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The Journal of Peasant Studies

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Latifundio and the logic of underdevelopment: thecase of Venezuela’s Sur del Lago

Chris Carlson

To cite this article: Chris Carlson (2016): Latifundio and the logic of underdevelopment: thecase of Venezuela’s Sur del Lago , The Journal of Peasant Studies

To link to this article: http://dx.doi.org/10.1080/03066150.2016.1185417

Published online: 02 Aug 2016.

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Latifundio and the logic of underdevelopment: the case of Venezuela’sSur del Lago

Chris Carlson

Underdevelopment in Venezuela is often understood as a product of oil dependence,weak state capacity or a subordinate position in the international division of labor.Yet all of these should be seen more as consequences of underdevelopment ratherthan its causes. This contribution posits an alternative explanation forunderdevelopment in Venezuela based on rural property relations and their impact onindustrialization and the diversification of the local economy. An in-depth case studyof one of Venezuela’s most important agricultural regions seeks to uncover theinternal productive logic of the region’s large rural estates, and argues that thedominance of these ‘latifundios’ and the resulting rural economy are at the root ofunderdevelopment in Venezuela.

Keywords: latifundio; Venezuela; development; property relations; agriculture;industrialization

Introduction

Venezuelan anthropologist Miguel Acosta Saignes (2009) once argued that the root causeof underdevelopment in Venezuela was the latifundio – the large rural estates that longdominated the countryside throughout much of Latin America. Writing in the 1930s, heclaimed it was the coercive labor regimes on these estates that kept workers mired inpoverty and prevented them from forming the basis of a domestic market for consumergoods. As long as large expanses of the countryside remained under the control of thesesemi-feudal estates, he argued, it would be impossible to develop a national market thatwould stimulate local industry and drive overall economic development.

But much has changed since the 1930s, and the coercive labor regimes that once pre-dominated in the countryside have long ceased to exist. The latifundio estates have moder-nized, agrarian reform and the growth of land markets have given rise to a new class offarmers, and pockets of modern mechanized agriculture have emerged around thecountry. Yet there also remain certain continuities with the past, as land ownership con-tinues to be concentrated in the hands of a small minority, and, more importantly, vastexpanses of fertile land remain underutilized or entirely unproductive. Like much ofLatin America, agricultural productivity lags far behind that of the developed world, andthe country is forced to import much of its food.

Despite important changes in the twentieth century, I argue that the structure of the ruraleconomy still lies at the root of underdevelopment in Venezuela. Behind the problem of thelatifundio highlighted by Acosta Saignes was a specific logic of production that remains inplace still today. It was not the coercive social relations between landowners and workers

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that was the cause of underdevelopment, but rather specific property relations, the relation-ship between landowners and their land, that led to a logic of low-intensity, low-pro-ductivity production strategies. These property relations, in turn, are the product ofcertain forms of land appropriation that have hindered the emergence of market disciplineand thereby have prevented the kind of agricultural revolution that would fuel industrializ-ation and drive development.

Agricultural revolutions were the sine qua non of capitalist development in much of thedeveloped world, and yet Venezuela, like much of Latin America, has never experiencedhigh rates of agricultural productivity growth. The reason, I argue, is that Venezuela’srural property relations were never transformed in such as way as to force producers tomaximize productivity like their counterparts in the North – by channeling investmentinto technical improvements and industrial inputs. Instead, a lack of market disciplinehas allowed producers to channel profits out of agriculture into consumption or speculativeinvestments, thus short-circuiting the process of capital accumulation. The result is arestricted domestic market for industrial goods, and limited possibilities for further indus-trialization and economic development.

This argument is quite different from conventional explanations for Venezuela’s devel-opment failures, which focus mostly on the country’s dependence on oil and the related dis-tortions in the economy. Many scholars focus on the state, its failed policies, weakinstitutional capacity or the inability to discipline capital into making the necessary invest-ments. However, none of these explanations actually gets to the root causes of underdeve-lopment, and instead they end up pointing to its various consequences. Missing is anydetailed analysis of the productive logic of the private sector.

In this study, I focus on one of Venezuela’s most important agricultural regions, the Surdel Lago in the western state of Zulia, and use it as a case study of how the specific way inwhich land is appropriated leads to specific property relations and a certain logic of pro-duction. Archival documents and land registry records provide the details of how thisregion’s land was settled from the late nineteenth century, and the conditions underwhich its current occupants acquired their land. By zeroing in at the level of individual pro-ductive units – two large farms in particular that are characteristic of the latifundio estatesthat predominate in the region – the rural productive logic is further illustrated as it con-tinues to exist up to the present day. It is this underproductive rural economy, I argue,that is at the root of underdevelopment in Venezuela.

Causes or consequences?

Today, little attention is given to the problems of the rural economy that Acosta Saignespointed to years ago. The rise of the oil industry and its dominant position in the Venezue-lan economy have led most scholars to center their attention on the effects of oil wealth andthe economic and political distortions associated with oil dependence. Theories such as the‘resource curse’ and ‘Dutch disease’ see the problems of underdevelopment as the result ofnegative effects of oil on the economy and state institutions, and thus they see oil depen-dence as the primary cause for Venezuela’s development failures.

To be sure, studies show that countries with high ratios of natural resource exports tendto have worse economic performance (Sachs and Warner 1997; Rodriguez and Sachs1999). Scholars argue that this happens for a number of reasons, including a decline inthe competitiveness of other sectors, decreased bureaucratic efficiency, or increased politi-cal corruption and conflict. Various authors point to the easy wealth that oil provides, andclaim it leads to greater incentives for rent seeking, the development of rentier states with

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weak institutional capacity, or a general culture of political corruption and ‘rent capture’(Karl 1997; Coronil 1997). All of this ostensibly prevents the state from facilitating invest-ment in productivity growth, and thereby promoting development.

However, more recent studies have challenged the methodology of the ‘resource curse’.They argue that the focus on dependence on resources – as opposed to overall abundance ofresources – obscures the relationship between resource wealth and development (Brunnsch-weiler and Bulte 2008). In fact, these studies suggest the direction of causality is more likelythe reverse – it is not oil dependence that causes underdevelopment, but rather underdeve-lopment that leads to oil dependence. When looking at overall abundance of resources,countries with more resources actually tend to have better outcomes than those with less(Cavalcanti, Mohaddes, and Raissi 2011), making it doubtful that resource wealth couldbe the causal mechanism behind underdevelopment. In addition, ‘resource curse’ theoriesseldom account for how countries become dependent on primary resources to begin with,nor why the development problems they seek to explain were often present long before theadvent of the oil industry.

Indeed, DiJohn (2009, 35–107) argues that in the case of Venezuela the oil theses havevery little explanatory power. This is because the distortions wrought by oil rents are notautomatic, but rather depend greatly on domestic policy. In Venezuela, the state has longprovided protections and subsidies for domestic industry and agriculture in order to neutral-ize the effects of oil-related distortions. The maintenance of various policies such as tariffs,price controls and import quotas has meant that domestic firms have usually been shelteredfrom the distortions of oil booms, allowing for significant growth in manufacturing andagriculture throughout oil boom periods. In addition, DiJohn argues there is little evidencethat ‘Dutch disease’ or a ‘rentier state’ had any uniform long-term effects on growth. Con-trary to what ‘resource curse’ theories would predict, Venezuela has experienced periods ofrapid economic and industrial growth that have coincided with large increases in oilrevenues.

Thus, DiJohn dismisses the various oil theses, and instead points to weak state capacityas the key variable in Venezuelan underdevelopment (2009, 169–270). His argument is thatVenezuela’s failings have more to do with its inability to move past the easy stage of importsubstitution into a big-push, heavy industrialization strategy. This transition required a highlevel of state capacity to discipline capital and coordinate investments, something Venezue-la’s fragmented and populist political system would not allow for. Therefore, the lack ofstate capacity meant the industrialization process faltered with the exhaustion of the easystage of import substitution, and the country was unable to deepen the development process.

