Another reason Brazilian title insurance is expensive...

Our formidable competitor to the south struggles to cope with wide income inequality and the all too familiar reaction - land reform.

Conflict in the countryside has ebbed but hardly stopped (see chart). For the MST, the demand for land reform is nearly bottomless and the conflict with industrial farming irresolvable. Mr de Oliveira reckons that 5m families—around an eighth of the population—are candidates for land redistribution. “Monocultures” like eucalyptus for paper, sugar cane for ethanol and soya degrade the environment, reduce the food supply in Brazil and drive labourers and small farmers off the land, he claims. [More]

Does this suggest a Zimbabwe-like meltdown of a powerful ag production system? Perhaps to be soon echoed by South Africa?

In Zimbabwe, forced and often violent takeovers of white farms led to a disastrous collapse of farm production. In South Africa a legal process of takeover under a democracy might lead to less disastrous results, but would still replace high-productivity white farming with the lower productivity of black farming. At best, the Government of South Africa would have a hard struggle to limit the damage done by its own land policy.

The timetable seems to be much too short for such a large-scale farming revolution and the objectives seem much too ambitious. This is not a question of racial capacities, but of farming productivity. If expropriation is completed by 2008 one expert considers that by 2009: “South Africa will no longer to be able to feed itself nor assist Southern Africa.” That would be a humanitarian tragedy. South Africa needs the white farmers who are an essential and efficient part of the national economy — indeed, they contribute to feeding the whole of Southern Africa. The main victims of this policy would be those poor blacks whom it is supposed to benefit. [More]

The analogy may not apply in Brazil. In the first place, Brazil has plenty of land still to deal out. No other country has this luxury, but the government could effectively albeit heavy-handedly create small plots by simply moving bigger landowners with generous grants farther into the frontier.

Brazil, and to a lesser extent Argentina, still enjoys tremendous potential to
expand area devoted to agricultural production. Brazil contains the world’s
largest remaining tract of virgin land—an estimated 547 million hectares
remain as virgin scrub land or rainforest. As much as one-fourth of this land is
cerrado—a savannalike flatland readily convertible to agricultural activity. In
addition, both Argentina and Brazil have huge areas under permanent pasture—
an estimated 142.5 and 185 million hectares, respectively—that support “grassfed”
cattle industries. Part of this pasture land could be converted to grain and
oilseed production under the right market signals. [More]

Second, like all real estate, it appears the issues are focussed on location. Landless peasants usually prefer acres close to population centers and markets, not a farm in the middle of a cerrado hundreds of miles from civilization, like many soya plantations are.

There is a similarity to land use arguments here in the US. Much of the dispute is centered on places like Lancaster County or the Eastern Shore. Few care about 15,000 acre farms in NW IA, by contrast.

Agrarian farms are a good solution where they are close to the markets they need. But people have not distributed themselves smoothly across any country. Thus efforts like Brazil's likely will never threaten the enormous majority of soya or cane production. It will be interesting to see if small farms contribute seriously to pork production. My hunch is they may be a popular source for domestic supply, while the large and growing Brazilian pork industry focuses on exports.

This is one reason some of us pay scant attention to land distribution/use issues, and some of us lay awake at nights. It is also a reason why national rules to decide these matters are unworkable. Land markets - which is how people tell us what they think land should be used for - are truly local.

Still, the power of agrarian movements in the response to perceptions of unfair incomes will likely bleed over to other issues, especially in South America, where socialist voices are getting a new hearing.

This is the real reason trends toward inequality are problematic - not that they don't make economic sense (all the boats, yadda yadda) but that the inherent human bias toward fairness overrides carefully drawn charts and economic models.