in the eastern folds of the peruvian andes where the warm air and lush vegetation of the Amazon basin lap at the sides of the rugged and windswept mountains, Wilber Vivanco’s grandparents spent most of their lifetimes working and living at a sprawling hacienda named Pintobamba. In the early twentieth century, Pintobamba’s 42,000 acres were planted with cacao trees and coca, a traditional plant with great significance to the lives and customs of highlands communities.1 Like other haciendas in Peru’s highlands, Pintobamba, located in the Cusco region, relied on peasant labor for its operations. Several hundred families lived on the estate, where they picked coca leaves and harvested and processed the cacao. In exchange for providing fifteen days’ worth of labor to the landowner each month, each peasant family received a small plot of land within the hacienda for its own use. If a family could not fulfill its work obligation, it could be removed from the land.
The working conditions were harsh, but some workers at Pintobamba managed to eke out a living and even brought desperately poor landless migrants down from higher in the Andes to help fulfill their work obligations. Still, many fell into debt and struggled with the endless labor. Life on the hacienda, and on those surrounding it, had much in common with life under serfdom in earlier European history. In these suffocating conditions, peasants on the haciendas in the area around Pintobamba eventually revolted. A social movement simmered even as the government sought to repress rebellious elements in the region in the early 1960s.
Pintobamba soon changed forever. A 1968 military coup ushered in a radical new government. Peru’s new military leaders decreed a massive land reallocation aimed at shattering the hacienda system and untethering peasant workers from servile labor for large landowners. It expropriated what was by then a smaller but still substantial version of the Pintobamba estate from its landowners in 1971 and turned it over to its workers. Wilber Vivanco’s grandparents were freed from the hacienda. They finally had direct access to land and even a government document with their names as land beneficiaries. But there was an important hitch: their access was not spelled out in the form of a clearly delineated plot of land and it was not recorded in public registries.
The government created a new system of cooperatives from most of the properties it seized from landowners. But the system was doomed from the start, because its failure to secure land rights meant that most of the country’s peasants were now shackled to the cooperatives, just as they had been to the large landowners that preceded them. Within a decade, peasants were fed up. Agricultural production stagnated and the economy teetered. The military retreated to the barracks, but no one in the Peruvian government that succeeded the military regime dealt seriously with the frustration boiling over in the countryside. Cooperatives collapsed like dominoes, and people divvied up the land informally among themselves. When Wilber’s grandparents left the Pintobamba area in the 1980s and his parents bought the land, there was no longer even a link between the government document for their land that they left behind and Wilber’s parents as landholders. His parents may have held the land, but they did not own it.
A deep economic crisis and growing guerrilla insurgency finally spurred the country to action. In the 1990s Peru passed legislation to systematically document landholding, provide clear land titles to legitimate landholders, and register those rights in the public land registry. Government bureaucrats fanned out across both rural and urban areas in a massive effort to blanket landholders with property rights. Wilber was still in school, going back and forth on breaks to help his parents farm coffee and coca on their small farm, but found his own calling in the effort to make right the errors of the previous reshuffle. He began training in Peru’s prosecutor’s office, got a legal degree, and took a job with Peru’s new land titling agency in 1998. It was not just a livelihood: for him it was “a social service,” he told me. “The state didn’t come out into the countryside much to help people in need, and I trained to help these people formalize their legal status on the land.”2
When the government’s land titling initiative came to the Cusco region in the early 2000s, Wilber’s parents received a secure and verifiable land title in their own names for the first time. “They became more protected,” Wilber said, “because the title was entered into the public registry. And at the same time they got more legal security. They could be sure that the land belonged to them and that no one could challenge that. And now they could access loans, more easily sell the land if they chose to, and leave a will that covered the land.”3
It was just the beginning of a broad transformation that would soon become visible across the area where Wilber’s parents held land. Wilber, who has spent his career working for several Peruvian agencies dedicated to land titling and formalization, recognized that the change was linked to property rights: “Now with their land titles in hand, people learned how to take out loans from small lending agencies like mutual credit associations, cooperatives, and municipal and rural savings and credit associations,” he told me. “Public investment in the countryside is now more secure. Now the government invests in improvements in coffee production, corn production, and all that because they know who they are working with. And people feel more empowered, because they have means of producing that resides in their own name and that they can easily leave to their children without fear that someone will take it from them. And that also gives the land value. Because you can sell if you want for a better price, and because of a title, not only is the state more likely to invest in your land but also NGOs [nongovernmental organizations].”
Wilber hopes one day to retire to the land his parents now own. There are thousands of stories like the Vivancos’ across Peru, which has become a poster child for property rights. Its economy is booming and investors have flooded it with cash for the past two decades. The country joined the ranks of upper-middle-income countries, and it recently began discussions to join the much-vaunted Organisation for Economic Co-operation and Development (OECD), the exclusive club of the world’s most advanced capitalist economies. Despite glaring inequality, Peru’s development trajectory is the object of envy among many lower-income countries.