Indeed, arguments that focus on the state’s capacity to discipline capital have becomepopular in development studies in recent years (Evans 1995; Chibber 2003; Davis 2004).The varying ability to impose discipline and press producers to make investments andimprove productivity has become a common explanation for what separates success fromfailure among developing countries. Yet these approaches tend to leave out an importantpiece of the puzzle – the question of why state discipline is needed in the first place. Ifduring classical capitalist development capital accumulation was largely driven bymarket forces and market competition, what makes the developing world different? Whyare producers in the South not forced to continually improve productivity throughmarket forces like their counterparts in the North? After all, state discipline would hardlybe needed if market competition forced producers to maximize productivity, adopt newtechnologies and reinvest profits.

The reason often cited for a lack of competitive pressures is oligopolistic market struc-tures and weak domestic markets (Chibber 2003, 32–35). The relatively small size of

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markets in developing countries means they are often characterized by a small number offirms in each sector, leading to little competitive pressure and thus the need for the state toimpose discipline. But how do we account for the poverty of the domestic market thatcreates this scenario in the first place? The state discipline literature does not provide anadequate answer to this question.

Neoliberal accounts, on the other hand, have tended to focus on state intervention in themarket as the principal cause for market failures. State policies create oligopolistic marketstructures and allow firms to depend on state support to avoid market competition (Naímand Frances 1995; Enright, Francés, and Saavedra 1996). Therefore, these scholarsbelieve that rolling back state interventions allows the market to function and impose dis-cipline on producers, forcing them to maximize productivity. However, this argument isahistorical, as in most cases the lagging productivity and stagnant economic performancelong preceded the interventionist policies of the mid-twentieth century, and, as in thecase of Venezuela, the situation did not improve with the neoliberal reforms of the1990s (DiJohn 2009, 108–29).

What all of these approaches have in common is that they analyze one or another of thevarious consequences of underdevelopment, without arriving at the root causes. This is alsothe case with dependency-inspired theories that attempt to link Venezuela’s underdevelop-ment to its position in the world economy as a primary exporter (Coronil 1997; Rangel2003). Much like the ‘resource curse’ literature, these accounts have difficulty explaininghow or why Venezuela came to depend on primary exports, and simply claim thecountry was ‘assigned’ a certain position in the international division of labor (Coronil1997, 29–30). But while it is true that integration into the global economy played a rolein determining what commodities would be produced for export, it did not determine theinternal logic of production, which, as we will see, was the key variable in the economy’sfailure to diversify away from primary exports, and thus escape its position in the inter-national division of labor.

At the core of each of the above problems, I argue, are the structure of the rural economyand its logic of low productivity. It is here we find the explanation for the relatively weakinternal market, and thus the reason for oligopolistic market structures and the need for statediscipline. It is here that we find the explanation for the inability of the Venezuelaneconomy to diversify away from primary goods, and thus the reason for continued oildependence. It is also here, in the rural economy, where we find the core reasons for a rela-tive lack of market discipline, and thus the failure of producers to maximize productivity.As will be explained in the next section, in much of the developed world it was in the ruraleconomy that a transition to capitalist property relations first brought about a generalizationof market discipline, and led to sustained processes of capitalist accumulation and industri-alization. This transition failed to occur throughout much of the Venezuelan countryside.

The agrarian origins of development

It was Marx who first pointed to the countryside as the point of departure for the capitalistmode of production. The expropriation of the English peasantry created a ‘revolution inproperty relations’, which, in turn, led to an ‘agricultural revolution’ with greatly improvedproductivity and methods of cultivation (Marx 1976, 908). This created what Marx called a‘home market’ for capital, as producers who were previously self-sustaining were forced topurchase their needs on the market, and thus were converted into ‘one great market pro-vided for by industrial capital’ (Marx 1976, 911). Lenin also pointed to the importanceof agriculture in the creation of a home market, emphasizing the market for capital

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goods as ‘commercial agriculture’ used increasingly modern methods of production andincreased the demand for manufactured goods and agricultural ‘means of production’(Lenin 1964, 68).

But the motor force behind these changes was first explained by Brenner (1976), whopointed to the key role of agrarian property relations in the transition to capitalism. Whatseparated capitalist agriculture from its pre-capitalist predecessors was a unique set of prop-erty relations – a unique relationship between producers and their land – in which access toland became mediated by market competition. Once English peasants had been expro-priated from their land, they were then forced to access land through the market andwere thereby forced to realize a level of income from the land equal to what any othertenant might realize. Producers became market dependent – forced to sell competitivelyon the market in order to pay for their land – and thus were disciplined by the market tomatch the competition by maximizing efficiency and channeling investment into improve-ments in productivity. This generalization of market discipline, Brenner argues, broughtabout sustained processes of capitalist accumulation, a transformation of pre-capitalist agri-culture, and, in turn, created the conditions for industrialization and capitalist developmentin England.

Following the work of Brenner, other scholars have found evidence that a process alongthese lines occurred in other developed countries as well. Post (2011), for example, hasargued that similar forces were at work in the economic development of the UnitedStates. During colonial times in North America, rural production was not dependent onthe market, and usually prioritized subsistence over commodity production. But whengrowing land speculation in the nineteenth century made it increasingly difficult toacquire cheap land on the frontier, access to land became mediated by the market, and pro-ducers were forced to concentrate on production of cash crops in order to make payments ontheir land. As in England before, new property relations – a new relationship between pro-ducers and their land – forced a change in production strategy, as producers began to sys-tematically specialize for the market, maximize efficiency and channel investment back intoproduction in order to match the competition and hold their place in the market (Post 2011,73–102).

It is important to note that producers did not necessarily see it as in their interests tomaximize output or improve productivity until they were compelled to do so by marketforces. Before the transition, English peasants that had non-market access to the landusually found it to be more rational to minimize risk and not open themselves up to thepotential pitfalls and pressures of market competition. They did this by engaging in‘safety-first agriculture’, producing first for their own subsistence and only marketing sur-pluses to boost their consumption. The same occurred among the early colonists in NorthAmerica, who prioritized subsistence production and often engaged in extensive land use,harvesting land for its natural wealth instead of undertaking intensive cultivation (Cochrane1993, 13–55). Unmediated access to land meant producers were not at risk of losing theirland if they did not maintain a certain level of efficiency, and thus they were not compelledto make systematic investments in productivity.

The key here is that the kind of market discipline that is characteristic of capitalismarises only under very specific conditions. Economic agents will be compelled to maximizeoutput only under certain property relations, where their economic survival depends onmaintaining a competitive level of production. Market discipline is thus the motor forcebehind sustained processes of capitalist accumulation and technical change, as it is onlywhen producers are compelled by the market to maximize productivity that they can be

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expected to systematically reinvest profits and continuously make innovations in the pro-ductive process.

The flip side of this, of course, is that in the absence of these conditions – under distinctnon-capitalist property relations – producers will often prefer to forgo maximizing pro-ductivity, and instead employ low-risk productive strategies. Where land is appropriatedoutside the market, or where access to land is not mediated by market competition, produ-cers will be under little pressure to maintain a certain level of productivity, and thus will notbe systematically compelled to plow profits back into improvements in production. Instead,profits may be used for consumption or speculative investment, channeled into less risky ormore lucrative endeavors, and a process of sustained capitalist accumulation and technicalchange will not occur.

Thus, behind the agricultural and industrial revolutions that Marx described in Capitalwas an important change in property relations. Land became a commodity to which accesswas mediated by the market, and this led to a generalization of market discipline in thecountryside. This was key to the transformation of agriculture, and, in turn, created therequisite ‘home market’ that fueled the process of industrialization. However, wherethese property relations did not take hold – and consequently where agricultural revolutionsdid not occur – unproductive agriculture presented a barrier to successful industrialization.

