Land reform enterprises in Peru

COITARATIVE STUDY OF LAND REFOR4M IN LATIN AMERICA BACKGROUND PAPER LANDM REFORM REFOPENERPRISES IN PERU by Douglas E. Horton Series Studies in Employment and Rural Development No. 2h Division Employment and Rural Development Departme,nt: Development Economics Development Policy Staff Inte-rnational Bank for Raconst-ruction and revelopment The author prapared this background paper in his capacity as researcher for the Land Te.n.ure Center (Ulniversitcy of Wisconsin at Madison), in partial fulfillment of a contract between the Bank and the Land Teniure Center. The views expressed represent those of the author and not necessarily those of the Land Tenuire Center or the Bank. This report may not be published nor m,ay it be quoted as representing tha views of the Land Tenure Center or of the Bank and its affiloated arganizations. Washington, D.C. , June 1975 TABLE OF COMTETS Pge SUMARY i Socio-EconomiLc Setting of the Land Reform i Land Reform and New Enterpise Forms V Reform Implementation and the Performance of New Reform Enterprises xv I. SOCIO-ECONOMIC SETTING OF TE LAND REFORM 1 A. Natural Resources, Population, and Economic Structure 1 Natural Resources and Population 1 Position of A& -zulturein the Economy 5 B. Recent Performance of the Agricultural Sector 7 Agricultural'Production--Trends 7 Results of Agriculture's Poor Performance 11 0. Characteriftics of Agriculture in the Principal Regions of Peru 12 The Coast 12 The HiSzlands 16 The Eigh Selv7a 19 D. Pre--Refom Agrarian Structure: .. 20 Pelai Importance..of Large and Small Holdings 20 The Orgaziztion. of Large Estates 27 II... LAND REFOEM AND NEW ENTERPRISE FORMS 32 A. The Emergence of Land Reform as a Political Issue, and Early Reform Measures 32 Rejection of Early APaA :Refor-m Proposals 32 Industrializ--tion and the "Agrarian Problem" 33 Land Redistribution Underthe 1964 Land.Reform Law 37 B. Land-Reform Under the Velasco Government 45 New Agrarian Legislation* 45 ReoTganization and Strengthening of the Ministry of Agriculture and the Land Reform Agency . . 53 Land Reform by Area: The-PIAR 57 New Reform Enterprises 60 Land Redistriblation T7 III. REFORM 2LE1TATION AND PERFORMANC OF. E7 RFORM ENTERPRISES 102 A. The Case Studies 102 B. Characteristids and.Performance of Collective Production Units 107 Three Main Types of Collective Production Units 107 Performance Scores for Reform Enterprises 114 Some Eplanatory Factors 115 C. Specific Issues . 120 Natural Conditions 120 Economies of Scale 122 Collectivizatica of Production, and Fusion of Estates 126 Public Agencies 129 Specific Adjudication Models 1 137 Implementation of the Land.Reform Program 143 Social Problems in New Reform Enterprises. . 147 Management and Supervision of Enterprise Activities 155 Economic Dislocations and Short-Term Production Effects . 162 Employment 166 Technical Change 169 Income Redistribution- 171 Ideology versus-Pragmatism... 174 Political Aspects of the Land.Reform . . 176 Interactions and Trade-Offs Between Member Support, Governmental Support, and Reform Enterprise Performance 180 LIST OF TABLES Table 1: Population in Census Years ..2 2: Cropland, Total Land, and Population, by Region, 3 3: Gross Domestic Product at Factor Cost, by Economic Sector, 1960,.1965, and 1970 5 4: Labor Force by Economic Sector, 1961 and 1971 6 5: Value Added per Worker, by Economic Sector, 1971. .. 7 6: Index Number-s of Total Agricultural.Production,, Food Production, Per Capita Food Production, and Production of Selected Agricultural Commodities, 1952-1972 8 7: Percentage Changes in Area, Yield, and Total Crop Production Values, 1960-1970 10 8: Commodity Exports, 1950, 195.5, 1960, 1965, 1970 11 9: Relative Nu.ber and Area of Farm Units, by Socio- Economic Category, 1961 22 10: Distribution of Total Land Area, Arable Land, Permanent Cropland, Natural Pastures, and Other Land, by Size of Production Unit, 1961 23 11: Relative Land Use, by Size of' Production Unit, 1961 23 12: Distribution of Livestock by Size of Production Unit, 1961 25 13: Percent of Land Owned by Peasant Communities, 1961 26 Table 14: Percent of Livestock Owned by Members of Peasant Communities, 1972 26 15: Distribution of Farm Families According to Socio- Economic Status, 1961 27 16: Comparison of the Agrarian Reform Laws 50 17: Budgets of the Ministry, of Agriqulture, apd Land Reform and Settlement Expenditures, 1960-1974 56 18: Characteristics off Governing Bodies of Agrarian Production Cooveratives 64 19: Adjudication., Goals. of-the Land Reform Program, 1976 79 20: Land Tenure: Pre-Reform Situation ani Post-Reform Goals. - .. 79 21: Land Distribution! Pre-Reform Situation and Post-Reform Goals 80 22: National and Zonal Summary of Progress in Land Redistribution asof 31 August 1973 82 23: Land Acauisition and Adjudication, and Number off Beneficiaries, as of 31 August 1973 83 24: Financial Aspects of the Land Reform, as off 31 August 1973 84 25: Value of Lands:-and Other Assets Adjudicated, and Number of Land Reform Beneficiaries 85 26: Types of Land Reform Beneficiaries, as off 31 August 1973 86 27: Titles Granted, as of 31 August.1973 8T 28: State and Private Lands Adjudicated, by Agrarian Zone, as of 31 AiAgust 1973 88 29: Land Redistribution Goals a 89 30: Types of Land. Acquired, by Agrarian Zone, as of 31 August 1973 90 31: Types of AdjudicationAModels, by Agrarian Zone,, as of 31 August 1973 91 32: Programs Complementary to Land Redistribution 92 33: Allocation of Agricultural Development Bank Loans, by Type of Borrower, 1967168 and 1972 96 34: Short-Term and Long-Term Loans of the 'Agricultural Development Bank, and Amount of-Loans.Granted in the Coast, Highlands, and Selva 97 35: Supervised Credit Approved by the Agricultural Development Bank, 1965-1972 98 36: Summary Data on 27 Reform Enterprises 103 Page Table 37: TypologyoffReform Eterprises 107 38: Characteristics and Performance of Torenty-Three Reform Enterprises -- 108 39: Characteristics and Performance of Nine Reform Enterprises: Wage-Labor System, All Producing Crops . 110 40: Characteristics and Performance of Seven Reform Enterprises: Colono System, Producing Crops or Crops and Livestock 1Il 4l:. Characteristics and Performance of Seven Reform Enterprises: Colono System, Producing Livestock 112 42: Performance Scores for Collective Production Units 116 43: Income Accruing to Members of Peasant Communities in the Algolan Project and the SAIS Cahuide, 1972-73 175 LIST OF MAPS AND CEARTS Map 1: Peru - 2: Peru, Natural Vegetation 3: Perd's 12 Agrarian Zones - 4: Location of Reform Enterprises Visited 104 Chart 1: Index Numbers of Agricultural Production, Selected Comodities,'1952-1972 9 2: Peruvia' Government Agencies Involved in the- Agrarian Reform Process'' 41 3: Organization of the Ministry of Agriculture 55 4: Organization of the Third Agrarian Zone 55a 5: Organizational Diagram of the SAIS "Cahuidell 69 6: Orgenizational Diagram of the CECOAAP 71 k 40 L 0 M B l A E C U A D O mu,~4 . 1 AS2 2 Piua Pura 3at 2 444 DEaara PALjRTMENT 5 TumLberta Tumbeso c AsI- 6 Ancash Haa TAasTo7 Lima LIma p CHic8 ICw C 9 Arequip Areqrulpa 10 Moquegua moquegua CaAac 3C 11 Tacna Tacna Aas~0 12 Amazoas Chachapoya - u13 San matin moyo'bamba kYý 14 Huanuco Huanuco 515I Pasco C erro de Pasco Tsutt.o re16 Junin Huancayo >kg.ny8 17 Huancavelca Huancavelca PUCALP -- la1 Ayacucho Ayacucho C> 19 Apurimac Abancay S 20 Cusco Cusco cm.~ rå ... .,~nat 2iPn Puno 6 Tns / /22 Madre de Dkos Pto. MNaldo~ad ru •23 Loret Iquitom 14 Pet HUAa pa...co ...- A cyo * 7. 22 N - n -AYACUCo .cu ...c.. Abancey c A SICUAN- Ma-p1 P E. R U- \ 9 - Ra-lway - Ferrocarriles PN Main Rod - Carreter2s> Principales" Roadø~c unde Cartea eny. 1 contruetin - onstrucelån mo'U"'Ux. De~ament limiten de Beundaries Departamentos 9~I6Ro- 531A pu) Truiillo LIMA Map 2: PERU NATURAL VEGETATION__ VEGETACION NATURAL To ~ . ae m ~ ~ 01ro.<I ece~frt Z~~ tluvioan « 4d -t.4 ~ed ac 01e t,op,co Io m C m r rrc P e n dr5 -Ykwr4,< fö~ - - - - aez - auc - ond (Po,o lav, o,rrm~ ofom, wc.. rr ya. r SEPTEcMER 9e wu9 A mm t el oxmtf MaD 3: PERU'S 12 AGRARIAN ZONES. DE Å \QDE A u I 2v i m W DELDINS oceano Pacifico X c curzco ELCA neuca -d AYAcuc P ERU PUNO MINITEIO DE AGR)CULTURA CFcNA GEN4ERAL DE CP.l'STRO RURALr -A'REQUIPA ipl _______CHIL12 ECRT S.N5-o,aY1 DECRTO UPREO N2 55 -7- A DE16-MYO-197 NOTE 1. This report was prepared as a background paper for a comparative study of land reform in Latin America conducted by the.-Development Economics Department of the World Bank. The main report by Shlomo Eckstein, Thomas Carroll and Douglas Horton, summarized the lessons that can be learned from a comparison of the land reform experiences of Bolivia, Chile, Mexico, Peru, and Venezuela. 2. The background papers vary substantially in terms of their subject matter and methodology. In most cases published and official documentation have been supplemented by field investigations. 3. Since most of the data were collected by 6ther agencies, the IBRD can not attest to the accuracy of the statistical information which appears in this report. The views expressed are those of the author(s) and do not necessarily represent those of the Bank. PREFACE AND ACIMOWLEDGMENS This report analyzes the interrelationships among Peru's pre-reform agrarian structure and the performance of the agricultural sector, land refo:rm proposals and programs, both prir to 1969 and later, and the performance cof new reform enterprises (cooperatives an quasi-cooperatives) created under the land reform program. In the 1960s Peruvian agricul- ture was nearly stagnant,,and the relative and absolute poverty of rural people increased. Latifundiam was near bankruptcy, and both landlords and laborers expected land redistribution. The ineffctual reforms of the Belaunde government aggravated both social aid economic aspects of the.agrarian crisis, and made real land reform inevitable. The military government's land reform program has promoted collective production in agriculture for both ideological and practical reasons. Neverthe- less, peasant production is not likely to be collectivized. Pre-reform land tenure and labor systems and production patterns are important determinants of the viability and performance of reform enterprises. Production cooperatives function best where production was centrally managed.prior to the reform; they function poorly where peasants pro- duced crops individually prior to the reform. In the'fature, practical considerations are likely to outweigh ideology, and many of the large crop-producing reform enterprises in the Highlands are likely to -dis- integrate. This report is based on two periods of fieldwork in Peru. From. April 1970 until June 1972 I studied pre-reform agriculttre and the process of land reform in ont,irrigated valley on the North Coast. This research was for my Ph.D. dissertation, and was funded by t1ie Ful- bright Coamission and Cornell University's Latin American Studies Pro- gram. In 1973 I was contracted by the Land Tenure Center (LTC) and the International Bank for Reconstruction and Development (IBRD) to write a report on the Peruvian land reform. From mid-August until late November I interviewed government officials in Lima and in the provinces, and supplemented my earlier fieldwork with visits to 27 new reform enter- prises. The report's body summarizes my findings on the pre-reform setting, the land reform process, and the performance of reform enterprises. Detailed case study reports and sumaries of findings for each Agrarian .Zone are included in appendices to the report. I. am deeply indebted to Shlpmo Eckstein and Thomas Carroll, co- directors of. the.. IBD.'s project, "Comparative. Experiences of Land Reform in Latin American ountries," for t.he opportunity to do this work and f9r methodological,and organizational suggestions, and to Luis Paz Silva, director of.Peru's Agricultural Sector Planning Office (OSPA), for ex- cellent contacts. Amador Merino R. and the staff of Peru's Fundaci'n para el,Desarrollo Nacional provided, excellent working facilities and _assistance. Luis Deustua provided.. valuable orientation and suggestions. Luis Bortesi, director of the Reform Agency's Programming Office, pre- pared.Apr,m..ne excellent set of statistical tables on the land reform process. - 7 The case.studies. are based largely on interviews with government officials, and members of reform.enterprises .in the provinces. Some of my best ideas(and some. of my yorst ones, no doubt) came from these in- terviews.. A few of tbe. people who helped me most are the following: Jesus. -Becerra,, Victoriano Caceres,, Elviro .Celis, Charles .de Witt, Anabal del Carpio, Luis del Rio, Luis Gallegos, Adriano Lozano, Mario Padr6n, Rodolfo Quiroz, and Lizardo,Salinas. I am grateful for the courtesy and assistance which these persons and many others extended to me. In Madiscn,,V.W.C. Thiesenhusen,and the LTC staff were extremely helpful in. the preparation of this report-a. far more lengthy and, oner- ous task,-than anyone.expected. Special thanks go to Julia Schwenn, who gave prompt. attention to every aspect of the work, and to Jane Dennis and MeLanie Strub. vwho did an excellent job of typing, editing, and proofreading. Joanna Steinberg, John Padgett, and "the boys" put the final manuscript together, in a very professional way. BÄCKGROUND PAE*.PREPArD FOR THE LAND REFOk4 STCY L_nd Reform in Chi!e, by iXcùuardo CJ 1untes. Studies in irployrent and Rural Developiont No. 15. -,livia Country Repo-rt, by Jeff Dorsc,. St:uclies in Employment and Rural Dcvelopment No. 1 6 k Case Study of ExHaclenda Tcrar,a in the Tiraque Region of the Upqm;- chababa Valley. by Jeff Dorsey. Stras in Emloyment and Rural Deopmet,L No. 17. 1-7. A Cdse Sudy of the Lcwer Cochanaba Valley, Bolivi.a, by Jeff Dorey. Svudie; in EpJyxmIt and Rural DevelopmentNo. 18. Lessonzs from the Mexicn Frence in Land Reform, by Shliomo Eek steinr. Studies 41. :pCmc and RuraZ I c.1elopea: No. 19. .Mexico Case Study: CoÄrative Analvsis of Econmic Po.rfo,-:mance of Tnure Groups in rhe Laguna 1Xsivi, by S Ss . tudies- iEmplortyr1e:± L:n Rural Dl.~'.1~~c.-men No., 20. Peas-n-: Cooeretion in'Land Reform Programs: SoDe Latin Aerican E,poranc-s, by Slom. Ec:stoin a-d Thomas Carroli. Studies in Erployment and Rural Developmeut No. 21. Peru Case Study Volume, by Douglas E. Horton. Studies in Empiovment and Rural Development No . 22. Land Reform and Group Farming in Peru, by Douglas E. lorton. Stadies in Employ- ment and Rural- Development No. 23. Land Reform and Reform Erterprises in Peru, by Douglas E. sorton. Studies in Employmnt and Rural Development No. 24. The Impact of Agrarian Reform on Chile's Large Farm Sector, by David Stanfield, and Oth1ers. Studies in Employnent and Rural D.evelopment. No. 25. Asentamiento Management and Productivity Changes in Chile's Central Vailey, by David Stanfiel'd and Stephen Smith. Studies in Employment and Rural Development No. 26. SUNMARY Socio-Economic Setting of the Land Reform The aggressive and innovative land reform program initiated by Peru's military government in 1969 is in large part a response to the country's agrarian crisis. Peruvian agriculture has.been nearly stag- nant in recent decades, and the poor performance of this sector consti- tutes one of the most serious obstacles to the country's development. The stagnation of crop and livestock production, and of agricultural employment and investment, have aggravated problems of widespread rural unemployment and poverty, social unrest, rural-urban migration, inade- quate food supplies, inflation, and rising food imports. The problems and prospects of Peru's land reform are intimately related to the country's pre-reform agrarian structure. Production patterns, the degree of land concentration, and the internal organiza- tion of production units differ markedly between Peru's three major geographical regions--the Coast, the Highlands, and the Selva. An over- view of agrarian structure in the Coast and the Highlands is necessary for the analysis that follows. (The Selva is of little weight in Peru- vian agriculture, and had not been affected by the land reform program as of.December 1973.) Coastal agriculture is highly productive and commercial. Natural conditions are excellent for a wide range of crop and livestock produc- tion, and production areas are favorably located with respect to domes- tic urban markets and shipping terminals on the Pacific Ocean. The country's principal export crops and most of the produce consumed in Peru's large urban population centers are grown on the Coast. All agri- culture is irrigated, and multiple cropping is common. Irrigation water is the most limiting factor of production in most coastal valleys. At the time of the land reform, large estates controlled the best-watered lands. Areas of coastal minifundia were generally located on the poorest and least-adequately watered lands along the margins and the bases of the river valleys. Prior to the reform the largest and most profitable coastal estates produced sugar and cotton. These estates were operated as centrally managed wage-labor production units. Rice and potatoes were grown on both large and small farms. On flat lands (the lower sections of the valleys) rice estates were operated as wage-labor operations; but where terrain was rugged (the upper valleys) land was often parceled among peasants who cultivated on a small scale and sold their output to the landowner. Corn, beans, and truck crops were generally cultivated on small private farms. In the 1960s large coastal estates mechanized heavily and cut their employment drastically. The sugar estates cut total employment by half. In other crops, such as rice and cotton, sharecropping and labor tenancy were eliminated. Consequently, the resident, population and work force of large coastal estates has fallen in recent years, and the rural population has become increasingly crowded onto the meager resource base of the minifundia, dependent upon part- time employment on the large estates and wherever else work can be found. In general terms, highland agriculture is unproductive and subsistence-oriented. In much of the region natural conditions do not permit cropping; elsewhere, the absence of markets and economic infra- structure limit the viability of comercial production. Livestock rais- ing is the principal economic activity in the region. "Most crops are consumed near the point of production. Wool and meat are -the principal exports of the region. In much of the Central and-Southern Highlands (notably in the departments of Pasco, Junin, and Puno) high tableland over 3,500 meters above sea level is known as "Puna." In most of the Puna no crops can be grown, and'it is here that Peru's largest and most profitable sheep ranches were located. The pre-reform agrarian structure of the Highlands was much more complex than that of the Coast. As on the Coast, most land in the High- lands was held by large estates. However, the majority of Peru's high- land estates were not operated as centrally managed wage-labor enter- prises, but were organized around some variant of the colono system, with resident laborers farming small plots of land and/or grazing live- stock on the estates' pastures, and paying rent in conmodities and/or labor. Large coastal estates specialized in crop production and held the best coastal lands. In the Highlands large estates specialized in livestock production, and while their owners purchased or usurped the -iii- region's best pastureland, they left much 'of the best cropland under the control of smallholders and peasant communities. All but a few of Peru's peasant communities are located in the Eighlands. Much of the Highlands'population resides in these communi- ties, and they hold significant portions of the country's land and live- stock. Community pastureland is generally held in common, but cropland is parceled' among community members for individual exploitation. Each community has a hierarchy of public officials for management of the community's affairs. Labor pooling is a common form of taxation for community projects, and labor exchanges between individual households are common. Ever since the conquest peasant communities have fought a losing battle against the encroachment of baciendas. In the present-century the already precarious position of communities in the Puna-region was. eroded by the expansion of commercial livestock enterprises, and expul- sion of peasant producers from these estates. Land concentration is one of the most salient features of Peruvian agriculture, but students of the country's agrarian problems have over- stated the degree of concentration by failing to take into account sig- nificant differences in land quality on large and small farms. Data from Peru's 1961 Census of Agriculture and Livestock indicate that while farms in the smallest category have only 6 percent of farmland, they have 31 percent of cropland and 25 percent of irrigated cropland. Farms in the largest category have three-fourths.of all land in farms, but only 30 percent of the cropland. On the Coast, where crop production is subject to important economies of scale, most cropland is held in medium- and large-sized holdings and managed in relatively large pro- duction units. But in the Highlando, where crop production is subject to diseconomies of scale, most-cropland is held in very small production units. Moreover, most cropland on large estates is parceled among resi- dent workers--"colonos"-and farmed in small, independent operational units. Not only has the share of cropland held by small farmers been under- estimated, the importance of sma.l-scale'livestock production has not been appreciated. Census data indicate that in 1961 nearly 60 percent -iv- of the country's sheep, cattle, llamas, and alpacas, 70 percent of the goats, and 80 percent of the hogs were held on production units of less than 5 hectares. Estates of over 500 hectares had just over 10 percent of the country's sheep,.alpacas, and llamas, 8 percent of the cattle, 2 percent oe goats, and 1 percent of hogs. The share of peasant communities in the country's agriculture is hard to estimate, since individual comuneros often own land and farm independently. The 1961 Census reported.that communities owned only 5 percent-of the country's cropland and 14 percent of the pastureland, but the Census grossly underenumerated the peasant communities. Data compiled for a recent study of meat production and consumption in Peru indicate that members of,.-peasant communities.own roughly one-third of the country's cattle, sheep,'and hogs, and one-fifth of the goats, lla- mas, and alpacas. As mentioned above, prior to the land reform most highland estates comprised large ownership units, but a significant .part of their crop -and livestock production was carried out by independent small-scale producers-the colonos. Colonos occasionally paid rent in cash or spe- cies for the small plots of land they tilled, and usually paid rent for the pasturage of their livestock on estate lands. They were gener- ally required td work on the estate several days each month at less than market wages. Highland estates often employed primitive produc- tion methods and appeared to be undercapitalized. They purchased few inputs and produced little market surplus. In contrast to this tradi- tional hacienda (cften termed the "latifundio-minifundio complex"), on the Coast a radically different type of large estate evolved, which operated as a single production unit, employing modern techniques and large volumes of purchased inputs for the commercial production of agri- cultural commodities (often for export). The prototype of the "modern, commercial estate" was the sugar plantation. Recently, estate produc- tion of rice, cotton, and potatoes has become increasingly organized around this model. Critics of Peru's pre-reform agrarian structure have emphasized the backwardness and inefficiency of traditional hacienda organization, and argued that cultural and political factors are central to its persistence in the Highlands. Recent'studies of highland agriculture, including my own fieldwork in Cajamarca and'the Central and Southern Highlands, indicate that economicdecision-making is a much more impor- tant determinant of the internal-organization of estates than are poli- tical and cultural factors, and that highland estate owners were much more concerned with the rationalization of production methods than pre- viously thought. It 21 of 22 ex-estates visited, interviewees reported that prior to the land reform:the primary concern of the landlord was profits. In many highland estates, primarily the largest ones, estate owners and managers have sought for years to eliminate peasant or colono production in favor of wage-labor production, but they have universally been opposed by the peasant residents of their estates. The elimination of peasant production went- farthest in large sheep estates in the Puna region, where professional managers were able to introduce a number of production improvements (such'as fencing, ration- ali,zation of pasture use, veterinary care, improved breeding stock, selection, and crossbreeding techniques) which increased productivity and profits markedly. In cattle raising, and especially in crop pro- duction in the Highlands, few technical improvements have increased productivity significantly above the levels of traditional peasant pro- duction, and fewer yet have involved significant economies of scale. Thus, large landowners have been-discouraged by unsuccessful attempts to modernize agriculture, and most have preferred to invest their manage- ment skills and financial capital elsewhere in the economy. In high- land,crop estates, where economies of scale were unimportant and rent collection was more profitable than central administration, even aggres- sive profit-maximizers embraced the colonato system. Land Reform and New Enterprise Forms Peru's APRA party advocated land reform as long ago as 1924. The party's platform had widespread popular appeal, but Peru's dominant economic and political interests had no intention of allowing the Apris- tas' progressive programs to be implemented. Consequently, for most of the period prior to 1956, APRA was ruthlessly repressed. The laissez- faire policies followed by Peruts conservative governments were by and -vi- large successful in stimulating rapid growth in the industrial, commer- cial, mining, and fishing sectors of the economy, but were inadequate for*stimulating agricultural growth, particularly in the Highlands. Moreover, they resulted in a pronounced concentration of the benefits of industrialization among a small segment of the urban population and increased the relative, if not. the absolute, poverty of.rural people. Ad Hoc Reform Measures. In 1956--the first presidential election of the decade--all major candidates advocated land reform in one form or another. The winner, a conservative who received the backing of the landowners, set up a commission to study the issues of land reform and urban housing. In 1959 Peru's,first Agrarian Reform and Settlement Agency was created. The first concrete land reform actions were ad hoc measures taken in 1963 in-resconse to peasant land invasions in La Con- venci6n and Lares Valleys north of Cuzco and in the Junin and Pasco de- partments of the Central Highlands. In La Convenci'n, peasant movements began with the formation of labor unions in the early 1950s. In 1958 a Provincial Peasant Federation was formed, and in 1 59 a Trotskqrite labor organizer, Hugo Blanco, joined-the movement. In December 1961 an effective general strike was called. Later, the unions, now headed by Blanco, vent on to occupy hacienda lands. The "invaders" could not be dislodged, and in March 1963 the government issued a special land reform decree-which legalized the de facto tenant occupations of hacienda lands in this region. The second case of massive land invasions in Peru occurred. in the early 1960s in the Central Highlands. The first invasion was precipitated by the expulsion of livestock owned by neigh- boring comuneros from an estate of the Cerro de Pasco Corporation. Land invasions proliferated, and by 1963 some 300,000 peasants were involved in the movements of the Central Highlands. In August 1963 the government issued a decree providing for the expropriation of one of Peru's largest estates, "Algola'n," and a small part of Cerro's hold- ings. At the end of 1963, the government initiated a campaign of vio- lent repression in rural areas. No other invasions were tolerated or resulted in significant land redistribution. Peru's first general land reform bill was signed into law by Presi- dent Fernando Belaunde in May 1964. This bill's provisions are so -vii- complex, the exclusions and exceptions so numerous, and the compensa- tion to landowners so generous that it was extremely difficult and costly to implement. Other obstacles to the land reform process included the low priority given to land reform by high-level government officials, inadequate financing and personnel for the Reform Agency, centraliza- tion of the land reform bureaucracy and its control by officials sym- pathetic to landowners, and an aggressive counter-reform campaign launched by opponents of the reform. The result of these and other obstacles confronted by the Peruvian reform process was inaction. No comprehensive national land redistribution plans were drawn up, much less implemented, and very little land was redistributed. Instead, the government and its Land Reform Agency attempted to defuse the peasant movements by pro- mising land redistribution and threatening not to include land invaders or use invaded land in the reform program. Where land redistribution did take place, it was largely the result of peasant invasions, not a planned reform program. Despite the fact that very little land was redistributed.during Belaunde's administration, the reform did have a significant impact on the expectations of both landlords and laborers. Large landowners realized that sooner or later land redistribution was inevitable. The expectation of reform encouraged then to decapitalize their estates and to transfer their assets out of agriculture. The peasantry also expected reform. The political campaigns of 1956, 1962, and 1963 led Peruvian peasants to believe that once in office, Belaunde would carry out a massive land reform. Gradually, their hopes turned to frustra- tions and cynicism. By 1968, government -officials realizing this fact feared that if the reform program did not improve, peasant movements and land invasions might spring up again. A major conclusion of my fieldwork is that non-enforcement of the 1964 law had a detrimental effect on agricultural production and invest- ment, and increased peasant pressures for land redistribution. Fear- ing expropriation, landowners "mined agriculture," extracting surplus for investment elsewhere in the economy and failing to conserve or in- prove their estates' land, equipment, or installations. Landlords also attempted to expel their colonos in order to reduce the "social burden" -viii- on their estates, and to avoid future conflicts. with peasants over rights to copland:and pastures and possible expropriation under the 1964 land reform law. In a few cases estates were sold outright to their workers or to neighboring peasant communities. In a few other.cases the Reform Agency granted provisional individual-titles to -colonos.,More commonly, however, Labor-management conflicts sharpened and strikes proliferated. Estate'profits fell, making it likely that.by the end of the decade many latifundists saw land reform not as a threat to their economic inter- ests, but as a way out of a bad situation. The Military Government's Reform Program. The announcement of the military government's land reform law (No. 17716) on June 24, 1969, marks- the beginning of a new and radically distinct phase in the Peru- vian land reform process. The law is more radical than the 1964 bill in many respectsi and it is far more easy to implement. Equally impor- tant, execution of the reform has been given highest priority by the government, and is considered the strategic first step in creating a new agrarian structure capable of contributing to Peru's social and economic development and of spreading the benefits of national devel- opment more widely among the population. In the 1969 reform law the maximum size allowable for private landholdings has been reduced, agro- industrial complexes (notably the sugar plantations) have been made subject to the reform, and a long list of specific "causes for expropriation" has been added. The-valuation procedure has been streamlined, ceilings have been placed on cash compensations to land- owners, and the 18-, 20-, and 22-year agrarian bonds have been replaced by 20-, 25-, and 30-year bonds. Three fundamental innovations intro- duced by the 1969 law are the following: First, the law created a spe- cialized branch of the judiciary ("El Fuero Agrario") which deals with legal questions related to the land reform process. Second, the new law prohibits all forms of land rental, and requires that all landowners reside on and work their properties directly. Third, the law requires that all agricultural workers participate in the profits and management of the enterprises for which they work. The 1969 land reform law has been complemented with a new water law, a new set of bylaws for -ix- agricultural cooperatives and quasi-cooperatives, and numerous other pieces of agrarian-related legislation. Since June 1969, Peru's land reform program has been much more ag- gressive and 'better planned than previously. 'The military government has centralized the financing and control of all public agencies deal- ing with agriculture within the Ministry of Agriculture, and.initiated a coherent, comprehensive-planning process for the agricultural sector. The Land Reform Branch of the Ministry of Agriculture receives first priority, and the other- branches function primarily as support insti- tutions in the land reform process. The primary goal of the-Ministry of Agriculture has"become the rapid and efficient implementation of the land reform. Under the 1964 law, expropriations and adjudications were ad hoc and estate-by-estate. Now land reform priorities are established by the national Land Reform Agency and land redistribution is implemented through regional planning units known as PIARs ("Integral Rural Settle- ment Projects"). Land reform by region facilitates the restructuring of agricultural production units since it allows old property boundary lines to be erased and small plots and/or estate lands to be fused into larger production units. Within each PIAR all agricultural lands are subject to land reform measures, which include parcel concentration and integration as well as redistribution of estate lands. To date, actions have concentrated on large estates, but in the future the mini- fundia problem is to be attacked at the PIAR level. The first estates to be affected under the 1969 land reform law were the countryts 12 coastal sugar plantations and a few immense high- land livestock ranches. These were expropriated prior to the establish- ment of PIARs and were so large and economically important that the government processed each one independently. Nearly all other lands affected by the reform have been expropriated and adjudicated via PIARs. New Reform Enterprises. Peru's Minister of Agriculture has stated: The central element in Peru's New Agrarian Struc- ture will be the "associative enterprises" charac- terized by joint ownership and self-management. These enterprises are of two forms: Agrarian Pro- duction Cooperatives [Cooperativas Agrarias de Producci'n--CAPs] and Agrarian Social Interest -Societies [Socie-dades Agricolas de Inter's Social-- SAISJ. The large-scale production cooperative-is seen by government theoreti- cians as the ideal production unit, combining the technical-economic advantages of productive efficiency with the social-political advantages of self-management. The SAIS is a complex quapi-cooperative production unit intended to be a transitory solution to special problems encoun- tered in the Highlands; with time, the.SAIS are to evolve into produc- tion cooperatives. Peasant-communities are to be restructured so as to -function-as production cooperatives. Individual smalholders are encouraged to pool their lands and farm jointly. Under the reform, land may be adjudicated to CAPs, SAIS, peasant communities, and indi- viduals; CAPs and SAIS are given first priority.,.Smallholders are en- couraged to join agrarian service-cooperatives or preferably to pool their lands in parcel integration cooperatives. CAPs and SAIS must join central cooperatives when these-are established. The two types of central cooperatives which exist are regional-central cooperatives at the PIAR level and specialized central cooperatives, such as Peru's sugar, coffee, and tea central cooperatives. Legally, the CAP is an indivisible production unit in which the ownership and usufruct of all productive assets--land, livestock, crops, equipment, and installations--is collective. No individual production is*permissible. Management is democratic, and profits.are distributed among the membership in proportion to the number of days.worked by each. The SAIS is a special, complex cooperative-like enterprise esta- blished by the Reform Agency in cases where highland estates are sur- rounded by peasant.communities threatening land invasions. The prin- cipal objective of the Reform Agency in establishing SAIS is to preserve the administrative and.physical unity of efficient livestock production units expropriated under the land reform, to distribute profits among neighboring peasant communities.in order to reduce tensions and threats of land invasion, and to promote the communities' social and economic development. Each SAIS is owned and managed by a service cooperative, made up of the workers of expropriated estates, and by a number of Peas- ant communities which have been designated by the Reform Agency as land -xi- reform beneficiaries. In addition to ownership and management, the members of the SAIS--the service cooperative and. peasant communities- participate in the profits generated by the SAIS. These profits are produced on the lands of the ex-estates, worked by the members of the service cooperative. Members of the-peasant communities participate in management and profits, but not in work.. Until the end of 1973 the Ministry of Agriculture had given top priority to the establishment and consolidation of base-level.reform enterprises-landholding production units. However, during 1973 and more recently, increasing emphasis has been placed on the creation of central cooperatives at the PIAR level. These second-level units, which are owned and operated cooperatively by the base-level enterprises, are to play a strategic role in the implementation of.the government's future agricultural policies. By- law, each base-level enterprise created under the land reform program must become a member of the central coop- erative in its region. Member enterprises will manage the central coop- eratives and finance their operations. Each central cooperative is to be responsible for production planning in its region, and for the com- mercialization of inputs utilized by its members and the agricultural commodities produced by them. Processing facilities are to be established by the central cooperatives, and delivery quotas may be established for each member enterprise. Investments in economic infrastructure are to be planned and executed by the'central cooperative, as are social programs. Five major objective2 of the government in establishing cen- tral cooperatives at the PIAR level are: (1) facilitate the implementa- tion of the country's agricultural policy; (2) reduce the Ministry of Agriculture's role in providing technical and managerial assistance to new base-level production units; (3) consolidate the new reform sector by providing marketing, processing., and other services on a cooperative basis; (4) equalize levels of productivity and income between base-level units; and (5) stimulate the economic diversification of rural areas. The 1969 land reform law and the 1970 Statute for Peasant Communi- ties call for the formal restructuring and "cooperativization" of peas- ant communities. A government agency, SINAMOS, is responsible for the restructuring process, which involves three steps: (1) forming new -xii- governing bodies; (2) purging community membership lists of non- residents and "non-peasants"; and (3) restructuring land tenure systems, first by equalizing land holdings, ultimately by collectivizing all agricultural and livestock production. Community notables and leaders are typically "cholos"-intermedia- ries between full-time community residents and the outside world. Many spend a great deal of time outside the' community each year, and thus, under the new Statute for Peasant Communities, they do not qualify for community membership and usufruct rights to' comunity property. They generally hold larger-than-average landholdings,'ind thus are likely to lose land if tenure patterns are restructured in accordance with the statute. Consequently, the economic interests of traditional community leaders are threatened by the restructuring process. Moreover, by ex- propriating all parcels which the communities sold over the last'half century, and by canceling the inheritance of usufruct rights, the new statute threatens the traditional individual cultivation system of nearly all comuneros. By the end of 1973 very few peasant'communities were functioning in accordance with the provisions of"the new statute, and SINAMOS had abandoned its restructuring activities in most areas. Under Peru's agrarian legislation, smallholders who are not mem- bers of peasant communities may' form two types of agricultural coopera- tives: agrarian service cooperatives and:parcel integration coopera- tives. In the former type, peasants who operate farms.of less than three times the legally defined "family-sized*unit" organize to provide themselves with input supplies, credit, machinery, storage, transport, processing, marketing, infrastructure, or other services, cooperatively; agricultural production per se remains organized on an individual basis. In the second type, smallholders cede land ownership or usufruct rights to the cooperative, and farm these lands jointly. Neither of these types of smallholder cooperatives has been actively promoted by the government primarily because highest priority has been placed on the formation and consolidation of CAPs and SAIS, and the resources of the Ministry of Agriculture and SINAMOS are concentrated on this task. Land Redistribttton. Data on pre-reform landholding patterns and the land redistribution goals of the government indicate that the land reform will neither reduce the concentration of landholding nor result in the general cooperativization of Peruvian agriculture. The new re- form enterprises (cooperatives. and SAIS) will own a small portion of the country's livestock and produce less than half the country's food- stuffs. Only about one-third of the rural populatioi will benefit di- rectly from land redistribution. Land is not being "redistributed," in the conventional sense, from large estates to small peasant farms. Large holdings are being fused into fewer, larger collective production units owned and managed by - their workers. On the other hand, small individual peasant production units are not being collectivized. The great majority of Peruvian small- holders are not affected. by the government's land redistribution pro- gram.,: By 1976 the government plans to redistribute approximately nine million hectares of farmland among 340,000 beneficiaries. Eighty per- ce4t of this land is-to be adjudicated to production cooperatives and SAIS, 16 percent to peasant communities, and 4 percent to individuals. When the land redistribution process.is complete, production coopera- tives and SAIS will hold between 55 and 60 percent of the countryts cropland and just over one-fifth of the pastureland. Although the re- distribution program will reduce the total area in private farms sig- nificantly, they will continue to hold 43 percent'of the country's farm- land; peasant communities will holdanother 32 percent; CAPs and SAIS will hold.13 percent and 12 percent, respectively. Land redistribution will not reduce the size of-large holdings, eliminate the minifundio: problem, or reduce the concentration of landholding; but the latifundio system will disappear. After the redistribution program is complete, fewer larger production units will hold a larger share of the country's farmland than was true before the reform; but these large-scale produc- tion units will be cooperatively owned and managed, and the income gener- ated on then will be distributed among their member-workers. -xiv- As of August. 