Correcting the mistakes of a self-destructive land reallocation effort was not easy. Peru careened from one crisis to another in the late 1980s and 1990s. The country threw open its doors to international financial and development agencies, becoming a laboratory for the World Bank and International Monetary Fund (IMF). Yet the transformation it needed finally took hold with its efforts to secure property rights over land and liberalize its economy. The road has been rocky and contentious. While property titling has enjoyed broad popular support, it has also fractionalized some indigenous communities and eroded traditional ties to the land, spurring pockets of justifiable resistance. But the project on the whole has set the country on much firmer footing to escape its underdevelopment trap, and it points to land power’s ability not just to entrench economic distortions, but to root them out as well.
Time and again, countries have reallocated land and rewired their economies only to see those economies sputter and stagnate. Cooperative and collective reforms in particular have driven hundreds of millions of people into the depths of hunger and poverty and many more into lives of mediocrity and disappointment. The twentieth century has witnessed these reforms poisoning economies again and again, and they have left enduring legacies of stagnation all over the world.
The failure to secure property rights over land is at the heart of the problem. Whether for ideological reasons, to ensure political pliancy, or out of simple incompetence, most governments that have reallocated land on a massive scale have failed to grant secure property rights to the recipients of that land. Holding land without property rights is like having a job without any contract. The landholder is trapped in a state of constant uncertainty and vulnerability. That weighs on every decision about how to use the land and whether to invest in it, deprives the landholder of credit, and renders the landholder helpless in the face of abuse and exploitation, whether from private parties or the state itself. Landholders who lack property rights have few avenues for recourse to protect themselves.
But although it’s clear that land reallocation can entrench a bad outcome, it’s also clear that doing reform correctly can reverse that outcome. The malign consequences of the Great Reshuffle are not irreversible, and the lessons from the mistakes show us what it takes to repair the structural flaws in how a society deals with land power.
Delivering, tracking, and enforcing property rights can help to counteract the disappointing development outcomes linked to many land reallocation episodes. That entails delineating who owns what land; giving people predictability in what they can do with their land, along with a sense of trust that the law will treat them fairly; and protecting people against land theft. Secure property rights can in turn increase land value, foster markets, and encourage investment in the land and productivity. Over time that changes economies as people invest more in the future. These investments can include things like sending their children to school rather than to the fields—and training them for upwardly mobile jobs in emerging sectors of the economy.
The story of Peru’s restoration of property rights in land provides insights into how it can be done.
peru was still saddled with the baggage of Spanish colonialism 150 years after it gained independence. As of 1960, land remained at the center of its economy. Half the population worked in agriculture, while the wealthiest 1 percent of large landowners controlled 80 percent of the land.4 The country’s deeply rooted system of hacienda landholding meant that many of these large landowners could trace their family holdings all the way back to the colonial era. But the clock was ticking on this arrangement. Peru was on the cusp of its own Great Reshuffle.
Labor unions and worker protections had started to take root on the coast by the 1960s, driven by worker organizing and the tighter incorporation of coastal enterprises into international markets. But working for a large landowner was fundamentally exploitative in the highlands where most people lived. Many peasants, such as Wilber’s grandparents at Pintobamba, had to labor on large estates with little or no pay. Some, especially women, did menial work in the owner’s house. Peasants could not easily leave, and many suffered physical and emotional abuse.
One woman I spoke with, Justina López, had been born into a tiny settlement at the upper parts of a large hacienda in the Cusco region’s Sacred Valley. She told me that in those days she had walked several miles daily between her home and the hacienda’s fields in the valley where she worked all day long, “week after week after week after week.”5 Villagers did not have running water or toilets, and the grassland was so spare that there wasn’t enough dirt to make an adobe house. The chilly Andean wind at almost 15,000 feet above sea level slipped right through the walls of the settlement’s stacked stone houses. During the corn harvest, the hacienda’s workers carried corn out of the fields on their backs “like a donkey.” Her parents and grandparents had done the same. “Everything belonged to the landowner,” she told me while sitting next to the courtyard of the now abandoned hacienda owner’s house, waving her hand up toward the mountain peaks across the valley floor. “There was nowhere for anyone to live freely.… The landowners were like kings.” There was no school and everyone lived and died illiterate. “The landowner didn’t want us to study,” she told me. “If we studied, people would have left.”
A military coup in 1968 spelled the end of these arrangements. The country’s young democratic government was struggling to overcome its own fecklessness in the face of an obstinate conservative opposition, corruption and foreign influence, and outbreaks of unrest. The military thought it could do better and took the reins.