Still, today, many scholars point to the persistence of obstacles in the countryside ofdeveloping countries and the key role that they play in limiting industrial development(Mundle 1985; Byres 1996; Kay 2002). They focus on the relative lack of agriculture–industry linkages, the weakness of agriculture as a source of surplus, and how low-pro-ductivity agriculture impinges on the growth of domestic markets due to its effects onwages and overall levels of consumption. Venezuela’s agricultural sector is a case inpoint, as low productivity epitomized by the continued existence of underproductive lati-fundios hinders economic development both by contributing to unemployment and lowwages, and by greatly restricting demand from the agricultural sector. Low investmenttowards agricultural improvements translates into weak demand for the kinds of industrialinputs that characterize intensive agriculture in the developed world, thus limiting the roleof agriculture in driving industrial growth.

The explanation for this unproductive agricultural sector lies in the same factors high-lighted above – in the predominant property relations among rural producers. Not only hasland in Venezuela been historically appropriated outside the market, but still, today, posses-sion of the land for many producers is not mediated by market competition, and thus there islittle compulsion to maximize productivity. Instead, vast areas of fertile land are used forextensive cattle grazing, while profits are channeled out of agriculture into commerce orbanking. This will be illustrated in the next section by tracing how patterns of land appro-priation in one of Venezuela’s most important agricultural regions have resulted in specificproperty relations and a certain productive logic among landowners.

Venezuela’s Sur del Lago

In December 2010, the zone south of Lake Maracaibo known as the Sur del Lago was thrustinto Venezuela’s national spotlight. Speaking on live television, President Hugo Chavezannounced the expropriation of 47 of the region’s largest farms. These farms, he argued,were low-productivity latifundios that underutilized the land and exploited their workers,and would therefore be taken from their owners and redistributed as part of the govern-ment’s ‘war on latifundio’. Such a sweeping measure had never been taken against theSur del Lago landholding class, and many of the powerful ranchers vowed to resist,

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threatening violence and blocking roads. Shortly after, the Venezuelan military was sent into occupy the zone and enforce the government takeovers.

Though criticized and ridiculed by the media, Chavez’s claims about the farms were notunfounded. A 1993World Bank report had described the region as having ‘very fertile land,able to support a wide variety of production systems’, yet much of the area was being under-utilized, as ‘over 90 percent of the arable land is used for cattle’. Part of the reason, thereport said, is that much of the land is ‘controlled by a few large landholders’, many ofwhom are ‘said to be traditional latifundistas’ (World Bank 1993, 9).

As shown in Table 1, land ownership in the state of Zulia is fairly concentrated, withthree percent of farms occupying 44 percent of the land. Many of the farms Chaveznamed for expropriation were massive in size, reaching 4000 hectares (10,000 acres),and they occupied some of the region’s most fertile land. Yet nearly all the farms werebeing used for extensive cattle grazing, averaging only one or two head of cattle perhectare, and often leaving a significant portion of the land unused (Contreras 2011). Pro-ductivity in the region is quite low, with annual milk production averaging around 1000liters per cow, and beef production around 130 kilograms per hectare, whereas in the devel-oped world these can exceed 4000 and 400, respectively (Urdaneta 2012, 105; Verde 1992).

Scholars have noted a conservative, ‘risk-averse’ logic among producers in the region.Poor management, failure to adopt available technologies, a lack of improved feed or sup-plements, little use of fertilizers and hormones, and a ‘resistance to change’ have all beensaid to characterize Sur del Lago cattle farmers (Peña 2012, 23–32; Carrizales, Paredes, andCapriles 2000). The typical production system is dual-purpose grazing in which cows areraised for both their dairy and meat production. This system is of lower productivity andless profitable than specialized production of milk or beef, but, as noted by Carrizales,Paredes, and Capriles (2000), it allows producers tominimize risk, as it gives them the flexi-bility to adjust production to changes in the market, withholding beef sales when prices arelow, while still having the constant income from milk sales (Urdaneta 2012, 100–04). Andit is a system that requires relatively little investment in infrastructure or inputs, and thus hasrelatively low costs (Urdaneta 2012; Llambí 1988, 201–223).

More important than the low productivity of the dual-purpose cattle system is the poorutilization of the land. Given the high soil fertility in this region, there is little question that

Table 1. Concentration of agricultural land, 2007.

Size (hectares)

Zulia Venezuela

Farms Area Farms Area

< 50 26,76975%

277,13510%

349,10682%

3,039,15311%

50–200 553816%

531,59820%

49,24712%

4,572,66617%

200–500 23096%

687,96626%

15,9943.7%

4,666,45817%

500–1000 7322%

486,28518%

58901.4%

3,837,22314%

> 1000 3471%

703,35726%

40190.9%

10,958,37941%

Total 35,695100%

2,686,341100%

424,256100%

27,073,879100%

Source: GBV (2010).

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intensive cultivation of crops would yield much higher profits than the current system ofextensive grazing does. Profits on the cattle farms average between USD 100 and 150per hectare per year (Urdaneta 2012), whereas the cultivation of various grains, fruits orvegetables in Venezuela can generate anywhere from USD 275 to 500 per hectare peryear (Vivas and Albisu 2012; Paredes, Guerrero Castillo, and Martínez 2007). Accordingto one study, total income from one hectare of land cultivated with various crops wouldgross more than four times what the same hectare of land grosses under the dual-purposegrazing system (OAS 1975).

So how do we account for this seemingly irrational productive logic among the Sur delLago cattle farmers? Conventional economic theories of profit maximization and rationalchoice cannot provide an answer. According to these theories, the use of vast tracts offertile land for inefficient, low-intensity cattle grazing would be entirely illogical giventhe opportunity costs and availability of higher profit alternatives. Yet much of Venezuelais dominated by large holdings that employ extensive rather than intensive uses of the land.Though the labor regimes have changed greatly over time – from slave labor and debtpeonage to wage labor – the underlying productive logic of these farms has remained rela-tively intact up to the present. To understand why, we must look at the specific ways inwhich the land has been appropriated.

Land appropriation

Until the end of the nineteenth century, European colonization of the Sur del Lago regionwas sparse, with most settlement limited to small villages located on the shores of thevarious rivers that flow down from the Venezuelan and Colombian Andes into Lake Mar-acaibo. Much of the rest of the hot, humid territory of tropical savannas and jungles thatruns from the southern shores of Lake Maracaibo south to the Venezuelan Andes andwest to the Colombian border was still a frontier zone at this time, home to the MotilónIndians who had resisted European settlement for centuries, but were increasingly inte-grated into Hispanic society by the nineteenth century (Linder 1992, 77–123).

Although in much of the country massive swaths of land had been appropriated sincecolonial times in the form of land grants, by the end of the nineteenth century most ofthe land in this region was still considered tierras baldías – state land that had not yetbeen granted to anyone. This land was typically appropriated by locals through simpleoccupation without purchase or formal title. Yet by the turn of the century increasingnumbers of people began requesting formal title to land in the region.1 Titles could beobtained by submitting a petition with a rough description of the area and boundaries ofthe land, the intended use and the form of payment. Most petitions were made duringthe early years of the Gomez regime (1908–1935), often by individuals with close ties tothe regime, and usually for very large plots of land. According to one study, the averagesize of the requests between 1880 and 1920 was 1531 hectares (3783 acres), and about40 percent of those were requested free of charge (Linder 1992, 152).

Petitioners were often not residents of the Sur del Lago, but rather merchants and cattleranchers from the surrounding areas who sought land as an investment. As we will see, thiskind of investment in land becomes important in explaining the productive logic that con-tinued here throughout the twentieth century. Land within range of the port city of Mara-caibo could be used to supply beef, dairy products or sugar cane to markets there, while

1Acervo Histórico del Estado Zulia (AHEZ): Registro de Tierras Baldías.