31, 1973,- just over half the prperties to be expro- priated by the reform.program had been-affected. The 'pace of expropria- tion and adjudication has. been most rapid in those sections of the -Coast and Highlands where Peru's largest-estates existed--the North Coast, Junln-Pasco,, and Puno. -Much less progress has been made on7 the Central and Southern Coast, in the High.Selva, and in those areas within the Highlands where .small- aad medium-sized.estates predominate. Complementary Programs. It is clear that land redistribution alone cannot solve the' many problems associated. 'with.'the .pre-reform 'ciisis of Peruvian agriculture. Public programs- are necessary both for con- solidation of. new enterprises in. the- reformed sub-sector and for stimu- lation of. growth in :the. non-reformed sub-sector' within agriculture." Governmental programs-,in these areas include: (1). supervision and audit- ing of new reform.'enterprises (cooperatives and, SAIS).; (2) training and capacitaci6n; (3) credit; (4) technical assistance; (5) marketing programs and price policy.;. (6) water. policyy (T).scientific, investiga- tion; and (8) colonizatioa- The Ministry of Agriculture 'is. the public agency which is most directly responsible for implementingthe government's agricultural programs. Within this Ministry,..responsibility for specific programs is delegated to specialized branches, the-nost directly-involved in the reform process being the,Land Reform and Colonization-Agency (Direc- ci6n General de Reforma Agraria y Asentamiento. -.Rural-DGRAAR), the Land Reform Investigation and Capacitaci6n Center:(Centro Nacional de Capa- citaci6n e Investigacion paral la Reforma Agraria--CENCIRA), and the Agrarian Production Administration (Direcci6n General.de Produccion Agraria-DGPA). The Agricultural Development -Bank (Banco de Fomento Agropecuario-BFA) is the principal source of credit for'the. agricul- tural sector, and-the only source of credit for most reform enterprises. SINAMOS, the government's Ministry-level agency responsible for . fostei,ing 'and channeling popular participation.in economic.and other institutions, collaborates with the Ministry of Agriculture in the design of adjudication models, prepares the peasantry for participation in coop- erative institutions, and takes responsibility for the supervision and control of peasant-.participation in.reform enterprises. In all public programs related to -xv . agriculture top priority has been given to.the reformed sub-sector, at the expense of the remaining private sub-sector. In the crucial area of technical assistance, programs aimed at increasing the production of smallholders have been cut back substantially. Consequently, to dat6 the land reform program may have had an adverse effect on small private farmers. When the land redistribution phase of the land reform ends, it seems likely that greater attention will be paid to this grow- ing segment of the rural population. Future trends in agricultural and livestock production, employment, and rural incomes will depend as much upon the non-reformed sub-sector as upon the new reform enter- prises. Reform- Implementation and the Performance of New Reform EnterOrises Twenty-seven reform enterprises were visited, of which.twenty-three are base-level collective production..units (production cooperatives and SAIS). On the basis of pre-reform land tenure systems and production patterns, these collective production units can be separated into three categories: (1) nine wage-labor enterprises; (2) seven livestock-colonato enterprises;. and (3) seven crop-colonato enterprises. .In the first. category, prior to the Inad reform all estate production was centrally managed; in the second and third categories, workers cultivated small plots of land or raised livestock in addition to working on the estate. All the wage-labor estates were located on the Coast; all the livestock- colonato estates were in the Puna region; all but one of the crop-colonato estates were located in the Highlands. In no case has the reform changed production patterns appreciably or caused enterprises to shift between these three categories. That is, in no case has the land reform col- lectivized peasant Droduction or varceled centrally managed production units among their workers. The economic: performance of most enterprises is encouraging. Over 80 percent earned profits in the year preceding my visit; in half out- put and employment have increased since the reform; in over two-thirds investment has risen. In social terms enterprise performance is less impressive. In 60 percent of the cases member support for the enter- prise and participation in management was moderate or ambivalent; in 20 percent participation vas active; in the other 20 percent members * -xvi- were discontent with the adjudication model (and would have preferred parcelization). Prior to the reform wage payments were highest on the coastal wage- labor enterprises and lowest on the crop-colonato enterprises.. Peas- ant prodliction increased incomes in colonato enterprises, but we do not know to that extent. Since-the reform, the real value of cash wages has remained roughly constant on the Coast, increased by one-quarter on livestock-colonato:.enterprises, and more than tripled on crop-colonato enterprises. "Performance scores" based on six economic criteria and- one social criterion.have been calculated for each.of the collective production units. The livestock-colonato enterprises in the Puna region and,the coastal wage-labor enterprises have high positive scores, indicating increases in output, employment, and investment since the reform,pro- fitable operation, and active member participation in management. Most highland crop-colonato enterprises have negative scores, indicating poor economic 'performance and member dissatisfaction with the adjudi- cation model. Highland crop cooperatives have performed poorly because: (1) they are vulnerable to reforn-induced decaitalization and disloca- .tions in management; (2) crop production in the Highlands is subject to,diseconomies of scale; (3) there is little member support for these enterprises and sharp conflicts between individual and cooperative in- terests. In highland cropping enterprises the flexibility and timeliness of both decision-making and the performance of cultural tasks are much more critical determinants of productivity than in either coastal crop enterprises or livestock enterprises in the Puna. In the Highlands if decisions are not taken and tasks are not performed at the correct time an entire crop may be lost. On the Coast, since seasonality is not a major factor in crop production, decisions and work can "wait." In the livestock enterprises of the Puna this is even more true. Thus, reform-related decapitalization and administrative dislocations have hurt the highland crop cooperatives much more than the other types. Diseconomies of scale pose significant problems for highland crop enterprises. On the Coast and in the Puna ex-estates have been fused -xvii- to form economically viable large-scale collective production units, but in the Highlands fusion has not been successful. Small. reform en- terprises in the Highlands cannot afford professional managers, and large enterprises pose severe management problems. The largest crop- colonato enterprise-in existence at the time of my fieldwork,the CAP Tfipac Amaru II, was one of the most poorly managed reform enterprises in Peru and one of the most notorious failures of the,reform program. As pointed out .earlier, in the Highlands cropping,has always-been carried out on very small plots, and, given the natural conditions of the region and existing technology, there are important economic argu- ments, in favor of smaj.l-scale rroduction. In many highland crop-colonato enterprises members state that parcelization of the.estate might have been a good thing. In none of the livestock-colonato enterprises or wage-labor enterprises did members oppose the adjudication model or feel that parcelization might have been more appropriate than formation of a collective-production unit. Conflicts between individual and collective interests are much more sharp in highland crop enterprises than in other types of reform enter- prises and have resulted in a scarcity of labor at crucial seeding and harvest times. Prior to the reform, hacienda workers were forced to repor%. for work on the threat of expulsion from the estate. Since coop- erativization they have worked less for the enterprise and spent more time on their own plots. The resultant labor shortage has had a nega- tive effect on production, and has encouraged mechanization. The case studies throw light on a number of reform-related issues and help explain the performance of different types of reform enterprises. Natural Conditions. As pointed out above, in the Highlands the seasonality of rainfall and temperature (frosts) imposes a rigid sche- dule upon cropping activities and makes timeliness a critical determin- ant of productivity. If credit,.seed, fertilizer, equipment, and labor are not made available to agriculturalists at the correct time, their entire year's crop is jeopardized. In contrast, livestock production is less influenced by seasonal climatic factors and far less dependent upon the supply of labor and off-farm inputs. On the Coast most crops can be seeded throughout the year and thus can "wait" for inputs to arrive. -xviii- Another consequence of the seasonality of cropping in .the Highlands is the seasonality of agricultural commodity supplies, and the resultant strains placed on commodity market channels and storage and processing facilities. Compounding these problems, the bulk of. production is mar keted during the rainy season, when commoditeis are most perishable and difficult to transport. Economies of Scale and-Collectivization. Five distinct types of economies of scale (ES) are relevant to the study of reform.enterprises: (1) ES in production planning and administration; (2) ES in production operations; (3) ES in delivery, marketing, and processing; (4) ES in the land reform process itself; (5) ES in public services .(especially technical assistance). Ministr of Agriculture officials emphasize the importance of econo- mies of scale, in large part because their own land reform and technical assistane programs are more easily implemented where a few large enter- prises are involved than where thousands of smallholders-are concerned. For this reason the Ministry of Agriculture is likely to fuse estates into cooperatives and SAIS which-are larger than optimal from the stand- point of production planning and operations. In highland cropping areas, ES in technical assistance are likely to be overestimated, due tothe importance of local variations in soils and weather. Government organized delivery and market systems are likely to be too bureaucratic and slug- gish to provide adequate, timely services to agriculturalists. There seem'to be few inherent advantages in-favor of any size group. Advantages for specific activities often depend upon the nature of non- agricultural institutional arrangements--e.g., the adequacy of delivery, marketing, and technical services for different size groups-and these change over time. Where smallholders are isolated and ignorant of tech- nical improvements originating outside their region, they cannot be expected to innovate or adopt modern methods aggressively. In small- holder areas technical change could be brought about more quickly if farmers were organized into service cooperatives, but minifundists are hesitant to hire adequate managers for their CAS. Thus, much of the burden for technical assistance remains with the Ministry of Agricul- ture. Where large production cooperatives are formed, the Ministry can convince the CAPs to hire professionals, and thus transfer much of the burden for technical assistance to the-enterprises themselves. Production cooperatives function best where estates were organized as wage-labor enterprises prior to the reform. Peasants who farm or raise livestock individually do not give up their land or livestock voluntarily in order to work collectively. In all cases where the gov- ernment has attempted to impose collectivization on peasant-tillers it has failed. In these cases troduction and investment have fallen and-the peasants have begun to see the land reform process asa.threat to their incomes, wealth, and independence. In general they continued to support the national government, and particularly the President, Gen- eral Velasco, but they damn local officials for inappropriate implementa- tion of land reform policies. Peasants often, but not always, oppose the fusion of several es- tates into a single large production cooperative. Economic interests are crucial here. Workers on relatively poor estates generally favor fusion with more profitable estates; workers on profitable estates gen- erally oppose fusion with poorer estates. -Colonos on all estates are suspicious of any form of cooperative production, and they oppose the fusion of estates where this may threaten their individual tenure rights. Public,Agencies. The land reform has placed severe strains on public agencies involved in the process. Of the various agencies, the Ministry of Agriculture has responded most adequately, but after an unfortunate initial delay. The BFA continues to frustrate cooperatives with what appear to be excessively legalistic procedures, more appro- priate for privately operated estates than for cooperatives. (A reform of BFA procedures in now under way.) SINAMOS' staff must be increased and its quality upgraded in order to meet the cooperatives' needs for training and motivation. Due to a severe manpower shortage and the high priority placed by the government on land reform, for the past several years a very high proportion of the Ministry of Agriculture's personnel and resources has been occupied with tasks of estate expro- priation and the formation and consolidation of production cooperatives. Consequently, technical assistance and other programs serving small pri- vate farters'have been severely curtailed. -xx-. The BFA comes in for scathing criticism:from many cooperative of- ficials, as a result of numerous "picayune,requirements and unwarranted delays" involved in the leading process. BFA officials note, however, that most of the delays in the lending process result from sins of commission and, more often, omission on the part of the prospective borrowers, not the BFA., SIIAMOS works with estates during the process of their cooperativi- zation, but after adjudication SINAMOS ,visits reform enterprises only sporadically. Cooperative and SAIS-members interviewed did not seem to think the work of SINAMOS was very effective, although most empha- -sized the need for capacitacion and training courses. CooDeratives and Peasant Communities. Cooperative structures are not indigenous to the Highlands. Peasant communities exhibit traits of self-government and labor pooling and exchange, but these alone do not constitute a strong base for.the adoption of cooperative institu- tions. To date the principal changes brought about by restructuring are in the sphere of internal administrative organization: traditional governing bodies have been replaced by new bodies with names analogous to those of cooperatives--Administrative and Vigilance Councils, Spe- cial Committees, and the Assembly. Despite the fact.that peasant communities are not likely to become converted into communal farms or production cooperatives in the fore- seeable future, this does not mean that cooperatives can play no role in their development. Where new land has been acquired production coop- eratives are acceptable to the communities. And where new activities are undertaken,,such as poultry production, marketing, or large-scale purchase-of inputs and/or consumer. goods, constitution of cooperatives is often the most appropriate solution. Implementation. As might be expected, the performance of public agencies has been most adequate where the process of cooperativization has been most tranquil and bureaucratically controlled. Peasant parti- cipation in the transitional period results in uncertainties which public agencies are hard pressed to cope with. However, peasant intervention has usually resulted in adjudication models which are more adequate to peasants' needs (and with which they are more strongly identified) than -xxi- . has been the case under the normal, bureaucratic course. While peasant participation in the cooperativization process seems important for en- suring active member support for new-cooperative institutions, the Min- istry of Agriculture and SINAMOS should by no means let peasants "work things out" entirely on their own. Close and amicable ties should be maintained with pre-cooperative groups, and technical and managerial assistance should be provided even where not directly requested. In one known case where the government virtually abandoned the enterprise the cooperative has not.proven to be a viable social or economic unit, despite the fact that the estate's workers are certainly better off in a production cooperative than in any alternative institutional ar- rangement (including individual smallholdings). For several reasons, implementation of the land reform program was simpler in the sugar estates than elsewhere, and simpler on the Coast in general than-in the Highlands. Within the Highlands implementa- tion has been smoother in livestock enterprises.than.in.crop estates. If the government has exercised excessive control over any aspect of the reform process it is in the design of adjudication models. Of- ficials invariably confront land reform beneficiaries with an already prepared adjudication model. They explain the model to the workers, emphasizing its strong points and avoiding discussion of its weak points, then exhort the workers to vote in favor of its adoption. If the workers reject the proposed adjudication model the government officials have failed at their job. Most Ministry of Agriculture officials are con- vinced that they "know what is best for the peasantry," and they con- sider rejection of their ideas as the result of ignorance on the part of the peasantry or political agitation on the part of anti-government (leftist ro rightist) groups. My case studies indicate, however, that quite often rural -orker,, have good economic reasons for opposing col- lectivization. In tacitional haciendas rejection of collective adjudi- cation models is both spontaneous and widespread. . Social Problems in New Reform Enterorises. In some instances "re- form turmoil" (e.g., occupation of estates) has led to-the consolidation of a cooperative spirit, in others it has been exploited by peasant and political leaders who oppose the formation of production cooperatives -xxii- or the land reform process. In three cases of peasant.take-overs (Santa Barbara, Casa Blanca, and San Nicolis) the principal dislocations seem to be temporary and principally the result of insufficient or tardy Ministry of-Agriculture support and.supervision, not of peasant inter- vention per se. In a fourth case-(Vilca Huaura) the negative social ,and economic effects have been more lasting, and appear to threaten the cooperative7s.success. Member support is generally positively related to the benefits derived from participation in the reform enterprise-, and negatively related to the impoitance of members' individual economic activities. Thus, in production cooperatives full-time laborers and employees are the principal supporters; part-time workers who own livestock remain disinterested. Wherever peasants occupy small plots of land and/or graze their own livestock, they oppose collectivization. In. no such cases has the government been successful in forcing peasants to farm jointly. Peasants-fear and oppose collectivization for four basic rea- sons:' (1) They fear- outside control of production cooperatives and the extraction of surplus. (2) They fear that the internal distribu- tion of income will be unfavorable to them. (3) They fear that the cooperative will fail and that they will lose both their life's savings and their source of current income. (4) They fear "peonization"--loss of the right to manage their own affairs and conversion into simple wage laborers. What the peasant seems-to want most is independence from outsiders, since dependence has always led to exploitation. He fears that without outside help (technical, managerial, financial) the coop- erative is likely to fail. But with outside help the peasants are likely to lose control of their enterprise, and the cooperative is likely to become an instrument of oppression, not of progress. In some cases - the peasant seems justified in opposing collectivization; in other cases he is not. For example, in highland crop production-technical economies of scale are relatively unimportant, and managerial problems are formi- dable; thus, collectivization is in most cases not advisable. But in livestock production there are strong arguments in favor- of large-scale production. In many service functions, too, large scale facilitates efficient operation; accounting is certainly one of these. -xxiii- The principal causes of social conflict and strife are the follow- ing: (1) dissatisfaction with the adjudication model; (2) government attempts to curb member participation; (3) severe economic problems; (4) dissatisfaction with services provided by the reform enterprise and frustrated expectations; (5) distrust and suspicion of high-level employees; (6) conflicts between collective and individual production; (T) conflicts between old and new members or between "insiders" and "loutsiders." In cases of severe internal conflicts, such as in the CAP T ipac Amaru II in Cuzco, the future of the enterprise is threatened and members become skeptical of the viability of cooperative ventures in general. In other cases, where internal conflict derives from less fundamental problems, it can "clear the air" and produce reforms which help consolidate cooperative institutions. As more than one reform enter- prise official stated, where there is no discontent or conflict., there is not interest in the enterprise,, A certain level (how much?) of con- flict, then, seems to be beneficial for the clarification of important issues and for arriving at solutions which.are acceptable to the mem- bership. SINAMOS and the Ministry of Agriculture can play an important role in helping reform enterprises introduce reforms which have worked well in other enterprises. Early in the reform process the government operated under the as- sumption that liquidation of the latifundia system and its replacement with the cooperative system would be accompanied by a radical transforma- tion of the behavior patterns of rural people. Personal egoism was ex- pected'(really assumed) to disappear, being replaced by a solidary coop- erative spirit. In fact, little character change has been witnessed to date. Interviewees in some cases stated that individualism seemed to have been accentuated by the reform, rather than reduced. In addi- tion to individualism, delinquency and corruption should be expected in the new reform enterprises. Established behavior patterns cannot be eliminated overnight, and these were the order of the day in the hacienda system. Many persons sanctioned for misdeeds shortly after the reform were being punished for actions taken prior to the reform, or during the period of disorganization immediately following the an- nouncement of the 1969 law, and often for acts which would have gone -xxiv- unnoticed or unsanctioned prior to the reform. Standards of performance have risen since the-reform,-and,performance seems to have improved. Bit since there is still a.- gap between the- standards of behavior and actual performance, corruption and delinquency continue to be problems in the cooperatives. It seems highly inappropriate to expect new coop- erative leaders to behave like saints. On the contrary, one should ex- pect abuses of power, and design mechanisms to control and supervise the actions of leaders and to cope with misbehavior in as effective a manner as possible. In small cooperatives informal supervision and sanctions perform important functions. In large reform enterprises formal vigilance is necessary; the vigilance council and special com- mittees must function well if corruption and delinquency are to be ef- fectively controlled. . Management and Supervision. Daniel Moynihan's remark, "there's little success in politics," seems equally appropriate for cooperative leadership. The majority of leaders in the enterprises.visited have been subject to crises of confidence at one time or another during their tenure in office, and few have.held widespread support until the end of their term. Leadership problems are particularly severe under the following circumstances: (1) where pre-reform peasant organization was weak; (2) where the reform enterpris- experiences severe economic problems; (3) where members do not strongly support their enterprise and see enterprise officials as agents of the state . The most severe leadership problems observed were 'in the CAPs T6pac Amaru II and Espinal. In other enterprises,,issues such as.the elimination of huaccha sheep have caused the serious erosion of leadership. The majority of reform enterprises visited had professional managers, and in these cases a great deal of control over day-to-day technical aspects of enterprise management was left in the hands of the manager. In all cases his actions were closely watched by the president, and in general there was close collaboration between these two figures. More weighty issues were discussed in sessions of the administrative council (which the manager attended). Major production, investment, employment, and pay decisions were deliberated in the general assembly. In practice, there are no rigid criteria for determining which issues are to be settled by specific enterprise officials, councils, committees, or the assem- bly. The more "important" orzcontroversial the issue, the more likely it is that it will be dealt with in the assembly. In general,. the spe- cial committees (e.g., the credit committee, marketing committee, admin- istration committee) do not function to the satisfaction of either coop- erative or SAIS members or public officials. If small, poor cooperatives, which do not employ professional manag- ers and which lack active member support and leadership, are to survive, the Ministry of Agriculture must provide continual-technical and man- agerial assistance. In three of the four reform enterprises visited in Cuzco, it could be said that the Ministry managed the enterprise. In the fourth (a peasant community) the Ministry provided continual technical assistance. Qualified technical-managerial personnel-willing to work for modest salaries in the Highlands is extremely scarce. In Cerro de Pasco, the manager of the central cooperative "Pasco" stated to me that numerous positions in the central cooperative could not be filled because trained technicians simply did not want to live and work under the harsh conditions of the region. In Cuzco and Puno, Ministry of Agriculture officials stressed the need to train young local people for management positions, and noted that the majority of pre-reform hacienda administrators were unwilling and unsuited for work in the reform enterprises. Formally, the'vigilance council of each reform enterprise must examine all decisions made by the administrative council, and place responsibility for illegal or inappropriate actions. In addition, STNAMOS should make periodic checks of records and accounts in order to-ensure the smooth functioning of reform enterprises, the legality of their decisions, and the consistency of their activities with public policies. A specialized office within the Ministry of Agriculture should also make periodic visits to the cooperatives and SAIS to evaluate management and review the books. (SI1AMOS is responsible primarily for social aspects of performance, the Ministry for technical and economic aspects.) In most of' the enterprises visited the vigilance council met rarely and was not thorough in its review of decisions made by enterprise of- ficials and the administrative council. SINAMOS provides capacitaci6n _Xxvi- prior to the formation of cooperatives and .SAIS, but once adjudicated, SIIAMOS visits the enterprises only when crises appear. The Ministry of Agriculture concerns itself primarily with technical aspects of pro- duction, often condemning SINAMOS for !'stirring up" members with parti- cipatory issues.: Members of reform,enterprises also tend to condemn SINAMOS for providing more questions than answers, and for bringing conflictive problems into the light without helping the enterprises to solve them. Economic Dislocations and Production Effects. On the Coast, few estates adequately maintained or replaced their tractors and equipment in the 1960s. Commonly, reform enterprises received little serviceable machinery from the ex-estates, not because the estate owners sold their equipment, but because they had little or nothing worth expropriating. A significant difference between the impacts of decapitalization on crop and on livestock enterprisesis that in the former case undercapi- talization jeopardizes the survival of the enterprise (crops cannot be seeded) and "capitalization" strains the finances of the new enter- prise; in the latter case, undercapitalization lowers productivity, but does not jeopardize profitability as severely as in crop enterprises, and capitalization can occur "naturally," through reproduction, with- out heavy expenditures. Since 1969, reform-related economic dislocations have been far more profound than previously. Economic dislocations resulting from the new reform process can be grouped under the following headings: (1) disruptions of investment and production in expropriable estates prior to government intervention; (2) disruptions d.uring,the interim between intervention and the formation of new reform enterprises; (3) disrup- tions in new reform units; (4) disruptions in the remaining non-reformed sector. Reform-induced decapitalization,of livestock estates has been severe, and has contributed to Peru's current meat shortage. A governmental decree made it illegal to sell or slaughter breeding stock without . authorization from the Ministry of Agriculture. However, this was vir- tually impossible to enforce. Livestock sales inflated meat production temporarily; capitalization of new reform enterprises has had the -xxvii- opposite effect in the short run, but is necessary for the eventual solution of the meat problem. Production data for recent years are of limited value, but it seems clear that the land reform process has not caused major disruptions in the production of most agricultural and livestock commodities. Once the cooperatives and SAIS are established and interim credit problems solved (as they are) both livestock and crop production (again not nec- essarily meat sales) begin to increase. Moreover, most cases studied show impressive rates of capitalization since the date of adjudication. On the Coast, nearly all enterprises visited had purchased tractors, field machinery, and trucks. In the Highlands, livestock numbers had increased markedly since the dates of adjudication. Capitalization is least satisfactory ia the highland crop enterprises around Cuzco. Here, lack of machinery seriously jeopardizes the cooperatives' economic survival. Economic dislocations in the remaining private sector--small- and medium-sized farms not affected by the reform, and a few large estates reduced in size by the reform--remain serious and will probably continue to be so for years to come. This is primarily due to the,uncertain position of independent small farmers in Peru's new agrarian system. On one hand, government spokesmen guarantee the rights of small private farmers; on the other, they denounce private farmers as reactionaries who obstruct the advancement of the land reform process. The Ministry of Agriculture has presented private farmers with "Certificados de In- afectacion," but these are so encumbered with clauses and restrictions that most farmers (and independent observers) consider them to be of very limited value. Clarifying the future rights of private farmers is very important for stimulating production in the non-reformed sub- sector. As a Ministry of Agriculture official noted, "the uncertainty is far worse than the sentence." Employment. One of the major disappointments of the reform is its impact on employment. Neither striking increases or declines have been reported, and it seems likely that the net effect is a small positive one. Both the reform enterprises and public agencies dealing with them, however, are searching actively for profitable ways to increase employ- meat. Most cooperatives and SAIS have been forced to grant membership -xxviii- to a few previously part-time workers, and the enterprises are now search- ing for productive ways of employing them. Reform enterprise members are by to means interested in increasing membership or non-member employ- ment at the expense of profits. On most of the estates visited the trend in pre-reform employment was downward. The reform has greatly diminished this trend, but there is little evidence of a marked increase in employment. A principal new source of employment has been the initiation of social investment pro- jects (community halls, schools, etc.). ]1n a few cases, increased em- ployment has been provided through diversification schemes. In Santa Lucia the manager (ex-functionary of the Ministry of Agriculture) had promoted the creation of three small shops within the cooperative which provided employment for about 30 people. One produced sweaters, another rugs, and the third bed frames and springs. The manager stated that the shops were not making profits, but were breaking even and providing much needed employment. In extremely few cases have reform enterprises devised means of employing member labor without paying cash wages. Intensification and diversification