Military rulers embarked on a massive cooperative reform. They seized half of the country’s privately owned land between 1968 and 1980, mostly during the rule of General Juan Velasco, converted this land into large cooperatives, and then inscribed peasants in these cooperatives. The state retained formal ownership over the land and had a heavy hand in overseeing cooperatives. Peasants were thrilled to receive more direct land access. When I visited Justina López’s community in 2014, it still had General Velasco’s portrait hanging at the entrance to the former hacienda that had been turned over to its workers.6 A small number of peasants got lucky and had land adjudicated to them directly rather than through cooperatives. That is what happened to Wilber’s grandparents. But even these peasants lacked secure land titles.
Landowners across the board were shocked by the reform. Some resigned themselves to it while others became recalcitrant and sought compensation. One former senator of Peru whose family had owned enormous swaths of land in the coastal region of Ica, as well as in the highlands that the government seized in the 1970s, railed against the reform to me in a meeting at Lima’s exclusive country club in 2018. He told me that he intended to use his office to force the country to make amends. His abortive plan sought to reroute water that naturally flowed east off the Andes into the Amazon instead to the west to irrigate arid coastal lands the family had repurchased, netting them a windfall that he felt they were owed.
People in the cooperatives in turn quickly got fed up with their flaws. They wanted their own land and autonomy and recognized that the government was using the system to play favorites with compliant groups. The link between work and pay was fuzzy, and work quotas were often tied to quantity rather than quality, which generated internal conflicts over profit-sharing and labor and a sense of unfairness. There were also tensions over cooperative leadership and corruption.7 Agricultural production stagnated as a result and the country fell into a trap of underdevelopment.
Protests grew in the late 1970s and Peru’s economy teetered. The military got skittish. It stage-managed a transition to democracy and retreated from the responsibility of day-to-day rule as the troubles escalated. The country elected the same president whom the military had ousted in its 1968 coup, Fernando Belaúnde.
Once in office, Belaúnde got the message from the countryside that people would no longer tolerate the cooperatives. But he was also distracted by a growing drumbeat of problems exacerbated by Peru’s underdevelopment. The country he came to lead a second time was radically different from the one it had been in his first term.
The economy suffered a series of further blows as the Latin American debt crisis blew up in 1982, spreading inflation and divestment across the region. Political parties and politicians were trying to rebuild themselves after a long episode of dictatorship during which parties and elections had been banned. There was also a Maoist-style guerrilla insurgency building in the Andes driven by the rebel group Shining Path (Sendero Luminoso). Shining Path sought to topple Peru’s government and construct a form of agrarian communism with roots in indigenous peasant communities. It formed in the neglected and foundering Ayacucho region and subsequently spread to rural areas, particularly those where local authorities were ineffective and the military response was either weak or marked by indiscriminate violence. The insurgency also lodged in places where Peru’s land reallocation was more limited and remnants of the hacienda system persisted, fueling support in the countryside for deeper and even more radical reform.8
In the face of these headwinds, Belaúnde took a practical step: he tapped the brakes on cooperatives. His government passed several pieces of legislation that enabled cooperatives to begin to disband and break up their lands among their members. But, to the frustration of many people in the countryside, the government stopped there. It did not create an agency to help dissolve cooperatives, parcel land among members, secure newly defined landholdings, or help new small peasant proprietors to get their footing in a refashioned economy.
The result was a free-for-all. Cooperatives themselves decided whether to disband, and if so, how. They grappled with a raft of contentious issues, such as who should get what land, how infrastructure and farm equipment should be managed, how any debts would be settled, and how landless cooperative members who joined as workers should be treated.
Government agents no longer played a role as overseers. Nor did the government track this enormous transformation. A thick fog of murky property rights settled in. Property ownership and property rights in the countryside became essentially undecipherable. The vast majority of landholders did not have documents or records indicating proof of ownership.
The fog only grew thicker throughout the 1980s. A new government in 1985, led by the charismatic new president Alan García, at first equivocated on continuing the breakup of cooperatives and then supported it. But there was little direct government involvement. Meanwhile, economic change and urbanization accelerated. Land transferred hands in the countryside. But no one knew exactly where or to what effect.
On January 2, 1989, Peru’s National Statistics Agency released a dire figure in the midst of a snowballing economic crisis: inflation in the country during the prior year had reached 1,722 percent. Everyone expected it to climb still higher. Peru’s mountain of foreign debt was piling up, and investors clamored for the government to liberalize the country’s economy and take a plain vanilla approach to capitalism. That included clarifying and strengthening property rights. The IMF stood at the ready to shovel cash into Peru’s economy in exchange for structural economic adjustment and secure property rights.