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timber and other natural products from the land could also be sold locally or exported. Peti-tioners usually offered to pay for the land with government bonds, indicating they wereholders of government debt and thus likely from the wealthier strata of society. Theprices for tierras baldías were usually as low as one or two bolívars per hectare, yet theadministrative costs of submitting a petition made requesting title too expensive formuch of the population (Linder 1992, 161–62).

Massive expanses of land were appropriated in this way in the early decades of thetwentieth century. Between the years of 1903 and 1919, one Maracaibo merchant namedOnésimo Rincón requested title to over 25,000 hectares (62,000 acres) of tierras baldíasto be used in cattle grazing.2 Another named Guillermino Paz requested over 17,000 hec-tares (42,000 acres).3 By 1927, President Gomez’s cousin Santos Matute Gomez hadamassed 10,000 hectares (25,000 acres) that he used to graze 800 head of cattle, whileGomez’s brother-in-law F.A. Colmenares Pacheco had at least 3200 hectares (8000acres), with 2300 head of cattle.4 Prominent merchants from the city such as JuanE. París and H. L. Boulton also acquired large amounts of land in the Sur del Lago,either for cattle ranching or to grow sugar cane for domestic and foreign markets (Linder1992, 189–226).

Right away, this form of land appropriation translated to a certain logic of production.Cattle ranchers began converting arable land into pasture, causing small producers todenounce the invasion of lands they had under cultivation.5 As early as the 1890s, campe-sinos were complaining to state officials that cattle ranchers were using land that was‘undoubtedly fit for agriculture, not for grazing’.6 Local officials complained that ranchershad ‘taken over all the land’, and that many of the lands requested for cattle grazing ‘actu-ally seem to be first-class agricultural lands’.7 One official noted that many of those whohad acquired land were ‘only concern[ed] with exploiting the precious woods thatabound, ignoring their duty to use [the land] for agriculture or livestock’.8

This was a direct result of the way in which the land had been appropriated, which putlittle pressure on producers to maximize its productivity. Unlike English tenant farmers orNorth American household farmers who appropriated land through a competitive marketand therefore were forced to extract a competitive level of surplus from that land inorder to pay market prices, producers in the Sur del Lago enjoyed a relative lack ofmarket constraints. Not only did they not acquire the land in a competitive market, buttheir ability to maintain possession of the land did not depend on competition in themarket – that is, they did not depend on competitive production of the land in order topay for it – and thus there was little pressuring them to maximize the productivity oftheir holdings.

Instead, landowners sought to minimize risk by investing little in the land, and simplycollecting rents from the cattle herds that roamed their land, or from other extractableresources. Various petitioners stated that they preferred to use the land for livestockbecause it would ‘not be possible to dedicate it to agriculture without large expenses and

2AHEZ, Registro de Tierras Baldías, 1893–1909 No. 86, 160; 1903, t. 6, l. 2; 1910, t. 24; 1911, t. 9,l. 24; 1915, t. 7, l. 7; 1915, t. 12; 1917, t. 7.3AHEZ, Registro de Tierras Baldías: 1898; 1905; 1910 t. 24; 1915 t. 12; 1917 t. 7.4AHEZ 1927: t. 3, l. 18.5AHEZ 1893:t. 18, l. 21.6AHEZ 1891:t. 16, l. 17.7AHEZ 1892:t. 8, l. 12; 1910, t. 6, l. 29.8AHEZ 1907:t. 2, l. 10.

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risks’.9 Land surveyors noted that the abundant rivers made irrigation a viable option,10 yetthose requesting land claimed that this too would cause ‘great expenses and risks’.11

Cultivation is no doubt a riskier enterprise than cattle grazing, requiring more labor,greater expenses, and investment in costly inputs and infrastructure. Growing crops alsoentails a number of risks related to the vagaries of weather, long gestation periods andthe seasonality of production. But these are risks that would be unavoidable for producersembedded in a capitalist logic of market competition and profit maximization. The fact thatproducers in the Sur del Lago could avoid taking these risks can only be attributed to thepresence of property relations in which competitive production had little bearing on theireconomic survival.

Non-market appropriation of the land meant that the cost of land seldom reflected itspotential productivity, nor would it compel landowners to maintain a certain level ofoutput. Landowners seldom had rent or mortgage payments, and when they did acquiremortgages they usually had income from other economic activities, and thus were notdependent on income from the land to pay their debts. With their landholdings secure,the most logical approach was a low-risk, land-extensive strategy that collected rentsfrom the land and channeled them out of agriculture into less risky ventures. Instead of sys-tematic investment in productivity, profits could be saved, consumed or invested into morelucrative economic activities.

Various newspaper editorials from the period noted this logic of underinvestment inagriculture. They attributed it to a ‘lack of an entrepreneur spirit’, and ‘an inexplicablelack of initiative’ among landowners, ‘few of whom make any repairs or improvementson their farms’.12 The ‘backwardness of agriculture and its resulting low productivity’was due to ‘poor investments made by some landowners, and wastefulness on the part ofothers…’. The ‘ruinous state of agriculture’ was blamed almost entirely on the land-owners: ‘It was poor management, given that they did not attempt to introduce modernsystems of cultivation, remaining stagnant with primitive systems both in cultivation andin livestock.’13

Instead of investing in improvements on the land, many landowners channeled profitsinto various business opportunities that had arisen in the first decades of the twentiethcentury. One of these was the Unión Agrícola, formed by a group of 45 of the largestcattle ranchers and merchants for the purpose of controlling the local market in sugar pro-ducts, and lending money to local producers (Rodríguez 2005). Others joined a group of USinvestors to buy shares of the Venezuela Sugar Company, a successful refinery complexthat later became known as Central Venezuela (Linder 1992, 178–226). Many of thosewho invested in these companies held part of their land under cultivation of sugar caneto supply the raw materials, yet the methods of production remained primitive due tolow levels of investment (Linder 1992).

A major consequence of the channeling of profits out of agriculture was a weakmarket for industrial goods. Weak demand for agricultural inputs or technology meantthere would be little possibilities for the development of local capital goods industries.In 1920, an advertisement for Fordson Tractors showed there were only 30 such tractors

9AHEZ 1910:t. 7, l. 1; 1924, t. 2, l. 11; 1927, t. 5, l. 5.10AHEZ 1910:t. 6, l. 29; 1919, t. 4, l. 6.11AHEZ 1927:t. 5, l. 5.12AHEZ 1913:t. 3, l. 17.13El estado ruinoso de la agricultura, Panorama (1990–2010), 29 April 1936, 8.

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being used in all of Venezuela, only two of which were owned by producers in the Sur delLago.14 By mid-century, less than three percent of the largest farms in Venezuela usedirrigation, less than two percent had tractors and less than one percent used fertilizers, her-bicides, insecticides or fungicide (Losada 1972, 50). By the 1960s, when modern methodsof cultivation were beginning to be employed in some regions, Venezuela was stillimporting only about 1000 tractors, 500 plows and 100 combine harvesters per year(Losada 1972, 120).

In order to fill the void left by the lack of private investment, the state began to increaseinvestment in agriculture. Starting in the 1920s, government subsidies and credits weregiven to the agricultural sector to finance farm improvements and technology. Yet thiswould do little to alter the prevailing productive logic. Most landowners could not beinduced to invest in improving productivity, and instead simply pocketed the money orinvested it elsewhere (McBeth 1983, 130). One subsidy in 1934 meant for strugglingcoffee and cacao planters ended up in the hands of some of the Sur del Lago’s wealthiestcattle ranchers, none of whom were major producers of either crop.15 By 1936, the stateagricultural bank reported that 73 percent of credit recipients had done nothing towardtheir land (Acosta 2009, 126).