of productive activities are by no means automatic results of cooperativization or the formation of SAIS, but must be encouraged through aggressive policies of the new reform enterprises (especially through the actions-of innovative manag- ers) and of public agencies (especially the Ministry of Agriculture). Innovation and aggressivity in these areas are scarce. Important policy variables which influence employment are: (1) the degree to which tech- nical assistance aims at crop diversification and the promotion of labor- intensive truck crops; (2) the adequacy of new marketing systems and the government's price policy; (3) the prices and availability of alter- native types of field equipment. Income Redistribution. The Peruvian reform has increased estate workers' incomes under two very different sets of circumstances: (1) on wage-labor estates which earned high rates of profits prior to the reform; (2) on traditional haciendas where the reform has eliminated rental payments by the colonos to the hacendado. Where estates were unprofitable prior to the reform, income increases in the short run have been small. In such cases improvements in management and -xxix- technology are necessary for marked improvements in incomes. To date little progress has been made on this front. Cropping is not intensi- fied as a result of the division of extensively farmed estates into labor- intensive minifundia (as was the case in Mexico and Bolivia) since the Peruvian reform does not parcel hacienda lands. Where laborers have benefited from the land reform without major technological changes (be- cause the profits which used to be received by the landlord are now distributed among the workers), it is unlikely that this once-and-for- all increase in worker income will be sufficient to maintain active mem- ber support for the cooperative. One cooperative manager warned that "technical change must be rapid for workers to be paid well and 'sub- versive movements' controlled; without technical advance the coopera- tive will fail." On the other hand, both cooperative members and manag- ers are aware of the potentially negative*impact of technical change on employment, both for present members and for their children. Ideology versus Pragmatism. Initially the government attempted to establish "pure" production cooperatives (i.e., with no individual production). In the sugar complexes the pure model was consistent with pre-reform labor and land tenure institutions, and the reform benefi-' ciaries supported cooperativization. But-outside the sugar complexes (particularly in the Highlands) such pure-cooperatives were opposed. by labor-tenants and sharecroppers, and insistence upon collectiviza- tion produced serious social and economic dislocations. More recently implementation of the reform has been guided more by practical consi- derations and less by ideological convictions. The policy of coopera- tivization at all cost has been abandoned. Cooperative and SAIS members have been allowed to keep their own livestock ad small plots of land. More public resources have been spent on teaching practical aspects of cooperative management and less on formal principles of cooperation. This change in emphasis is, I think, an appropriate one, since land reform beneficiaries are more interested in practical issues than in theory and doctrine. If peasants are to be convinced of the advantages of cooperation, they must see concrete benefits. Their cooperatives and SAIS must function well, and this depends more upon adequate organi- zation and technical assistance than upon an understanding or acceptance of traditional cooperative doctrine and ideology. -xxx- Reform agencies continue to press for collectivization and the formation of production units which are larger than those which the peasants would form themselves. Two fundamental reasons for this fact are the following: (1) The government is ideologically committed to collectivization, and any drift .in the direction of small-scale or in- dividual production makes officials vulnerable to claims that they are moving rightward in their policies. (2) Large-scale units are more nearly self-sufficient in terms of technical and,service personnel than are small units, and thus help reduce the burden of technical assistance now shouldered by the Ministry of Agriculture. (See comments on econo- mies of scale and collectivization," above.) Political AsDects of the Land Reform. The 1964 reform law elicited a strong political counterreform campaign on the part of' large landowners. The military government eliminated the political power of the latifun- dists by expropriating them first. However, the land reform process has encountered political resistance from small- and medium-sized farm- ers and in some cases from farm laborers. In 1973, small- and medium-sized farmers in Cajamarca and Arequipa organized and forced the government to state more clearly what position private farmers were to occupy in the new agrarian system. The colonos of ex-haciendas have also forced the government to moderate its initial drive to collectivize all production on estates affected under the re- form. .Colonos are now to receive usufruct rights to their plots, and in some cases, individual titles free of charge. Sugar workers called numerous,general strikes and expelled several technicians before the government liberalized its cooperative election laws in ways allowing more democratic worker control of the sugar cooperatives. Leftist political groups attack the government by attacking the cooperatives. As one cooperative official noted, "if the cooperatives fail, the Revolution fails." A principal function of SINAMOS is to counter these attacks, but to date its actions have had little success. Cooperative members are often skeptical of the competence and even the sincerity of SINAMOS functionaries. Small farmers are fearful of their collectivistic ideology, and leftist groups denounce SINAMOS as a coun- terrevolutionary agency bent on enslaving peasants in government- controlled production cooperatives. Thus, the land reform has succeeded in eliminating the political power of the latifundists, and with surprisingly little opposition from them. But the government has gained little support from the peasantry. Only about one-third of the rural population will receive land under the program, and most of these beneficiaries will be required to join cooperatives, in which they have little faith. From a political stand- point, a major problem of the land reform is that cooperativism has been an imposed government program; it is not a genuine movement with strong grassroots support. Member Suoport, Governmental Sumport, and Reform Enterprise Per- formance. There are several criteria of reform enterprise performance, and innumerable factocs which influence these. In this area the impor- tance of interactions and trade-offs cannot be overestimated. Three of'the most important types of interactions are the following: (1) member support and responsibility versus governmental support-and re- sponsibility; (2)'economic performance versus member support.and parti- cipation; (3) enterprise performance versus governmental support. To the extent that members support and take responsibility.for the manage- ment of their enterprise, the state can relax. But in many cases new reform enterprises cannot function on their own, and member support and responsibility must be cultivated. Here an important dilemma arises: If the state takes on responsibility for the management of reform enter- prises, members are likely to lose interest in management and, through non-participation, fail to acquire skills necessary for taking over responsibility themselves. Adequate economic performance of reform enterprises is necessary for member support-where cooperatives and SAIS experience severe eco- nomic problems members tend to conclude that their leaders are incom- petent or corrupt, and that cooperation-is. not viable per sie. But mem- ber participation in some cases jeopardizes the economic performance of the enterprise, especially where members utilize enterprise resources for individual production and seek to expand individual production at the expense of cooperative or SAIS production. One of the major conclusions of this research is that public sup- port is necessary for the consolidation of most enterprises created -xxxii- under the reform. Production cooperatives and SAIS cannot be.expected to flourish on their own.- Training for both peasants and technicians is needed in the areas of reform enterprise management, accounting, cre- dit operations, supervision and control, and practical aspects of agro- nomy and animal husbandry. Special credit and technical assistance pro- grams are necessary. Price policies and marketing systems need improve- ment. In the long run, the quality of the rural school system must be upgraded. All of these types of programs are now being implemented, at least to a degree, by the Peruvian government. They are costly, and some can be expected to yield benefits only in the long run. They are most costly and least beneficial in the short run in isolated, . backward areas where peasants are poor. For practical political reasons the government is-likely to invest its funds where it gets the greatest short-run-return. Since the returns are likely to be calculated in terms of productivity, not participation; more is likely to be spent on, e.g., credit and technical assistance than on adequate.capacitacion and training of peasants. Moreover, government funds are likely to be invested in the areas which are already most productive, wealthy, and best integrated into the market system. To the extent that this- is true, government policies are-likely to improve the technical per- formance of the best reform enterprises and disregard the poorest ones- perhaps allowing them to disintegrate. Just as public support is necessary for the success of new reform enterprises, adequate performance is likely to be necessary for the continuance of public support. It is very unfortunate that some of the reform's "showcases," such as the cooperative T11pac Amaru II, have performed so poorly.. In political terms, such notorious failures are likely to overshadow the numerous less conspicuous success stories, and may discourage continued public support for the new reform enter- prises. I. SOCIO-ECONOMIC SETTI1G OF THE LA17D REFORM A. Natural Resources, Population, and Economic Structure Natural Resources and PoDulation In Peru, more than in any other South American .country, demographic trends and natural conditions conspire to limit the capacity of agricul- ture to feed the national population, to provide adequate rural incomes, and to promote industrialization. In recent years Peri:'s population has grown at about three percent-per annum, implying a doubling of the country's population in 23 years. In purely physical terms Peru has abundant unexploited land, but most of this (in the Selva) is difficult to settle, of unknown productivity, and isolated from urban coastal mar- kets. Consequently, expansion of the country's agricultural frontier has proceeded slowly and the ratio of cropland to total population has fallen to the lowest level of any South American country. The rural population continues to grow, rural incomes'have remained stagnant or fallen, and underemployment has become conspicuous in the agricultural sector. Rural-urban migration has also been massive, and slums now encircle the national capital, Lima, and other major cities. Industry can by no means absorb the manpower leaving the countryside, and urban unemployment and especially underemployment, in the form of various unproductive and poorly remunerated "service activities," have become major concerns for national policy-makers. Table 1 shows the growth of PerI's r.ural and urban population over the last three decades ind the distribution of population between the principal regions of the country--the Coast, the Highlands, and the Selva (Map 2). Total pQpulation growth accelerated from 2 percent per annum in the 1940s and 1950s to 3 percent per annum in the 1960s. In the 1960s urban population grew at an average annual rate of 5 percent, rural population at a rate of 0.5 percent. Population has grown in 1. This section draws heavily on IBRD, The Current Economic Position and Prospects of Peru (Washington, D.C., 1973), Chapt. II. -2- Table 1: POPULATION IN CENSUS YEARS (in thousands and percentages) 1940 1961 1972 Number % Number :_ Number _ Urban 2,197 35 4,698 4T 8,087 60 Rural 4,011 5,209 53 5,485 4o Total 6,208 100 9,907 100 13,572 100 Coast 29 39 43 Highlands 64 52 47 Selva 7 10 Total 100 100 100 Sources: (1) Pera, ONEC, Poblaci6n,del Peri, resultados provisionales del censo de 1972 (Lina, 1972), p. 59. Figures are not corrected for underenumeration. Numbers for 1972 are provisional. (2) General de Divisi6n, E. P., Enrique Valdez A., Ministro de Agricultura, "El sector agraric, exposicion en el CAEM, ,24 de mayo de 1973" (CENCIRA: Lima, 1973), p. 2. absolute numbers,in each of Peru's principal regions, but migration has flowed ,from,the Highlands to the Selva, and especially to .the Coast. The growth of urban coastal cities has been dramatic. In 1972 the Lima metropolitan area held about 23 percent of the country's population. Between 1961 and 1972 Peru's six largest coastal urban centers increased their share of the country's.population from 24 percent to 32 percent. Table 2 shows the regional distribution of Peru's total land area, cropland, and population, and illustrates the very low levels of land utilization and cropland per capita which characterize the country. Only 2.2 percent of the country's total land area is cropped; cropland amounts to only 0.2 hectares per capita. Peru's three natural regions, the country's 23 Departments, the principal population centers, and the location and extent of the coun- try's transport infrastructure are shown in Maps 1 and 2 at the begin-- ning of this paper. The coast is a narrow, arid strip of land which runs 2,200 kilometers from Peru's northern border with Ecuador to the southern border with Chile. The coastal desert is transversed by 52 short rivers which originate in the Highlands and flow toward the Pacific Ocean. The majority of these rivers flow all the way to the ocean a -3- Table 2: CROPLAND, TOTAL LAND, AND POPULATION, BY REGION Land Area Cropland as a Total Cropland Total Cropland % of Total Land Population per Canita (... 000 has. ..) (f) (000) (has.) Coast 14,000 800 5.7 5,836 0.1 Highlands 34,000 1,674 4.9 6,379 0.3 Selva 80,000 400 0.5 1,357 0.3 Total 128,000 2,874 2.2 13,572 0.2 Sources: (1) CIDA, Tenencia de la tierra X desarrollo socio-econ6mico del sector agricola--Peri. (Washington, D.C., 1966), Chapt. 1. (2) Valdez, "El sector agrario," p. 2. few months each year, when highland rains are heavy. Only a few rivers carry water to the ocean all year. Due to the peculiar effects of the Humboldt Current, which carries cool water northward.just off the Coast, it seldom rains in this region. All coastal agriculture and the large coastal population centers are located in the irrigated oases along the principal coastal rivers. Where irrigation water is available, coastal lands are highly productive and can be cultivated year around. A wide variety of crops.(including sugar cane,.cotton, rice, corn, fruits and vegetables., and potatoes) can.be grown, and crop yields are high, both in comparison to yields obtained in the Highlands.and the Selva, and in compariscn to those obtained in other countries.2 In both social and economic terms the Coast is Peru's modern region. Coastal agriculture is highly productive and overwhelmingly commercial. Long before the land reform, traditional land tenure systems (sharecrop- ping and labor-tenancy) had practically disappeared in this region. The bulk of Peru's modern industry is located on the Coast, primarily in the Lima metropolitan area. The until-recently dynamic fishing in- dustry is, of course, coastal. The majority of the country's profes- sionals and bureaucrats are employed on the Coast. The highly central- ized Peruvian government has its national offices in Lima. 2. A useful, brief description of Peruvian geography is found in Preston James, Latin America (New York, 1969). -4- Until-recently the majority of Peruvians resided in the Highlands and were employed in agriculture and livestock raising. In recent de- cades outmigration has reduced the share of the Highlands in total popu- lation, and mining has become the dynamic sector within the region's economy. But mining employs a very small share of the workforce, and has few linkages to the rest of the highland economy. Rugged terrain and torrential seasonal rains make transport-and communication between the Coast and the Highlands, and within-the High- lands.itself, costly and risky. Development on the Coast has had rela- tively little impact on life in the Highlands. If anything, the effect has been negative; the best-educated and most ambitious people are drawn from the Highlands to Lima and other coastal urban centers. Natural resources in the Highlands are poorly suited to agricul- ture. Of the total land area, only 5 percent is cultivated.. Most of the remainder--80-percent--.is low-qualityp6stureland. In contrast-to the Coast, cropping- in the Highlands is seasonal and very risky. Most cropland is not irrigated, and droughts jeopardize-production. Seasonal fluctuations in'temperature are dramaLtic and unpredictable. The rugged terrain, low population density, 'and lack of roads and storage facili- ties discourage commercial production o"f agricultural commodities. Consequently, the bulk of agricultural commodities are consumed near the point of production. -The main agricultural exports of the region are livestock products--primarily meat and wool. The Selva is Peru's great unexploited and largely unexplored low- land region to the east of the Andes. Several times in the past the Peruvian government has fostered (more through words than through deeds) colonization in this region, but with little success. Inclemency, varia- bility of soil resources, high settlement costs, and the lack of social and economic infrastructure severely limit the contribution which this region can make to the nation's commercial agriculture and livestock production in the near future. Most colonization which has occurred to date in this region is in the "High Selva" along the fringes of the Andes. Despite the great difficulties involved in colonization of the Selva, and the poor record to date, most authorities on Peruvian agriculture agree that colonization of this region is a necessary com- plement to land reform. -5- Position of Agriculture in the Economy In Peru, as in all developing economies, the share of agriculture in total production and employment falls over time. By 1970 agricul- ture's share in domestic production had falj'en to 16 percent; mining, manufacturing, fishing, and construction contributed 35 percent; ser- vice activities contributed 49 percent (Table 3). In the period 1965-TO the most rapidly growing economic sectors were fishing, electricity and gas, and manufacturing, with average annual growth rates of 8.9, 5.9, and 5.8 percent respectively. More recently overall economic growth has accelerated, the manufacturing and public utility sectors have con- tinued to prosper, construction has boomed, and commerce has picked up. In contrast, fishing production has been cut back drastically, apparently as the result of a short-term shift in the off-shore currents upon which Peru relies for its anchovy catch. Table 3: GROSS DOMESTI' PRODUCT AT FACTOR COST, BY ECONOMIC SECTOR, 1960, 1965, AND 1970 (values in millions of 1960 soles) - lacrease 1960 1965 1970 1960-70 Absolute % Absolute o Absolute % Agriculture 12,805 22.5 13,226:( 18.4 13,577 16.1 6 Other Com- modity Produc- tiona 18,040 31.7 23,790 33.1 29,489 35.0 63 Services 26,064 45.8 34,589 48.5 41,197 48.8 58 Totalc 56,909 100.0 72,342 100.0 85,265 100.0 50 aIncludes fishing, mining, manufacturing, and construction. In 1970 manufacturing contributed 23 percent to total GDP. bIncludes electricity, gas, and water; transport and communications; commerce and finance; government; ownership of dwellings; and miscel- laneous services. Commerce and miscellaneous services predominate. CECLA states that "because the individual activities and the total were calculated independently, the sum of the former does not correspond exactly to the latter, . Sources: UN, ECLA, Economic Survey for Latin America, various years. -6- Between 1961 and 1971 agriculture's share in employment fell from 49 percent to 44 percent. :The share of manufacturing and other como- dity producing sectors'remained nearly constant at 20'percent. The share of services increased from 28 percent to 33 percent. Over this period agriculture absorbed about 30 percent of the increase in Peru's labor force, and services absorbed 45 percent. The dynamic secondary sector absorbed less than a quarter of the increase (Table 4). Table 4: LABOR FORCE'BY ECONOMIC SECTOR, 1961 AND 1971 (in thousands, and percentages) 1961 1971 Increase, 1961-71 Absolute. % Absolute % Absolute .% Agriculture 1,597 49.1 1,936 43.8 339 21 Other Commodity Productiona 629 19.4 897 20.4 268 43 Services 905 27.8 1,44o 32.6 535 59 Unspecified and New Entrants 119 3.7 . 142 .3.2 23 19 Total .3,250 100.0 .4,415 100.0 1,165 36 aFishing, mining, manufacturing, and construction. Source: Direcci6n General de Empleo, Situaci6n ocuacional del Per, 1971. A comparison of Tables 3 and 4 indicates that agriculture is rapidly losing ground relative to other sectors of the economy in terms of labor productivity. The real value of agricultural production increased only 6 percent over the 1960s, but agricultural employment increased 21 per- cent. In contrast, the other commodity producing sectors (primarily mining and manufacturing) increased production by 63 percent and employ- ment by only 43 percent. The wide range of service activities increased both production and employment by 'just under 60 percent. Table 5 shows that value added per agricultural worker is roughly one-third of the average for the whole economy, and that the producti- vity of agricultural workers is, on the average, less than one-quarter the productivity of non-agricultural workers. Although labor producti- vity is a very crude measure of income, these and the figures cited -7- Table 5: VALUE ADDED PER WORKER BY ECONOMIC SECTOR, 1971 (in thousands of 1960 sales) Value Added Proportion Per Worker of Average Agriculture 7,146 0.35 .22 Other Commodity Productiona 35,010 - 32,754 1.73) 1.00 Services 30,576 1.51 Average 20,219) 1.00 , aSee note to Table 4. Source: Table 4, and ECLA, Economic Survey of Latin America, 1971, Table 126. above indicate that incomes in agriculture are far below those in other sectors, and that the relative poverty of farm people is increasing over time. B. Recent Performance of the Agricultural Sector Agricultural Production Trends In general terms Peruvian agriculture has been nearly stagnant in recent decades, and the poor performance of this sector constitutes one of-the most serious obstacles to the country's develcpment.3 Land scarcity, adverse price movements, and insecurity of land tenure have restricted both crop and livestock production, and aggravated problems of widespread rural poverty, inadequate food supplies, -ural-urban mi- gration, and rising food imports. Table 6 and Chart 1 present indices of total agricultural produc- tion, food production, and production of specific commodities over the period 1951-1971. These data indicate that in both the 1950s and the 1960s total production increased at an annual rate of approximately 2.5 percent. In the former decade food production increased at a slightly higher rate than total agricultural production. In both the 3. This is the conclusion of the above-cited World Bank report. See Chapter V, Section A. "able 6: INDEX NU"BERS OF TOTAL AGRICULTURAL PT.ODUCTION, FOOD PPODUCTIT, PER CAPITA FOOD PP.ODUCTION, AND PRODUCTIOU OF SELECTED AGRICULTURAL CO`TODIT1ES, 1952-1972 (1952-1956=100) Per Total Capita Agric. Food Food Production of Selected Agricultural Commodities Prodn. Prodn. Prodn. Wheat Barley Corn Rice Sugar. Potatoes Cotton, Beef Hutton Pork. 1952 97 99 103) 1953 98 100 102) 1954 103 103 103)- 100 100 100 100 100 100 100 1 100 100 100 1955 103 102 100) 1956 99 97 92) 1957 100 100 92 90 80 90 105 103 80 98 1 105 136 165 1958 107 106 95 97 87 96 76 111 79 99 1 118 144 190 1959 113 113 98 105 *. 94 113 139 122- 93 113 123 144 190 1960 116 112 95 100 105 113- 129 121 87 125 125 148 195 1961 121 118 97 100 107 127-. 135 -123 95 126 130 140 190 1962 125 119 95 99 89 153 145 125 108 141 112 156 210 1963 127 123 95 99 88 159 105 117 109 141 117 156 220 1964 132 130 98 93 88 167 136 116 117 131 , 135 144 235 co 1965 132 130 95 95 86 196 112 123 120 124 123 144 215 1 1966 138 139 98 91 85 183 140 117 115 114 i 148 156 210 1967 139 143 98 92 83 196 179 114 131 92 143 128 215 1968 131 134 89 73 71 177-- 111 97 121 99 142. 128 215 1969 140 147 94 82 79 196 172 -117 142 90 153 128 235 1970 153 159 100 81 82 204 224 117 147 87 I 162 132 290 1971 155 164 99 79 77 205 229 138 150 76 165 132 330 1972 154 163 95 91 82 196 185 138 145 81 167 140 270 Source: FAO Production Yearbooks -9- Chart 1: INDEX NUMBERS OF TOTAL AGRICULTURAL PRODUCTION (TAP), FOOD PRODUCTION (FP), AND PER CAPITA FOOD PRODUCTION (PCFP) (1952-1956 = ioo) //s -9- Chart 1: INDEX NUMBERS OF TOTAL AGRICULTURAL PRODUCTION (TAP), FOOD PRODUCTION (FP), AND PER CAPITA FOOD PRODUCTION (PCFP) - --- (1952-1956 ioo) L/ F7 11 - 1950s and the 1960s livestock production has increased more rapidly than crop production. In addition to,bei4g' nearly stagnant.,'.-aricultural production varies a- great deal from yrear to year. Regional statistics show even greater, flutuations, reflecting- the- vulnerability of Peru- vian agricultur6 (particulary Highland crop production) to climactic factors.- In contrast to the situation in other Latin American countries, the main factors contributing to increases in crop production in Peru have been-yield increases, not increases in the area under cultivation (Table 7). In the 1960s the area dedicated to"export crop production fell by nearly one-fifth, and yields of these crops increased by only 6 percent. In contrast, the-area seeded to-crops for domestic consump- tion rose by over 10 percent and yields increased by"24 percent. Table 7: PERCENTAGE CANGES IN AREA, YIELD, AND TOTAL CROP PRODUCTION VALUES, 1960-1970 (1970 farm prices) Area Yields Production Value (. . . percentage changes ... Crops for Domestic Consumptiona 13 24 37 Export Productionb. ' -17 6 -11 Total Crops 5 11 16 aIncludes rice, barley, maize, wheat, and potatoes. bIncludes sugar cane, coffee, and cotton. The export of cotton refers to the fiber; seed oil is consumed domestically. Source: IBRD, The Current Economic Pbsition'and Prospects of Peru (Washington, D.C., 1973), Table. 7.3.. Several factors responsible for these trends are the following: (1) the country's severe scarcity of agricultural land and slow expansion of the agricultural frontier; (2)' adverse movement in agriculture's terms- of-trade within the Peruvian economy--input prices have risen much more rapidly than output prices; (3) the threat of land reform (which discour- aged investment and motivated the liquidation of livestock on large es- tates); (4) lack of economic infrastructure (particularly irrigation, transport, and storage) necessary for reducing the very high risks in- volved in Peruvian agricultural production. -11- Results of Agriculture's Poor Performance Historically, Peru's coastal export agriculture--cotton and sugar-has been.dynamic and productive, and agricultural exports have earned a substantial share of the country's foreign exchange.- In recent years, however, production of agricultural com=odities for export has contracted somewhat, and the contribution of agriculture to total exports has dropped considerably. Of the four principal agricultural. exports-,. only coffee--grown in the High Selva--has shown a strong secular increase over the last two decades (Table.8), Table:8: COMMODITY EXPORTS,. 1950, 1955, 1960, 1965, 1970 1950 95-5 1960 1965 1970 A. Value, in Millions of U.S. Dollars 1. Cotton 68.0 68.1 73.1 87.4 52.1 2. Sugar 29.7 37.0 47.5 36.8 60.7 3. Coffee 1.0 8.0 18.6 29.0 43.8 4- Wool - -7.9 5.9 7 r 9.1- 3.3 5. Fish Products 5.7 .11.8 50.0 185.7 346.7 6. Petroleum and Mineralsa 66.1 115.6 207.9 290.1 465.1 7. Others 15.2 24.5 -28.9 29.2 62.6 Total 193.6 270.9 433.1 667.3 1,034.3 B. Relative Share (percentages) 1.-4. Agriculture 55.1 43.9 33.8 24.3 15.5 5. Fish Products 2.9 4.3 11.5 27.8 33.5 6. Petroleum and Mineralsa 34.1 .42.7 48.0 43.5 45.0 7. Others 7.8 6.7 4.4 6.o Totalb 100.0 100.0 100.0 100.0 . 100.0 aPetroleum products, copper, iron, zinc, silver, and lead. b Slight discrepancies due to rounding. Source: Banco Central de Reserva, various reports. Lands previously dedicated to the production of export commodities have been shifted into crops for domestic consumption, but growth of food production has fallen short of population growth, Jeopardizing both the trade balance and the already inadequate nutritional level of the -12- majority of the Peruvian population. Between 1951 and 1970 the value of agricultural imports rose from $28 million to ,144 million.4 An of- ficial source-estimates that the national average per capita consumption of calories and protein covers only 97 percent and 85 percent, respec- tively, of'the minimum requirements. Perhaps the most serious consequence of agriculture's poor perfor- mance is the widespread rural poverty which it implies. On the average incomes in agriculture are far below those in other sectors of the economy (see again Table 5). And on the average national'food consumption is below what the U.N. has established as the minimum requirement. Unfor- tunately we do not have-even rough estimates of rural incomes and food consumption in the Highland, biut all observers agree that poverty-and.- malnutrition are'most prevalent in this region.6 C. Characteristics of Agriculture in the Principal Regions of Peru The Coast In general terms, coastal agriculture is highly productive and com- mercial. Natural conditions are excellent for a wide range of crop and livestock production, and production areas are favorably located with respect to domestic urban markets and shipping terminals on the Pacific Ocean. The country's principal export crops and most of the produce consumed in Peru's large urban population centers are grown on the coast. 4. Charles Oman "Problems of Peruvian Agricultural Development and Possibilities for Ford Foundation Assistance" (Draft paper prepared for the Seminar on Peruvian Agriculture held in Santa Mar a, Peru, 16 and 17 October 1973), p. 3. 5. Peru', Oficina Nacional de Estadistica y Censos, "Hoja de balance de alimentos, 1969" (Lima, 1973). Minimum requirements for Peru were established by the U.N. at 2,410 calories and 65.1 grams of protein per capita per day. 6. Lima, which has 26 percent of the nation's population, consumes 38 percent of all calories consumed in the country and 51 percent of all protein. Peru', Ministerio de Agricultura, OSPA, Plan nacional de desarrollo, Plan agrario a corto plazo, bienio 1973-1974 (Lima, 1973), p. 3. -13- Among the natural conditions favoring coastal agriculture are high soil quality, level land, moderate climate, with minimal fluctuation of temperatures, and the abundance of river water for:irrigation in several coastal valleys. All agriculture.is-irrigated, lands can be cropped year-round and multiple cropping is common where irrigation water is available. Land use is highly intensive, and' livestock.is seldom pas- tured on the coast. In recent years cattle-feedlots, modern dairies, and factory-like hog.and poultry production units have been installed in the vicinity of the major coastal urban population centers. The absence of seasonal fluctuations in temperature and rainfall, and the uniformity of terrain provide optimal conditions for large-scale agriculture. Prior to-the land reform most coastal land was held.in large estates which operated as centrally.managed wage-labor-enterprises. Nevertheless, the majority of coastal production units were small, and a large share of the coast's foodstuff and livestock production came. from these units. Irrigation water is the most limiting factor of production in most coastal valleys, and the large landowners purchased estates both for their land and for the rights to irrigation water which came along with the land. At the time of the land reform large estates controlled not only the best coastal land but the best-watered lands. Areas of coastal minifundia were generally located on the poorest and least-adequately watered lands along the margins and the bases of the river valleys. Most smallholders received irrigation water only for a short period each year, when the river flows exceeded the demands of the large estates. Consequently, most smallholders were restricted to a single crop each year, and could not seed highly remunerative crops, such as rice or sug- ar, which demanded large or uniform supplies of water. In recent years a few poorly managed coastal estates, caught in the increasingly severe cost-price squeeze, sold off medium-sized 7. Until 1969, water rights were bought and bold along with estate lands, and could be transferred between estates owned by the same per- son or corporation. The new water law of July 1969 (D.L. 17752) abol- ished these rights. -14- parcels (e.g., 15-20 hectares) of high-quality, well watered land to independent farmers. These farms are now dedicated largely to truck crop production, and are among the most productive agricultural enter- prises in the country. Such prosperous medium-sized farms are, however, very few, and they hold an insignificant portion of the coast's agricul- tural land. Prior to the reform the largest and most profitable coastal estates produced sugar cane and cotton. Peruvian legislation requires coastal producers to dedicate a portion of their land to foodstuff production (25 percent in the case of sugar estates, 40 percent for all other pro- ducers). However, prior to the reform these stipulations were not strict- ly enforced. Sugar and cotton estates were generally operated as cen- trally managed wage-labor production units. Rice and potatoes were grown on both large and small farms. On flat lands (the lower sections of the valleys) rice estates were generally operated as wage-labor opera- tion3; but where terrain was rugged (the upper valleys) land was often parceled among peasants who cultivated on a small scale and sold their output to the landowner, who, in turn, often operated a rice mill and marketed white rice. Corn, beans, and truck crops were generally cul- tivated on small private farms. In recent decades most coastal landown- ers have attempted to expel their sharecroppers and labor tenants, and employ wage laborers. In areas of relatively recent settlement,8 and in the upper reaches of most coastal valleys, however, colonos contin- ued to occupy a significant portion of hacienda lands at the.time of the land reform. .Prior to the reform most large landowners did not reside on their estates, but rented them or entrusted their management to hired adminis- trators. It is important to noye that a significant portion of the coast's small landowners also lived in town and rented their farms. Since Peru's new agrarian legislation prohibits all forms of land rent- al, and requires landowners to reside on their farms, the small absentee owners are being adversely affected by the land reform along with the latifun,0 is s. 8. For example, the Santa Valley, near Cbimbote. -15- - Where timely, large-scale processing of a perishable commodity was necessary (e.g., sugar), where heavy financing was required (both cotton and sugar), and where large field size permitted mechanization (sugar, cotton, and in cases rice), large-scale producers had clear advantages over small farmers. But where the above mentioned factors were not pre- sent, and where frequent, small-scale marketing of a perishable commodity was involved (truck crops) small producers had the edge over large pro- ducers. In the 1960s large coastal estates mechanized heavily and cut their employment drastically. The sugar estates cut total employment by ap- proximately 50 percent. In other crops, such as rice and cotton, share- cropping and labor tenancy were eliminated, partly in order to reduce the full-time work force and the "dependency burden" on the estates.9 Consequently, the resident population and work force of large coastal estates has fallen in recent years, and the rural population has become increasingly crowded onto the meager resource base of the minifundia, dependent upon part-time employment on the large estates and wherever else work can be found. Global income data for the several categories of coastal rural work- ers are lacking, but data obtained in the case studies on the coast give some indication of pay rates on large estates just prior to their expro- priation. In two sugar estates for which data are available, cash wage rates were S/.52 and S/.57 per day for common laborers. In both of these cases weekly food rations, housing, medical care, and other perquisites raised the effective wage rate to S/.80-100 per day. On smaller estates producing cotton and potatoes, wages ranged from S/.42 to S/.58, but the value of perquisites was much lower, raising the effective wage rate to no more than S/.60-7O per day. On the only coastal estate visited which had a significant part of its land occupied by labor-tenants, cash wages were only S/.17 per day, but a ration valued at S/.15 per day was also supplied. 9. A large resident population was a disadvantage for estate owners to the extent that Peruvian social legislation (which requires adequate housing and medical and educational facilities) was enforced. -16- Prior to the reform most large-coastal estates were unionized. The sugar unions were first organized by political activists in Peruts APRA political party in the early 1930s, but later in the.decade both APRA-and the unions were suppressed and the union movement disintegrated. In the late 1940s the unions were,set up a second time, but again were broken. In the late 1950s a third movement got:underway which resulted in the-establishment of Aprista-led unions in most of the sugar estates, and the spread of unionization to other coastal estates. Most of these unions still existed at the time of the land reform. 