President García had other plans. He had already thumbed his nose at the IMF and nationalized private banks in order to “democratize credit” and foster state-led economic development. Peru’s most famous novelist, the eventual Nobel laureate Mario Vargas Llosa, led a popular movement to oppose the “totalitarian” controls linked to nationalization.9 But García carried the day. And in doing so, he drove Peru’s economy into the ground. Inflation ballooned to 3,000 percent and the economy shriveled. García’s popularity took a nosedive.
Sadly, this wasn’t even Peru’s worst problem. The guerrilla insurgency that had simmered in the early 1980s had now boiled over. Murders, kidnappings, and extortion spread across the central Andes. The violence started to spill into Peru’s coastal cities. Bombings intruded on even the chic neighborhoods of the capital, Lima.
Like so many other countries that reshuffled land by adopting collective or cooperative land reforms, Peru had gotten stuck in an underdevelopment trap. Poverty, weak property rights, and a lack of investment reinforced the country’s economic stagnation and political instability. But the crisis that rocked Peru in the late 1980s set the stage for an inflection point that finally set it on a path to securing property rights in land.
peru’s presidential election in 1990 pitted its national author, Mario Vargas Llosa, against a political novice and agricultural engineer, Alberto Fujimori. Fujimori ran on the vague platform of “Change,” in an effort to capitalize on García’s unpopularity during his waning days in office. Although Fujimori was a virtual unknown until shortly before the first round of the presidential election, he eked out second place in a fractionalized field and advanced to a runoff against Vargas Llosa.
In light of Peru’s runaway inflation and deep recession, the race between Vargas Llosa and Fujimori boiled down to two possible approaches to economic management: “shock” or “no shock.” Vargas Llosa advocated an immediate and painful “shock” to the economy through price increases, the removal of subsidies, and currency devaluation followed by a program of shrinking the size of government and its role in the economy. One of his controversial campaign television ads presented a monkey behind a desk, symbolizing a government bureaucrat, gobbling fruit, accepting a bribe, and then defecating on the desk. Vargas Llosa’s own campaign slogan is a cautionary tale in political messaging: “It will cost us… but together we will make Big Change.”
Fujimori staked out a more centrist position as the “no shock” candidate. Instead, he advocated a more sequential approach to stabilization that would minimize job losses and avert a steeper economic recession. He promised to trim government fat rather than privatize it across the board. And he targeted the messages and language of his campaign at the middle and lower classes.
The result was a stunning rebuke. Fueled by popular queasiness with Vargas Llosa’s proposals for economic reform, disdain with his links to the political establishment, and mistrust of his upper-class origins, Fujimori trounced Vargas Llosa by over twenty percentage points.
Despite his resounding win, Fujimori was in an unenviable position. He inherited an economy in free-fall. Time was not on the side of a cautious, sequential economic fix.
Fujimori made a bold gambit: he simply adopted the “shock” approach. It would become a recurring pattern reflecting Fujimori’s cunning and ruthless political instincts. Less than two weeks after his inauguration, he rolled out the tanks in Lima and announced radical price increases in fuel, medicine, food, and other goods and services across the economy. “Fujishock” had arrived.
The next step was structural economic adjustment. Fujimori’s reforms cynically followed the outline of Vargas Llosa’s proposals.10 This was no mere coincidence: Fujimori turned to part of Vargas Llosa’s economic advisory team to resolve the economic crisis.
The most prominent figure was the renowned economist Hernando de Soto. De Soto’s influential book The Other Path argued that the government’s poor property rights provision and enforcement had given rise to its enormous informal sector and deprived citizens of the support they needed in order to thrive economically. The implication was that Peru’s endemic social and political instability could not be overcome absent major property rights reforms. The fog of murky property rights was choking the country.
De Soto’s ideas were in keeping with a new strain of “neoliberal” economic thinking. Adherents to this school of thought believe that property rights are important for development because they encourage accumulation and production. People can confidently make productive investments when property rights are secure because they do not have to worry that their property or investments might be arbitrarily seized. The transparent and enforceable nature of ownership and interests also enables people to use their property as collateral to obtain loans in order to improve their assets or invest in productive activities such as sending their children to school. And secure property rights support the functioning of property markets by making it easier to value, sell, purchase, lease, and mortgage property.
Incomplete and insecure property rights do just the opposite. They depress the value of land and make it difficult to sell, lease, or use as collateral. They encourage short-term thinking and short-term investments, because owners are worried about counterclaims or appropriation. Those threats encourage people to remain on their property more than they otherwise would in order to protect it, suppressing seasonal migration and working outside the home for long periods. Unless communities are tight-knit and customary law is strong, a widespread lack of property rights can scare off investors and capital.