In the 1940s and 1950s, the state began investing in a number of public works projectsin the Sur del Lago, constructing highways, building levees and draining large areas of low-lying land (Zambrano 2011). It is estimated that as many as 600,000 hectares of fertile landwere made productive from these infrastructure projects (World Bank 1993, 9). Yet this toowould do little to improve productivity. Despite the state’s intention to use these lands foragrarian reform, the new areas were quickly swallowed up by another wave of non-marketland appropriation (Mora 2001, 131–32). Politically and economically powerful cattle ran-chers used their influence to expand onto the newly productive lands, dedicating themalmost entirely to extensive grazing (World Bank 1993, 9).

By the 1960s and 1970s, it became clear to government officials that vast amounts ofland in the region were being underutilized (OAS 1975). State programs began to encou-rage the cultivation of various crops such as bananas, which are very well suited to thezone and can earn four to six times as much in profits as cattle. But these initiativesfailed as ‘the large landholders who control most of the region are unwilling to take therisks that are involved’ (Lindstrom 1972, 125). A lack of market dependence meantthere was little to compel landowners to maximize productivity, and so they preferredlow-risk, low-investment production strategies. As one report said, the landowners ‘arenot anxious to begin crop-farming because livestock production carries very little risk’(Lindstrom 1972, 123).

This logic has changed very little over the years, despite changes in the dominant formof land appropriation. By mid-century, land in the Sur del Lago was increasingly acquiredon the market, either by purchasing from those who held title to their land, or by purchasingland improvements – buildings, planted fields, etc. – that were located on a given plot ofland. Most of the land that had been acquired through land requests in the first decadesof the twentieth century was now changing hands through market transactions, and it isin this way that many of the current landowners in the Sur del Lago acquired the landthey have today.

14Panorama (1990–2010), 21 April 1920, 1778.15Relación de los agricultores de café y cacao necesitados. Panorama (1990–2010), 13 December1934, 3896.

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Yet even with land increasingly being acquired via the market, it had limited effects onthe prevailing productive logic. The reason was that most land purchases continued to comein the form of investments from wealthy individuals, often from outside agriculture, andtherefore landowners were generally not dependent on market competition to maintain pos-session of their land. In other words, even though market prices were often paid for the land,there was still a lack of market discipline due to the specific relationship between land-owners and their land. To illustrate this, we will trace the evolution of two latifundiosthat are representative of the productive units that dominate the region, and show howthe same productive logic that developed here in the early twentieth century has continuedto exist up to the present.

Hacienda Bolívar

On 13 March 2011, President Hugo Chavez hosted his famous Sunday television show livefrom the Hacienda Bolívar, the most emblematic of the Sur del Lago cattle farms expro-priated in 2010. For nearly 80 years, the 4000-hectare (10,000-acre) farm had belongedto the prominent Brillembourg family, owners of a veritable economic empire in Venezuelaand perhaps the most notorious of the Sur del Lago landowning families. But now that thehacienda had been taken over by the state, Chavez was eager to show the nation why theyhad ‘rescued’ it from the hands of the ‘latifundistas’ (GBV 2011).

Like many of the farms in the region, the Hacienda Bolívar was consolidated throughnon-market means around the end of the nineteenth century. Founded in 1893 by localstrongman Albino de Jesus Medina, the farm was started by simply clearing a sectionof unoccupied land and planting it with sugar cane and corn (Güerere 1951, 85–86).Medina went on to request title to nearly 5000 hectares (12,000 acres) of the surroundingland,16 and by his death in 1926 had become one of the wealthiest landowners in theregion, from both cattle ranching and the operation of a sugar mill.17 Profits were usedto invest in various economic ventures such as the Union Agrícola, a riverboat serviceto Maracaibo, and the continuous acquisition of more land (Rodríguez 2005; Güerere1951, 59).

The hacienda did not fall into the hands of the Brillembourg family until 1933 whenJoaquin Brillembourg and his father-in-law Vitelio Bravo purchased it on a foreclosureauction. Brillembourg was a merchant from Maracaibo who from as early as 1910 hadbeen requesting tracts of land from the state,18 and had together with his father-in-law pur-chased various haciendas at foreclosure auctions at a significant discount (Güerere 1951,86–87). By the 1920s, the two of them held extensive properties around the state, andwere among the Sur del Lago’s largest landowners.19

Brillembourg and Bravo paid just 215,000 bolívares (about USD 43,000 in 1933) forthe Hacienda Bolívar, less than a third of what it had sold for six years before.20 The pre-vious owner had purchased it from Medina’s heirs in 1927 for 700,000 bolívares (USD

16AHEZ Gazeta Oficial de Zulia, October 21, 1895, 76; AHEZ Registro de Tierras Baldías, 1893–1909: e. 125, e. 173; 1910:t. 24, e. 50, e. 109, e. 180; 1915:t. 12; AHEZ 1914: t. 3, l. 11; 1918:t.2, l. 11.17AHEZ 1910, t. 6, l. 28; 1919: t. 4, l. 4; Güerere (1951, 86).18Brillembourg requested at least 5,000 hectares between 1910 and 1924: AHEZ, Registro de TierrasBaldías 1910, t. 24, e. 16; 1915, t. 12, e. 23, 30; 1917, t. 7, e. 143; AHEZ 1909, t. 14, l. 8.19AHEZ 1919, t. 4, l. 4.20Registro Subalterno del Distrito Colón (RSDC 1912–1943), 1933, Trim. 3, Prot. 1, No. 22–23.

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140,000),21 but was unable to make payment after an explosion in the sugar mill paralyzedproduction and the Bank of Venezuela foreclosed on the property (Güerere 1951, 85–86).The bank then sold to Brillembourg and Bravo to recover the debt remaining against theproperty, giving them a two-year mortgage to be paid in four installments.22

The partners immediately capitalized on one of the key advantages of large landhold-ings: easy access to credit. Using landholdings as collateral for loans was a commonway for large landowners to obtain funds to invest in various other economic activities,even while their farms remained undercapitalized. The first loan was taken in 1933, andwas used to repair the damage from the previous owner’s sugar mill explosion. By 1934,sugar and rum from the hacienda were once again being sold in Maracaibo and in surround-ing towns.23 However, the family went on to borrow money against the hacienda again in1940 and 1946, and likely continued to do so for many years to come.24

Over the next few decades, the family built a considerable economic empire in Vene-zuela. By the 1950s, newspapers were referring to Brillembourg as a ‘millionaire’, as thefamily owned considerable land, a meat-packing plant, and were part owners of a Mara-caibo bank.25 In the 1960s, they bought the largest sugar refinery in the region, CentralVenezuela, and were constructing another multi-million dollar meat-packing plant.26 Bythe 1980s, they were owners of their own family-owned conglomerate, Grupo Confinanzas,the sixth largest financial group in Venezuela, with investments in banking, insurance, autoassembly and agribusiness.27

Little investment, however,went into the productivity of the vast expanses of landoccupiedby their cattle ranches.Local campesinogroups repeatedly invaded the family’s properties in anattempt to take themover and redistribute the land.28 They accused theBrillembourgs of appro-priating public lands, and leaving them idle or underutilized.29 In one case, a 6000-hectare(15,000-acre) holding was said to be ‘totally overgrown with weeds’ (Mora 2001, 153), andhad only 100 hectares cultivated with sugar cane.30 Another, of 440 hectares (1000 acres),was said to have been left completely abandoned. These and other family properties were fre-quently squatted on by landless campesinos, only to be periodically expelled by the Brillem-bourgs, and their subsistence plots destroyed (Mora 2001, 153–56).