10 The Highlands In general terms, Highland agriculture is unproductive and subsistence-oriented. Natural conditions in much of the region do not permit cropping, and where cropping is possible, the absence of markets and economic infrastructure often limit the viability of commercial pro- duction., Livestock raising is the principal economic activity in the region, but drought and high altitude limit the productivity of livestock enterprises. Most crops produced in the Highlands are consumed near the point of production. Wool and meat are the principal livestock ex- ports of the region. In much of the Central and Southern Highlands (notably in the de- partments of Pasco, Junin, and Puno) high tableland over 3,500 meters above sea level is known as "Puna." In most of the Puna no crops can be grown, and it is here that Peru's largest and most profitable sheep ranches were located. The pre-reform agrarian structure of the Highlands was much more complex than that of the Coast. As on the Coast, most land in the High- lands was held by large estates. In contrast to the situation on the Coast, however, the majority of Peru's highland estates were not operated as large, centrally managed wage-labor enterprises. Instead, they were organized around some variant of the colono system, with resident 10. Excellent discussions of APRA and the sugar unions are presented in Peter Klaren, La formaci6n de las haciendas azucareras y los origines del APRA (IEP: Lima, 1970), and in Julio Cotler, "Crisis politica y populismo militar en el Perd" (IEP: Lima, 1969). -17- laborers farming small plots of land and/or grazing their own livestock on the.estat.es' pastures, and paying rent in commodities and/or labor.11 Large coastal estates specialized in crop production and held the best coastal lands. In the Highlands large estates specialized in livestock production, and while their owners purchased or usurped the region's best pastureland,. they left much of the best cropland under the control of smallholders and peasant communities. All but a few of Peru's peasant communi.ties-which derive from the pre-historic allu, or extended family--are located in the Highlands. Much of the Highlandts population resides in these communities, and they hold significant portions of the country's land and livestock. Communal traditions and land use pose special problems for the land reform pro- cess. Historically all land within the jurisdiction of a community was the domain of that.community, and its use was determined by communal authorities. Pastureland was generally held in common, and all community members grazed their livestock on it. Cropland was typically parceled among community members for individual exploitation. A small portion of the cropland was often cultivated communally, and the proceeds fi- nanced community projects.. Each community had a hierarchy of public officials for management of the community's affairs. Labor pooling was a common form of.taxation for community projects, and labor exchanges were common between individual households (especially between close rela- tives and neighbors). Ever since the conquest the peasant communities have fought a los- ing battle against the encroachment of haciendas. In the present cen- tury the already precarious position of the communities was eroded by the expansion of commercial livestock enterprises, expulsion of peasant producers from- these estates, and the acceleration of population growth. Community populations increased markedly, despite heavy out-migration, 11. Where wages were paid to hacienda residents, they were generally below rates paid to non-residents, who did not enjoy the use of hacienda resources for individual production. -18- and man-land ratios fell. Moreover, within the communities, private appropriation of land and socio-economic differentiation have increased.12 In the Highlands natural conditions limit the region's development potential, and have an important.influence over land use and the organi- zation and productivity of crop and livestock production., Cropping is impossible in'many areas because of high altitude, inadequate rainfall, and frosts. Little crop production takes place above 3,500 meters above sea"level, and practically none above 4,000 meters. Where crops are grown, production units are generally small; yields are low, on the aver- age, and highly variable. The use of mechanical traction and heavy equip- ment is limited by the rough terrain and high altitude (which cuts power markedly), and discouraged by the fact that cropping is highly seasonal, and thus machinery is needed for only short periods each year. Improved seeds, fertilizers, and other non-farm inputs could increase yields of most crops markedly, but their use has not become widespread in many areas because of inadequate technical assistance and credit for small farmers, the high risks associated with agricultural innovation in the Highlands, inadequate supplies of agricultural inputs, and poor markets and storage facilities for perishable commodities. Consequently, high- land cropping is characteristically peasant production, employing primi- tive methods on small, isolated plots of land for local consumption. In contrast, livestock is produced on both large and small units. Until the land reform, sheep raising was a big and very lucrative busi- ness for a few corporations owning immense tracts of land in the Central and Southern Highlands (Junin-Pasco and Puno).13 The corporately owned livestock estates improved production methods and increased their profit- ability through importation of purebred breeding stock, careful programs of livestock selection and crossbreeding, fencing and pasture rotation, regular professional veterinary care, expulsion of peasant producers 12. The peasant communities are discussed in greater detail in Sec- tion II.B. below. 13. These corporations included the Cerro de Pasco Corporation, the Sociedad Agrzcola y Ganadera Algolan, the Sociedad Ganadera del Centro, and the Sociedad Ganadera del Sur. -19- and centralization of management decisions in.a technical professional staff, and reduction of the labor force. As will be-shown in Section I.D. below, Peru's large livestock-cor- porations held a very small portion of the country's sheep and*other livestock, but their estates were quite'progressive and profitable, and their administrative organizations have been taken by the government. as the models for reorganizing -other highland estates under the land reform. In the Highlands, estate workers are generally labor-tenants, rather than pure wage-laborers, and cash wages are much lower than on the Coast. All.the.ex-estates visited in the Highlands permitted some individual cultivation or grazing. The case studies indicate that cash wage rates are inversely related to the amount of estate land held by colonos and the number of.individually owned livestock grazing on,the estate. The largest and most.progressive livestock corporations of the Central High- lands and Puno, which severely limited peasant production, paid the high- est wages-S/.25-27.50 per day. The smaller cropping estates of Cuzco, which had much of their land occupied by colonos, paid less than S1.19 per day. In one case .(No. 20) no cash wages were paid. The High Selva At the end of 1973 the Peruvian government had not yet announced its plans for reforming the agrarian structure of the High Selva. The principal role this region seems likely to play in the reform program is that of an escape valve for increasing demographic pressure in the Highlands. Since the Selva does not play a major role in Peruvian agri- culture, since the land reform has not yet been extended to the Selva, and since none of the reform enterprises visited as part of this study were located in the Selva, the discussion of agriculture in this region will be brief. The population of the High Selva is small and of relatively recent settlement. Local urban markets for agricultural commodities are limited, and most commercial production depends upon coastal and foreign markets precariously linked to the Selva by mountain roads. The principal agri- cultural commodities shipped to the Coast are coffee, tea, fruits (in -20- some cases processed), and livestock products. The government hopes to expand commercial rice and sugar production in this region in.the near future. Where large estates are carved out of the jungle, they are often cleared by mejoreros who are alloted small plots of hacienda land to clear and bring under cultivation. Once settled, some large estates continue.to be farmed in small lots by landholding peasants (e.g., the coffee estates of La Convenci6n Valley north of Cuzco); in other cases the estates come under central management (e.g., the tea estates below Tingo Marla and in La Convencion). Quite often, owners of large coffee and tea estates own the only local processing facilitiesi and independent smallholders sell their products to them. There appear to be no overwhelming economies of scale in crop pro- duction in the High Selva, since the terrain is rugged and the crops involved require a great deal of hand work. But professional management is important for introducing improved production methods, since the labor force is typically of highland extraction and unfamiliar with the crops prcduced, and since little technical assistance is provided by the Minis- try of Agriculture in this region. Large-scale cattle producers have an advantage over small producers in that they can afford to introduce new types of cattle, new feed crops, and improved sanitary measures. D. Pre-Reform Agrarian Structure Relative Imortance of Large and Small Holdings Land concentration is one of the most salient features of Peruvian agriculture, but most students of the country's agrarian problems have overstated the degree of land concentration by failing to take into ac- count significant differences in land quality on large and small farms. The Inter-American Committee of Agricultural Development (CIDA) estimated that in the early 1960s 96 percent of Peru's farms--the sub-family and family-sized units--held only 10.7 percent of the country's agricultural land, while the medium- and large-sized estates held 80.6 percent of the land (the remainder being held by peasant communities). The sub- family-sized units averaged only 1.6 hectares; the large estates averaged -21- 1,338.1 hectares (Table 9).14 In addition to stressing the extreme con- centration of land in large holdings, CIDA and most other students of the Peruvian agrarian problems argued that the above-cited figures under- stated "real land concentration" since many large landowners owned more than one production unit, and since the large units held the country's best land. Data presented in the CIDA study of Peru indicate that the census grouping of landholdings by size of production unit does under- state.the concentration of land ownership, but only slightly.15 However, data presented in the 1961 Peruvian Census of Agriculture and Livestockl6 indicate that small holdings have, on the average, better land than large holdings. Table 10 presents data on the distribution of farmland among four categories of pzoduction units: less than 5 hectares, 5-100 hectares, 100-500 hectares, and over -500 hectares. The most remarkable fact re- vealed by these data is that while farms in the smallest category have only 6 percent of farmland, they have 31 persent of cropland and 25 per- cent of irrigated cropland. Farms in the largest category have three- fourths of all land in farms, but onIV.30 parcent of the cropland. Over three-fourths of all l d in small fains i. cropland, in comparison to only one-sixth on the large estates. Farms in the largest category aver- age 3,650 heet;ares in size, but have only 210 hectares of cropland under producticn (Tables 10 and 11). 1i. The "IDA 7esults, based on preliminary results of Peru's 1961 Agricultural and Livestock Census, do not reflect the amounts of land held bv acion5.& colce, since vage-laboorers were not censused as in- dependan produacis, 15. CIDA, Tecia Tn -ti?rr v desarocllo sric-econnmico del sect3r ayrTcola Ca Wa-hingtcn, D.C., 19 p . 16. Pri, IFP? C, P.:imer ceuso nacicnal arozecuerio (Lima, 1965). The 1961 Census is inadequ.ate in several respects, but since the results of the 1972 Census are not yet available and no other source exists, we must base our statistical analyses of pre-reform landholding patterns .a lrge tart u:con the 1961 data. Three major inadequacies of the 161 Census are: (1) non-enu aeration of wage-laborers; (2) under- enumeraton oc peasait communities; and, related to this point, (3) under-estimation of the total area in pastures. Wage-laborers hold a large part of hacienda cropland in the Highlands. Peasant communi- ties hold a large part of Peru's natural pastures. ㅋ Table 10: DISTRIBUTION OF TOTAL LAND AREA, ARABLE LAND, PERMANENT CROPLAND, NATURAL PASTURES, AND OTHER LANDP BY SIZE OF PRODUCTION UNIT, 1961 Number Total Land Use Average - - - 9- [Z _e .Size of Pro- of Pro- Land in All Irrigated Natrual Other of Holding.. duction Unit duction Units Farms Cropland Cropland Pastures Land All La I ( --------------------- percentages --------------------- ----- has -------- 11 0-5 Has. 82.9 5.8' 30.9 25.4 1.1 2.2 1.5 1.4 5-100 Has. 15.7 10.4 29.4) 5.4 9.5 13.9 5.8 100.-500 Has. 0.9 8.8 9.9)- 74.6 8.7 8.4 201.8 33.5 Over 500 Has.-a o.5 75.0 - 29.8) 84.8 79.9 3654.2 212.5 Totalb/Average 100.0 100.0 100.0 T00.0 100.0 100.u Source: Peru-, Direcci8n Nacional de Estadistica y Censos, Primer den§o nacional Agropecuario (Lima, 1965). a. The average production unit over 2,500 has. (the largest census category) has 10,382 has., with 518 hag. of cropland. b. Ingignificant differences due to rounding. Table 11: RELATIVE LAND USE9 BY SIZE OF PRODUCTIOWUNIT, 1961 Total Cultivable Size of Pro- Land in Arable Permanent but Not Natural Forest and. duction Unit Farms Cropland Cropland Cultivated Pasture Barren 0-5 Has.a 100.0 71.5 5.8 9.4 9.6 4.7 5-100 Has. 100.0 35.4 6.1 13.6 25.7 19.2 100-500 Has. 100.0 14.5 2.1 9.0 49.3 25.1 OVer 500 Has.b 100.0 4.8 1.0 6.2 .56.3 31.7 Average 100.0 12.7 1.9 7.3 49.8 28,3 Source: See source to Table 10. a. on production units of less than 7 hectares(the smallest census category), 03.7 percent of all land was arable, 3.1 percent under permanent crops, and 5.4 percent cultivable but uncultivated. b. on production units of over 2,500 has. (the largest census category) 3.9 percent of land was arable, 1.1 percent under permanent crops, and 61 percent cultivable but uncultivated. less than 5 hectares. In Lambayeque and Tumbes--the only departments with only coastal lands--only 11 percent of arable land was held on small farms. In marked contrast, for all other departments (primarily High- lands, but also with some farmland in the Selva) 50 percent of all arable land was on farms of less than 5'hectares. Thus,. it is clear that while irrigated coastal farmland is held primarily on large farms, most crop- land in the Highlands is held by very small farmers. Since wage-laborers on large estates were not censused as independent producers, these data 14nderstate the actual dominance of small-scale producers-in Highland crop production. It is often argued that large estates drastically under-utilized their resources by grazing land which was suitable for cultivation. There is no question but that large estates-,utilized,their lands less intensively than they could have, and less intensively than would have been the case if these lands had been held by smallholders. But it is highly unlikely that the estates could have brought much new land into cultivation profitably, or that a significant expansion of commercial crop production will result from the land reform without major changes in technology or markets. Most of Peru's "cultivable but uncultivated" land is held by large Highland estates. Peru's largest estates, which hold half this land, are in the highlands of Cuzco, Pasco, Junin, Puno, and La Libertad. A significant share is' also held by large estates in the Selva. We have no reliable statistical data on the qualityof this potentially cultivable farmland, but census data and field observations indicate that most of it is held in remote areas characterized by hazard- ous growing conditions and poor economic infrastructure and markets. My own fieldwork indicates that most cropland in large highland estates is worked by colonos, not by the hacienda administration itself. In many cases, the amounts of cropland tilled by colonos is not strictly controlled, and they do not pay rent for cropland. Under these condi- tioLs, e;pansion of cultivation is limited more by adverse growing con- ditions (high risks), lack of labor and equipment in critical seeding and harvest periods, and inadequate markets, than by disinterest on the part of the landowner. In other cases (notably in Puno and the Central Highlands) administrators of large sheep ranches have attempted to Table 12: DISTRIBUTION OF LIVESTOCK BY SIZE OF PRODUCTION UNIT, 1961 Llamas and Sheep Cattle ogs Alpaas Goats Average Average Average Average Average Size of Pro- Number Number Number Number Number duction Unit % per Unit % per Unit % per Unit % per Unit % per Unit Landless 2,7 24 3.6 10 26.5 37 24.6 65 16.0a 91 0-5 Has. 53.6 24 56.6 6 52.7 3 33.2 16 51.1 22 5-100 Has. 27.3 67 25.7 12 17.9 4 21.3 37 27.8 61 100-500 Has. 4.3 175 5.7 50 .1.7 9 9.8 104 2.7 129 Over 500 Has. 12.0 862 8.4 131 1.2 13 11.1 224 2.4 198 Totale 100.0 100.0 100.0 100.0 100.0 Source: See source to Table 10. Averages are based on the number of production units holding each type of livestock, not .the total number of production units in the country. a. Includes 1 percent corresponding to units of unspecified size. b. Production units over 2,500 has. (the largest census category) have an average of 1,651 sheep, 272 cattle, 16 hogs, 363 llamas and alpacas, and 315 goats. c. Insignificant differences due to rounding. reduce cropping on the estates ar.cut their labor force in order to increase profits from livestock production. In such cases subdivision of the land would clearly result in an increase in cropping (and a de- crease in livestock production). But since the Peruvian land reform is not breaking up such large units,17 the cultivated area on these units is not likely to increase. In any case, crop production in these areas is very risky and of low average productivity; the 1961 Census reports that 49 percent of all crops lost in the previous cropyear, due to ad- verse weather and other unforeseeable causes, were in the departments of Puno and Junin (primarily due to frost).18 Not only has the share of Peruvian cropland held by small farmers been underestimated, the importance of small-scale livestock production has not been appreciated. Observers seem to have noticed the few, im- mense, and highly productive ranches in the Central Highlands and in Puno, and concluded that most livestock production came from these large units. Census data indicate, however, that in 1961 nearly 60 percent of the country's sheep, cattle, llamas,-and alpacas, 70 percent of the goats, and 80 percent of the hogs were held on production units of less than 5 hectares. Estates of over 500 hectares had just over 10 percent of the country's sheep, alpacas, and llamas, 8 percent of the cattle, 2 percent of goats, and 1 percent of hogs (Table 12). The importance of peasant communities in the country's agriculture is hard to estimate, since individual comuneros often own their own land and farm independently. The 1961 Census indicates that at that time the communities owned only 5 percent of the country's cropland19 and 14 percent of the pastureland (Table 13). Data prepared for a recent study of meat production and consumption in Peru20 indicate that members 17. On land redistribution under the reform program see Section II.B. below. 18. Peru', Primer censo, Table 40. 19. Generally parceled among the comuneros and farmed individually. 20. Convenio, Ministerio de Agricultura, AID, Fundaci6n para el Des- arrollo Nacional, Estudio de evaluaci6n del problema de carnes en el Peru (Lima, 1973), Vol. 6. -26- Table 13: PERCENT OF LAD OWNED BY PEASANT COMMUNITIES, 1961 Type of Land Percentages Total Area in Farms 11 Arable and Permanent Cropland 5 Natural and Cultivated Pastures 14 Other Land 8 Source: See source to Table 10. of peasant communities own roughly.one-third of the country's cattle, sheep, and hogs, and one-fifth'of the goats, llamas, and alpacas (Table 14). Comuneros are generally small independent producers with less than 5 hectares of land under their personal control, and who graze on pas- tures -owned by their communities and on the lands of neighboring large estates. Figures on livestock numbers held by small producers overstate their contribution to livestock production since their animals are gener- ally of poorer quality and less well fed than animals on large estates. They also tend to consume a larger share of their own production, and thus contribute less to the marketed supply of livestock products. Table 14: PERCENT OF LIVESTOCK OWNED BY MEMERS OF PEASANT COMMUNITIES, 1972 Type of Livestock nPercentages Cattle 31 Sheep 32 Hogs 33 Goats 21 Llamas and Alpacas 20 Source: Convenio, Ministerio de Agricultura, Agen- cia Internacional para el Desarrollo, Fundacion para el-Desarrollo Nacional, Estudio de evaluaci6n del problema de carnes en el Peri (Lima, 1973), toma 6. (Based on Estadistica agraria 1971, Atlas de comuni- dades, and information supplied by SINAMOS' Dire- cci6n de Organizaciones Rurales.) -27- Table 15 shows the relative number of estate managers and operators, small independent farmers, and estate residents (including colonos) in 1961. Nearly 70 percent of the farm families fell into the second cate- gory, and over one-quarter fell into the third. Colonos outnumbered wage-laborers by two to one. Table 15: DISTRIBUTION OF FARM FAMILIES ACCORDING TO SOCIO-ECONOMIC STATUS, 1961 Status Percentages Estate Operators - 3.0 Estate Managers 1.0 Operators of Family-Sized Smallholdings 7.6 Operators of Sub-Family-Sized Smallboldings 61.7 Farm Workers:a Colonos 17.8 Wage Laborers 8-9 26.7 Total Agricultural Families 100.0 aAccording to CIDA estimatesof the 300,000 farm workers in 1961, two- thirds were colonos (predominantly in the Highlands), and one-third were vage-laborers. (60,000 on the Coast, 25,000 in the Highlands, 15,000 in the Selva). See the CIDA-Peru report, Chapter IV, and corresponding Appendix. Source: Solon Barraclough, "Agricultural Policy and Land Reform," Jour- nal of Political Economy 78, 4 (Part II), p. 920. The Organization of Large Estates Prior to the land reform, most highland estates were organized around some variant of the colono system. Individual estates comprised large ownership units, but within the estates a significant part of crop and livestock production was carried out by relatively independent small- scale producers--the colonos. Colonos occasionally paid rent is cash or species for the small plots of land they tilled and generally paid rent for the pasturage of their livestock on estate lands. They were generally required to work for the estates' management several days each month at less than market wages. Such estates often employed primitive production methods and appeared to be undercapitalized. They purchased few inputs and produced little market surplus. Their residents, who were not unionized and often non-Spanish speakers, lived in relative isolation from the modern sectors of Peruvian society. -28- In contrast to this traditional hacienda (often termed the "latifundia-minifundia complex"), on the Coast a. radically different type of large estate evolved, which operated as a single production unit, employing modern techniques and large volumes of purchased inputs for the commercial production of agricultural commodities.(often for export). The prototype of the "modern, commercial estate" was the sugar plantation. Recently, estatelproduction of rice, cotton, and potatoes, has become increasingly organized around this model. The CIDA study and other critiques of Peru's pre-reform agrarian structure have emphasized the backwardness and inefficiency of the tradi- tional hacienda, and argued that cultural and political factors are cen- tral to an explanation of its persistence in the Highlands. According to this view, the largest and most extensively operated highland estates (notably sheep estates) were owned by hacendados endowed with a "quasi- feudal mentality,n21 who cherished landownership primarily for the social prestige and political power associated with it, not for the eco- nomic returns. Owners of highland latifundia were assumed to be so wealthy that the marginal utility of income was very low. Thus, they were insensitive to "normal" economic stimuli, and failed to rationalize and modernize their production methods in ways which would have increased profits. Recent studies of highland agriculture, including my own fieldwork in Cajamarca and the Central and Southern Highlands, indicate that eco- nomic decision-making is a much more important determinant of the inter- nal organization of estates than are political and cuLtural factors, and that highland estate owners were much more concerned with the ration- alization of production methods than previously thought. In 21 of 22. ex-estates visited during my fieldwork interviewees reported that prior to the land reform the primary concern of the landlord was profits. The one estate in which officials stated that the owner was relatively 22 unconcerned with profits was on the Coast, near Lima. In most 21. CIDA, Tenencia de la tierra, p. 112. 22. Case No. 8, "Santa Barbara." -29- highland estates, primarily the largest,ones, profit-oriented owners and administrators seemed to have been greatly concerned with the moderni- zation of production methods and with the substitution of large-scale wage-labor production for peasant or colono production. Until the present century, in the Highlands both crop 'and livestock production was carried out on a small scale by peasants residing in peas- aut. communities or on haciendas. `*Where land was concentrated on large estates, the owners left production to resident colon6s'and merely col- lected rent. Technology was primitive, transport facilities were poor, and urban markets for agricultural commodities and livestock products were restricted. Surplus production was small both in.the haciendas and in the peasant communities. Over the course of the present century, international markets for Peruvian wool opened up, and improved produc- tion methods became available which could be profitably introduced on a large scale; estates in the Central Highlands expanded and modernized. Central to this modernization process were the curtailment of peasant production (both crops and livestock), the -replacement of colonos with wage laborers, and the reduction of population and labor force on the large estates. Peasants have resisted these changes, and even on estates whose administrators were ruthlessly profit-oriented (such as those of the Cerro Corporation and other firms in the Central Highlands) peasant production had not yet been entirely eliminated at the time of the land reform. In Puno, despite the wishes of*owners and administrators-to elimi- nate- peasant production on sheep estates,.peasant residents often re- tained half or more of the total-livestock population. The immense sheep estates of the Central and Southern Highlands were the largest haciendas in the country and among the most profitable. Nevertheless, most'of' their' land was at extremely high altitudes above sea level and was extremely poor, unsuitable for crop production or even cattle grazing. Estates which held better land, at lower altitudes and more suitable for cropping, were typically much smaller than the sheep estates and more traditional in terms of their internal organization. Few important economies of scale encouraged large-scale crop production; hecienda colonos continued in possession of a significant part of the estates' cropland. -30- In highland sheep estates, professional managers were able to in- troduce a number of production improvements (such as fencing, rationali- zation of pasture use, veterinary care, improved breeding stock, selec- tion, and crossbreeding techniques) which increased productivity and profits markedly. In cattle raising, and especially in crop production, relatively few technical improvements have been able to increase producti- vity significantly over the levels of traditional peasant production, and fewer yet have involved significant economies of scale. Thus, even highly profit-motivated large landowners have been discouraged by unsuc- cessful attempts to modernize agriculture, and most have preferred to invest their management skills and financial capital elsewhere in the economy. Some students of the hacienda system argue that the colono system was maintained in large part because traditional haciendas were largely self-sufficient, poorly integrated into product and capital markets, and thus unable to pay cash wages.23 Several of the case.studies pre- sented in the appendix to this report contradict this view and support the hypothesis that colonato was maintained even on commercial estates owned by aggressive profit maximizers where economies of scale were un- important and rent collection was more profitable than central adminis- tration. The following two quotations illustrate this point. The first is from the representative and large shareholder of a corporation which owned several haciendas in northern Peru, and refers to a rice estate in the upper Zafa River Valley. At the time of the reform, colonos held about half this estate's cropland (Case Report No. 1). The second quo- tation is from the business manager of the same corporation, and refers to a large estate in the highlands of Cajamarca (Case Report No. 3). In order to solve our labor problem and to maximize the production of the hacienda we gave plots of 23. See, for example, Eric Wolf and Sydney Mintz, "Haciendas and Plantations in Middle America and the Antilles," Journal of Social and Economic Studies 6 (September 1957); and Solomon Miller, "Hacienda to Plantation in Northern Peru: The Process of Proletarization of a Tenant Farmer Society," in Julian H. Steward, ed., Contemporary Change in Tradi- tional Societies (Chicago, 1967). -31- marginal land to colonos. Since we-also financed their production we could dictate the following conditions: 1. Seed the varieties that.,we specified. 2. Seed when we specify., 3. Use irrigation when we' specify; and in the fashion we specify. 4. Sell us all the harvest. We seeded one time each year on the best lands.. .in that way we.assured- ourselves-one good crop per year- and the colonos seeded two times each year and worked for the hacienda when we needed their labor. With this system we managed, to utilize the available irrigation water rationally, minimize the risks incurred by the hacienda, employ the residents of the hacienda year around, and eliminate the need to contract workers outside the hacienda. The irregularity of the terrain and rainfall is the principal problem there. ... Irregularity ruins any calculation of yield' or profitability. "Normal conditions" practically.do not exist in that zone. ... Intensive cultivation is im- possible, and therefore cattle grazing has always been the principal activity. ... We invested - quite significant quantities of money and time in that fundo, but never did we reap an adequate -return. The most important branch of the:busi-. ness has always been "rental of pastures." Therefore, we never changed the system; but rather improved it-made it yield more. -32- II. LAND REFORM AND NEW ENTERPRISE FORMS A. The Emergence of Land Reform as a Political Issue, and Early Reform Measures Rejection of Early APRA Reform Proposals Peru's APRA party advocated land reform as long ago as 1924 in its original program.1 In the political campaign preceding the Peruvian presidential election of 1931 the Apristas damned the "sugar and cotton barons" and foreign imperialists, and advocated state direction of the country's industrialization. APRA's political platform had widespread popular appeal, especially on the north coast where the largest sugar and cotton plantations were located, but Peru's dominant economic and political interests had no intention of allowing the Apristas' progres- sive programs to be implemented. Coastal agriculture figured prominantly in the nation's economy and foreign trade, and the incipient commercial and industrial bourgeoisie was in no position to challenge the interests of the coastal latifundists. On the contrary, they were dependent upon the latifundists for their own existence. APRA's nationalistic, populist politics threatened the interests of Peru's powerful, traditional elite. Consequently, for most of the period prior to 1956, the APRA party was ruthlessly repressed by the military (the "watchdog of the oligarchy"), and the country's conservative governments rejected land reform and the other APRA proposals which would have threatened the atmosphere of "con- fidence and security" necessary for attracting the foreign capital and technology which was seen by them as necessary for the development of Peru's incipient industrial sector.2 1. See footnote 10, Section I, and also Robert Marett, Peru (London, 1969), Chapt?rs 12-14. 2. Cotler, "Crisis pol'tica," pp. 7-29. -33- Industrialization and the "Agrarian Problem" The laissez-faire policies followed by conservative Peruvian govern- ments in recent.decades were by and large successful in stimulating rapid growth in the industrial, commercial, mining, and fishing sectors of the economy, but were inadequate for stimulating agricultural growth, particularly in the Highlands. Moreover, they resulted in a pronounced concentration of the benefits of industrialization among a small segment of the urban population and increased the relative, if not the absolute, poverty of rural people. The poor performance of Peruvian agriculture and the declining weight of agriculture in the national economy were discussed in Section I.B. above. In the present Section these will be related to the land reform issue. The slow growth of food and total agricultural production has be- come of increasing concern to national policy makers since it constricts the domestic suply of food and raw materials for the cities and indus- tries, increases inflationary pressures, and requires the expenditure of scarce foreign exchange on food imports. Moreovar, by exacerbating the poverty of rural people, agriculture's poor performance has stimu- lated rural-urban migration, the growth of urban slums, and rising crime rates. "Poverty started to slap the face of the sophisticated and sub- tle 'Limeno' way of life.",3 As fishing, mining, manufacturing, and services expanded and agri- culture stagnated, the political hegemony of the Peruvian landed oligar- chy became increasingly tenuous. In the post-war period the main source of the oligarchy's political power was not its land and dependent labor, but its accepted role as spokesman for laissez-faire capitalism and the smoothly functioning network for political brokerage within the electoral bargaining system. As the agrarian base of the oligarchy was being un- dermined, the large landowners invested in urban real estate, commerce, fishing, and other sectors. 3. Carlos Amat, "The Agrarian Reform Process in Peru: A Historical Perspective" (Unpublished term paper: Madison, 1972). -34- All these factors helped to make the inadequate performance of agri- culture a political issue of national importance, but two other devel- opments were crucial to the conceptualization of Peru's agricultural problem as an essentially "agrarian" problem-the Bolivian Revolution of 1952 and the growing peasant unrest in the Peruvian Highlands. More than anything else, fear of an agrarian revolution "a la Boliviana" moti- vated Peruvian politicians to begin discussing.,land reform as a legiti- mate political issue. And when the first lands were finally,distributed among peasants, in the ad hoc measures of 1963, this was the direct re- sult of peasant land invasions. In 1956-the first Peruvian political election of the decade--all major candidates advocated land reform in one form or another. The win- ner, Manual. Prado, a conservative who received the backing of the land- owners, set up a commission to study the issues of land reform and urban housing. The Commission was presided over first by Pedro Beltr9n, one of Peru's most prominent spokesmen for conservative landholding inter- ests, and later by the legal council for the Cerro de Pasco Corporation, owner of' one of the country's largest sheep ranches. Numerous other prominent representatives of landholding interests served on the Commis- sion. Despite the conservative positions of the Commissions's members, Congress denied it an initial grant necessary to begin its studies. Beltran obtained the necessary funds from the Rockefeller Foundation. In 1959, Beltr9n was appointed to the premiership. Peasant unrest had become an issue of national import by that time, and Beltran's first major act as premier was to create Peru's first Agrarian Reform and Set- tlement Agency (Instituto de Reforma Agraria y Colonizaci6n-IRAC).5 The next year, again in response to the continuing rural crisis in the Highlands, the Commission for Agrarian Reform and Housing finally issued its report, after four years of procrastination and inaction. ,The Com- mission's report included an innocuous agrarian reform bill which was submitted to congress, but never considered by the legislators. IRAC's 4. Terry L. McCoy, "The Politics of Agrarian Reform in Peru" (Unpub- lished paper prepared as part of the research and training program of the Land Tenure Center: Madison, 1965), Pp. 7-8. 5. Ibid., p. 10. -35- activities were limited by financial constraints and political priori- ties to colonization projects and conspicuous public works in rural areas. I The first concrete land reform.actions (land redistribution) were ad hoc measures taken in 1963 in response-to peasant land invasions in La Convenci6n and Lares Valleys north of Cuzco in-the High Selva and in the Jundn and Pasco departments of the Central Highlands. In La Con- venci'n, peasant movements.began with the formation of labor unions in the early 1950s to protest the demands of landlords for free labor and sale of peasant production (coffee) to the haciendas at less-than-market prices. In 1958 a Provincial Peasant Federation was formed, and in 1959 a Trotskyite labor organizer,'Hugo Blanco, joined the movement. In 1960 and 1961 strikes were-organized in several haciendas; by the end of 1961 there were 42 unions on strike in La Convenci6n.7 In Decem- ber 1961 an effective general strike was.called, and as a result the Prado government issued a decree in April 1962 which abolished the un- paid labor obligations. With success in this area, the unions, now headed by Blanco, went on to occupy hacienda lands. Landlords, the police, and the military attempted to expel the "invaders," and numerous violent clashes resulted. The de facto occupations seemed impossible to undo, however, and in March 1963-the military government which had overthrown Prado in mid-1962 issued a special land reform decree (No. 14444) for the valleys of La Convenci6n and Lares which legalized the de facto ten- ant occupations.of hacienda lands.- It is important to.note that in this case, as in all subsequent cases of land reform in Peru, the peasants were not granted lands free of charge,'but were required to repay the state for lands received, over a twenty-year period. The second case of massive land invasions in Peru occurred in the early 1960s in the Central Highlands, and involved occupations of several estates of the Cerro de Pasco Corporation", the Sociedad Agr'cola Ganadera 6. The material on peasant movements in La Convenci6n, Lares, and the Central Highlands is drawn from Gerrit Huizer, The Revolutionary Potential of Peasants in Latin America (Lexington, 1972), pp. 114-124. 