Property rights have to include a degree of tradability to have any real meaning. You can have a property title, but if the government prohibits you from selling, leasing, or using your property as collateral under any circumstances then it is not much of a “right” at all so much as an obligation. Property rights allow holders to transform their property or use it to get other things they want. If you can’t do that, you are stuck, and so are the markets.
Excludability is another inherent aspect of property rights. You have to be able to prevent other people from using your property or infringing on your property rights. If everyone can use a resource and no one can exclude others from it, then everyone has an incentive to use as much as they can. But that depletes the resource and makes everyone worse off.
De Soto’s ideas were powerful. Many of them had not been rigorously tested. But that didn’t matter much in the environment at the time, especially because de Soto had deep international connections. This was crucial for setting the course of Fujimori’s economic policies.
De Soto had encouraged Fujimori to take a trip to the United States and Japan before he assumed the presidency. Through his brother, who was an assistant to the United Nations secretary general, Javier Pérez de Cuellar, a Peruvian, de Soto arranged a meeting for Fujimori in New York with the president of the World Bank, the managing director of the IMF, and the president of the Inter-American Development Bank. These kingmakers of the international financial world presented Fujimori with a stark choice: take the “no shock” path and end up isolated and unpopular like outgoing president García, or take the “shock” path and receive a windfall of international financial support and assistance.11
The prime minister and emperor of Japan reinforced the same message. His input had a personally outsized impact on Fujimori, given his Japanese ancestry. Noting Fujimori’s receptivity to the “shock” approach, the leaders of his transition team quit shortly thereafter and before Fujimori took office.
Fujimori’s initial shock therapy delivered the anticipated pain to the population. Worker salaries plummeted in real terms. Official estimates indicate that the move plunged one-quarter of the population into extreme poverty. They joined another one-third of Peruvians who already suffered extreme poverty.
The economy as a whole then staged a remarkable turnaround, notwithstanding stubbornly high poverty and inequality. Within a year, the government checked hyperinflation, returned the economy to growth, and reduced unemployment.12
The government then set to work on structural economic reform under the guidance of international financial institutions. Fujimori appointed de Soto as a personal representative to liaise with these institutions and guide reforms. The reform package included ambitious efforts to liberalize the economy to trade, privatize state industries, and strengthen property rights.
One of the projects that de Soto spearheaded was a massive urban land titling program. With support from the World Bank, the government registered and gave property titles to hundreds of thousands of people living in informal housing in Peru’s urban peripheries.13
At the same time, the government started to deal more systematically with the fog of murky property rights in the countryside, which had notably thickened in the wake of the country’s land reallocation program and the subsequent breakup of cooperatives. The opening salvo came in 1992 with a large-scale land titling program known as the Special Land Titling and Cadaster Project (known as PETT).14 Its goal was to formalize rural land rights across the country. That included mapping property boundaries, creating a land cadaster (a comprehensive, official register of property ownership and boundaries), and distributing and registering land titles centrally. The Inter-American Development Bank stepped in with financial assistance to help as the program tested pilot projects and got up and running in its first few years. The government then passed legislation that promised to distribute land titles to beneficiaries of Peru’s land reform in particular. And it took steps to meet the demands of indigenous communities that had become increasingly organized and vocal and wanted state recognition of their status and land rights.
peru’s cooperative reform had been a nightmare from the perspective of neoliberal thinkers. It suffocated land markets and private investment and it failed to channel worker initiative and work incentives. The government leaned on state agencies to stoke productivity by picking winners and losers, which became infused with political calculations and meddling. When the lackluster results became apparent, the government made it worse by putting cooperative management more directly under its own bureaucratic control. The free-for-all that followed the cooperative era was not much better.
International financial institutions were so keen on economic reform in Peru that they largely turned a blind eye toward Fujimori’s authoritarian tendencies, including when he shut down the opposition-led Congress in 1992 and centralized power. And they ignored rampant human rights abuses as Fujimori unleashed a brutal counterinsurgency campaign that crushed the metastasizing violence from Shining Path and returned security to the country. Fujimori’s luck eventually ran out in 2000 as evidence of abuse of power and corruption mounted. He fled to Japan and resigned.
But by then the tide was beginning to turn. Rural land titling accelerated in the 2000s with Peru’s return to democracy. The government began blanketing areas with massive land titling efforts. People marched for land titles. Politicians campaigned on doling them out. The government put up enormous billboards in the countryside advertising the country’s land titling agency and the progress it had been making.