When the Hacienda Bolívar was taken over in 2011, state officials reported finding only173 hectares under cultivation, just four percent of the total land area (Dirección Aló

21RSDC (1912–1943), 1927, Trim. 3, Prot. 1, No. 22.22RSDC (1912–1943), 1933, Trim. 3, Prot. 1, No. 26.23Ecos y Notas, Panorama (1990–2010), 27 April 1934, 3.24The original land sale deed notes various mortgages against the property (RSDC 1912–1943, 1933,Trim. 3, Prot. 1, No. 22–23) and likely more could be found if one were to follow the document trailthrough the years.25400 Mil Bs. en impuestos le debe Brillembourg al Concejo de Colón, Panorama (1990–2010), 11September 1957, 16; El Banco Unión abrirá sucursal en Maracaibo, Panorama (1990–2010), 19 July1958, 8.26Nuevo presidente del Central Venezuela, Panorama (1990–2010), 25 March 1966, 17; Veinte mill-ones invertirán en matadero industrial de El Vigia, Panorama (1990–2010), 15 September 1964, 9.27Inversionistas zulianos adquieren importante volumen de acciones del Banco de Maracaibo, Panor-ama (1990–2010), 28 December 1985, 1; Las compañías de seguro no tenemos monopolio alguno,Panorama (1990–2010), 30 July 1987; Inversión millonaria hará Confinanzas en el Zulia, Panorama(1990–2010), 15 June 1991, 4–11.28Detenidas 80 familias al ocupar hacienda, Panorama (1990–2010), 22 August 1970, 38; No permi-tiremos que invadan a ‘Gran Vía’, Panorama (1990–2010), 25 April 1987, 4–9.29‘A Gibraltar lo expropiaron’, Panorama (1990–2010), 23 July, 1991, 2–5.

30No permitiremos que invadan a ‘Gran Vía’, Panorama (1990–2010), 25 April 1987, 4–9.

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Presidente 2011). The rest of the 4000 hectares was being used for extensive cattle grazing,with major signs of underinvestment. Officials found 7500 head of cattle, less than two headper hectare, with 20 percent of them diseased due to a lack of attention and poor pastureconditions (GBV 2011). Daily milk production was reported to be not more than 2.5liters per cow, less than half of the already low regional average of five to six liters.31

This logic of low productivity and underutilization of the land was the result of specificproperty relations in which there was a lack of market pressure to maximize productivity.Although the Brillembourgs purchased much of the land on the market, and even acquiredmortgages against their property over the years, they did not depend on maximizing theoutput of the land in order to maintain possession of it. Because they had numerousother sources of wealth, with the land acquired as an investment, they did not depend onincome from the land, nor did they need to maximize output in order to pay for the land.Instead, their landholdings could serve as a basis for expansion into other sectors of theeconomy as they channeled profits and credits into various businesses, disregarding invest-ment in the productivity of their holdings.

Thus, the specific nature of land appropriation translated into a lack of market depen-dence – the possession of the land was not mediated by market competition. It wasJoaquin Brillembourg himself who best conveyed this logic in a comment he made in1958. When workers on the Hacienda Bolívar attempted to form a labor union, Brillem-bourg threatened to fire them all and release the dairy cows to pasture. According to oneworker, Brillembourg assured them that ‘he has enough millions to eat and enjoy lifewithout needing to get anything out of his valuable hacienda’.32

Hacienda El Chao

The Chavez government ended up taking over only about half of the 47 farms named forexpropriation, and there were many more latifundios that never made the original list.Such was the case of the Hacienda El Chao, a 4800-hectare (11,800-acre) cattle farmthat was once owned by dictator Juan Vicente Gomez, and has since remained in thehands of a family that had close ties to him. Though it did come under the scrutiny of Cha-vista officials, it managed to escape from the wave of expropriations that began in 2010.

Founded around the turn of the nineteenth century by one Rene Finol, the hacienda wasstarted by simply clearing and cultivating an unclaimed plot of land.33 Like many campe-sinos at the time, Finol sold the land he had cleared to incoming cattle ranchers who did notwant to clear land themselves (Lindstrom 1972, 61). By 1912, the land belonged toOnésimo Rincón, a Maracaibo merchant and cattle rancher who had been requesting thetierras baldías surrounding Finol’s farm from as early as 1903.34

Rincón started out as a merchant and riverboat captain who carried supplies from Mar-acaibo to the Sur del Lago, selling basic merchandise to farmers on credit. When his clientswere unable to pay their debts, he often ended up taking control of their farms or joiningthem as a partner, and in this way was able to acquire a large number of landholdings inthe region (Güerere 1951, 89–90). He also acquired land through his close connectionsto the Gomez regime, which facilitated the granting of massive amounts of tierras

31‘Rescates en Sur de Lago marchan con buen pie’, Panorama (1990–2010), 29 December 2010, A-6.

32Acusa a los Brillembourg de maniobras anti-obreras, Panorama (1990–2010), 7 August 1958, 18.33AHEZ, Registro de Tierras Baldías, 1893–1909, 272.34AHEZ 1903, t. 6, l. 2.

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baldías in the region.35 These lands were often used in joint ventures with Gomez and hisassociates to fatten cattle for sale in surrounding markets (Linder 1992, 231).

Hacienda El Chao was just such a venture, and Gomez and his associates purchased amajority share in the farm in 1912. The partnership, which took the name of Rincón &Compañía, eventually controlled as many as 10 large cattle ranches in the area, and hadexclusive contracts with slaughterhouses that allowed the near monopolization of thelocal beef market. Gomez and his associates provided the capital, while Rincón oversawthe management of the properties and their activities (Linder 1992, 231). By the seconddecade of the twentieth century, they were among the largest landowners in the region.36

Given the way in which the land was acquired, there was little to compel Rincón &Compañía to maximize the productivity of their landholdings. The nature of their invest-ments in land meant that regardless of the costs involved in acquiring cattle ranches,there was a complete absence of market constraints to force a more intensive use of theland. In addition to the cattle business, Gomez and his associates were involved in arange of economic activities like gambling, liquor sales and real estate, which meanttheir ability to remain solvent was largely disconnected from the productivity of theirfarms.37 Instead of investing in intensive cultivation, profits from cattle could be used toexpand into a number of other business ventures, while the vast fertile lands of the haciendawere left uncultivated.

By 1927, the Hacienda El Chao consisted of 3200 hectares of land with 2500 head ofcattle – less than one head per hectare – and little to no land under cultivation.38 But thiswas not due to a lack of good land. In 1932, an expert from the Ministry of Agriculturevisited the hacienda and gave a beaming report of the land quality and the prospects forcultivation. There were ‘thousands of hectares of the best land… the richest land [he] hasseen’, with ‘unlimited possibilities for rice cultivation’.39 The expert urged the land beused for ‘large-scale cultivation’, yet Rincón & Compañía preferred to channel invest-ment elsewhere.40

This logic would go largely unchanged after Gomez’s death when the hacienda cameunder the exclusive control of the Rincón family. Like many large landowners from theregion, the family created its own conglomerate firm, Grupo El Chao, to hold their numer-ous investments in the regional economy. In the 1940s, they invested in a milk plant tosupply cheese and milk products to Maracaibo and surrounding areas.41 By the 1970sthey were part owners of the Banco de Fomento Regional Zulia and the Banco Hipotecariodel Lago, and by the 1980s they had invested in a number of commercial ventures in Mar-acaibo.42 In the 1990s – now the fourth generation of the Rincón family – they beganinvesting in aquaculture facilities for fish farming and planted a portion of the haciendawith African palm (Lira 2013). By 2007, they had taken their investments abroad, expand-ing cattle operations to Costa Rica (La Gaceta Digital 2007).

35See note 2.36AHEZ 1910, t. 6, l. 28.37See Yarrington (2003) for a discussion of Gomez’s various business dealings.38AHEZ 1927, t. 3, l. 18.39Ministerio de Salubridad y de Agricultura y Cría, Panorama (1990–2010), 22 July 1932, 2.40Ministerio de Salubridad y de Agricultura y Cría, Panorama (1990–2010), 22 July 1932, 2.41Lactuario Maracaibo, Panorama (1990–2010), 11 October 1942.42Inaugurada la nueva sede del Banco de Fomento Regional Zulia, Panorama (1990–2010), 22 June1974, 31; Documento constitutivo estatutario del Banco Hipotecario Del Lago C. A., Panorama(1990–2010), 31 May 1977, 36; Registro de Comercio, Panorama (1990–2010), 2 May 1981, 66.