7. Huizer states that there were 174 haciendas in the area. -36- Algol6n, and other large landowners. The first invasion, in 1960, was precipitated by the expulsion of livestock owned by neighboring comune- ros from an estate of-the Cerro Corporation. Traditionally, the comune- ros (many of whom worked on the hacienda) had grazed their livestock on estate lands, paying rent for pasturage. When the Corporation fenced the pastureland and drove the comuneros' livestock out, the peasant com- munity San Antonio de Rancas initiated futile legal actions and finally decided to invade lands of the estate to which the community had old titles. When the police attempted to expel the invaders from the estate a fight broke out and three peasants, including the community's leader, were killed. In January 1961, when peasants from the community San Pedro de Yana- huanca invaded several estates of the Algolan Corporation, eight peas- ants were killed. In March 1962 the local peasant federation organized an "1agrarian army" of 2,000 men on foot and 1,500 on horseback. Numer- ous land invasions took place, violence broke out, and a state of siege was declared in the region. Miners and railway workers in Cerro de Pasco organized a sympathy strike on the day of a funeral for eight peasants killed during one encounter. After the military overthrown of Prado in mid-1962, the peasant movements of the Central Highlands ceased their tactic of land invasions until Belaunde (the most pro-land reform candidate) had become elected and inaugurated (July 28, 1963). Belaunde's campaign involved trips to several rural areas never before visited by a presidential candidate. Belaunde assured himself of peasant support by distributing small bags of soil as advances on the land peasants were to receive after the elec- tion. But once elected, Belaunde was unable to meet the land reform demands of his peasant supporters. As a joke c.rculating in Lima at the time had it, Belaunde's electoral slogan, "Adelante campesinos!" was changed soon after the election to the plea, "No empujen, pues." The first invasion took place just two days after the inauguration, and involved 3,500 peasants initially, and 8,000 within a few days. Soon numerous other well-organized Envasions were underfoot. CIDA has estimated that approximately 300,000 peasants became actively involved in the land invasions, pressuring for the reforms promised by various -37- politicians.8, In August 1963 the government issued Supreme Decree No. 11 which provided for the initiation of expropriation procedures in the Algol6n estates and a small part'of Cerro'6 holdings, for ultimate trans- fer to peasant beneficiaries. At the end of 1963, after the Minister of Interior had been severely criticized by representatives.of Peru's large landowners for allowing land invasions and' rural anarchy, the Belaunde government initiated a' campaign of violent repression in rural areas. No oth6r invasions were tolerated or resulted in significant landredistribution. Land Redistribution Under the 1964 Land Reform Law On August 12, 1963, in keeping with its electoral pledge to initiate a sweeping land reform program, President Belaunde's Acci6n Popular party submitted a draft land reform bill to congress. By November, six other bills had been submitted, and an ad hoc committee had been set up to draft a compromise bill. The bill produced, which wis much weaker than the President's original proposal, was signed into law by President Be- launde in May 1964.9 Peru's 1964 land reform law (No. 15037) is detailed and comprehen- sive, with 248 articles, two special dispositions (one of which excludes peasants involved in land invasions from the benefits of the reform), and four transitory dispositions. But the law's provisions are so com- plex, the exclusions and exceptions so numerous, and the compensation to landovners so generous that the law was extremely difficult and costly to implement. The following long quotation, from a book by James Petras and Robert La Porte, Jr., details several of the law's weak points and 10 their negative impact on the reform program: Law 15037 contains a number of articles which lim- ited the application of the law and prevented it from 8. CIDA, Tenencia de la tierra, Chapter XI. 9. McCoy, "The Politics of Agrarian Reform in Peru," pp. 16-18. 10. James F. Petras and Robert La Porte, Cultivating Revolution, The United States and Agrarian Reform in Latin America (New York, 1971), pp. 35-38. The following analysis of land reform under the 1964 law draws heavily on this work. -38- becoming an effective instrurent for large-scale change. The major limitation to extensive agrarian reform appears in Article 25, which expands the amount of unaffected (exempted) lands under the law. For expropriation purposes, one hectare of irrigated land is equivalep. to three of 'dry' land (unirrigated--vaguely mat broadly interpreted) and to 100 hectares of pasturage. As a result of the equivalence tables, of the 890,000 hectares owned by multi-family units in the Costa and Selva, only about 250,000 hectares are expropriable after all exceptions allowed under the law. These excep- tions and others reduce the extent of lands vulner- able to expropriation. As a consequence of the limitations imposed by Article 25, lands available for expropriation could only provide 6.5 hectares of land per family to a maxim of 95,000 families, which represents only 13 percent of the 714,000 families which should reasonably have benefited from a valid agrarian reform. Other articles, such as 29 and 34, listed numerous reasons for exempting certain types of hacienda lands. These reasons were vague and open to considerable subjective interpretation by agrarian reform officials and later in courts of law and before special agrarian reform evaluation committees. At various stages in the bureaucratic and judicial processes, a hacendado could have virtually all or at least large sectors of his lands exempted from expropriation. Exemptions were allowed for (1) specific types of haciendas, (2) methods of opera- tion or quality of agricultural administration evident (efficient and productive), (3) topography of the property, (4) high income of the haciendas, (5) capital investments made by hacendados. Article 25 permitted each member of a corporation (sociedad) or partnership (condominio) to claim individual exemptions. Thus, if 150 hectares of coastal land could be exempted per individual, a corporation owned by fifty persons could exempt a total of 7,500 hectares. This provision allowed for the total exemption of all the coastal and Sierra sugar and cotton haciendas. Title XV of the law also worked contrary to the goal of a family farm of 6.5 hectares. Title XV, when applied to areas outside of agrarian reform zones, permitted only the distribution of certi- ficates of possession to feudatarios. This meant that tenant farmers were given legal possession of their subsistence plots. Title XV did not permit consolidation or expansion of these tiny holdings through expropriation of adjacent -39- haciendas. In effect, minifundismo was actually perpetuated and strengthened through the application of Title XV. The actual consequence of the law con- tradicted the stated purpose of ending minifundismo as stated in Articles 1, 2, 6 and.95. ... In another area, Law 15037 did not provide clearly for transfer to peasants of lands owned outright by the govern- ment or by government corporations. The law merely said that such government-owned lands were-'to be designated in totality to the ends of the agrarian reform.' As a result, hacienda properties owned by the ministries of Education, War, Aviation, etc. were not to be used for agrarian reform purposes because ONRA's and CORFIRA's (the Agrarian Reform Finance Corporation) rights of acquisition were not specifi- cally stated in the law. Instead, there were reports that government lands were being sold freely and openly to 'third parties' (presumably persons outside * the government). . Another serious defect of the law was the inade- quate specification of water rights. This was of particular importance along the Costa. The lav did establish clearly the objectives and criteria for the use of water in relation to land tenure (see Articles 81, 84, 109, and 121), but the qualifications and exceptions of Articles 110 and 123 largely annulled the intent of other articles relevant to water rights. Finally, the law lacked strong sanctions for those who did not comply with it. Articles 65 and 240 did establish sanctions for noncompliance, but they were very benign. In addition, no sanctions were established in the law against large landowners who violated Arti- cles 27 or 55, nor for violations-of Titles XV and XV. The law did establish severe penalties against camesinos who invaded adjoining lands. At times these invasions were encouraged or provoked by large landowners in order to create further legal problems for the campesinos and to confuse the agrarian situa- tion that much more. After careful study of the Peruvian law, the CIDA Report noted: 'Law 15037 with its 248 articles, at- tached administrative directives, and a multitude of implementative regulations (reglamentaciones), is a law that is too extensive, difficult to interpret and, in addition, difficult to administer in many cases...in many aspects the law is almost inoperable.' Inadequacy of the 1964 law was only one of many problems facing the Peruvian land reform process. Other problems included the low priority given to land reform by high-level government officials, -40-. inadequate financing and personnel for the new Reform Agency (Oficina Nacional de Reforma Agraria--ONRA), centralization of the land reform bureaucracy and its control by officials sympathetic to landowners, and an aggressive counter-reform campaign launched by opponents of the re- form program. Articles 216 and 217 of the 1964 law called for three percent of the national government's General Budget to be assigned to the Agrarian Reform Finance Corporation for a period of 20 years. If these assign- ments had been met, the pace of land redistribution would still have been limited by inadequate financing, but in fact they never were met. Con- sequently, expropriations were curbed and salaries-for ONRA personnel were frozen. ONRA also lacked independence of action,.and the,support of other public agencies. Chart 2 shows the relation of ONRA to other government agencies involved in the reform process. Within this complex network of agencies the National Agrarian Council (Consejo Nacional Agrario-- CNA), greatly influenced by landowning groups, was."the real policy- making center of agrarian reform.""l The CNA appointed ONRA's employees, making intermediate-level decision-makers in the Reform Agency respon- sible both to their superiors in ONRA and to their employers in the CNA. The confusion of responsibility and authority which resulted clearly reduced ONRA's capacity t6 implement a coherent reform policy. A second major area of inter-agency confusion and rivalry concerns the relationship of ONRA to the Peruvian Agrarian Investigation and Pro- motion Service-(Servicio de.Investigaci6n y Promoci6n Agraria--SIPA). For administrative purposes, SIPA divided the country into'twelve "Agrarian Zones." In contrast, ONRA operated through.five "Reform Re- gions" and three '.'Reform Zones.". According to Petras and La Porte, these differing organizational structures made the effective coordination of the activities and services.of OKRA and SIPA nearly impossible.12 But in addition to the organizational differences., there were active rival- ries between OKRA and SIPA--the former acting as the government's Land 11. Ibid., p. 40. 12. Ibid., p. 69. 曰 -42- Reform Agency, the latter serving all Peruvian agriculturalists, and making little or no attempt to service reform beneficiaries before other farmers. Consequently, "vhen ONRA settled peasants on new lands, more likely than not SIPA.did not follow with the needed technical assis- tance."13 Both the bureaucracies of OITRA and SIPA were characterized by highly centrplized decision-making and dependence upon the 'Conservative National Agrarian Council. The,following statement by a former ONRA Zonal Direc- tor (cited by Petras and La Porte) reflects the tight control exercised by the CNA over ONRA, and its negative effect on the implementation of reform:14 The zonal authority initiated proceedings for expro- priation but depended on the National Agrarian Coun- cil for approval of such actions. ... Though expro- priation can take place before court proceedings, the CNA undermined many zonal chiefs' decisions on expropriation actions. The lav allows for expropria- tions but political decision-makers undermine attempts to carry it out. Administrative changes were keys in frustrating agrarian* reform. CNA did not rule that a zonal chief's decisions to expropriate were illegal but they could and did change administrative personnel in the zone hence overturning decisions to expropriate. The CNA also limited funds, staff, etc. at the zonal level as a means of control. In the relations be- tveen the zonal directors and the CNA, administra- tive regulations created dependency of the zonal directors on the CNA and the director general thus undermining the autonomy specified in the agrarian reform law. In addition to the inadequacies of the 1964 land reform law and of the administrative structures established to implement its provisions, the land reform program was attacked by an aggressive counter-reform movement. The Apristas, who had ce2led for land reform since the 1920s, now became allied with conse.-,,rative political forces in sabotaging the reform. This "change of heart" reflected the crude opportunism of 13. Ibid., p. 42. 14. Ibid., p. 69. -43- Aprista politicians, their jealousy over Belainde's stealing the land reform issue from them, and their fear that effective land reform would break the coastal estate workers' unions, which provided a large part of the popular support for the APRA party.15 Within the government, counter-reform forces sought to cut the program's financing and to block its implementation. Propaganda campaigns were launched in-the national press. Landowners attempted to expel their tenants (so as not to lose land under the reform law's Title XV) and to keep.ONRA officials off their lands. The opposition sought to discredit ONRA policies and personnel. Most of the newspapers and magazines owned and operated by reform opponents carried stories of corruption, incompetence, lack of accom- plishment, and "subversion." ONRA officials became defensive and devoted a great-deal of time and re- sources to refuting these charges. Bogged down inaisvering-charges, ONRA was unable.to take the offensive in the countryside. Continual.:harass- ment had a detrimental effect on the morale of ONRA personnel and caused excessive personnel turnover. 16 The result of these and other obstacles confronted by the Peru- vian reform process was inaction on the part of ONRA. As can be seen from Table 22, at the end of Section II.B., below, very little land was redistributed. No comprehensive national land redistribution plans or priorities were drawn up, much less implemented., Instead, the gov- ernment and its Land Reform Agency attempted to defuse the peasant movements, by promising massive land redistribution, threatening not to include land invaders or use invaded land in the reform program,17 15. Petras and La Porte quote a high-ranking Aprista. politician as stating, "one ought not to take all the land from the larger hacien- das.... APRA is for 'social justice' but to expropriate large hacien- das is stupid, and not even necessary. The large haciendas are heavily industrialized and we should protect private industry. We have to replace feudalism.but not in the plantations." Ibid., p. 66. 16. Ibid., p. 44. 17. Huizer notes that in Cuzco 104 out of 114 peasant-occupied es- tates were peacefully desoccupied as a result of these promises and threats. See Huizer, The Revolutionary Potential, p. 123. -44- and by implementing small-scale, ad hoc land redistribution projects in the most critical areas of peasant unrest. Where land redistribu- tion did take place, it was largely the result of peasant invasions, not a planned reform program. Land reform under Belaunde was, as Petras and La Porte have noted, "a kind of agrarian reform under duress." Despite the fact that very little land was redistributed during Belaunde's administration, the reform did have a significant impact on the expectations of both landlords and laborers. Large landowners realized that sooner or later land redistribution was inevitable. The expectation of reform encouraged them to decapitalize their estates and to transfer their assets out of agriculture. The following state- ment, from the 1963 business records of a large estate in Cajamarca, illustrates this point: The Agrarian Reform Law will soon be approved, and will certainly affect Udima. Therefore, we should plan to dedicate all our attention, in the years in which the firm can still do so, to extracting the maximum possible surplus from the 'coloniaje' and from the hacienda's cattle.... We should eliminate the stables and the cheese factory, the alfalfa fields, land reclamation projects, etc., the purchases of feed concentrates and all the other activities which force the hacienda to spend money which is never transformed into profits. The peasantry also expected reform. The political campaigns of 1956, 1962, and 1963 led Peruvian peasants to believe that once in office, Belaunde would carry out a massive land reform program that would free them from the hacienda system and give them land. Gradu- ally, their hopes turned to frustrations and cynicism. Government officials realizing this fact feared that if the reform program did not improve, peasant movements and land invasions might spring up again. The following statement (cited by Petras and La Porte) was made by the Director General of ONRA in an interview in July 1968:18 The most dangerous stage of the reform is now. The peasant is now a protagonist of agrarian 18. Petras and La Porte, Cultivating Revolution, p. 97. -45- reform. The peasants know there is no money for further expropriation. The peasants are thinking that agrarian reform is a deception but are not sure. The peasants may take action in their hands.... .B. Land Reform Under the Velasco Government New Agrarian Legislation As shown in the previous section, the 1964 law was never implemented on a national scale and failed to alter the country's agrarian structure appreciably. Agricultural production continued to stagnate, export pro- duction declined, widespread poverty persisted, inflationary pressures increased, and rural-urban migration accelerated. Military repression and the*promise of land redistribution helped to quash the large-scale peasant movements of the early 1960s and the subsequent guerrilla threat, but latent pressures for social change intensified in rural areas. Throughout the 1960s the unionization of rural workers spread from the Coast to more remote areas in the Highlands and the High Selva.' In many cases peasants organized to petition the government for the enforcement of minimum wage and other provisions of Peru's social and labor legislation, and for land redistribution. ONRA and other public agencies often balked at these peasant demands, and the peasantry became increasingly frustrated and critical of government agencies and their bureaucrats. But enforcement of social and labor legislation did im- prove, and some land did change hands. A major conclusion of my fieldwork is that non-enforcement of the 1964 law had a detrimental effect on agricultural production and invest- ment, and increased peasant pressures for land redistribution. Fear- ing expropriation, landowners "mined agriculture," extracting surplus for investment elsewhere in the economy and failing to conserve or im- prove their estates' land, equipment, or installations. Landlords also attempted to expel their colonos in order to reduce the social burden on their estates, and to avoid future conflicts with peasants over rights to cropland and pastures and possible expropriation under Title XV of the 1964 land reform law. In a few cases estates were sold outright -46- to their workers or to neighboring peasant communities.19 In others ONRA granted provisional individual titles to colonos.20 More commonly, however, labor-management conflicts sharpened and strikes proliferated.21 Estate profits fell, making it likely that by the end of the decade many latifundists saw land reform not as a threat to their economic in- terests, but as a way out of a bad situation.22 By the time the military, headed by retired army general Juan Ve- lasco Alverado, deposed President Belaunde in October 1968, it was abun- dantly clear that neither the land reform nor any of the other ambitious reforms promised by Belaunde could in fact be implemented by his admin- 23 istration. Peru's largest mass-based political party, the tradition- ally left-wing APRA, had become allied with the conservatives in oppos- ing Belaunde's reforms; the President had become increasingly obsessed with jungle colonization and the "Marginal Amazonian Highway," and cor- ruption, poor administration, and internal dissension had brought the government's major programs to a near halt. The ambitious development plans of Belaunde's Acci'n Povular party, backed by the military in the 1963 presidential election,,had failed, and it seemed likely that the 1969 elections would be won by the military's traditional. enemy, APRA-- now the major conservative force in the country. The Peruvian military had traditionally perceived national securi- ty as having both an external component (national defense) and an inter- nal component (preservation of public order and prevention of internal subversion). In the post-war period they became increasingly aware 19. Cases Nos. 17 and 26.* 20. Case No. 1. 21. Cases Nos. 2, 3, and'8, among others. 22. Especially in lieu of the bond transfer mechanism designed'to stimulate investment in industry, which was introduced by the new land reform law's Article 176. 23. This and the following paragraph are drawn largely from Martin Scurrah, "Neither Capitalist nor Communist: Authoritarianism and Parti- cipation in Peru" (Draft of forthcoming journal article, ESAN: Lima, 1973). -47- of the strategic link between national development and internal securi- ty.24 And in the 1960s their actions in suppressing the Highland guer- rilla movements had awakened them to the severity of rural poverty and the necessity of implementing land reform in order to prevent further outbreaks of rural violence and the resurgence of.the guerrilla movement. As one.perceptive observer has noted:25 By their own account.. .the military have been most influenced.by.their personal experiences performing military duties in rural areas and provincial garri- . sons where they have come face to face with rural poverty and backwardness, by their experiences in suppressing the guerrilla activities of 1965-1967 and by the apparent inability of the political par- ties.to deal with the pressing problems of the coun- try. . . . This experience has led them to give priority to the problems of wealth and income dis- tribution and national integration. . . . The rela- tive ease with which the guerrillas were defeated did not obscure the fact that their emergence sig- nalled the.existence of serious contradictions within the country and while the guerrillas were eliminated as possible pover contenders the im- possibility of completely eliminating social con- flict and subversion within the existing political, social and economic structure impressed itself strongly upon the military. While defeated on the field of battle, the guerrillas nevertheless had their political analysis accepted by the military. The first indication that the self-proclaimed Revolutionary Mili- tary Government intended to implement land reform on a broad scale came in its "Outline of the Socio-Economic Policy of the Revolutionary Gov- ernment," presented in December 1968,26 in which land reform figured as the first of five structural reforms to be implemented.27 In this 24. This line of thinking was institutionalized in courses in mili- tary educational institutions such as the CAEM (Centro de Altos Estu- dios Militares). 25. Scurrah, "Neither Capitalist nor Communist," pp. 7-9. 26. "Lineamientos de la politica econ6mico-social del Gobierno Re- volucionario" (Peru, Oficina Nacional de Informaci6n: Lima, 1969). 27. The other structural reforms include a new mining policy, a new industrialization policy, reorganization of the public administration, and fiscal reform. -48- document the government promised to accelerate the land reform process in all parts of the Highlands and to grant preferential treatment to land reform beneficiaries in the government's promotion, credit, and technical assistance programs.28 '.Under the military government land reform activities did increase. In January 1969 arrangements for-the expropriation of the landholdings of the Cerro de Pasco Corporation, which had been initiated but stalled under,the previous government, were finalized. And in June of the same year a new land reform law was drafted. The announcement of the Military Government's land reform law (No. 17716) on June 24, 1969, marks .the beginning of a new and radically distinct phase in the Peruvian land reform process. The law is more radical than the 1964 bill in many respects, and far more easy to im- plement. But more importantly, execution of the reform has been given highest priority.by the government, and is considered the strategic first step in creating a new agrarian structure capable of contributing significantly.to Peruvian social and economic development and of spread- ing the benefits of national development more widely among the rural masses. The 1969 reform law is sim-lar to its predecessor in many impor- tant respects. A comparison of Titles III and IV of the 1964 and 1969 laws indicates that nearly as much land could have been expropriated under the old law as under the new law, the main,difference between the two being that agro-industrial complexes were not subject. to expro- priation under the provisions of the 1964 law. The "miccm retainable land" provisions are relatively unimportant, since both laws provide for the expropriation of all land utilized "inadequately" or on which "anti-social forms of land tenure" or "illegal labor conditions" pre- vail, regardless of size of holding. Both laws provide for the regula- tion of rental and labor contracts, and both prohibit the use of "anti- "~29 social labor and land tenure systems. Both laws state that peasants 28. Ibid., pp. 42, 45-, 46. 29. Essentially labor-tenancy, which ties the usufruct of land to the provision of personal services, whether remunerated or not. in possession of small parcels of estate lands at the time of the re- form (feudatarios) are to be granted individual titles to their parcels. Neither law sets forth an order of priorities with respect to adjudi- cation models; whether lands are to be adjudicated to individuals, coop- eratives, or other types of institutions is to be left up to the Minis- try of Agriculture, and to be determined on the basis of the social characteristics of the beneficiaries, the micro-economy of the area, the type of land involved, and the pre-existing and proposed agricul- tural and livestock production patterns. Both the 1964 and the 1969 laws state that land reform beneficiaries will receive priority in the provision of credit and technical assistance by the Ministry of Agriculture and other public and semi-public agen- cies, and that among the various types of beneficiaries, cooperatives and peasant communities will receive first priority. Both laws indi- cate that parcel consolidation projects will be initiated by the state in order to alleviate the minifundia problem. Both laws state that the government will encourage the reorganization of peasant communities so that they will function as cooperatives, in order to improve the technical level of production and to prevent further subdivision of communal property. On the other hand, many of the main provisions of the 1969 law are more radical, and most provisions are more easily implemented than were those of the 1964 law. Most of the ambiguities and internal in- consistencies which characterized the earlier legislation have been eliminated, and there are fewer opportunities for appep.l and delay. Of eaual or possibly greater importance, a special branch of the judi- ciary was established to deal with the disputes arising from the imple- mentation of the reform. As a result of these measures more land is subject to redistribution under the new law, and the time necessary for the expropriation and adjudication of estates has been greatly re- duced. Table 16, which compares some of the main provisions of the 1964 and the 1969 laws, shows that the maximum size allowable for private landholdings has been reduced, agro-industrial complexes (notably the sugar plantations) have been made subject to the reform, and a long Table 16: COMPARISON OF THE AGRARIAN REFORM LAWS 1964 Decree Law 15037 1969 Vecr6e Law 17716 A. EXPROPRIATION 1. Maximum Retainable Land (in hectares) -Individually owned land a. Coastal irrigated farmlands 150) b. Coastal occasionally irrigated farm- 150a lands 300) e. Coastal nonirrigated farmlands 450 .300a d. Coastal irrigated grazing lands 1,000 1,500a e. Coastal:nonirrigated grazing lands 3,000 3,000a f. Highlands and jungle irrigated farmlands By executive regulation according to 15-551 (depending on province) g. Highlands and jungle nohirrigated 'conditions in various provinces farmlands 'Same as (f) A landholding plot size sufficient to sustain a heard of 5,000 head of sheep or its equi- valent in other species. -Land Owned by Corporations Multiply above limits by Number All land owned by corporations is to be ex- of stockholders proptiatad. 2. Landholding in excess of Maximum Subject to expropriation according Total area is subject to expropriation. to following progressive scale!- (In hectares) (In percent) First 350 30 Next 500 f3 Next 500 70 Next 500 90 Next 500 100 3. Agro-industrial complexes and Not subJect to expropriation. Treat complex as integral economic unit, a estates producing crops destined subject to expropriation. for industrial transformation 4. Causes for Expropriation 5 conditions related to inadequate 32 conditions related to inadequate land use, land use and unjust or illegal landf illegal labor conditions, existance at social tenure or labor conditions. conflicts, acts of sabdtage, and the land needs of the reform process in the locality. B. VALUATION FOR COMPENSATION 1. Valuation of Exprbpriated Property Determined on basis of dverage of Land: Temporarily based on self-assessed three values: values shown in the 1968 returns of a. capitalized average income declared the newly established land tax, until for tax purposes during five years. completion of cadostral survey. prior to expropriation; Cattle: Market value. b. value according to potential yield ix_e Assets: Book value -50- of the land as formulated by the Institute of Agrarian RefQrm; and c., market value according to valuations of the-Technical Body of Appraisers. C. FORM OF COMPENSATION 1. Maximim Cash Payment For efficiently managed farm, S/.200,000; For efficiently managed farm, S/.100,000; for inefficienp owner-operated land, for inefficient owner-operated land, S/.100,006; indirectly cultivated land S/.50OO0;- inirectly cultivated or idle or idle land, S/.50,000. land,;S/.25,000. 2. Terms of Payment in Bonds Efficiently managed farm, 6 percent, Efficiently managed farm, 6 percent. 20 18 years; inefficient owner-occupied land, years;,inefficient owner-qperated land, 5 percent. 20 years; idle lands, 4 per- 5 percent. 25 years; idle 'lands, 4 per- cent, 22 years. cent, 30 years. 3. Payment for Expropriated Capital Paid full. in cash. Paid in cash up to S/.1 million, balance Equipment in bonds. 4. Bond Issue Authorizes S/.6billign, negotiable bonds. 'S/.15 billion non-negotiable bonds. 5. Bond Characteristics. 1. Acceptable by government development 1. Non-negotiable but may be redeemed at banks as collateral on loans. nominal value if proceeds, acconmpanied 2. ExchaL.geable, at nominal value, for by equivalent amount in cash, are in- shai,3 in trust fund, administered vested in industrial enterprises to b by Industrial Bank for financing new "specified" by regulations relating enterprises organized by Bank or ex- - to the law. landowners (Note: trust fund never i iiplemented). 6. Amortization and Interest Pay- Tax exempt annual cash payments. Tax exempf and paid in cash up to S. ments on Bonds S/.22,000; the remainder in shares of industrial enterprises set up by the Industrial Bank. a. These maximum retainable hol4ings can be adjusted upward if specified efficiency conditions are met. - Source; Adapted from Thomas Carroll, "Land Reform in Peru." AID SPRING REVIEW COUNTRY PAPER SR/LR/C-6 (Washington, D.C., June, 1970), pp. 31 and 32. Carroll's sources are; Decree Law 17716, June 24, 1969, Decree Law 15037, May 31, 1964; and Pan American Union, STATEMENT OF THE IAWS OF PERU, Washington, D. C., December 1965. -51- -52- list of specific "causes for expropriation" have been added. The valu- ation procedure has been streamlined, ceilings have been placed on cash compensations to landowners, and the 18-, 20-, and 22-year agrarian bonds have been replaced by 20-, 25-, and 30-year bonds--all of the above tending to lower the financial burden imposed upon the state by land redistribution. Three fundamental innovations introduced by the 1969 law, but not reflected in this table, are the following: First, as mentioned above, the law created a specialized branch of the judiciary ("El Fuero Agra- rio") which deals with legal questions related to the land reform pro- cess. Second, the new law prohibits all forms of land rental, requir- ing that all landowners reside on and work their properties directly. Third, the law requires that all agricultural workers participate in the profits and management of the enterprises for which they work. Since the declaration of the 1969 land reform law, this document has suffered a number of amendmeats30 and has been complemented with a new water law,31 a new set of by-laws for agricultural cooperatives and quasi-cooperatives,32 and numerous other pieces of agrarian-related legislation. While these legislative measures are of undeniable impor- tance, they will not be discussed in this paper except in direct rela- tion to the implementational issues discussed below. 30. One of the most important amendments refers to private parceli- zation schemes. In its original version the law provided mechanisms for the private parcelization of estate lands, but numerous conflicts and abuses of these provisions led to the amendment of the law, prac- tically eliminating the possibility of such. schemes. For an account of conflicts on one estate which precipitated modification of the law, see Case Report No. 14 ("San Nicolas"). The more well-known case of "Huando" is reported in Ram6n Zaldivar, "Elementos para un enfoque general de la Reforma Agraria Peruana," Cuadernos agrarios 1 (1971). 31. D.L. No. 17752, July 24, 1969. 32. D.S. No. 240-69-AP, November 4, 1969. Peru's basic cooperative law dates from 1964. -53- Reorganization and Strengthening of the Ministry of Agriculture and the Land Reform Agency As pointed out in Section II.A., above, implementation of the 1964 land reform law was frustrated by inadequate.financing and personnel for the Reform Agency (ONRA), lack of priority given to land reform by the government and the Ministry of Agriculture, and poor coordina- tion, and at times open ccnflicts, between ONRA and the Peruvian Agri- cultural Investigation and Promotion Service (SIPA). Curiously enough, SIPA operated outside the Ministry of Agriculture, in what constituted the "Public Sub-Sector," and had more funds and personnel at its dis- posal than did the Ministry (one dependency of which was ONRA). Prior to* the declaration of its new land reform law, the military government centralized the financing.and control of all public agencies dealing with agriculture within the Ministry of Agriculture, and ini- tiated a coherent, comprehensive planning process for the agricultural sector.33 After the declaration of the new reform law in June 1969 the Land Reform Branch of the Ministry received first priority, and the other branches began to function primarily as support institutions for the land reform process. A new technical committee (COAMA) was created to coordinate the activities of the six main branches of the Ministry--Land Reform and Settlement, Water, Forestry, Production, Com- mercialization, and Agricultural Investigation Administration-and es- pecianly to facilitate the execution of the land reform and to prevent serious, economic dislocations during the process.35 -Of the six Admin- istrations at the national level, only the Land Reform and Settlement 33. This and the following three paragraphs draw heavily on General de Divisi6n E.P., Enrique Valdez A., Ministro de Agricultura, "El sec- tor agrario, exposici6n en el CAEM, 24 de mayo de. 1973" (CENCIRA: Lima, 1973), pp. 63-68. 34. Since other branches of the Ministry of Agriculture "lent" per- sonnel and facilities (e.g., vehicles and office space) to the Land Reform Branch, it is very difficult to measure the true value of gov- ernment expenditures on the land reform program. 35. This committee is presided over by the Ministry of Agriculture's Superior Director, and is composed of the Directors of the six main branches of the Ministry, and the Heads of the Ministry's offices of Administration, Legal Affairs and Planning. Valdez, "El sector agra- rio," p, 65. -54- Administration (Direccion General de Reforma Agraria y Asentamiento Rural--DGRAAR) is an executive organism.36 All other executive agen- cies operate at the local level. Even in the very special case of land reform, local Ministry offices -are no' given far greater autonomy than was the case prior to 1969. Both SIPA and ONRA were eliminated under the new government's re- organization and their functions were taken over by the Ministry of Agriculture's Land Reform, Production, Comercialization, and Investi- gation Administrations. SIPA's "Agrarian Zones" and ONRA's "Reform Regions" and "Reform Zones" were integrated into a new system of twelve "Agrarian Zones (MaP 3). Each Zonal Office has three administrative subdivisions: Land Reform, Natural Resources, and Production and Com- mercialization. The 12 Zonal Offices', which are-the Ministry's prin- cipal executive organisms, have broad authority over decisions in their locality, and the Directors of Zonal Offices act as "Ministers of Agri- culture" in their respective Zones.37 Zonal Directors are carefully selected by the Ministryrs National Headquarters in Lima, and they coor- dinate their actions carefully' with policies- laid. down in Lima. Meet- ings of Zonal Directors with hnigher authorities in Lima are frequent, and telephone contact is maintained on a daily basis. Within the 12 Agrarian Zones, Ministry of Agriculture policies are implemented via 53 "Agrarian Offices" and 205 "Agarian Agencies," each of which is re- sponsible for a specific geographical*area (Charts 3 and 4). The first priority on the local as on the national-level is implementation of the land reform program. Since the military government came to power in 1968, and especially since the initiation of the new land reform process in June 1969, the budgets of the Ministry of Agriculture and of the Land Reform Agencies (first ONRA, later'DGRAAR) have increased substantially, as can be seen from Table 17. 