Property rights in Peru became something much greater than a neoliberal recipe for marketization. They became a political goal for peasants across the country. One former official I spoke with, who worked on land titling first in the Cusco region and then at the national level in the 2000s, recounted that “people organized and went to the land titling offices in the rural areas and in regional capitals.” He underscored, “Both people from indigenous communities and people from the towns, they came intensely, clamoring, ‘We want land titling from the state.’”15 Rapid economic growth and development during this period further spurred those demands as it came to impact and encroach on undocumented traditional landholders. Those landholders, the official told me, “wanted a way to regularize all of this.” To document and register landholdings, “people mobilized and organized and set up meetings with municipalities supported by COFOPRI and PETT.” The Commission for the Formalization of Informal Property (known as COFOPRI), like PETT, was a land titling agency.16
By the end of the decade the government had issued over 2 million titles to rural plots of land, covering former land reform beneficiaries and other rural inhabitants alike.17 This constituted half of all rural plots. Property titling extended still further in the 2010s.
Like Wilber Vivanco’s family, many people who received property titles benefited in ways large and small. Juan de Dios Condori, who works for an NGO in Cusco on land issues in indigenous communities, told me how his parents were impacted by receiving a secure land title from the government in 2002 for over 1,200 acres of pastureland. His parents were living in an indigenous community named Sallani in the Canchis province of Cusco, and most people within part of the community informally held land that had been passed down through private transactions. With community backing, they wanted to separate those lands from communal lands, and Peru’s land titling agency assisted in the process. For Juan de Dios’s parents, it helped resolve a complicated family issue. His parents managed a herd of llamas and alpacas and had land as one of three lines of kinship from the prior generation. But without clear property delineations and titles among those lines, they could not be certain where they could pasture their animals permanently, and they didn’t want to invest in their house and in infrastructure without more clarity.
Having their land titled gave them relief and the clarity they needed. “It gave them legal security,” Juan told me, “and gave them the security to know that they could stay in one place. They improved their house. And they started to invest in infrastructure that would help with productivity, like ranching and production systems, irrigation, and other things.”18
The property titling programs did not just stick to the one-size-fits-all neoliberal playbook of granting complete property rights to individuals. While some indigenous communities, including Sallani, wanted to split up their land among families, others wanted property rights of a different stripe. Indigenous communities had received about one-third of the land distributed through Peru’s land reallocation program.19 Bits and pieces of these communities, and sometimes more than one at a time, had been pulled into the cooperatives that the government had formed.
Indigenous communities wanted legal recognition of their communities as well as rights over both communal lands and the lands that community members worked as households. They made the case that property rights do not have to be go-it-alone individual rights in order to be complete, and that collective groups could hold property rights just as private individuals do. That called for a different organization of rights, including inalienable rights to traditional indigenous community land and the recognition of communally held lands within communities that chose to organize themselves in part with communal resources.
The government responded by formally recognizing and titling thousands of indigenous communities, returning to and refining a policy it had started in the 1920s. One of the foremost observers of this process called it a “renaissance of Andean social groupings.”20 By 1998, the government had recognized 5,700 separate communities, and 4,000 of these had received land titles. Community land titling and more sophisticated and precise mapping proceeded in the 2000s. Over 5,100 communities had received titles by 2016, and the government now recognizes nearly 6,200 communities.21
This process has been rocky at times. Given the high stakes of land titling, many communities have engaged in boundary disputes with their neighbors. Others have been embroiled in contentious internal debates about how to manage land ownership. Still others have resisted property rights reforms, whether because they at times encroach on community lands or because some perceive them as a threat to traditional ways or as a hook that draws them into deeper obligations to the state. In part in response to discontents like these, indigenous communities in recent years have won other protections to their lands and a greater political voice, such as the legal requirement that the government engage in dialogue with them and take their viewpoints and interests into account in advance of development initiatives or administrative processes that may affect them.
Favorable external conditions in the 2000s, combined with Peru’s internal economic reforms beginning in the 1990s, put the country on a path to robust economic growth. The country’s gross domestic product grew at an average rate of 5 percent annually in the first two decades of the new millennium.22 This is considerably above the growth rate of many of its Latin American peers. Peru entered into the group of upper-middle-income countries by 2010.
Peru got slammed harder than most by the COVID-19 pandemic, however, suffering a steep economic contraction and the highest recorded death toll per capita in the world eighteen months into the pandemic.23 But its economy quickly regained its footing, and the OECD entered discussions with Peru in January 2022 regarding its accession to the club of advanced economies. The only other Latin American countries in the club are Chile, Costa Rica, Colombia, and Mexico.
This success story is a multifaceted one. Peru’s mining-oriented economy benefited from the enormous commodities boom in the 2000s. Its favorable trade policies, light regulatory environment for foreign capital, and stable economy have made it attractive for investment.
Greater property rights protection is also an important part of the equation. Peru rectified one of the most glaring problems of its land reallocation program by securing property rights in land to a greater degree. It simultaneously shored up property rights over urban land and in the business sector.