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The fact that the family now used the hacienda to produce beef, milk, fish and palm oilseemed to exhibit a more productive use of the land. Indeed, this is what the Rincóns arguedwhen campesinos invaded the farm in 2013 and demanded it be expropriated (Lira 2013).The ensuing legal battle was won by the Rincóns, and the campesinos were eventuallyexpelled from the land, but in the process it was revealed that the actual land use hadchanged very little over the years. Court documents show that the hacienda now haslittle more than 8000 head of cattle on a total of 4800 hectares of land – less than twohead per hectare (TSJ 2013). Cultivation of African palm takes up a mere two percent ofthe land, while fish farming takes up less than one percent (Lira 2013). Despite signs ofmore productive use, the vast majority of this highly fertile land is still being used for exten-sive cattle grazing.

The logic of underdevelopment

The cattle ranches of the Sur del Lago provide an excellent case study of the productivelogic at the root of underdevelopment in Venezuela. The overall strategy of extensiveland use and the channeling of profits away from the productivity of the land is still standardpractice among the region’s landowning class. Other examples include the Pérez family,with more than 12,000 hectares (30,000 acres) in cattle ranches, and investments inbanking, food processing and distribution;43 or the Finol family, which began in cattleranching and expanded into construction, retail and milk processing (El Machiquense2014). For these landowners, land is a resource for which yields need not be maximized,and instead can be used as a repository to store and extract wealth, with little need forreinvestment.

The generalization of this logic throughout much of Venezuela’s agricultural sector hashad major consequences for the country’s overall development. It has meant that much ofthe country’s best agricultural land is used for extensive, low-productivity activities ratherthan intensive cultivation. Currently, at least 75 percent of the land in the Sur del Lago isused for cattle grazing, while only four percent is dedicated to cultivation (Mora 2001, 131).In the state of Zulia as a whole as much as 33 percent of the land is suitable for growingcrops, yet only about seven percent of the land is cultivated, the rest being used forgrazing (GBV 2010). According to one study, 16 times as much land could be broughtunder cultivation statewide (OAS 1975).

A similar pattern applies to Venezuela as a whole. Though grazing is not as dominant inthe rest of the country as it is in Zulia, it still occupies more than half of all agricultural landin the country, while only 13 percent is dedicated to cultivation (Figure 1). And the patternis even worse if potential agricultural land not included in the census data is considered. TheWorld Bank (1993) has estimated there to be about 51 million hectares of potential agricul-tural land in Venezuela, or almost double the total amount of agricultural land currently inuse. Yet only about three million hectares of land are cultivated according to the most recentcensus data (GBV 2010). In other words, only about six percent of all potential agriculturalland in the country is used to grow crops, while the rest is used for grazing and forestry, or isleft idle.44

43Soy enemigo de la miseria, Panorama (1990–2010), 16 July 1987, 4–11.44Census data indicate that 13 percent of agricultural land in Venezuela is currently under crop pro-duction, but this does not include potential agricultural land that is not included in the census data. TheWorld Bank estimated this unused land to be about 20 million hectares (World Bank 1993).

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This inefficient pattern of land use is further demonstrated by looking at value-addedstatistics for various agricultural products. Table 2 shows that value added per hectarefor cattle grazing in Venezuela is much less than that of major crops like corn, sorghumor rice. Yet cattle production continues to dominate the landscape, covering vastly morearea than any other product. According to census information, the nearly 14 million hec-tares dedicated to grazing in 2007 held only about 14 million animals – about oneanimal per hectare (GBV 2010).

It is this productive logic that is at the root of underdevelopment in Venezuela. Whereasin much of the developed world it was strong demand from a dynamic agricultural sectorthat fueled processes of industrialization and economic diversification, in Venezuela agrazing-dominated agricultural sector characterized by a logic of low investment produceslittle demand for industrial goods, and thus greatly limits the domestic market for industry.Although modern, mechanized agriculture has emerged in some regions of the country, thevast majority of agricultural land remains under the control of producers who invest verylittle in the kinds of capital inputs that would stimulate local industries. The 2007 agricul-tural census reported that only 17 percent of all farms in Venezuela had tractors, only 4.4percent had combine harvesters, 6.4 percent had agricultural implements and less thanseven percent had irrigation equipment (GBV 2010).

In other words, the weak demand from the agricultural sector has inhibited the diversi-fication of the local economy, and therefore helped perpetuate the dependence on primaryexports. Industrialization occurred very late under the aegis of import substitution (ISI), andit was mostly limited to the production of various consumer goods, food processing, localassembly of foreign-produced goods, and some heavy industry such as steel and aluminum.But despite the initial successes of the ISI model, the small domestic market continued to bea fundamental barrier, as a lack of economies of scale hindered the possibilities for the

Figure 1. Total agricultural land use in Zulia and Venezuela, 2007.Source: GBV (2010).

Table 2. Estimated value added per hectare for various products, 2003.

Product Value added (millions of Bs.) Hectares Value added per hectare

Cattle 1,315,982 13,700,000 96,057Corn 321,461 531,147 605,220Sorghum 157,131 302,084 520,157Rice 126,204 137,404 918,489

Source: BCV (2007), GBV (2010).

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deepening of the industrialization process. Though the population became highly urbanizedand nearly tripled in size in the second half of the twentieth century, by the 1990s there werestill only around five million Venezuelans, or about one in every five, with the type ofpurchasing power marketers usually target (Enright, Francés, and Saavedra 1996, 244).This meant that the domestic market was still far too small for many industries toachieve the required economies of scale to be set up competitively on a local basis.Local consumption would allow for limited capacity in industries with moderate-scaleeconomies, such as textiles and various consumer durables, but would not provide nearlyenough demand for more integrated local industries like automobiles or agricultural equip-ment. And this, in turn, greatly constrained industrial demand, limiting the possibilities forthe development of a capital goods sector. Only a small number of capital goods industriesof low complexity could successfully develop on the basis of domestic demand, such asaluminum cables and steel pipes to supply the petroleum and construction sectors, whilevirtually all other capital goods continued to be sourced abroad (Enright, Francés, and Saa-vedra 1996, 253–77).

The small size of the domestic market has also meant that whatever industries diddevelop would be characterized by oligopolistic market structures, a high level of industrialconcentration and a lack of innovation (Leff 1979; Enright, Francés, and Saavedra 1996;Escobar 1985). From its inception, industrialization in Venezuela was dominated by a rela-tively small number of highly diversified conglomerate firms (Rangel 1971; Naím 1989).Instead of competing in terms of price or quality, these firms often collaborate with eachother to achieve equilibrium in a given sector, fixing prices and dividing the market upamong themselves (Naím 1989; Enright, Francés, and Saavedra 1996). Firms oftenattempt to outflank rivals not by improving productivity or increasing efficiency, butrather by securing distribution channels or key inputs that limit the growth of rival firms.A 2008 report showed that of 48 manufacturing sectors studied, 37 exhibited high levelsof concentration in which the top four firms in each sector controlled from 70 to 100percent of the market; only three sectors exhibited low levels of concentration (Direcciónde Investigación y Fomento 2008).

The result is that industrialists often have little incentive to invest in innovations andimprovements to raise productivity, and instead prefer to use profits to expand into othersectors of the economy. Much like the productive logic that prevails in agriculture, theindustrial sector developed its own kind of ‘latifundio’ in the guise of the grupos económ-icos (Rangel 1971; Naím and Frances 1995). Because they are often free from marketconstraints due to a lack of competition, these highly diversified conglomerates useprofits much like their rural counterparts – to expand into a variety of different sectorsinstead of reinvesting profits and maximizing productivity. The result is that the typicalfirm structure is a highly diversified family-owned conglomerate such as Brillembourgs’Grupo Cofinanzas, with investments in a wide range of economic activities, but little rein-vestment in the productive process.45 And their ability to consolidate themselves in natu-rally protected, non-tradable or service sectors, and to control key inputs, distributionnetworks and market information, has often allowed the grupos económicos to becomeheavily entrenched in areas of the economy not subject to competition from imports(Schneider 2008).