36. The predecessor of the DGRAAR was ONRA, which in turn replaced IRAC. 37. This quotation is from the Head of Planning in the Third Agrarian Zone. Chart 3: ORGANIZATION OF THE MINISTRY OF AGRTCULTURE MINISTRO A SE 50R IA ISPECTORIA GENERAL DIRECTOR SUPERIOR OFICINA SECORIAL DE PLUNIFICACION AGRAMIA OFCINA Gt.NERAL De ~ASESORIA UIICA DE ADUINISTIlACICk ECTSR URL D sAifC OFICINA DE OFICRIA DE PRIOCE- F.AICA DE RELACIONES IAMIENIO ELEC- COMUNICACIONES PUBLICAS TRNCOEATOS ARFARIA URAIA Y DE ABUAS GE FORESTAL T CASA PRODIJCCIUN AGRARIA DE COMERCIAlIZACION INVESTIGACION AGRRAIA ASElÍTAW1E9110 RURAL CENTROS REGIMALES DE DIRECCIONES ZONALES CESAINAAGRADA OFICINAS AGRARIAS AGENCIAS AGRARIAS ADM.NISTRACIONES TECNICAS DE DISTRITOS DE RIEGO INSTITA DE CENTO NACIONAL DE CAIA. OFICINA NACIONAL DE RA0INN LTIA ES PARA LA REFORMA AGRARIA fiina de .,o.)iMain y mellados Chart 4: ORGANIZATION OF THE THIRD AGRARIAN ZONE ZONAL ADMINISTRAIION COMMITTEE INSPECTION OFFICE ADMINISTRATIVE PROGRAMMING & OFFICE STATISTICS OFFIC CADASTER EGAL OFFICE OFFICE lCOMUNICATIONS OFFICE AGI RATURAL RESOURCES PRODUCTION AND ADMINITRATON 1DMINISTRATION TING ADMINISTRATIO AGRARIAN OFFICE: 4GRARIAN OFFICE: . GRARIAN OFFICE: AGAIN,0FFICE3 HUARAZ H1IMBOTE TRUJILLO HUAHCO 7 Agrarian Irrigatio 5 Agrara. 2 Irrioat a Agrar an Irrgatio 3 Agraria Irrigatio istrict eencies 38 Secto (6 Supervisorl 27 STctors 1 Spervisors 23 Sectorsi -- E20 SerIsr 11 Secor 1auer o -55a- -56- Table 17: BUDGETS OF THE MINISTRY OF AGRICULTUREAND LAND REFORM AND SETTLEMENT EXPENDITURES, 1960-1974 (in millions of current soles) Budget, Land Reform and Settle- Ministry of Agriculture ment Agency Expenditures 1960 0.9 1961 39.4 1962 55.2 1963 74.2 1964 114.1 1965 201.6 1966 197.5 1967 239.6 1968 228 177.5 1969a 1,670 410.6 1970 3,115 769.7 1971 522.5 1972 8,688.6 19731 1 1974) aln 1969 the Ministry of Agriculture absorbed SIPA and other agencies which were previously not covered by the Ministry's budget. Sources: (1) General de Divisi6n E.P., Enrique Valdez A., Ministro de Agricultura, "El sector agrario, exposici6n en el CAEM, 24 de mayo de 1973" (CEN1CIRA: Lima, 1973), p. 63. (2) Peru', DGRAAR, Oficina de Programaci6n, "Gasto de Reforma Agraria y Asentamineto Rural, serie historica 1960-72" (Lima, 1973). In conclusion, there has been a centralization of financing and responsibility for all public programs in the agricultural sector with- in the Ministry of Agriculture, a substantial expansion of the Minis- try's budget, an increasing emphasis on planning, and a marked tendency to decentralize or "ruralize" the Ministry. The Ministry of Agricul- ture now has the highest percent of its staff outside Lima of any Minis- try and is the only Peruvian public agency which has a functional re- gional planning and administration network in all parts of the country. The primary goal of the administrative reforms discussed above was to implement the land reform program as quickly and efficiently as possible. But they also aimed at laying the groundwork for greatly improved post-reform agricultural programs. The next tjo sections of -57- this paper deal with the Ministry of Agriculturets new regional plan- ning unit (the PIAR) and the new enterprise units created by the-land reform process. Attention will.focus on the f=nctions of regional plan- ning and the new reform enterprises in the landreform process.per se and-in the "new agrarian" sector being created by the land reform.-, Land Reform By Area: The PIAR "PIAR" is the acronym for the phrase Proyecto Integral de Asenta- miento Rural (Integral Rural Settlement Project). The Ministry of Agri- culture's Adjudication Manual defines the term as. 'a set of actions aimed at settling land reform beneficiaries in an organized fashion in cooperatives and SA.IS."38 The two principal goals of the government in establishing PIARs are to facilitate the land, reform process and to create new enterprises and,a new agrarian structure which are conducive to socio-economic development. In operational terms PIAR means "land reform by region." Whereas expropriations and adjudications under the old reform law were ad hoc and estate-by-estate, the National and Agrarian Zonal Of.fices now.draw up coherent land reform plans and define,specific geographical areas in which these integral land reform plans are to be executed. Land, reform by region greatly facilitates the restructuring of agricultural production units since it allows oldiproperty boundary.lines to be erased and the fusion of small plots.,and/or estate .lands into.larger prpduc- tion units. Within each PIAR, not onyr estate lands but all agricul- tural lands,are subject to land reform measures, including parcel con- centration and integration. To date, actions have concentrated on large estates, but in the future the minifundia problem is to be attacked at the PIAR level. The specific set of actions necessary for the implementation of land,reform.by PIlARs are the following:39 (1) Subdivision of the country's Agrarian Zones into smaller "Sec- tors," each of which presents a degree of internal homogeneity in terms 38. The term SAIS is defined below. 39. Gerardo Ca'rdenas, "La nueva estructura agraria," ParticiDaci6n 3 (1973). -58-- of ecology,. physical infrastructure (transportation, irrigation systems, etc.), and land tenure problems. (2) .Determination of which Sectors should receive priority in each Agrarian Zone's land reform activities. The main criteria for determining sectoral priorities are the volume of expropriable land, the presence of large, economically important estates, the presence of tensions and social conflicts, and demographic pressure. (3) Analysis of Sectors in order to determine the principal reform- related problems and their potential solutions. (4) Subdivision of Sectors into smaller areas in which the PIARs are to be executed. This subdivision takes into abcount ecological factors, existing physical infrastructure, genez'al socio-economic con- ditions, and the volume of expropriabie lands in each area. The objec- tive is to delineate areas which are amenable to coherent planning and execution of land reform and post-reform agricultural policies. The dimension of PIARs varies greatly, depending upon the specific condi- tions of each f'gion. In some coastal valleys only one PIAR is estab- lished, in others several. In the HigLands the physical dimensions are generally greater. In general, where irrigated agriculture is con- cerned each PIAR encompasses from 5,000 to 15,000 hectares. In the Highlands, 200,000 to 500,000 hectares of low grade pastureland may fall within the ambit of a single PIAR. (5) Determination of a set of priorities for the intervention and expropriation of estates within each PIAR. (6) Determination of the adjudication model (type of new enter- prise) for each estate expropriated and the dimensions of each new en- terprise established under the land reform program. (The physical boundaries of new enterprises need not follow those of the ex-estates; generally estates are fused to form larger production units.) (7) Interim management of estates expropriated under the land reform. Two possibilities exist: a Special Administrative Committee may be set up and staffed by government officials, or a worker- controlled Provisional Administrative Commission may be established. (8) Selection of land reform beneficiaries., (9) Drafting of development plans for each new enterprise. -59- The first estates to be affected under the 1969 land reform law were the 12 large and highly productive coastal sugar plantations and a few immense highland livestock ranches. These were expropriated prior to the establishment of PIARs and were so large and economically impor- tant that the government treated each one independently. Nearly all other lands affected by the reform have been expropriated and adjudi- cated via PIARs. Until the end of 1973 the Ministry of Agriculture had. given top priority to the establishment.a.ad consolidation of base-level reform enter*rises--landholding production units. However, during 1973 and more recently, increasing emphasis has been placed on the creation of "central cooperatives at the PIAR level." These second-level units, which are,owned and operated cooperatively by the base-level enterprises, are to play a strategic role in the implementation of the government's future agricultural policies and in the socio-economic .development of rural areas. By law, each base-level enterprise created under the land reform program must become a member of the central cooperative in its region. Member enterprises will manage the central cooperatives and- finance their operations. Each central cooperative,is to be respon- sible for production planning in its region, and for the commerciali- zation of inputs utilized by its members and the agricultural commodi- ties produced by them. Processing facilities are to be established by the central cooperative, and delivery quotas may be established for each member enterprise. Investments in economic infrastructure (irri- gation canals, warehouses, roads, etc.) are to be planned and executed by the central cooperative, as are social programs (education, capaci- taci'n, etc.).40 Five major objectives of the government in establishing central cooperatives at the PLAR level are: (1) facilitate the implementation of the country's agricultural policy; (2) reduce the financial and ad- ministrative burdens of the Ministry of Agriculture in providing 40. Based on Peru', Ministerio de Agricultura, Zona Agraria IV, "In- forme: Modalidad de adjudicaci6n y lineamientos generales del PIAR "SUPEPATIVILCA-FORTALEZA" (Lima, 1972), and other documents of the Min- istry of Agriculture. -60- technical and managerial assistance to new base-level production units; (3) consolidate the new reform sector by providing marketing; process- ing, and other services on a cooperative basis; ()-equalize-levels of productivity and income between base-level units; and (5) stimulate the economic diversification of rural areas. . -In order to implement the last two points, the central cooperatives are to receive a significant share of the profits of affiliated produc- tion units. Part of the pooled-funds is to be redistributed by the central cooperative among these same production units in accordance with social and,economic needs, and part is to.be invested in non- agricultural activities in accordance with priorities specified in Re- gional Integral Development Plans -(PIDs) drawn up by the gover:ment with the participation of representatives of land reform beneficiaries (via their base-level production units and their central cooperatives). At the time of my fieldwork in late 1973 very few.central cooperatives at the PIAR level had been established and were functioning, but several others were being set up., Government plans indicate-that in the future third-level and possibly higher-level cooperatives will be established to integrate the base-level production units and,PIAR-level central cooperatives into a larger cooperative sector. New Reform Enterprises Peru's Minister of Agriculture has stated: In substitution for the defective agrarian struc- ture which existed prior to the Revolution, the Peruvian reform [el proceso peruano] is creating new forms of peasant enterprises which are designed in accordance with the specific characteristics and needs of the country.41 The central element in Peru's -New Agrarian Struc- ture will be the "associative enterprises" char- acterized by joint ownership and self-management. These enterprises are of two forms: Agrarian Production Cooperatives [Cooperativas Agrarias 41. Enrique Valdez A., "La Reforma Agraria Peruana, conferencia del Ministro de Agricultura en la primera reuni6n plenaria de Jefes de Misiones Diplomg-ticas Peruanas en el Exterior" (CENCIRA, 1973), p. 18. -61- de Producci6n--CAPs] and Agrariar, Social Interest Societ es [Sociedades Agricolas de Interes Social- SAIS1.42 The governmental priority given to cooperative and quasi- cooperative forms of production is based on the following premises: (1) The desirability of maintaining the integrity of pre-existing large-scale production units and their physical infrastructure. (2) The desirability of forming new large-scale units which allow for the rational use of land, water, labor, equipment, and installations. (3) Potential economies of scale in marketing, financing, manage- ment, and the provision of technical assistance. (4) Potential job creation in large-scale production units through the division of labor and diversification of activities. (5) The advantages of improving social conditions (e.g., housing, education, medical car.e) in large production units with their resident populations living in a few, large population centers. (6) Collective ownership and work break the traditional isolation of the peasantry and are conducive to the establishment of more socially oriented attitudes and behavior. The large-scale production cooperative is seen by government theo- reticians as the ideal production unit, combining the technical-economic advantages of productive efficiency with the social-political advantages of self-management. The SAIS is a complex quasi-cooperative produc- tion unit created by the government as a temporary solution to special problems encountered in the Highlands; with time the SAIS are to evolve into production cooperatives. Peasant communities are to be restruc- tured so as to function as.production cooperatives. Individual small- holders are encouraged to pool their lands and farm jointly. 42. Valdez, "El sector agrario," p. 21. 43. Ibid., p. 22. 44. Articles by Gerardo Cirdenas, Jaime Llosa, Carlos Delgado, and Hectar Bejar in the SITIAMOS journal Participacion and in other govern- ment publications spell out the theory and ideology of the present mili- tary regime. -62- In addition'to the production cooperatives and SAIS, which are given highest priority by the government, agricultural lands may be held by individuals, partnerships, and peasant communities; in each of these cases full-time workers must participate in management and profits.45 The 1969 land reform law prohibits corporations from own- ing farmland. Under the reform, land may be adjudicated to CAPs, SAIS, peasant communities, and individuals; CAPs and SAIS are given first priority. Smallholders are encouraged to join Agrarian Service Cooperatives (Coop- erativas Agrarias de Servicios--CAS) or preferably to pool their lands in Parcel Integration Cooperatives (Cooperativas Agrarias de Integra- ci6n Parcelaria). CAPs and SAIS must join central cooperatives when these are established. Two types of central cooperatives exist: re- gional central cooperatives at the PIAR level (see previous section) and specialized central cooperatives, such as Peru's sugar, coffee, and tea central.cooperatives (see below). The remainder of this sec- tion outlines the characteristics of the CAP, the SAIS, and the special- ized central cooperative, and discusses smallholder organization (ser- vice cooperatives and parcel integration) and the reorganization of peasant communities. Section III below presents an analysis of the problems and prospects of CAPs,,SAIS, and central cooperatives based on 27 case studies. 1'a The Agrarian Production Coonerative (CAP). According to Perus Cooperative Bylaws, the CAP is an indivisible production unit in which the ownership and usufruct of all productive assets-land, livestock, crops, equipment, and installations--is collective. No individual pro- duction is permissible. Management is democratic, and profits are dis- tributed among the membership in proportion to the number of days worked by each.46 45. In the case of individually owned farms, a minimum of 20 per- cent of profits must go to workers; a minimum:-of 50>percent of the pro- fits of partnerships must be paid to workers. Crdenas, "La nueva es- tructura agraria," p. 33. 46. D.S. 240-69-AP, Articles 95-104. -63- In the management of cooperative affairs, the membership is the supreme authority. In cooperatives with less than 500 members the en- tire membeTship meets periodically in General Assembly; in larger coop- eratives an Assembly of Delegates is elected in representation of the general membership. In both cases all members vote in elections for the selection of workers' representatives to sit on an Administrative Council, a Vigilance or Supervisory Council, an Education Committee, and one or more Special Committees. One member of the Administrative Council is selected as the cooperative's president. Table 18 indicates the principal characteristics of these governing bodies. In most cases a professional manager is hired, and in a few cases (notably the large coastal sugar cooperatives) several technicians are employed. In smaller cooperatives management functions may be performed by the cooperative's president or other member-workers. Peru's Cooperative Bylaws specify the following limitation on the distribution of net annual profits:47 (1) not less than 10 percent to the Reserve Fund; (2) not less than 5 percent to the Education Fund; (3) not less than 10 percent to the Social Provision Fund; (4) not less than 5 percont to the Cooperative Development Fund; (5) not less than 15 percent to the Investment Fund; Note: the above allocations under (1)-(5) may not exceed 70 per- cent of the net annual profits. (6) interest not exceeding 2 percent per annum, is paid on members' contributions; (7) the resultant balance is distributed among members according to time worked, 25 percent being capitalized and added to the members' share holdings, the balance being paid in cash or species. Although the spirit of the Peruvian reform process and of the Coop- erative Bylaws is to promote worker participation in management and profits, Peruvian cooperative legislation allows cooperatives to employ non-members who share in neither management nor profits. Each CAP's 47. Ibid., Article 26. Table 18: CHARACTERISTICS OF GOVERNING BODIES OF AGRARIAN PRODUCTION COOPERATIVES GoVerning Body Comp:-qition Principal Functions 1. Gendral Assembly All members of the cooperative. 1. klectmembers of Administrative and SSupervisory Councils (Asambles General) .1 2. Elect members of Special Committees 3. Consider and approve,Annual Reports and Accounts. 4. Allocate surpluses (ithin legal limits 5. Approve annual Development Plans'and Budgets.* 6. Set financial limits on powers delegated to Adbiatistrative Council. 2. Assembly of Delegates 100-200 members elected by General Functions 3-6of General Assembly Assembly when cooperative member- (Asamblea General dA Delegados) ship exceeds 500.. 3. Administrative touncil Not less than 5 members elected by 1, Responsible for day-to-day operations. General Assembly 2. Appoint managers andgrant them the (Consejo de Administracion) powers necessary to Carr: out their work. 3. Submit an Annual Repoit and Accounts to the Assembly. . 4.Vigilance Council N6d less than:-3 members elected by 1. Supervise actions of Administrative General Assembly Council and Special Committees to ensure (Consejo de Vigilancia) that these are adequate and within the poweri granted to these bodies. 2. Check tht cooperatives' accounts. 3. Examine claims by memberaagainst actions by Adminitrative Council and-Special Committeds. * 4. Submit a report on its activities to the Assemlily. 5. Education Committee and Not less than 3 members elected by the 1. Plan the-policy for the corresponding Special Comitteess operational or geographical unit for functional or. geographical unit. which the committee has been formed. 2. Advise on,iti execution. (Comites.Especializados) 3. Such other duties as may be delegated by the Administrative Council. a. Except for the Education Committee, their establishment is optionali Source: Cooperative Bylawss D.S. No. 240-69-AP, Nov. 4, 1969. -65- initial membership is determined by the Ministries of Agriculture and Labor on the basis of payroll records. In general, full-time workers and others who have worked over half the year preceding expropriation in the estate(s) in question are granted membership. If the-Ministry of Agriculture determines that the "carrying capacity"48 of the CAP exceeds its initial membership, the CAP may be required to expand its membership. In most cases, non-members are employed on the CAPs only for seasonal planting or harvesting tasks. On the sugar cooperatives,. however, non-members are employed year around for cane cutting and other onerous tasks which members choose not to perform. - The SAIS. In the early 1960s peasant invasions in the Cen- tral Highlands resulted in the expropriation of a large, efficiently operated livestock estate known as "AlgolEn."49 Algolin's pasturelands were divided by the Ministry of Agriculture into 23 lots which were adjudicated to 14 communal cooperatives (whose members were residents of neighboring peasant communities) and 9 CAPs (whose members were ex- workers of the ex-estate). As a result of the chaotic invasions and the subsequent subdivision of the enterprise unit, livestock numbers fell dramatically, the pre-reform administrative structure disintegrated, income disparities continued, and the Ministry's technical assistance costs soared. Based on this unsatisfactory experience, Peru's military govern- ment created a novel adjudication model, known as the "Agrarian Social Interest Society" (SAIS), which allows the benefits of land reform to be distributed among peasant communities without the subdivision of estates. The concept of the SAIS wasfirst introduced in Peru's Coop- erative Bylaws. In this document the SAIS is defined as a pre- cooverative institution, to be created when the government determines "that a group of land reform beneficiaries does not fulfill one or more of the requirements demanded for the legal recognition of a cooperative.... 48. Based on the natural resources, markets, capitalization, and other characteristics of each region and estate, the Ministry calculates the number of workers which the estate should be able to employ on a full-time basis. This number of workers is termed the estate's cabida. 49. Case No. 15. -66-. When the special.conditions which reQuired the-creation of the SAIS cease to exist, the SAIS should become a cooperative.,,50 ' In practice. the SAIS is a special, complex cooperative-like enter- prise established by the Reform Agency it cases where highland estates are surrounded by peasant communities threatening land invasions. In these cases the principal'purpose of the SAIS is to preserve the admin- istrative and physical unity of efficient livestock production units expropriated under the land reform,'to distribute profits among neigh- boring peasant communities in order-to reduce tensions and threats of land invasion, and to promote the communities' social and economic de- velopment. . Legally a SAIS is an enterprise owned and managed by a service 'cooperative,'made up of the workers of expropriated estates, and by a number of peasant communities which have been designated by the Reform Agency as land reform beneficiaries. The2service cooperative differs from a production cooperative (CAP) in that-its members are not'owners of the land and capital they employ in the produdtion process. The ser- vice cooperative differs from an Agrarian Service Cooperative (CAS) in that in-the former'enterprise-the members are workers who- exploit the resources of a SAIS collectively, whereas in the latter each-member is an independent smallholder who benefits from services (delivery, market- ing', etc.) provided cooperatively. In addition to-ownership and manage- ment, the members cf the SAIS-the service coop and peasant communities-- participate in the prof-its generated by the SAIS. These profits are produced in the lands of the ex-estates worked by the members of the service cooperative. Members of the peasant communities participate in management and profits, but not in work. A document prepared by Ministry of Agriculture, officials in the Tenth Agrarian Zone summarizes the advantages of the SAIS as follows: A. Social Advantages " (1) MaLintenance of the pre-reform economic unit, which maximized productivity 50. D.S'. 24-69-AP, Articles 143 and 146. -67- (2) Maximization of the number of beneficiaries (3) Integration of the ex-estates and peasant communities (4) Efficient provision of services, including social and techni- cal assistance (5) Leveling of incomes within the area (especially as related to the heterogeneity of natural resources), (6) Progressive technical and cooperative qapacitaci6n of the peas- antry B. Technical Advantages (1) Optimization of the. use of pastures and other resources through, e.g., fencing, comprehensive planning, and pasture (2) Livestock improvements through programs of importation, selec- tion, crossbreeding, and veterinarial services (3) Employment of technical personnel over a greater area C. Economic Advantages (1) Economies of scale (2) Optimal use of installed facilities and infrastructure D. Financial Advantages (1) Maintenance of the existing, well-functioning financial system (2) Provision of financial assistance to peasant communities E. Administrative Advantages (1) Maintenance of the existing, well-functioning administrative structure (2) Provision of management training for the peasantry In determining which peasant communities should become members of the SAIS, the Ministry employs the following criteria: (1) Member communities must border on lands adjudicated to the SAIS (2) Over 4O..percent of the comuneros' income must come from agriculture and livestock raising (3) Less than 90 percent of their income must come from agriculture (4) The per capita productive capacity of the member communities (es- sentially the man-land ratio) must be below average for the area (5) Income per family must fall below the average for the area (6) Communities with border conflicts with estates adjudicated to the SAIS are favored over those with no conflicts -68- (7) Communities which receive no lands under the reform are favored over those which receive land The principal criterion in determining the distribution of owner- ship and profits among SAIS members is the relative income of each com- munity and the service cooperative; the poorer the community, the greater its share in the SAIS' ownership and profits. The governing bodies of the SAIS correspond to those of the CAP, Each member of the SAIS has equal representation in the SAIS Assembly of Delegates; and since there are several community members and only one service cooperative, the communities predominate aot only in owner- ship and profit shares, but in management. Thus, in this complex quasi- cooperative institution, the major shareholders (the communities) manage production and receive most profits, but do not work on the SAIS.. The SAIS' workers (ex-workers of the ex-estates) do not participate signi- ficantly in either management or profits. The SAIS has two principal spheres of activity: (1) production on the lands adjudicated to the SAIS-termed Production Units; (2) tech- nical and organizational assistance to the member peasant communities. The SAIS' operations in the former sphere fall under the jurisdiction of an Agriculture and Livestock and an Administrative Division; acti-. vities in the communities fall under the jurisdiction of a Development Division (Chart 5). The SAIS attempts to reduce the income gap between ex-estates and peasant communities through two principal mechanisms: (1) distribution of SAIS profits among the communities and the service cooperative in inverse proportion to their pre-reform income levels; (2) provision of technical assistance and credit to the communities via the Develop- ment Division which operates exclusively for the benefit of the affili- ated communities. In the future the peasant communities are to be restructured so as to function as production cooperatives, and gradually the physical, social, and cultural boundaries between ex-communities and ex-estates are to disappear. The SAIS itself is then to evolve into a single, giant Agricultural Production Cooperative. -69- Chart 5: ORGANIZATIONAL DIAGRAM OF THE SAIS "CAHUIDE" (Case No. 16) Delegates' Assembly Planning--- lOff;ice Educationj Administration Vigilancl Committe Council Council Specal L:--- jCommittee . Hanageen (Legal Adviso IDevelopment jAgriculture Administrativ Division ----------land Livestock-- Division Division a Agriculture and Livestock a Accountin Health . .Purchases Education Sales 0 Infrastructure Personal CD Organization of Peasant Enternrises PVeterinary Services Punto I TRatu ILaivAo aAntapongo Production Units Central Cooperatives: The CECOAAP. As part of the Peruvian government's program to create a new agrarian structure organized along cooperative lines, central cooperatives are being established to provide marketing, credit, processing, accounting, technical, and managerial assistance, and other services to CAPs and SAIS on a cooperative basis, and which are intended to promote social and economic development on a larger scale. The service, income redis- tribution, planning, and other functions of the regional central coop- eratives at the PIAR level have already been discussed. Now the organi- zation and functions of Peru's largest and most complex specialized central cooperative--the sugar central cooperative (Central de -TO- Cooperativas Agrarias de.Producci6n Azucareras del Peru'--CECOAAP)-- will be discussed. Prior to .their expropriation in 1969, Peru's sugar plantations were owned by corporations which Iuid their main offices in Lina. The corporations were also members of Peru's Natiqnal Agrarian Society (SNA), the Sugar Producers' Committee of-which distributed national and' foreign quotas for sugar sales and provided..specialized technical assis- tance for the plantations. The Lima offices of the sugar corporations managed the plantations and provided them with financial, accounting, and commercial services. After expropriation, the Peruvian government set up a "Supervisory Committee" and "Special Administrative Committees" which continued these functions (and absorbed a large part of the sugar corporations' and the SNA's staffs). With the adjudication of the sugar plantations to independent production cooperatives, each productiondunit has become responsible for its own management, and the services of the government's Supervisory and Special Administrative Committees have been assumed by a second-level cooperative--the CECOAAP.5+. The central cooperative's principal functions are the following: (1) marketing of the products of the affiliated sugar cooperatives; (2) installation and operation of processing facilities; (3) management of credit for both the central cooperative and its member cooperatives; (4) provision of technical assistance in order to improve and expand the operations of member cooperatives.and improve the services provided by each to its members; (5) provide inputs and consumption goods to the member cooperatives; (6) establish warehouses, storage facilities, machinery repair and service centers, and similar facilities to be used by the member cooperatives; (7)-centralize the research and scientific investigation activities of the members;- (8) establish uniform account- ing, auditing, and control systems, and promote the centralization of these; (9) promote the professional, technical, and cooperative train- ing of members of affiliated cooperatives.52 51. Case No., 27. 52. CECOAAP,, "CECOAAP: Q ie somos? Q ie hacemos? Qfe vendemos?" (Lima, n.d.) -71- Chart 6 outlines the organization of the CECOAAP: Chart 6: ORGANIZATIONAL DIAGRAM OF THE CECOAAP (Case No. 27) IDelegates' Assemb1P4 Administrativ ISpecial Committees Vigilance 0 jcouncil lCouncil - Education CommitteeD a0 < JGeneral Manag~emen/ Administrative egal IComtrollershiP P Division I Fepartment_ Technical Marketino Financi Purchasinj Organizatio ISocial Division] Division I Division I Division and Systems Promotio 4 Division Division c> Each of the CECOAAP's 12 member cooneratives elects 4 representa- tives to the Central cooperative's Assembly of Delegates, which is the supreme authority within the CECOAAP's governing structure. Assembly, Delegates elect 12 members to the Administrative Council--one from each member cooperative. This Council is the principal decision-making unit within the CECOAAP's governing structure, and is the Central coopera- tive's legal representative. The Vigilance Council, composed of 5 mem- bers, is also elected from the Assembly of Delegates, and is responsible for the supervision and control of actions taken by the Administrative Council, other bodies within the Central, and persons employed by these. The Administrative Council elects an Education Committee and Special Committees. The Education Committee is responsible for providing coop- erative capacitaci6n for employees of the Central. The Special Commit- tees provide specialized support for the Administrative Council in the areas of marketing, purchases, and industrial diversification. The CECOAAP's manager is named by the Administrative Council, and is responsible for implementing decisions made by this Council. Imple- mentation is carried out through a complex organizational structure -72- which includes six-specialized Divisions. The manager is assisted in his functions by the CECOAAP's Administrative Division, the Legal De- partment, and a Comptrollership Utit. The Administrative Division han- d1es internal accounting and matters related to personnel and general services. The Comptrollership Unit concerns itself with the evaluation, control, and supervision of accounting and administrative operations, Within the operational structure of the CECOAAP, the Technical Division is of-central importance. Its principal functions are the fol- lowing: (1) scientific investigation oriented toward the improvement of cultivation, milling, and refining operations; (2) extension and technical assistance in these same areas;..(3) technical studies designed to promote the expansion of suga.,r production and the agro-industrial diversification of the member cooperatives; (4) solution of special problems of cooperatives affected by, e.g., earthouakes, floods, and fires. The CECOAAP's Financial Division administers the central coopera- tive's finances, grants loans to member cooperatives, negotiates loans from other financial institutions for members, advises members on spe- cific financial,matters,.and.manages.the insurance policies of all the members. . The Organization and Systems Division,specializes in the analysis of organizational methods and systems, and the planniug.and implemen- tation of improved methods and systems. The Division.operates a com- puterized data processing center in the main.office in Lima, which pro- cesses accounting data for member cooperatives. A study is being pre- pared on the feasibility of installing data processing centers in the provinces. The Social Promotion Division provides advice, support, and coor- dination for member cooperatives in the following types of programs: health, education, cooperativism, housing, public relations, and social services. The CECOAAP's budget for 1973 is summarized below: Governing Bodies S/. .430,000 General Management . 2,386,000 Administrative Division 17,927,000 -73- Comptrollership S/. 1,530,000 Legal Department 1,742,000 Technical Division 19,561,000 Financial Division 5,116,000 Purchasing Division, 12,702,000 Marketing Division 10,412,000 Social Promotion Division 4,760,000 Organization and Systems Division . 6,782,000 Data Processing Center . 18,364,000 Legal Assistance Washington., D,C. 2,046,000 International Sugar Organization 319,000 Total 104,077,000a aSlight differences are due to rounding. Source: CECOAAP. The CECOAAP is much larger and more complez than the country's other specialized central cooperatives (e.g., the coffee and tea cen- tral cooperatives), but all have essentially the same functions--to provide base-level production units with technical, financial, market- ing, and other services, which prior to the land reform were provided by the Lima offices of estate owners and by the specialized committees of the SNA. Since the specialized central cooperatives take over functions which are necessary for the operation of the production units and which were performed in Lima prior to the reform, they have not encountered nearly as much member opposition as have the regional central coopera- tives, which take over functions already performed by the individual production units, and which add technical assistance and management functions previously performed by the Ministry of Agriculture without charge to individual cooperatives. The specialized central cooperatives have also limited their activities to essentially technical ones, and thus have avoided the thorny issues of income redistribution and social investment, which have weakened member support for regional central cooperatives. Restructuring'of Peasant Communities. Peasant (ommunities are the remnants of pre-Colombian villages which conserve vestiges of traditional self-government, labor sharing, and communal ownership of land. In many communities pastureland is communally owned, and all members graze their animals on it. Less often, pastureland has been subdivided for individual use, and at times individual ownership. Crop- land is nearly always subdivided for use by individual community mem- bers, and in nearly all 'communities "iAdds" of"privately owned crop- land are found. In extreme cases islands of communally owned land are found amid a patchwork of small private parcels. (In Quehuar--Case No. 17--all land use is individual.) Labor exchange for individual production (including cropping, house- raising, etc.).and labor pooling for community tasks (such as road re- pairs, canal construction, and school building) are common in most peas- ant communities. But such activities are not similar to work in pro- duction cooperatives on four counts: (1) Land is held in small individu- al plots, not large collective units. (2) When labor is exchanged among individual producers the man who occupies the plot on which the work is being carried out is the boss. He directs work and is solely responsible for the outcome; at the close of the season he is owner of the product. Decisions are not made democratically, and profits are not shared. (3) When labor is pooled for community tasks, such tasks require community action for only brief periods--a day or two, or a week at most. Such work is usually performed in a festive atmosphere, with food, drink, and often a full-fledged party afterward. (4) Labor ex- change and pooling are community traditions accepted by communiiy mem- bers in part because they are useful mechanisms for getting work done, but also because deviance is strongly sanctioned within the community. Title X of the 1969 land reform law calls for the formal restruc- turing and "cooperativization" of peasant communities. The 1970 Stat- ute for Peasant communities53 supplements the land reform law in pro- viding the legal basis for restructuring. SINAMOS' Administration of- 53. D.S. No. 37-79-A. -75- Peasant Communities (Direcci6n de Comunidades Campesinas) is responsible for the restructuring.process. The steps in restructuring are the fol- lowing- . . (1) Formation of New Governing. Bodies: The traditional Communal Delegate (Personero) and Directive Council (Junta Directiva Comunal) are to be replaced-by Administrative and Vigilance Councils. (2) Selection of Members: Communal membership lists are to be purged of persons who do not meet the following requirements: (a) sta- ble residence in the community; (b) not owning agricultural land; (c) derive income primarily from agriculture; (d) not belonging to another peasant community. (3) Restructuring of Land Tenure: Landholding patterns are to be restructured in order to eliminate private ownership, equalize the size of usufruct plots, and expand the scope of collective production. Ownership of all communal lands sold by the community or occupied by individuals after January 18, 1920, is to revert to the community. Members who hold plots at the time of restructuring may continue to enjoy usufruct rights over plots not in excess of the legally defined "family-sized unit.,"54 Usufruct of excess holdings will revert to the community. No communal land may be sold, no new usufruct rights may be established, and existing usufruct rights may not be inherited. Thus, at the death of.a comunero, his land will revert to the community for collective exploitation. All lands adjudicated to peasant communi- ties under the land reform must be exploited communally. The three steps involved in restructuring have been listed in as- cending order.of difficulty. The first two steps are much less.diffi- cult than the last one, but even the second one has caused strong oppo- sition to restructuring in most communities. Community notables and leaders are typically cholos--intermediaries between full-time community residents and the outside world. Many spend a great deal of time out- side the community each year (driving trucks, marketing commodities, 54. Or in excess of an "average communal unit" determined by the members of each community; this point is not entirely clear (and has not been applied). -76- working elsewhere, etc.), and thus do-not qualify for community member- ship and usufruct rights.to community property under the new Statute for Peasant Communities. They generally hold larger-than-average.land- holdings, and thus.are likely to lode land if tenure patterns are re- structured in accordance with--the--new.statite. Consequently, the eco- noinic interests of traditional community leaders are threatened by the restructuring process. -Moreover, by expropriating all -parcels which the communities sold over the last half century, and by canceling the inheritance of usufruct.rights, the new statute threatens the traditional individual cultivation system of nearly all comuneros.