Extending property rights delivered a boost to land reform beneficiaries that long lacked them. By the early 2010s, poverty, illiteracy, and inequality dropped in these populations while agricultural productivity went up.24
“The impact that the process of land titling and plot regularizing has had in both urban areas and rural areas is enormous,” the former official who worked on land titling for most of the 2000s told me emphatically. “Formalizing property helps to incorporate people into economic activity. With a property title, a person can access credit.… And once someone has their land in the public registry, they can mortgage their property and they can make legal transfers.” He pointed to credit as especially important in sparking economic dynamism. “The banks have been creating facilities for giving credits and loans. That has sparked entrepreneurship among people [who received a property title]. Accessing credits and loans has helped a lot in starting small businesses and initiatives.”
peru’s reforms beginning in the 1990s transformed the country into a model for property rights in the developing world. And as a real-world laboratory, the country began influencing international development trends.25 But property rights reforms are complicated. They take time, money, and dedication to show results. Governments have to invest in registering and tracking property as it changes hands and transforms. People have to see value in property rights or they will not go through all the legal steps to transfer and register their property. And where governments are weak, corrupt, or unresponsive, a property title is not enough. Property rights have to be defensible and well-enforced. If someone tries to take your property, but law enforcement or the courts do not do anything about it, the title is not worth the paper it’s printed on.
Capturing the benefits of land reallocation becomes ever more difficult as time passes. The cracks in an existing property rights system grow wider if people sell their land informally and there is no paper trail. That makes it more difficult to reap economic returns from prior episodes of land reallocation through property rights reforms alone.
A dense fog of property rights in Peru had blanketed the countryside for decades. By the time property rights reforms began to lift the fog, informal land sales and transfers had transformed some areas. Mining companies had elbowed their way into some communities. A brutal El Niño year in 1998 ruined a swath of farmers. And Peru’s guerrilla insurgency had displaced people in many rural communities and put their property up for grabs. All of this reshuffled Peru’s rural population. A considerable number of people who had finally received their own land as cooperatives disbanded had lost it.
The Peruvian government also failed to provide the comprehensive support necessary for small farmers to thrive and to compete against larger competitors. While the government was shoring up property rights, its economic reforms simultaneously made other aspects of farming more difficult. Currency and trade reforms raised competition from agricultural imports. Fujimori shuttered the Agrarian Bank, which had been a source of cheap agricultural credit. Private lenders were hesitant to fill the gap. And he gutted the Ministry of Agriculture by firing more than three-quarters of its employees.26 Many of its programs came to a screeching halt. These shortcomings help to explain why Peru’s work to secure property rights over land and put them in the service of development paid off, but not as spectacularly as might have been possible.
Japan, South Korea, and Taiwan offer a benchmark for a best-case scenario. All three countries created a thriving small farming sector by reallocating high-quality land from large landowners to tillers; they then showered the new beneficiaries with generous agricultural inputs and credits while limiting property rights restrictions. Within a generation, land beneficiaries were sending their children to school rather than having them work on the farm. Governments used this early growth to transform their economies toward export-oriented manufacturing, further advancing development. The circumstances of reform in these three countries were unique. Nonetheless, if Peru had reshuffled differently, in a manner more akin to that of Japan, South Korea, and Taiwan, its path might have been different.
Peru continues to suffer from government weakness and turnover, bureaucratic red tape, and corruption. Outright discrimination against its indigenous population also continues. These problems make it hard for property rights reforms and broader development initiatives to fully blossom. For instance, there remain too many hoops and costs to registering land and clearing property titles. Government milestones and agencies shift frequently with political instability, offices are difficult to access for many people in the countryside, and bureaucratic training is uneven.27 Land in parts of the countryside is falling back into informality as it changes hands outside of public registries. And some people prefer to hold land informally to avoid assuming obligations toward the state, such as paying property taxes. Taken together, these problems risk unwinding some of Peru’s progress.
In part because of government weakness and neglect, rural areas turned out heavily to elect the populist president Pedro Castillo in a stunning 2021 election. Castillo promised to return the favor through a “second agrarian reform” that would provide farmers with loans, tax breaks, and technical support.
But just over a year later, Castillo landed in jail after he tried to dissolve Congress in a bungled attempt to grab more power. This is nothing new in Peru. All but one of its former elected presidents since the mid-1980s have been charged with or jailed for corruption or abuse of power. Members of Congress often come under investigation for corruption as well.28 It is a stifling backdrop for carrying out complex and long-term reforms.
Nevertheless, Peru’s example is instructive: it teaches us that although the underdevelopment trap is difficult, it is not terminal.
