniel robinson (tufts u) 25 th march, 2015 1
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From Land Grab to Land Development: A Forgotten Role for Private Investment
Derek Byerlee (Georgetown U)Will Masters (Tufts U)
Daniel Robinson (Tufts U)25th March, 2015
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Transformative role of investment in land development (LD) overlooked in recent debates
Large investments per ha that greatly increase the productivity and value of land (e.g., irrigation)
Often significant economies of scale in development phase
But not usually economies of scale in farm operation phase
LD often subsidized/managed by the state but lack of resources and capacity
Historically successful private sector examples
Invested in land development but operated by family farms
Motivation
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1. Medium to large-scale irrigation
Economies of scale in building infrastructure 2. Some types of frontier expansion
Land clearing, soil amendments, pioneering experimentation, transactions cost for land acquisition, environmental compliance
3. Some types of plantations
Bulky products with quick processing require investments in roads and a mill
All with high upfront capital costs
Types of Land Development with Economies of Scale
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Options for Land Development Farm Operations
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InvestorInvestor
(few crops)
Land Development Phase (Economies of scale)
Farm Operation Phase (Few economies of scale)
Family farms
Hybrids (Nucleus-outgrower
Global capital and knowledge
Private Irrigation Schemes
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Historical Role of Private Investment
Late 19th century development of irrigation in US, Australia, Thailand• Private land & water
development• Concessions often
stipulated max size family farm operations
Investor profits based on land sales
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Development of Renmark Irrigation Scheme, Australia,1890s
Brazil, Peru, AustraliaHigh investment costs—often > $10,000/haLess focus now on family farmsHowever, Chinese investment in Oz
negotiated with indigenous groups ($50 M) Africa
Sugarcane with outgrowersRice but most large-scale operationsPPPs with smallholders (Zambia)
Contemporary Private Irrigation Schemes
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Land Development in Savannah Frontiers
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Historical—Private Settlement of Family Farmers
Land development and settlement• North Parana Land
Co (1.25 Mha)-1932-67
• Colonization companies for the Cerrado in 1970s & 80s
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AMP Land Development, Sth Aust, 1949-64• 340K ha of infertile
soils• Investment in soil
amendments, land clearing and improved pastures
• Objective to create family farms 6% return to company
Contemporary ExamplesBRAZIL SAVANNAH AREAS, AFRICA
Large land development companies in Brazil• BrasilAgro• SLC LandCo
Capital and knowledge for LD• $2,000-4,000/ha for LD• Purely market based and
results in more unequal land ownership
Infrastructural corridors searching for a model for private investment in land development• Inclusive of in situ
smallholders?• Potential for in-migrant
settlement of smallholders in low density areas
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Private land development often more successful than state schemes
Clear economies of scale in LD Many have been transformative—vibrant
family farm agriculture
But significant risks to investors and farmersCreates an immobile asset
Regulatory role of the state critical to create family farm agrarian structureBut often high costs to indigenous groups
Lessons from History
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Recognize that much land unproductive without significant investmentWon’t happen without private K
Recognize economies of scale for LD but not for farm operationDesign contracts and business models to
focus on investment in LD & turn over to smallholders
Balance deals with in situ smallholders with potential for in-migrant smallholders
Policy Implications for Today
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Extra
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Increase in land productivity from land development
High Low
Products suitable for family farm operation (most)
Land development Investor Family farms
Farm operations
Family farm in situ & settlers
Nucleus-outgrowerFamily farms
Products suitable for large farm operation (e.g., s/cane, oil palm)
Land development Investor Not applicable
Farm operations
InvestorNucleus-
outgrower, contract
Extensive cattle operations
Typology of Land Development and Farm Operation
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