- By the end of 1973 very few peasant communities had been restruc- tured and were functioning in accordance.with the provisions of the new statute-, and activities of. SINAMOS -in the area of restructuring had nearly halted. SINAMOS officials were-awaiting the-declaration of a new Peasant Communities Law and-the drafting of a manual to guide the restructuring process. - . The ultimate goal of restructuring is .to create Communal Coopera- tives in which all,-or nearly all, agricultural production.s collec- tive.55 As of the-end of 1973 this goal had not been reached in any peasant community . Where communal- cooperatives-did function (Cases Nos. 17-and 26) only part of the conmunities' members had.*joined the cooperatives, and-the cooperatives-' members- continued to derive a sub- stantial part of their- incomes from individual crop.and livestock pro- duction. -. - . Agrarian Service Cooperatives (CAS) and Parcel Integration. Under Peru?s agrarian legislation, smallholders who are not members of peasant communities may form two types of agricultural cooperatives: agrarian service.cooperatives and parcel integration cooperatives. In the former type, peasants who-operate farms of less than three times the legally defined "family-sized unit" organize to provide themselves with input supplies, credit, machinery, storage, transport, processing, 55. The Cooperative.Bylaws (D.S. No. 240-69-AP). state that each member of a communal cooperative may hold no more than one-quarter hec- tare of cultivable land. marketing, infrastructure (irrigation canals), or other services coop- eratively. Agricultural production er se remains organized on an in- dividual basis. In the second type, smallholders cede ownership or usu- fruct rights to their lands to the cooperative,. and the cooperative's members farm these lands jointly. Four sub-types of the parcel inte- gration. cooperative are outlined in the Cooperative Bylaws: in the first type, all ownership rights are ceded to the cooperative; in the second, all usufruct rights are ceded to the cooperative; in the third and fourth types, ownership or usufruct rights to a 2ar of each peasant's lands are ceded to the cooperative, and the members continue to farm the re- mainder in small individual plots.50. Neither of these types of smallholder cooperatives has been actively promoted by the government since the initiation of the new land reform process in 1969, primarily because the government has placed highest priority on the formation and consolidation of CAPs and SAIS, and the resources of the Ministry of Agriculture and SINADS are concentrated on this task. The previous government promoted the formation of ser- vice cooperatives, and many of these .continue to function. A few others have been formed in recent years, largely as a result of peasant initia- tive.,57 To my knowledge, no parcel integration cooperatives had been established by the end of 1973. Land Redistribution The central element in the military government's land reform pro- gram is land redistribution. Latifundist agriculture is to be liqui- dated through the expropriation and transfer of property rights to small farmers, agricultural workers, and peasant communities. Cooperative production units established on lands expropriated under the reform program are to form the core of a new agrarian sector which will stimu- late the growth of agricultural production, raise rural incomes, and 56. In no case can more than one hectare be retained by each member. 57. In some cases, peasants who opposed the formation of production cooperatives formed service cooperatives in order to demonstrate to government officials that they were not opposed to cooperativism per se. See Cases Nos. 1 and 5. -78- promote general socio-economic development. The following paragraphs outline the principal goals of the government's land redistribution program.and its progress as- of August 31, 1973. By 1976 the.government plans to redistribute-approximately 9,000,000 hectares of farmland among 340,000 beneficiaries, Eighty percent of this land is to be adjudicated to production cooperatives and SAIS, 16- percent to peasant communities, and 4-percent to -individuals (Table 19). Although the redistribution program will reduce.the total area in pri- vate farms by 8,650,o00.hectares, private farms.vill continue to hold 43 percent of the country's farmland. .Peasant communities will hold another 32 percent, and CAPs and SAIS will hold 13 percent and 12 per- cent, respectively (Table 20).58 About two-thirds-of the country's cropland, but only one-quarter of the pastureland, is to be redistri- buted. According to the Iead of the Reform Agency's Statistical Office, a surprisingly small portion of the country's pastureland will be re- distributed because:a large share is already owned by peasant communi- ties.59 When the land redistribution process is complete, production cooperatives and SAIS will hold between 55 and 60 percent of the coun- try's cropland an, just over one-fifth of the pastureland. Land redistribution will not reduce the size of large holdings, eliminate the minifundia problem, or reduce the concentration of land- holding. On the contrary, after the redistribution program is complete, fewer larger production units will hold a larger share of the country's farmland than was true before the reform. The smallest farms, which account for 90.5 percent of the production units, will hold only 6.5 percent of the farmland; the largest reform enterprises, which amount to only 0.3 percent of all production units, will held 83.2 percent of the land (Table 21). 58. Peasant communities and SAlS will have mostly pastureland. 59. Interview: Dr. Luis Bortesi (DGRAAR, Oficina de Programaci6n, Lima), October 18, 1973. Dr. Bortesi stated that the 1961 Agriculture and Livestock Census grossly underestimated the total area in natural pasture and overestimated the share of pastureland held by large estates by grossly underenumerating peasant communities. See also footnote 16, Section I. -79- Table 19: ADJUDICATION GOALS OF TE LAND REFORM PROGRAM, 1976 Type of Area Beneficiaries Adjudication Number 000 has. % Families Individual 61,376 348 3.9 61,376 18.1 Production Cooperatives 818 3,777 42.0 174,503 51.3 Peasant Communities 372 1,400 15.5 59,222 17.4 SAIS 68 3,475 38.6 44,899 13.2 62,634 9;000 100.0 340,000 100.0 Source: Estudio de evaluacion, pp. 10-97 (based on data supplied by the DGRAAR). Table 20: LAND TENURE: PRE-REFORM SITUATION AND POST-REFORM GOALS (thousands of hectares and percentages) Pre-Reform Pbst- Reform Type of Situation (1961) Goals (1976) Land Tenure Area % Area R Private Farms 21,277 73 12,625 43 Peasant Communities 7,833 27 9,233 32 Production Coozeratives 0 0 3,777 13 SAIS 0 0 3,475 12 Total 29,110 .100 29,110 100 Source: Fstudio de evaluaci6n, pp. 10-97, 98, 99 (based on data from the DGAAR -and SINP2MOS). Pre-reform figures correspond to 1961; post- reform figures are goals for 1976.' As of Aug-ust 31, 1973, Just over half the properties to be expro- priatcd by tht reform program had been affected. The pace of expropria- tion and najudication has been rapid in those sections of the Coast and Highlands where Peru's largest estates existed-the North Coast, Jun=n-Pasco, and Puno. Much less progress has been made on the Central Table 21: LAND DISTRIBUTION: PRE-REFORM SITUATION AND POST-REFORM GOALS F 1'-e Post-Reform :j.i61)__Goals (1916) brea Number Area Size U t0 .Units (000 has.) Less thtan 5 has. 0, 32 1,055 5.5 746,467 90.5 1,203 6.5 5-100 hao. 131,827 15.5 1,859 9.9 71,674 8.7 1,178 6.3 100-500 has. 8,u61 0.9 1,625 8.7 4,120 0.5 750 L-0 Over 500 has.a _.h l_4,066 75-9 2,37 0.3 15,17o 83.2 Total 851,927 100.0 18,605 100.0 824,998 100.0 18,605 100.0 a These data indicate that the reform process will incréase the average size of farms in the smallest category from 1.49 has. to.l.61 has., and the average size of farms in the largest category from 3,709 has. to 5,654 has. Source: Estudio de evaluacifn, pp. 10-30. Pre-reform distribution is fromCIDA, based on Peruls 1961 Agricultural and Liveslock Census. Post-reform distribution is based on projections of the DGRAAR. -82- Table 22:- NATIONAL AND ZONAL SU14MARY OF PROGRESS IN- LAND REDISTRIBUTION AS OF 31 AUGUST 1973 A. National Sumary. Progress, 31 August 1973 Land Reform Expropriated Adjudicated Goals Absolute % Absolute % Number of'Properties 9,708 5,217 54 n.d. Number of Beneficiaries 341,409 n.d. 154,584a 45 Land Area: Irrigated Cropland 863,497 416,229 48 n.d. Non-Irrigated Cropland 969,604 415,856 43 n.d. Natural Pasture 6,420,378 3,572,611..56 n.d. Forest 1,424,540 200,959 14 n.d. Barren 2,191,108 902,725 41 n.d. Total Land Area 11,869,127 5,508,380 46 3,494,531 29 B. Summary by Agrarian 'one Progress, 31 August 1973 Agrarian Hectares to be Expropriated Adjudicated' Zoneb Transferred Absolute _o Absolute $ I 524,450 97,003 18 772,427 14 II 801,772 444,950'--' 55 208,700 26 III. 1,451,877 1,060,952 73 804,111 55 IV 966,194 102,425 11 31,054 3 V 299-,051 93,298 31 82,126 27 VI 532,500 75,868 14 6,454, .1 VII 246,500 4,850 2 3,551 1 X 3,018,828 1,550,843 51 1,341,581 '44 XI 2,44o,856 753,799 31 . 387,105 .16 XII 1,587,099 1,323,860 83 692,325 44 aDoes not include colonists. bZones I-VII have lands in both the Coast and the Highlands; Zones X-XII are Highlands. CIncludes 164,758 hectares settled by colonists. n.d. No data.' Source: Estudio de evaluaci6n, pp. 10-74, and DGRAAR. Tables 29 and 30 show how much of each type of land is to be redis- tributed in each Agrarian Zone, and what progress has been made to date. Of the total land area to be affected, only about 16 percent is cropland, 54 percent is natural pasture, and the remainder is forest and wasteland. Nearly two-thirds of the land expropriated by August 31, 1973, was pas- tureland, 15 percent was cropland, and only 20 percent was forest and -81- and Southern Coast, in the High Selva, and in those areas-within the Highlands where small- and medium-sized estates predominate (Table 22).60 By August 31, 1973, six times as much land had.been expropziated and eleven times as much had been adjudicated under the 1969 land re- form law as under all previous agrarian legislation (Table 23).61 Ad- ministrative costs per unit of land redistributed and per beneficiary have been drastically cut under the new law. Cash compensation per unit of land has also been reduced somewhat. The value of bonds issued per unit of land has doubled. The increase in total compensation per hectare results in large part from the expropriation of higher quality, irrigated coastland and agro-industrial facilities under the new law (Table 24). The most valuable assets expropriated under the reform process are located on the North and:Central Coast, where Peru's sugar plantations (agro-indudstrial_ complexe I) are located. . The. value of as- sets adjudicated per beneficiary is much higher on the Coast than in the Highlands or the Selva (Table .25).. .. Not including colonists', 152,500 families had benefited from land reform by August 31, 1973. Of these, 50 percent were members of pro- duction cooperatives, 22 percent were members of SAIS, 17 percent were residents of peasant communities which ,ad received lands under the reform, and 11 percent received individual titles to the plots of ha- cienda land they occupied prior to the reform (Table 26). The majority of beneficiaries receiving individual titles have not been.required to pay their 7agrarian debt" to the government (Table 27). Over one-third of all land affected by the land reform is Sn the. Central Highlands (Tenth Agrarian Zone) where Peru's largest and most productive sheep ranches are located. The bulk of all public lands affected by the reform process are in the Selva (Table 28). 6o. The largest coastal estates were the sugar plantations (agro- industrial complexes); smaller coastal estates cultivated cotton, rice, potatoes, and several other crops. The largest highland estates were corporate-owned sheep ranches; smaller estates in the Highlands and the High Selva generally cultivated crops in addition to pasturing livestock. 61.. As pointed out in Section II.A., above, much-of the land redis- tributed prior to June 1969 was affected prior to the signing of the 1964 land reform law. Table 23: LAND ACQUISITION AND ADJUDICATION, AND NUMBER OF BENEFICIARIES, AS OF 31 AUGUST 1973 Previous Period D.L. 17716 (as of 6-24-69) (6-24-69 to 8-31-73) Total Absolute Absolute Absolute Figures % Figures % Figures % A. Land Acquisition (has.) 1. State Lands 95,460 44.0 121,348 56.0 216,808 100.0 2. Private Lands T38,910 111.0 4,552,662 86.0 5,291,572 100.0 3. Total/Average 834,370 15.1 4,674,010 84.9 5,508,380 100.0 B. Land Adjudication Area (has.) 320,906 8.4 3,510,844 91.6 3,831,750 100.0 Percentage of A.3. 38.5 75.1 69.6 C. Number of Beneficiaries 13,657 8.2 152.339 91.8 165,996 100.0 O D. Area per Beneficiary 23 has. 23 has. 23 has. Source: Official data provided by DGRAAR. Table 24: FINANCIAL ASPECTS OF THE LAND REFORM, AS OF 31 AUGUST 1973 Previous Period D.L. 17716 (as of 6-24-69) (6-24-69 to 8-31-73) Total A. Compensation to Ex-Landowners (thousands of current soles) 1. Cash Payments for Land, Constructions, Installations, Machinery, Equipment 123,022 564,545 687,567 2. Cash Payments for Cattle 71,569 1,227,661 1,299,236 3. Agrarian Bonds 356,723 8,218,182 8,574,905 Sub-Total 551,314 10,010,391 10,561,708 B. Administrative Costs (thousands of current soles) 1. Agrarian Zones ... 535.,313 476,470 1,011,783 2. National-Agrarian Office (DGRAAR) 228,371 230,459 458,830 Sub-Total 763,68 706,929 1,470,613 Total 1,314,998 10,717,323. 12,032,321 C. Cost per Beneficiary (current soles) 1. Cash 14,248 11,765 11,969 2. Bonds 26,120 53,94T 51,657 3. Administratok 55,919 4,640 8,859 Total lost per Beneficiary 96,287 70,3522,85 D. Cost per Hectare (curret soles) 1. Cash 606 510 519 2. Bonds 1,112 2,341 2,238 3. Administration . 2,380 ... . 201 384 Total Cost per Hectare 4,098 '31052 3,141 Source: See source for Table 23. . -85- Table 25: VALUE OF LANDS AND OTHER ASSETS ADJUDICATED, AND NUMBER -OF LAND REFOlM BENEFICIARIES (values in thousands of current soles) Value of Assets Agrarian Number-of Adjudicated, Value per Zonea . Beneficiariesb Including Interesto Beneficiary I 17,612 - 1,284,845 73 II 20,484 3,234,402 - 158 III 33,070 .3,301,000 100 IV 7,900 .1,495,503 189 V . 7,071 886,455- 125 VI 1,453 148,588 102 VII 578 37,198 64 VIII 2,257 5,997 3 Ix 3,993 - . 43,422 11 X 34,030 924,272 27 XI 24,442 162,360 - 7 XII 11,294 643,774 .7 Total/Average 164,184 12,168,815 714 aZones 1-VII have land in the Coast and the Highlands; Zones VIII and IX are in the Selva; Zones X-XII are in the Highlands. biBeneficiaries" here do not include spontaneous colonists. Cinterest rates are 4 percent, 3 percent, and 2 percent for lands in the Coast, Highlands, and Selva, respectively, and 7 percent for other assets. Source: See source for Table 23. wasteland. Table 31 shows the distribution of adjudication models by Agr,,ian Zone. Production cooperatives have been established in all parts of the country. Three-quarters of the peasant communities which have received land are located in the.-Central Highlands (Zone X). Most SAIS are in the Highlands of Ancash and La Libertad (Zone III).- Individual parcels have been adjudicated primarily in'the Selva. Programs Complementary to Land Redistribution While land redistribution is the central element in the Peruvian government's-new agrarian policy, several other programs complement land redistribution by expanding the land base; by establishing, con- solidating, and supervising new reform enterprises; by implementing the -86- Table. 26: -TYPES OF LAND REFORM BENEFICIARIES, AS OF 31 AUGUST 1973:. Types of Beneficiaries Number Sugar Cooperative Members 'Ex-Full-Time Estate Worker's; 19,776 Ex-Part-Time Estate Workers 7,967 Members of Non-Sugar Cooperatives 48,964 Members of SAIS 33,041 Members of Peasant Communities Not Associated with SAIS , 25,734 Ex-Colonos of Ex-Estates 16,996 Total 152,478 Note: In addition to the above-listed beneficiaries, the DGRAAR hss granted titles to 11,706 colonists in government- sponsored projects and to 1,178 spontaneous colonists out- side government projects. Source: See source for Table 23. water law and other facets of Peru's agrarian legislation; and by pro- viding credit, technical assistance, and other services to both the reformed and the non-reformed sub-sectors within agriculture. Table 32 lists several of the most important programs and the government agen- cies responsible for their implementation. The Ministry of Agriculture is the public agency which is most directly responsible for implementing the government's agricultural programs. Within this Ministry, responsibility.for. specific programs is delegated to specialized branches, the most directly involved in the reform process being the Land Reform and Colonization Agency (Direcci6n General de Reforma Agraria y Asentamiento Rural-DGRAAR), the Land Re- form Investigation and Capacitacion Center (Centro Nacional de Capaci- taci6n e Investigaci6n para la Reforma Agraria--CENCIRA), and the Agrarian Production Administration (Direcci6n General de Produccion Agraria-- DGPA). The Agricultural Development Bank (Banco de Fomento Agropecuario-- BFA) is the principal source. of credit for the agricultural sector, and the only source of credit,for most reform enterprises. SINAMOS, the government's Ministry-level agency responsible for fostering and chan- neling popular participation in economic and other institutions, Table 27: TITLES GRANTED, AS OF 31 AUGUST 1973 Types of Production Peasant Adjudication Individuals Cooperatives SAIS Communities Total Agrarian Reform Families 4,033 73,890 33,041 25,734 136,698 Hectares 43,631 1,455,285 1,548,151 361,114 3,408,181 Directed Colonization Families 6,783 2,817 9,600 Hectares 250,326 60,215 26,678a - 337,219 Gratuitous Families 277 277 Hectares 1,108 1,108 "Condonados,"b Families 17,609 - 17,609 Hectares 85,242 - 85,242 Spontaneous Colonization Families 1,782 - 1,782 lectares 29,854 - - - 29,854 Total Families 30,484 76,707 33,041 25,734 165,966 Hectares 410,161 1,515,500 1,574,829 361,114 3,861,604 Source: See source for Table 23. a. Selva land adjudicated to the SAIS "Tipac Amaru" to be used in future colonization. b. D. L. 19977 of 1973 pardons the agrarian debts of ex-hacienda colonos and colonists in government-directed colonization projects receiving five or less hectares of land under the land reform. Table 28: STATE AND PRIVATE LANDS ADJUDICATED, BY AGRARIAN ZONE, AS OF 31 AUGUST 1973 (in hectares) Agrarian Zonea Total State Lands Private Lands I 72,427 2,077 70,350 II 208,700 42,156 166,544 III 804,111 10,761 793,350 IV 31,054 1,348 29,706 V 82,126 2,299 79,827 VI 6,454 1,818 4,636 VII 3,551 232 3,319 VIII 64,223 64,223 - Ix 138,092 137,560 532 I - 1,341,581 51,403 1,290,178 XI 387,105 13,170 373,935 XII 692,325 59,026 633,300 Total 3,831,750 386,073b 3,445,677 Source: See source for Table 23. a. See note a., Table 27. b. This figure exceeds that appearing in Table 23 because some state lands were adjudicated without passing through the formal acquisition process. -88- Table 29: LAND REDISTRIBUTION GOALS (does not include colonization or actions in the Selva) TOTAL AREA TO SETTLEMENT AGRARIANa BE TANSFERRED LAND USE (has.) CAPAUTY ZONE Number of Dryland Natural Number of Properties Has. Irrigated Farming Pastures Forest Wasteland Families I 961 524,450 106,840 31,423 87,346 132,877 165,959 31,352 II 1,124 801,772 12O,330 183,041 214,088 144,165 140,148 41,355 III 969 1'451,877 231,883 236,514 583,191 110,986 289,303 47,496 IV 769 966,194 177, 756. 174,890 445,207 17, 603 150,738 42,125 V 1,355 299,051 96,846 23,133 155,889 1,42? 21,754 22,217 VI 468 532,500 38,900 15,000 417,800 7,200 53,600 8,621 VII 159 246,500 23,600 3,700 160,300 23,800. 35,100 8,292 X 589 3'018,828 26,197 116,794 11747,755 589,226 538,856 62,453 XI 1,788 2,440,856 36,390 137,756 1162,667 386,437 717,606 58,626 XII 1,526 1!587,099 4,755 47,348 1'446,135 10,817 78,044 18,872 TOTAL 9,708 11'8t9,127 863,497 969,604 6'420,378 1'424,540 2'191, 108 341,409 Source: See source for Table 23. a. See note a to Table 26. -89- -90-- Table 30: TYPES OF LAND ACQUIRED, BY AGRARIAN ZONE, AS OF 31 AUGUST 1973 Number L A N D S E" Agrarian of Total Irrigated Dryland Zonea Properties Area Farming Farming Pasture Forst Fallow N.A.U.b Wasteland 1 420 97,002.60 52,293.55 125.92 31,572.55 6,182.40 4,836.25 1,005.17 906.76 II 868 444,949.92 122,422.78 70,605.56 165,93r.69 47,003.77 6,153.02 4,994.85 19,759.25 III 692 1'060,952.00 122,172.22 150,282.89 624,218.91 53,143.00 13,834.45 6,731.24 90,569.29 IV 608 102,425.29 54,054.60 4,748.96 22,292.23 460.26 1,281.42 2,300.51 17,287.31 455 93,298.26 33,487.47 936.75 49,436.45 476.14 905.19 812.30 7,243.96 VI 225 75,867.53 5,844.00 54,269.54 13,405.83 6.75 377.62 6.13 1,877.66 VII 263 4,849.52 4,040.49 11.93 - 2.78 6.14 5.03 703.15 IX 1 532.00 - 532.00 - - - - X 409 1'550,843.34 10,770.73 40,614.60 14084,278.99 87,487.19 3,895.60 4,210.31 319,585.84 XI 748 753,798.63 10,706.53 62,297.35 394,527.52 5,962.52 168,751.33 629.60 110,923.56 XII 520 1'323,060.46 437.06 23,350.04 11186,067.90 233.72 751.50 1,711.47 110,508.77 TOTAL: 5, 47 1508,379.5S5 416,229.43 415,855.62 3572,611.29 200,958.53 20U,792.52 22,406.61 679,445.55 Source: See source for Table 23. a. See note a, Table 27. b. N.A,U.: Non-agricultural use -91- Table 31t TYPES OF ADJUDICATION MODELS, BY AGRARIAN ZONE, as of 31 AUGUST 1973 Pr6duction Peasant re-Co"partive Total CooperatiVes 'Communities'a S. A. I. S. Groups Individuali . AGRARIAN ZONEa ram. lics. No faa. tHe. N2 F. line. No am. is. Fam. Has. ra. "as. I 18,133 77,853 62 6,705 30,705 7 7,141 14,595 - - - 521 5,426 3,606 27,127 II 22,323 279,740 33 18,198 176,445 *1 360 15,708 - - - 1,039 71,040 1,926 22,547 III 33,091 804,471 20 13,683 100,960 2 528 3,130 16 17,919 693,790 21 360 940 6,231 IV 7,920 31,195 24 6,349 23,960 1 20 13 - - - 20 .141 1,531 7,081 V 7,150 03,160 44 5,890 54,902 1 327 23,495 - 79 1,034 -846 3,729 VI 1,561 69,696 5 !07 1,091 - - - - ** - 100 63,242 066 4,563 V11 578 3,551 5 215 1,779 - - - - - - - 363 1,772 VIII 2,257 64,223 3 73 400 - - - - - 26,671F - - 2,184 37,057 JX 3,993 138,092 13 415 36,230 - - - - - . 3,570 101,854: X 35,404 1,375,337 05 6,707 363,900 60 15,509 290,937 5 8,767 615,756 1,374 33,756 2,967 62,980 Xi 24,544 400,255 55 11,546 256,196 5 1,130 4,134 1 2,006 27,171 102 13,150 9,752 '99,604 , XII 11,460 714,-990 15 6,251 474,020 4 .631 1,102 7 4,349 211,434 166 22, 664 63 5,762 168,414 4,042,563 364 76,707 1 515,500 81 25,734 361,114 29 33,041 1,574,829 4,230 210,013 28,702 380,30 Source; See source for Table 23. a. See note a, Table 27. b. Provisional Adjudications: ex-eatates managed by "Provisional Adminialrative Commissions." After the period of interim management, these groups became production cooperatives. c. There is no figure for beneficiaries since this area corresponds to a pr6posed colonization project of the SAIS "TOpac Anaru." -92- Table 32: PROGRAMS COMPLEMENTARY TO LAND REDISTRIBUTION Program Imolementing Agency 1. Establishment of New Reform Ministry of Agriculture, Enterprises SINAMOS 2. Production and Development Planning for New Reform Enterprises Ministry of Agriculture 3. Supervision, Control, and Ministry of Agriculture, Auditing of Reform Enterprises SINAMOS 4. Training and Capacitacion Ministry of Agriculture, SINAMOS 5. Credit Agricultural Development Bank, Ministry of Agriculture 6. Technical Assistance Ministry of AgricUlture 7. Marketing and Price Policy Ministry of Agriculture 8. Water Policy Ministry of Agriculture 9. Scientific Investigation Ministry of Agriculture 10. Colonization Ministry of Agriculture collaborates with the Ministry of Agriculture in the design of adjudi- cation models, prepares the peasantry for participation in cooperative institutions, and takes responsibility for the supervision and control of peasant participation in reform enterprises. The Ministry of Agriculture is responsible for most of the steps in the land reform process per se.62 At the later stages SINAMOS parti- cipates in the selection of adjudication models and, more directly, in peasant capacitaci6n, drafting of reform enterprise charters and bylaws, and the organization of their governing bodies. During the interim between the expropriation of estates and the adjudication of their assets to land reform beneficiaries, the Ministry of Agriculture is responsible for organizing interim management bodies. These bodies may take two forms. Until 1973 the government adjudicated many estates to prospective land reform beneficiaries "provisionally," 62. The formal division of labor between the Ministry of Agriculture and SINAMOS is defined in several government documents, including, "Ac- ci6n conjunta del Ministerio de Agricultura y el SINAMOS en el 9mbito rural: Directiva No. 1-Delimitaci6n de funciones en relaci'n a las acciones el el 9mbito de los proyectos integrales de asentamiento rural" (CENCIRA: Lima, 1973). Table 31; TYPES OF ADJUDICATION MODELS, DY AGRARIAN ZONE, as of 31 AUGUST 1973 Production Peasant re-Cooperotive Total Cooperatives Communities S. A, I S. Groups Individuals AGRARIAN . G ZONEa Fam. flo. No Fam. Hea. Ne Fam. Hea. No Fam. Has. Fam. Has. Fam. Has. I 18,133 77,053 62 6,705 30,705 7 7,141 14,595 - - - 521 5,426 3,606 27,127 11 22,323 279,740 33 10,198 170,445 1 360 15,700 - - - 1,839 71,040 1,926 22,547 III 33,091 804,471 20 13,603 100,960 2 628 3,130 16 17,919 693,790 21 360 , 940 6,231 IV 7,920 31,195 24 6,349 23,960 1 13 - - - 20 141 1,531 7,081 U 7,150 83,160 44 5,898 54,902 1 327 23,495 - - - 79 1,034 846 3,729 VI 1,561 69,696 5 587 1,091 - - - - - - 106 63,242 866 4,563 VII 578 3,551 5 215 1,779 - - - - - - - - 363 1,772 VIII 2,257 64,223 3 73 400 - - - 26,67 - - 2,184 37,057 IX 3,993 138,092 13 415 36,230 - - - - - - - 3,578 101,654 X 35,404 1,375,337 05 6,707 363,908 60 15,509 290,937 5 8,767 615,756 1,374 33,756 2,967 62,980 XI 24,544 400,255 55 11,546 256,196 .5 1,130 4,134 1 2,006 27,171 102 13,150 9,752 99,604 XII 11,460 714,990 15 6,251 474,020 4 631 1,102 7 4,349 211,434 166 22,664 63 5,762 160,414 4,042,563 364 76,707 1 515,500 81 25,734 3 J1,114 29 33,041 1,574,829 4,230 210,813 28,702 300,307 Source: See source for Table 23. a. See note a, Table 27. b. Provisional Adjudications: ex-estates managed by "Provisional Adminisrrative Couissions." After the period of interim management, these groups became production cooperatives. c. There is no figure for beneficiaries since this area corresponds to a proposed colonization project of the SAIS "Tipac Amaru." -93- and ostablished. worker-controlled "Provisional Administrative Commis- sions." 63 Often, workers were not adequately prepared to manage the estates,-and technical and managerial assistance from the Ministry of Agriculture was lacking. As a result, the provisional adjudications led to problems at the stage of formal adjudication, because "prospec- tive land reform beneficiaries-in some. cases members of the Provisional Commissions--often did not meet the formal criteria for membership in new reform enterprises.64 Ia order to eliminate these management and membership problems, the government has relied increasingly upon "Spe- cial Administrative Committees"n5 made up of government appointees. In the special cases of the large sugar plantations and a few sheep ranches, one special committee was set up for each ex-estate. Later, where smaller estates have been concerned, special committees have been established to-manage several estates each. Prior to adjudication, the Ministry of Agriculture, with participation of workers' delegates and assistance from SINAMOS and the BFA, draws up a production plan and a general socio-economic development plan for each new reform enter- -rise. During the expropriation-adjudication interim SINAMOS is respon- sible for establishing and supervising the work of an "Organizing Com- mittee"66 in each ex-estate. This committee drafts,the charter and bylaws of the reform enterprise and arranges for the election of workers' representatives to the enterprise's-new governing bodies. Over this period SIXAMOS also gives short courses on the objectives and policies of the military government, the land reform process, and on cooperative principles and operation. Once new reform enterprises are formally established, the DGPA is responsible for supervising and controlling the technical-production 63. Comisiones provisionales de administracin. 64. Often, prominent estate workers owned land, or received land under the reform program, and thus did not qualify for cooperative membership. This occurred in Espinal, Case No, 1. 65. Comites especiales de administraci6n. 66. Comit' organizador. -914- aspects-of the new units' activities. Within DGPA a specialized agency67 is responsible for evaluating and supervising the economic performance of reform enterprises. SINAMOS:is responsible for evaluating and super- vis.ing the performance of the new units' formal governing-bodies, and for auditing. their accounts. CENCIRA was established by the Peruvian government to investigate and evaluate the land reform process and provide capacitaci'n for pub- lic officials and land reform beneficiaries. Since SINAMOS and the. DGPA also have capacitacion -programa, coordination is-necessary. CENCIRA is formally responsible for this task. Adequate financing for new reform. enterprises is, of course, of the utmost importance. The BFA provides two types of credit to reform enterprises,and other agriculturalists: "ordinary credit" and "super- vised credit." In the first case, the BFA is solely responsible for the loan appraisal, disbursal, and-recovery, and.provides no technical or managerial assistance to clients. Prior to the land reform, ordinary loans were made primarily to large- and medium-sized farmers. In the case of supervised credit, the BFA is merely the fiscal agent for a government trust fund; the Ministry of Agriculture appraises and approves loans and covers the risk;68 the BFA disburses the loans and is respon- sible,for debt collection, but does not incur any loss-resulting from default.. These loans are.made primarily to small farmers who do not meet "bankers' standards" for commercial credit. Peru's supervised credit program was initiated on a small scale in 1953. The first national program was initiated in 1964, with a-six million dollar grant from the U.S. Agency for International Development.69 The stated purpose of the supervised, credit program was to provide credit 67. The Enterprise Promotion and Credit Administration--Direccion de Promoci6n Empresarial y Cr6dito. 68. Until 1969, these tasks were under the responsibility of SIPA. 69. This discussion of supervised credit draws heavily upon Manuel Guardia Mayorga, "Plan nacional de credito agropecuario,-" in Seminario nacional de cr6dito agropecuario (CENCIRA: Lima, 1973). The supervised credit program initiated in 1964 functioned largely on the Coast, where it was known as the "Plan Costa." See Case No. 1. -95- to smallholders at subsidized rates, in order to create credit-worthy clients for the BFA. This credit program suffered from both high administrative costs and high default rates, and in an attempt to reduce costs and improve collections, the BFA and SIPA promoted the formation of cooperatives and pre-cooperative groups through which supervised credit could be channeled to smallholders. By 1968,.one-quarter of the value of loans approved under the supervised credit program was:- made to, or through such groups. Since 1969, as a result of the land reform process, the credit opera- tions of the BFA have expanded greatly, and the BFA' operations have become more responsive to the government's agricultural development plans. Land reform beneficiaries are given priority in the allocation of funds, and among the different types of beneficiaries, cooperatives are given top priority. The BFA also takes into account the Ministry of Agri- culture's crop and livestock production goals, in order to stimulate foodcrop production and the reorganization of production patterns in line with the government's regional development goals. T1 Tables 33, 34, and 35 indicate recent trends in BFA lending. Responsibility for management of the supervised credit program and provision of technical assistance falls largely upon the dependencies of the Agrarian Zones -- the "Agrarian Offices" and "Agencies" 2--and credit supervision and technical assistance-related tasks consume a large part of the time of Ministry personnel at this level. Agents who appraise loans are often poorly prepared for this type of work, and do not have sufficient time to evaluate loan requests carefully. These same agents are also generally poorly informed of the results of research 70. In nearly all cases, loans were made to smallholders through cooperatives and pre-cooperative groups established for this purpose. An AID evaluation notes that for such units to perform well, it is nec- essary to couple technical assistance, input delivery, and marketing ser- vices to the credit function. "An Evaluation of Selected Supervised Credit Programs in Peru" (Internal report to the USAID and the Govern- ment of Peru: Lima, June 1968), Part IV. 71. For example, no loans are granted for the expansion or renova- tion of coffee plantations on the North Coast. See Case No. 2. 72. See again Section II.B. and Chart 4, above. -96- Table 33: ALLOCATION- OF AGRICULTURAL DEVELOPMENT BANK ,LOANS, BY TYPE OF BORROWER, 1967/68,AND 1972a .(in thousands of,current soles and percentages) Amount Percent Amount Percent Small Farmers- Individuals 1,014,405 29.3 1,445,339 22.2 Cooperativesc 290,632 8.4 3,170,514 48.T Medium Farmers 650,659 18.8 270,010 4.1 Large Farmers . -1,507,219 43.5 1,624,019 24.9. Total 3,462,915 100.0 6,509,882 100.0 Supervised credit as a percent of Total Credit 17.4 16.3 Source: Luis Pinto Fernandez D. "Politica crediticia del Banco de Fomento Agropecuaria del'Paru'," in.CENCIRA, Seminario-Nacional de Credito AgroDecuario, IQuitos, Peru', 3-7 de Setiembre de 1973 (CEINCIRA: Lima, 1973). a. Includes both "ordinary" and "supervised" credit. b. Cooperatives are included in this category because the Bank extends to them the same favorable rates of interest charged small, individual borrowers. c. Includes pre-cooperative groups, all types of cooperatives, and SAIS. d. Insignificant discrepancies due to rounding. -97- Table 34: SHORT-TERM AND LONG-TERM LOANS OF THE AGRICULTURAL DEVELOPMENT BANK, AND AMOUNT OF LOANS GRANTED IN THE COAST, HIGHLANDS, AND SELVA (in thousands of soles and percentages) Amount Percent Amount Percent Type of Loan: Short-Term 2,962,024 85.5 5,671,655 87.1 Long-Term 500,896 14.5 838,227 12.9 Total 3,462,920 100.0 6,509,882 100.0 Region: Coast 2,505,389 72.4 3,970,415 61.0 Highlands 420,026 12.1 773,741 11.9 Selva 537,505 15.5 1,765,726 27.1 Total 3,462,920 100.0 6,509,882 100.0 Source: See source to Table 33. -98- Table 35 :.SUPERVISED CREDIT.APPROVED BY THE AGRICULTURAL DEVELOPMENT BANK, 1965-1972 (in millions 'of'current soles and percentages) Total Percentage Allotted a Amount to Cooperatives 1965 168.0 2.4 1966 173.2 3.7 . 1967 - 328.7 19.2 1968 552.6 23.7 1969 604.5 20.7 1970 376.1 28.2 1971 506.1 55.3 1972 1,059.7 73.2 Source: Manuel Guardia Mayorga, "Plan nacional de credito agropecuario," in CENCIRA, Seminario Nacional de Credito Agropecuario. a. Includes pre-cooperative groups, all types of cooperatives, and SAIS. b. The sudden decline in loans approved by the Bank is the result of a restriction in external financing for Bank operations. _99-. and investigation performed under the jurisdiction of other branches.of the Ministry. In addition to credit supervision and technical assistance, the agents are responsible for crop inspection and reporting, land reform activities, and numerous other tasks, including a great deal of .paper work. The great increase in the--Ministry of Agriculture's workload in recent years has resulted in a rapid expansion of staff and budget,* but shortages of funds and manpower persist. In credit operations, funds are often less scarce than specialized manpower for appraisal and paper work. Thus, in both the areas of credit and technical assistance, priorities have had to be made, and services denied certain prospective clients. Credit and technical.assistance to all independent private farmers have been.curtailed, as the resources of both the Ministry of Agriculture- and the BFA have been concentrated on the consolidation of the reform sector.T3 Government policy affects the marketing of agricultural commodities and inputs.in several ways. Retail price ceilings on the basic foodstuffs place a ceiling on farm profits, and discourage not only speculation but production.' In recent years the need to adopt a more rational price policy to stimulate agricultural production, has been much discussed, within the BFA and the Ministry of Agriculture, but as of December 1973 no concrete steps had been taken to raise the prices received by producers. T14 A public enterprise, known as EPSA has.been established to market foodstuffs through a chain of supermarkets in Lima, dampen fluctuations in commodity supplies and prices in urban areas.by:entering wholesale markets., monopolize foodstuff imports, and control the domestic marketing of certain agricultural commodities, such as rice, coffee, and seed potatoes. To date, EPSA's programs have not raised farm-gate prices, 73. This fact was brought out clearly in several interviews with Ministry officials in Agrarian Offices and Agencies. 