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for countries struggling with underdevelopment as a consequence of their land reallocation policies of the past, discerning a path to prosperity entails paying attention to property rights in land rather than ignoring them. Property rights alone are not a silver bullet for development. They require other complementary reforms, such as making investments in administration and recordkeeping, and strengthening the rule of law. And there is no one-size-fits-all type of property rights. They are most effective and garner greatest support when they are adapted to on-the-ground cultural and social practices.
For Peru, the first step was to recognize and codify the remaining on-the-ground practices of informal land tenure and rights locally before more was lost to the remaining pockets of murky property rights. Documenting current land tenure and land occupancy is a critical step toward eventually securing property rights and has to be followed by systematic tracking of land rights and transfers. Next comes the hard work of government reform. That includes strengthening the government, putting property registries in order, reducing corruption, and working to incorporate and respect the rights of both individuals and indigenous communities.
The treatment of indigenous communities and lands is particularly important in Peru. In many ways, the long-term development problems of the country are linked to the dispossession and exploitation of these groups both during the time of Spanish colonization and since independence. They have been forced into labor for others and stolen from. And their second-class status and unprotected land claims have made them vulnerable to exploitation.
This situation has only recently started to change with the legal recognition of indigenous communities, new laws strengthening their property rights, and policies giving them a right to prior consultation before their land is impacted by outsiders such as multinational mining companies. Outsiders can no longer count on easily pushing these communities around. The pendulum has started to swing in the other direction: outsiders are beginning to recognize that it is better to have clearly delineated communities and rights, so that they can predict what will happen if they want to extract resources from an area, than to risk sparking social resistance and protest. This change in attitude is part and parcel of how property rights can facilitate development.
Creating and maintaining property rights in land is far easier said than done. Governments that reallocate land at a massive scale often also seek to influence and control beneficiaries for political and social reasons, and are therefore hostile to the notion of secure property rights.
As a result, episodes of land reallocation that derail development rarely right themselves. They require one of two types of major bumps to set them on a different path. The first is a turn to democracy. Authoritarian governments have been the chief advocates of the most economically disastrous collective and cooperative reforms. A turn to democracy often spells a new dawn. Policy tends to get better when people have a say—and when politicians have more incentives to listen to them. When democracies replace authoritarian regimes that have put such reforms in place, few people want to continue life in the government-imposed collectives and cooperatives. So democracies born with them have typically folded them and broken up the land for private forms of ownership. They have granted land to families or communities, depending on people’s demands, and secured the new owners’ property rights over the land. Much of Eastern Europe after the fall of the Berlin Wall pursued this route.
Peru started along this path but fizzled out. Its democratic leaders in the 1980s facilitated the breakup of cooperatives, but they did not provide a real solution to the people who had been part of the cooperatives. Rather than setting them up on a path to success, the government simply stepped aside. That approach failed.
The second bump to breaking free of the underdevelopment trap involves economic crisis. Some governments face crises so severe that they are forced to call in a lifeline from international financial agencies. Since the 1980s, these agencies have made their aid conditional on economic reform. One common condition is to strengthen the weak or absent property rights that land reallocation programs have left in their wake. International donor agencies and financial institutions, such as the World Bank and the IMF, sweep in when countries are in the throes of crises and compel them to reform how they manage the countryside.
International financial agencies have placed pride of place on property rights reforms. They have helped to design and implement large-scale land titling and land formalization programs to people lacking formal rights. The argument is simple: as property rights advance, so does development.
This second bump was the one that jolted Peru. It has also shaken other countries, including Mexico and Vietnam. Both Mexico and Vietnam adopted radical collective reforms in the twentieth century that endured for decades and that came to stifle their economies. In Mexico, a collective reform in the wake of the Mexican Revolution broke up a hacienda system and delivered land to communities as a whole. In Vietnam, a new Communist government in the North cut down landlords and imposed collectives a few years after the end of World War II. Following the Vietnam War and unification, it sought to collectivize agriculture in the South as well, but it had far less success there than in the North, in light of the tiller reform that the US government had implemented there in the early 1970s. A debt crisis followed by a financial crisis in Mexico in the 1980s and 1990s forced the country to turn to the World Bank and the IMF for help. An economic crisis in the mid- to late 1980s did the same for Vietnam. Within several years of engagement, both countries were on a path to providing property rights in land to the beneficiaries of land reallocation that had lived without them for decades.
As in Peru, the property rights reforms in Mexico and Vietnam were controversial, costly, and even paternalistic in many ways. But they mostly paid off in the long term. All of these countries have attracted investment and seen domestic shifts in behavior that have supported economic development and transformation.
Land reallocation can be a disease afflicting the body politic with social maladies such as underdevelopment. But under the right conditions it can also become a cure. Land reshuffling and land power can be harnessed to advance development as much as they can to disrupt it. They can also be trained on fixing even more insidious social problems.