45Major groups include Cisneros, Polar, Mendoza, Zuloaga, Capriles. Smaller groups like Grupo ElChao would seem to fit what Naím (1989, 33) labels ‘miniconglomerates’ which he describes as thecommon structure even among smaller firms in Venezuela.

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It is in this context that we must understand the country’s stagnant productive structure,and the need for state discipline in the transition out of the easy stage of import substitution.The relative lack of market discipline in both the agricultural and industrial sectors meantthat for most producers their economic survival was relatively disconnected from theirability to raise productivity, and therefore there would be little need for systematic reinvest-ment in the productive process. This meant that as the easy stage of ISI ran out of steam inthe 1970s, and the state was unable to coordinate the needed investments for a broaderindustrialization strategy, the stagnant productive logic in both the primary and secondarysectors led to a collapse in growth (DiJohn 2009, 226–67). This, together with the collapseof oil prices, combined to produce the severe economic crises of the 1980s and 1990s.Indeed, the current ongoing crisis of widespread shortages, rising food imports, highinflation and slow growth is also due to the inability of the domestic economy to raise pro-ductivity and increase output, a product of the low-risk investment strategies employed bylandowners and entrenched industrialists. The most recent fall of oil prices in 2014 has onlyexacerbated these problems, which have been ongoing for the better part of the last decade.

Thus, our explanation for underdevelopment in Venezuela must start with the logic ofthe latifundio. It was this logic, a product of the underlying property relations in agriculture,which would later translate into a similar logic throughout much of the rest of the economy,thereby constraining the process of industrialization and inhibiting the diversification awayfrom primary exports. This had little to do with the presence of oil wealth, a certain culturallogic or a certain position in the global economy, as none of these factors can account forthe lack of market discipline that allowed for the generalization of low-productivity pro-duction strategies in agriculture and industry. In both sectors, producers adopted acertain economic logic because it was the most rational economic strategy given the con-crete conditions that developed historically. And as long as these conditions remain inplace – as long as the rural property relations remain unchanged – this logic will continueto predominate throughout much of the country.

Various state-led agrarian reform programs have sought to dismantle this logic, but theyhave mostly failed due to their tendency to reproduce the same property relations at the rootof low productivity. The most recent attempt, with the Land Law of 2001, was the largest inscale, but it does not appear to have been any more successful than its predecessors. From2001 to 2013, the Chavez government expropriated an estimated eight million hectares offarmland across the country, about half of which came under direct management of thestate, with the rest redistributed to campesinos (Hernández 2013a). However, this has notsignificantly altered the logic of low productivity in the countryside, for two mainreasons. First, a large number of latifundios have remained untouched by state expropria-tion. Though eight million out of 27 million total hectares of agricultural land is a significantportion of all land, it is still less than half of all land occupied by farms of over 200 hectares(see Table 1). Second, and perhaps more importantly, most of the land taken over by thestate has remained as unproductive as before. This is because both the state and campesinosappropriate reform land outside of the market, and thus there is little market pressure toimprove productivity.

Indeed, the latifundios that we have focused on in this study are illustrative of thereasons for the ineffectiveness of the Chavez-era reforms. As mentioned above, HaciendaEl Chao was left untouched by the state, despite coming under scrutiny and being occupiedby local campesino groups for its obvious underutilization of the land. Like many otherlarge land holdings in the region, it has been left free to continue its low-intensity pro-duction strategy of extensive cattle grazing on a vast expanse of highly fertile land. Thesame has happened with other large landowning families in the region, such as the Perez

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family, who have seen some portions of their property affected by the recent land reform –

but even those are now being returned to them by local courts (Nunes 2015).The Hacienda Bolívar, on the other hand, was taken over by the state, and yet, several

years later, there is little sign that any improvements have been made. Under state manage-ment, the land is still used for extensive cattle grazing, with reports that production hasfallen to even lower levels than before (Hernández 2013b). Because of the state’s lack ofimprovements, local campesinos have since invaded areas of the hacienda, using someof the land to produce crops. But given the nature of this kind of peasant production, thecampesinos are not compelled to make major investments or improvements in production,nor do they have access to the kinds of credit they would need to do so, and so the landcontinues under low-productivity subsistence production, serving only as a supplementto income earned off the land.

In other words, though agrarian reform has often created new groups of propertyowners, it has seldom altered the property relations, the relationship between producersand their land. Because reform land has typically been appropriated outside of themarket, possession of the land has seldom come to be mediated by market competition,and thus it continues under a low-risk logic of production, with little compulsion toinvest in maximizing productivity. Neither the state nor the peasants are compelled bymarket competition to make the kinds of concentrated investments necessary for transform-ing the productive process, nor do they have the resources necessary to do so in many cases,and thus the logic of low productivity continues.

Conclusion

Though it was written nearly a century ago, Acosta Saignes’ work on latifundio came aboutas close as any to uncovering the root cause of underdevelopment in Venezuela. By linkingthe country’s development to its rural structure and the large estates that predominatedthere, he provided a better explanation than any of the dependency or oil-centered theoriesthat came to the fore in the second half of the twentieth century. Where Acosta Saignes wentwrong, however, was in focusing on the labor relations in agriculture, instead of what wasmore important, the property relations. It was not so much the latifundios’ repressive laborregimes that hindered the process of economic development, but rather the specific propertyrelations and the resulting logic of low-intensity, low-investment production strategies thatresulted in a restricted market for industrial goods, and thus little stimulus forindustrialization.

The Sur del Lago not only provides an excellent example of this logic, but it also pro-vides clear empirical evidence to refute certain conceptions among scholars about the oper-ation of markets and market production. The idea that increased market opportunities andincentives can provide the impetus for producers to carry out changes in productionmethods in order to maximize profits is still commonly accepted as an explanation forwhat brought about commercial agriculture in the developed world, and it continues topervade policy prescriptions for developing countries as well. The Sur del Lago cattle ran-chers are a present-day example of how this logic breaks down. In the absence of certainproperty relations, producers cannot be expected to pursue greater profits by adoptingnew and improved methods, especially if it implies greater risk.

The Sur del Lago also challenges certain conceptions about the universality of capitalistimperatives. Even those theorists with the most precise definitions of what is and what is notcapitalism have declared that ‘capitalist imperatives now span the world’ (Wood 2003,152). Yet the predominance of extensive cattle grazing and the perpetuation of

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latifundio-like farms across much of Latin America would seem to indicate that capitalistimperatives might not be as universal as some think, particularly among rural producersin the global South. It has been argued that a ‘generalization of commodity relations’means that capitalism has fully permeated the countryside in the South, and has led to‘the end of the agrarian question’ (Bernstein 1996). But this ignores the question of towhat extent capitalist property relations have been universalized, which is quite anotherquestion from the generalization of commodity relations. This is the question that needsto be answered, and it can only be found by looking at the empirical evidence in the vastarray of societies that make up the global South.

AcknowledgementsI would like to thank Doug Yarrington and Charles Post for their helpful comments on an earlierversion of this paper. Also, special thanks to Iriana Colina and Doug Yarrington for their help andguidance in navigating the archives in Venezuela.

Disclosure statementNo potential conflict of interest was reported by the author.

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Chris Carlson is a PhD candidate in the Department of Sociology at the Graduate Center of the CityUniversity of New York. His research is on the sociology of development, with a focus on agrarianrelations and structural transformation in the global South. Email: cmcarlson@gmail.com

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