74. Empresa Pablica de Servicios Alimenticios., -100- 'and producers complain of marketing dislocations introduced by the public T5 enterprise.. Another government agency has been established to control fertilizer imports, production, and marketing. 'The international fertilizer shortage and the agency's internal organizational problems have produced serious dislocations in fertilizer supplies,;.most agriculturalists.fault the public-agency for mismanagement and. excessively bureaucratic procedures. Prior to 1969, rights to river-irrigation water were purchased and sold along with estate lands. -On the Coast, where all agriculture is irrigated, estates were occasionally purchased for their water rights (which could be transferred to.other estates) rather than for their lands,.per se. The 1969 water law abolished traditional private rights to irrigation water, and vested in the state the authority to allocate irrigation water in accordance with the public interest. Producers now submit to the Ministry of Agriculture production plans, which the Ministry takes into account in drawing up a global production plan for each river valley. On the basis of the individual requests.and the Ministry's global production plan, individual water-allotments are adjusted to availabilities. Although little information is available, it seems Othat the.new water law has not appreciably altered.the pre-reform distribution of irrigation water between large and small farms. Since the large coastal estates are now the government's mo&el reform enterprises, the Ministry of Agriculture favors them in its allocation of irrigation water, at the expense of small private farmers. A recent reorganization of the Ministry of Agriculture concentrated responsibility for all scientific agricultural investigation under a single branch of the Ministry of Agriculture. The Military Government's commitment to increasing, domestic agricultural production.indicates that increasing emphasis will be placed on scientific investigation and the dissemination-of its results. Howeveri-to date, little improvement T5. In 1973, rice producers ihcurred losses because internal finan- cial problems prohibited EPSA from purchasing rice at harvest time. Rice producers also complain of low purchase prices and severe discounts for low quality. Many potato producers feel that government control of seed potato marketing is responsible for recent seed shortages. 76. Ley Orginica del Sector Agrario: D.L. No. 19608, November 21, 1972. -101- has been made in the highly inadequate research and dissemination systems of the Ministry of Agriculture. Because of the extreme shortage of good agricultural land in Peru many experts consider colonization as a necessary complement to land redistribution.8 Peru's first Land Reform and Settlement Agency (IRAC) concerned itself primarily with settlement. Later, the Belaunde government was more concerned with opening new lands in the Selva than with redistribution of settled farmland on the Coast and in the Highlands. But despite public interest in colonization, government sponsored settlement projects have failed to attract large numbers- of colonists,' or to contribute significantly to the country's commercial agricultural production. Rates of outmigration from settlement projects are high, and colonists are among the poorest and most isolated members of the rural population. As Table 27 shows, colonists in government projects have received less than 10 percent as much farmland as have land reform beneficiaries in already settled areas. Moreover, not all the colonists who have received land titles are in the Selva; a large part 'have entered high- cost irrigation-settlement projects on the Coast. 77. I have no data on secular trends in government budgetary alloca- tions to scientific investigation and dissemination. 78. This point is emphasized in the above-cited IBRD study, The Cur- rent Economic Position and Prospects of Peru. -102- III. REFORM MPLEUMTATION AND`PZRFORMANCE OF NEW REFORM ENTERPRISES A. The Case Studies This final chapter is based on field work carried out in From early 1970 until mid-1972, as part of my thesis research, I studied hacienda organization and the land reform process in tour estates in northern Peru (Cases Nos. 1-4).1 .In August 1973 I returned to Peru to supplement these four detailed case studies with more brief studies of other reform enterprises, and to gather, data on macro aspects of the 2 reform process. The first six.veeks .were spent.in Lima, gathering published and unpublished monographical.material-and.macro data, and interviewing public officials involved in the reform process. October and November were spent outside Lima, visiting provincial offices of the Ministry of Agriculture, the Agricultural Development Bank, and SINAMOS, and several reform enterprises. In total,.twenty-seven enter- prises in six Agrarian Zones were visited. Basic data on these enter- prises are presented in Table 36. The location of the enterprises visited is indicated on Map 4. Detailed case studies were written, and are included in Appendix B of this reTiort; a summary of findings for each Agrarian Zone is included in Appendix A. The Second, Third, Fourth, Tenth, Eleventh, and Twelfth Agrarian Zones were visited; these are the principal Zones in which land redistri- bution has taken place under the 1969 law. Within these Zones an attempt 1. The thesis research was supervised by Tom Davis, of the Economics Department, Cornell University, and was funded by the Fulbright Commission, the National Science Foundation, and Cornell's Latin American Studies Program. The thesis is not yet complete. Some preliminary results are reported in my article, "Haciendas and Cooperatives: A Preliminary Study of Latifundist Agriculture and Agrarian Reform in Northern Peru," Land Tenure Center Reprint No. 53 (September 1973). 2. This research was supervised by Shlomo Eckstein and Thomas Carroll and forms part of a larger study of land reform and reform enterprises in Peru, Bolivia, Chile, Mexico, and Venezuela, funlied by the Inter- national Bank for Reconstruction and Development. -The Case Study Outline (Appendix B) is adapted from an earlier version prepared by Shlomo Eckstein. Table 36. SUMMARY DATA ON 27 REFORM ENTERPRISES Main Crop Number Total Case a Agrarian or Date of Date of of Area Number Type Name Zone Livestock Intervention Adjudication Hem b (ha Members (has.) 1 CAP ESPINAL 2 Rice 6/69 1/73 163 8,212 2 CAP MONTESECO 2 Coffee 6/69 1/72 272 1,960 3 CAP UDIA 2 Cattle 6/69 12/71 512 39,500 4 CAP POMALCA 2 Sugar 6/69 10/70 3,300 16,662 5 CAS LA CAMPINA 3 Corn-Misc. N.D. 6/73 106 998 6 C SANTA-LACRAMARCA 3 Cotton-Corn N.a. 7/72 8C 8,222 7 CAP CERRO ALEGRE 4 Cotton-Potatoes 6/71 12/72 265 1,087 8 CAP SANTA BXRBARA 4 " - " N.D. 6/72 137 443 9 CAP CERRO BLANCO 4 " - 8/71 12/72 150 532 10 CAP CASA BLANCA 4 " - N N.D. 6/72 72 668 11 CAP CAIDERA 4 " -Misc. N.D. N.D. 150 900 12 CAP ANDAHUASI 4 Sugar 6/69 N.D. 375 1,084 13 CAP EL POTAO 4 Cotton-Corn 9/71 1/73 98 717 14 CAP SAN NICOLKS 4 Sugar 11/69 7/72 300 1,432 15 C PASCO 10 Sheep N.A. 6/72 23c 300,000 16 SAIS CAHUIDE 10 Sheep 10/69 4/71 30d 268,182 17 CC QUEHUAR 11 Potatoes N.D. 73 280 N.D. 18 CAP TGPAC AMARU 1I--ANTAPAMPA 11 Cattle-Potatoes 69 6/71 2,800 37,351 19 CAP TAJJUANTINSJYO 11 Cattle-Wheat 2/70 6/73 187 11,017 20 CAP MARISCAL RAMN CASTILLA 11 Wheat-Potatoes 9/69 6/73 82 2,331 21 SAIS YOCARK 12 Sheep 69 12/70 56 9,421 22 CAP SANTA LUCIA 12 Sheep N.D. 10/72 235 74,115 23 SAIS BUENA VISTA 12 Sheep N.D. 12/72 750 49,383 24 CAP MICAELA BASTIDES 12 Sheep N.D. 8/72 586 60,250 25 CAP POSOCONI 12 Sheep-Cattle 11/69 71 75 1,769 26 CC LA UNI6N DE SORATIRA 12 Sheep N.D. 9/66 87 6,539 27 C CECOAAP N.A. Sugar N.A. 12/70 12c 120,157 Source: Appendix B: "Case Study Reports." Notes: a. The 5 types of reform enterprises visited are the following -- CAP; Agrarian production cooperative; CAS: Agrarian service cooperative; C: Central Cooperative; CC: Communal cooperative; SAIS: Agrarian social interest society. b. "Number of Members" refers to natural per-ons in all casea except Nos. 6, 15, 16 and 27. c. The members in these cases are cooperat-',-s. d. One service cooperative and 29 peasant communities. N.A. Not applicable. N.D. No data. -103- -1o4- 4: LOCATION OF REFORM ENTERPRISES VISITED Ä- -' -r'' " AMA AS 0o T 0o ccZ nn NL,0RII A-NC,ASH. ~- r-~ HUA A MADRE DE DIOS --ceano T Paci fic Xl uICA-0 CUZCO CA P E Rý U MINSTER10 DE AGRDCULTURA CFCN& GENEPLAL oCC^MT-RO RURAL it Ip * - '¾.. REQUIPA coo,ooo Q PA TACNAf TE DE SELVA TACA H _______ 1CH ILE -105- was made to select cases which were representative in terms of their location, size, and labor-tenure system, and which had been established at least one year prior to my visit. Transportation problems and the severe time constraint forced me to restrict most of my visits to cases which could be reached by jeep in a few hours drive from Agrarian Offices. If the cases selected present any bias, it probably results from the fact that I did not visit many isolated reform enterprises, far "off the road." Even if time and resources had been available, it would have been impossible to visit a "representative" number of isolated cases, since the estates in these areas have entered the reform process later than the more accessible commercial estates, and thus few isolated reform enterprises were function- ing at the time of my field work. Several cases were selected for special reasons. As stated above, I had already studied Nos. 1-4, and therefore selected these cases for follow- up studies. I traveled to Zone III specifically to visit Case No. 6, since it was the only PIAR-level central cooperative functioning in Peru at the time. Case No. 5 was an accident! I met the president of the CAS in the Chimbote Agrarian Office and found the reform history of his enterprise so interesting that I decided to follow it up. I traveled to Cerro de Pasco specifically to visit the central cooperative "Pasco" (Case No. 15) in order to gather data on the Algol6.n Project and the performance of the production and communal cooperatives set up in this area in the mid-1960s. I selected No. 16 as one of Peru's model SAIS. I visited two communal cooperatives (Cases No. 17 and 26) in order to determine to what extent "communality" influenced the characteristics and performance of the cooperative enterprises. "Tipac Amaru II" (Case No. 18) was selected because I wanted to see, first hand, the problems of this cooperative, which is one of the most widely publicized failures of the land reform program. I selected Case No. 25 because Ministry of Agriculture officials in Puno told me that it was one of the most successful of the smaller cooperatives in the region (in general, the reform enter- prises which Ministry officials were most anxious for me to see were the largest ones). The CECOAAP (Case No. 27) was selected because it is Peru's most important specialized central cooperative. In conclusion, the "sampling technique" was a very subjective one. In each Agrarian Zone I asked Ministry of Agriculture officials to describe -106- each reform enterprise in the region, and to indicate to me which ones could be reached within a few hours drive. Then I attempted to visit as many of the most interesting and representative cases as possible. In general, one day was alloted for each visit. In some cases two enterprises were visited in a single day. I usually was provided transportation by the Ministry of Agriculture, and often was accompanied by an agricultural engineer from the local Agrarian Office-or Agency. The twenty-seven reform enterprises visited include eighteen agrarian production cooperatives (CAPs), three SAIS, two communal cooperatives, three central cooperatives, and one agrarian service eooperative (CAS). Of these, the CAPs, SAIS, and communal cooperatives are "base-level" collective production units; members of the CAS farm individually; the central cooperatives are "second-level" institutions which provide services for collective production units. The characteristics.and performance of the reform enterprises depend in large part on the labor-tenure systems which existed in these enter- prises prior to the reform. The land reform has altered these systems very little. In no cases have collective production units been subdivided2 and in no case has individual peasant production been collectivized. The two major labor-tenure systems existing in Peru are wage-labor and colonato (sharecropping and labor-tenancy). Within the colonato type, livestock enterprises differ markedly from enterprises which produce only crops or both crops and livestock. Given these criteria for differentiation the reform enterprises visited can be grouped as follows: 3. Under the Belaunde government the livestock complex "Algolgn was subdivided into twenty-three production and communal cooperatives, not into individual parcels. I know of no case where large collective production units have been subdivided into several cooperatives or individual parcels under the new reform law. 4. As noted earlier, prior to the reform there was individual sheep production on large estates -- this was gradually being eliminated in favor of centrally managed production; this tendency continues and may be reinforced by the new land reform law. On this point, see the section on the SAIS in Section III.C. below. -107- Table 37: TYPOLOGY-OF REFORM ENTERPRISES Type .. Number Visited Base-Level Collective Production Units: Wage-Labor Enterprises 9 Coloiato: Livestock Enterprises 7 Colonato: Crop or Crop-Livestock Enterprises - 7 Service Cooperatives 1 Central Cooperatives 3 Total Number of Cases 27 Source: Appendix B: "Case Study Reports." B. Characteristics and Performance of Collective Production Units Three Main Tynes of Collective Production Units. Table 38,. which presents summary data for the twenty-three collective production units visited, indicates that the "average" unit has 235-members and 4,435 hectares, and at the time of expropriation, was appraised.by the Ministry of Agriculture at.23.3 million soles. In over half these.."collective production units" members continued to farm some land or graze livestock individually, although in most cases the bulk of land and livestock was owned and: managed by the group. Sixty-five percent of the reform enterprises visited were managed by professionals; in a few.other cases professionals were to be hired.in the near future. In only about one-fifth of the enterprises could member participation in management be considered "active" or "substantial;" in sixty percent member support and participation-vas moderate or ambivalent; in nearly one-fifth of the enterprises members'were discontent with the adjudication model.6 The economic performance of most enterprises is encouraging. Over eighty percent of the new enterprises earned profits in the year preceeding 5. The "averages" calculated for this analysis are medians. Mean calcu- lations for membership, area, and appraisal value are significantly higher than the medians. Mean and median wage levels are. approximately the same. 6. In most cases where members were discontent with the adjudication model, they would have preferred individual parcelization. Table 38: CHARACTISTICS AND PEFORMANCE OF TW Y-TEEE REFORM ENTERPRISES VALOES Variable + 9 0 9 Median c No Values Data 1. Region' 10 6 T- 2. Interim Management 13 T 3 3. Number of Members 235 4. Total area (has.) 4,435 1 5. Change in crop area or intensif'i- cation of production 3 5 12 2 1 6. Change in Output 4 8 4 3 3 1 T. Change in Employment 5 6 4 4 2 2 8. Change in Investment: Productive 10 6 4 3 9. " " " Social 7 8 8 10. Profitability 19 4 11. Member Support . 5 8 6 2 2 12. Professional Manager 15 8 13. Peasant Production 12 2 9 Pre-Reform: 14. Union 14 1 2 6 15. Basic Wage (soles) 23.75 9 16. Ration 6 1 11 5 Post-Reform: 17. Union r l41 5 7 18. Basic Wage (solesy 40.00 1 19. Ration: 8 6 5 . 20. Appraisal Value (oo soles) 23,333 11 21. Reform Turmoil 6 2 14, 1 Source: Appendix B: "Case Study Reports." Notes: a. Cases Nos. 1, 2, 3, L 7, 8, 9, 10, 11, 12, 13, 14, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, and 26. b. K-y- (See Below) Variable Number + 0 - 1. Coast aighlands Puna 2. Special Adminis- Provisional Admini- trative Committee . strative Comission 5-9. Large Moderate No Moderate Large Increase Increase Change Decrease Decrease 10. Profits , Losses 11. Member Participation in Ambivalence -Member Opposition to Adjudi- Management . cation Model t Active Moderate Moderate Strong, 12. Presence Absence 13. Significant A few Parcels Very little or or huacchas None 14. Presence Peasant Absence Association 16. Subsidized Moderatley Neither Food Subsidized Ration Sales to Workers 17. Presence Absence 19. See 15. 21. Considerable Moderate None c. Mean values for variables Nos. 2, 3, and 19 are much higher than the median values, due to the presence of a few vary large enterprises in the sample. -108- -109- my visit. In about one-third of the enterprises visited production has intensified since the reform, through changes in activities or expansion of cultivation; and in half the enterprises production and employment have increased. In about thirty percent production and employment levels have fallen since the reform. The investment performance of most enterprises is impressive: in over two-thirds, productive and social investments have increased. Over eighty percent of the enterprises for which data are available had labor unions prior to the reform, most of which continue to function. Cash wage levels have increased substantially since the reform--by nearly seventy percent. In addition, the number of enterprises providing rations to workers or selling foodstuffs and consumer goods at less-than- market prices has increased markedly. Thus, it appears that land reform has increased the cash incomes and living standards of most of these reform enterprises' members substantially. Global data conceal important differences between the characteristics and performance of different types of reform enterprises. As indicated in Table 37, the collective production units can be separated into three groups, on the basis of their production patterns and labor-tenure systems: (1) wage-labor enterprises; (2) livestock enterprises with colonos (referred to below as "livestock-colonato enterprises"); and (3) crop or crop- livestock enterprises with colonos (referred to below as "crop-colonato enterprises"). Tables 39,40, and 41 present comparable data on these three types of reform enterprises. All the wage-labor enterprises are coastal; the livestock-colonato enterprises are all located in the Puna region; six of the seven crop-colonato enterprises are in the Highlands, the seventh is in the upper part of a narrow coastal valley, where rugged terrain limits the use of heavy machinery. The wage-labor enterprises are the smallest in terms of land area, with an average of 900 hectares; crop- colonato enterprises have eleven times as much land; livestock-colonato enterprises have fifty-five times as much land. The livestock enterprises have fewest members; the land area per member is 568 hectares; highland 7. Inflation has raised the cost of living between thirty and forty percent. Taole 39: CHARACTERISTICS AND PERFORMANCE OF NINE REFORM ENTERPRISES: WAGE-LABOR SYSTEM, ALL PRODUCING CROPSa VALUESb Variable + 0 0 9 - Median . No Values Data 1. Region 9 2. Interim Management 8 1 3. Number of Members 150 4. Total area (has.) 900 5. Change in crop area or intensifica- tion of production 2 2 5 6. Change in Output 3 5 1 T. Change in Employment 5 3 1 8. Change in Investment: Productive 4 2 3 9. I" I "f Social 2 3 4 10. Profitability 9 11. Member Support 2 T 1.2. Profession"l Manager 8 1 13. Peasant Pr-dutction 9 Pre-Reform: 14. Union 9 15. Basic wage (soles) 55.60 4 16. Ration 3 1 2 3 Post-Reform: 17. Union 8 1 18. Basic Wage (soles) 75.00 4 19. Ration 5 1 2 1 20. Appraisal value (ooo soles) 36,925 6 21. Reform turmoilI 3 6 Source: Appendix B: "Case Study Reports." Notes: a. Cases los. 4, 7,8,9,10, 11, 12,13, and 14. b. See notes to Table 38. c. " " " " " -110- Table 4o: CHARACTERISTICS AND PERFORMANCE OF SEVEN REFORM ENTERPRISES: COLONO SYSTEM, PRODUCING CROPS OR CROPS AND LIVESTOCKa VALU E S Variable + * 0 9 - Median No Values Data 1. Region 1 6 2. Interim Management 2 4 1 3. Number of Members 272 4. Total area (has.) 9,614 1 5. Change in crop area or intensifi- cation of production 1 3 2 1 6. Change in Output 1 3 3 T. Change in Employment 1 3 2 1 8. Change in Investment: Productive 1 3 3 9. " " I Social 1 2 4 10. Profitability 3 4 11. Member Support 1 k 2 2 12. Professional Manager 2 5 13. Peasant Production 6. 1 Pre-Reform: 14. Union 3 1 1 2 15. Basic Wage (soles) 9.25 1 16. Ration 3 3 1 Post-Reform 17. Union 2 3 2 3.8. Basic Wage (soles) 35.00 1 19. Ration 3 3 1 20. Appraisal Value (ooo soles) 2,578 3 21. Reform Turmoil 3 1 2 1 Source: Appendix B: "Case Study Reports." Notes: a. Cases Nos. 1, 2, 3, 17, 18, 19, and 20. b. See notes to Table 38. c. TI " " TI ' -111-* Table hl: CHARACTERISTICS AND PERFORMANCE OF SEVEN REFORM ENTERPRISES: COLONO SYSTEM, PRODUCING LIVESTOCKa V A L U E Sb Variable + 9 0 9 - Median No Values Data 1. Region 7 2. Interim Management 3 2 2 3. Number of Members 235 4. Total area (has.) 49,383 5. Change in crop area or intensifi- cation of production 1 2 4 6. Change in output 1 3 2 1 7. Change in employment, 5 1 1 8. Change in Investment: Productive 5 1 1 9. " " " Social 4 3 10. Profitability 7 11. Member Support 2 1 4 12. Professional Manager 5 2 13. Peasant Production 6 1 Pre-Reform: 14. Union 2.- 1 4 15. Basic Wage (soles) 25 4 16. Ration 6 1 Post-Reform 17. Union 1 1 5 18. Basic Wage (soles) 4o 4 19. Ration 5 2 20. Appraisal Value (ooo soles) 11,050 2 21. Reform Turmoil 1 6 Source: Appendix B: "Case Study Reports." Notes: a. Cases Nos. 16, 21, 22, 23, 24, 25, and 26. b. See notes to Table 38. -112-. -113- crop-colonato enterprises have thirty-five hectares per member; coastal wage-labor enterprises have only six hectares per member. The average land reform appraisal value for the few wage-labor estates for which data are available is thirty-seven million soles; livestock estates were approased at an average of eleven million soles; crop-colonato estates at only 2.6 million soles. Prior to the reform, coastal wage-labor estates paid the highest cash wages in rural Peru. Pay rates on livestock estates in the Puna were only 45 percent as high; and on crop-colonato estates in the Highlands less than 20 percent as high. Since the reform, pay rates have become more equal. Pay rates have increased only 35 percent in coastal wage- labor enterprises; in livestock enterprises wages have increased sixty percent; in crop-colonato enterprises wages have increased 278 percent. Despite the tendency to equalize pay rates, wages in the High- lands remain only about half as high as on the Coast. Income from individual crop and livestock production offsets these differences in cash pay rates, but we do not have data which indicate to what degree. In the department of Puno reform enterprises now supplement cash wages with sales of consumer goods to members at less-than-market prices, through cooperative stores. In economic terms, the wage-labor enterprises and the livestock- colonato enterprises have performed much better than the crop-colonato enterprises. All nine of the wage-labor enterprises and all seven of the livestock enterprises reported profits in the year preceeding MY visit; four of the seven crop-colonato enterprises reported losses. Nearly half the wage-labor and livestock-colonato enterprises have inten- sified production since the reform, and none have reduced the area seeded. Only one of the seven crop-colonato enterprises has intensified produc- tion, and three have reduced the cultivated area. Production has risen on three-fourths of the wage-labor and livestock-colonato enterprises, and in none of these cases has output fallen; in contrast, output has fallen in six of the seven croo-colonato enterprises. Employment has increased moderatley in 55 percent of the wage-labor enterprises, and has increased significantly in over 80 percent of the livestock-colonato enterprises for which data are available. In over 80 percent of the croD- colonato enterprises employment has fallen since the reform. -14- In only one-third of the wage-labor enterprises and in none of the livestock-colonato enterprises did the reform process produce significant social turmoil and dislocations. In contrast, over half the crop-colonato enterprises have suffered reform-related social dislocations. In 60 percent of these enterprises members are dissatisfied with the adjudication model, and would have preferred subdivision of the ex-estate. In none of the wage-labor or livestock-colonato enterprises would members have preferred parcelization. Member participation in management has been most active in the coastal .wage-labor enterprises. In most livestock enterprises in the Puna, professional managers monopolize technical decision-making,. and the formal governing bodies of reform enterprises concern themselves primarily with social matters. The only two highland crop-colonato enterprises in which members participated actively in management were communal cooperatives which did not employ managers. Performance Scores for Reform EnterDrises. Tables 38,39,40,4lare summarized from a larger table which includes data on the same variables for each of the 23 collective production units considered in this study. Variables 5 through 11 can be used as per- formance criteria, and by weighting the symbols at the head of this table a "performance score" can be calculated for each enterprise. The following weights were used: Symbol Weight, + 2 1 0 0 -1. -2 Since seven variables are used in the calculation of performance scores, the scores can range from -14 to +14. A score of 14 implies profitable oper ation, active member participation in management, and that significant 8 increases have occurred in the intensity of production, output, employ- ment, and both social and productive investment. A score of zero implies little or no-change in production systems, output, employment, and investmery 8. Change in crop mix, increase in seeded area, diversification, etc. -115- 9 zero profits, and member ambivalence toward the reform enterprise. Nega- tive scores imply financial losses, member opposition to the adjudication model, and reductions in production intensity, output, employment, and investment. Performance scores for individual enterprises are shown in Table 42. As should be expected from the discussion of the preceeding paragraphs, wage-labor enterprises and livestock-colonato enterprises have the highest performance scores. The score of the best-performing crop- colonato enterprise falls far below the score of the poorest-performing enterprise in the other two categories. The lowest-ranking enterprise is a crop-producing cooperative in the department.of'Cuzco. In this dismal case the seeded area, volume of production, and levels of employment and investment have fallen since the-reform; the'cooperative suffers financial losses, and'member support for the enterprise and participa- tion in management are slight. The highest-scoring enterprises are crop-producing cooperatives on the Central Coast and sheep-producing enterprises in the department of.Puno. In general, the economic per- formance of the livestock enterprises is better than that of the coastal cooperatives, but member participation in management is less.active in these immense enterprises in the Puna than in the smaller coastal enterprises. Some Ehxplanatory Factors. The scores listed in Table 42 are, of course, very rough measures of social and economic performance. It seems clear, however,that in the early post-reform period, the performance of enterprises producing crops in the Highlands has been very poor, in comparison to that of large livestock enterprises in the Puna and crop-producing enterprises on the Coast. The three principal factors responsible for the poor performance of crop-colonato enterprises are: (1) their vulnerability to economic dislocations produced by the reform process; (2) diseconomies of scale which characterize crop production in the Highlands; (3) lack of member support for these enterprises. Decapitalization and disruptions in management and administrative systems have occurred in most estates 9. Or, of course, a balancing of positive and negative factors. -116- Table 42: PEPFOpMANcE SCORS FOR COLIECTIVE PRODUCTION UNITS Performance Score Wage Labor Enterprises Case No. 4. Pomalca 5 T. Cerro Alegre 6 8. Santa Barbara 10 9. Cerro Blanco 9 10. Casa Blanca 10 11. Caldera il 12. Andahuasi 6 13. El Potao 6 14. Sani Nicolas 4 Average for Type 7.4 Colonato-Cro Enterprises Case No. 1. Espinal 1 2. Monteseco - 5 3. Udima - 1 17. Quehuar 1 18. Tipac Am=ru Il - 4 19. Tahuantincuyo -10 20, M. Ramón Castilla - 3 Average for Type - 3 Colonato-Livc-tock Enterprises Case No. 16. Cahuide 6 21. Yocará 9 22. Santa Lucia il 23. Bizena Vista 8 24. Micaela Bastides 7 25. Poscooni 9 26. La Unión de Soratira 5. Average for Type 7.9 Average for 23 Enterprises 4.4 Source: Appendix B: "Case Study Reports." -117- affected by the reform. On the Coast these dislocations have produced temporary and marginal reductions in production, investment, and employment. In livestock enterDrises the reduction of herds by landlords faced with expropriation resulted in temporary increases in meat sales, followed by temporary.reductions in sales while herds were built up again. In highland cropping enterprises decapitalization and disruptions in management have produced far mora precipitous reductions in production, employment, investment, and profits; and the recovery of these enterprises seems less certain. Prior to the reform, hacienda owners could force their colonos to report for work, under the threat of expulsion from the estate. Since the reform, the colonos can no longer be coerced into reporting for work, and many prefer to tend their own crops during the crucial seeding and harvest periods. On the Coast, labor shortages are not problematic, since in this region enterprise members do not farm individual plots, production is highly mechanized, workers can easily be transported between enterprises, and no rigid schedule is imposed on production by seasonal fluctuations in rainfall and temperature. Labor shortages are unimportant in livestock- colonato enterprises since the labor demand,is low and roughly constant year round, and does not come into conflict with the labor demands of peasant production at crucial times of the year. Only in highland crop- colonato enterprises have seasonal labor shortages appeared. Reform- induced labor shortages accentuate r-roblems resulting from decapitaliza- tion at the time of expropriation, and encourage crop-colonato enter- prises to purchase new tractors and heavy machinery. As a result of the labor and capital shortages many crop-crlonato enterprises in the High- lands are now unable to seed at the optimal times. Since the climate requires timely seeding and harvesting, these.enterprises have been forced to reduce seeding and have lost crops seeded late. Often, crop-colonato enterprises cannot purchase tillage.equipment because the Agricultural Development Bank will not provide credit. Credit is not forthcoming because these enterprises are poorly managed and do not report profits. They are roorly managed because they have no profession, managers and because members are poorly prepared for management tasks and little interested in them. The enterprises have no managers because they -118- are too small and unproductive to support a professional's salary. They are unprofitable because they are undercapitalized and poorly manage., and unable to requisition labor at crucial seeding and harvest periods. Their members are disinterested in both management and work on the enter- prises, because they expect a higher return from time spent on their individual plots. Ex-estates in both the Coast and the Puna have.been fused into larger managerial units with satisfactory results, but this has not been the case in highland crop-producing areas. Natural conditions are so varied, and timeliness is so important in highalnd crop-production that strong diseconomies of scale exist. The CAP Tdpac Amaru II is not only the largest crop-colonato enterprise in Peru, but one of the least viable reform enterprises in the country. The poorest performing enterprise among the cases studied, Tahuantinsuyo, is also the only case visited in which the landlord was left with a portion of the ex-estate--all equipment, buildings, installations, and a few hectares of the best cropland. The division of this estate and resultant severe decapitalization of the reform enterprise was a serious error which has not only reduced output, employment, investment, and profits, but demoralized the workers.10 Monteseco, another poorly performing reform enterprise, is a very special case in the upper reaches of the Zaia River Valley, where a secular trend of ecological deterioration makes coffee cultivation pro- gressively less productive and profitable. The estate was near bankruptcy before the reform, and cooperativization alone can do little to improve its economic performance or raise the living standards of its members.11 The two best-nerforming enterprises, Caldera and Santa Lucia are both managed by ex-public functionaries. In the former case the manager 10. The Ministry of Agriculture is aware of these problems, and the re-integration of the pre-reform production unit seems imminent. 11. This is the only enterprise studied in which cash wages have remained nearly constant since 1969, implying a sharp reduction in real wages. A de facto disintegration of the former production unit is in process; as coffee plants die residents seed other crops on individual plots and pasture a few head of livestock. -119- worked previously for ONDECOOP; in the latter case for the Ministry of Agriculture; in both cases the managers are strongly identified with the land reform process, and have the active support of the membership. Two other cases with outstanding performance, Santa Barbara and Casa Blanca, were very poorly managed, severely undercapitalized, and racked by bitter labor-management disputes prior to the reform. Before expropriation the owners of these two estates abandoned them, and their workers organized themselves and maintained production for several months without pay. Since the reform in both cases, output and investment have increased sharply above pre-reform levels, and social conflicts have subsided. Santa Barbara had not yet contracted a manager at the time of my visit, but the cooperative's leaders were anxious to do so. -120- C. Specific Issues' The case studies throw light on a number of important issues related to the implementation, of the land reform and the performance of new reform enterprises. This final section summarizes my findings as they relate to a number of these reform-related issues. Natural Conditions Natural conditions on the Coast are far less variable than they are in the Highlands, both in spatial and temporal terms. Within the irrigated oases of the principal coastal river valleys, soil conditions and ecology vary far less between points than they do bLtween points in the Highlands. Seasonality and the risks of natural disaster (drought, frost, flood) are also far less important on the Coast than in the Highlands. Moreover, irrigation allows managers to control cultivation cycles to a much greater extent on the Coast than in the Highlands; they can decide not only when to plant, but when to mature the crop. Cultivation in any one field must follow a biologically determined sequence of operations, but the cycle need not be initiated in all fields at the same time. Seedbed preparation in one field can coincide with seeding in another, maturation in a third field and harvesting in a fourth. (Certain crops, such as cotton must be seeded at particular times of the year but no estates produce only cotton - by law, only 60 percent of any estate can be under cotton). In the Highlands, cropping is more productive but more risky than livestock production. Crop production is less productive and subject to greater risks in the Highlands than on the Coast. But more important for the study of reform enterprises is the fact that highland cropping is highly seasonal in comparison to livestock production and coastal crop production. The seasonality of rainfall and temperature (frosts) imposes a rigid schedule upon cropping activities and makes timeliness a critical determinant of productivity. If credit, seed, fertilizer, equipment, and. labor are not made available to agriculturalists at the correct time, their entire year's crop is jeopardized. In contrast, livestock production is less influenced by seasonal climatic factors and far less dependent upon the -121- supply of labor and off-farm inputs. On the Coast most crops can be seeded throughout the year and thus can "wait" for inputs to arrive. (The principal exceptions are cotton and rice, but even rice can be seeded much of the year in many places, and if the optimal time passes for either of these crops, others can be substituted.) The longer the wait (fields lying idle) the lower the value of output per hectare per year, but in most cases waiting does not seriously threaten the crop. In addition to making the timeliness of non-farm supplies of critical importance, the seasonality of highland crop production makes competition for labor severe during the seeding and harvesting seasons. During the seeding and harvest seasons, cooperative and SAIS members would rather work on their own plots of land than in their enterprises' fields. Labor shortages motivate reform enterprises to mechanize. Another consequenc'e of the seasonality of cropping in the Highlands is the seasonality of agricultural commodity supplies, and the resultant strains placed on commodity market channels and storage and processing facilities. Compounding these problems, the bulk of production is marketed during the rainy season, when commodities are most perishable and difficult to transport. Seasonality is important for the land reform process for four main reasons: (1) new reform enterprises and interim management institutions (Special Committees and Provisional Commissions) often suffer from adminis- trative problems which result in hesitancy and delays in both production planning and operations. Under any conditions delays are bound to reduce productivity somewhat, but where seasonality is not pronounced delays are not likely to ruin a crop. In the Highlands, where crops must be seeded and harvested on time, delays can spell economic disaster for a new enterprise. (2) Decapitalization of estates has reduced their capacity to seed and harvest rapidly and at the optimal times. (3) In the High- lands, where natural conditions permit, members always grow crops of their own, and during times of peak labor demand (seeding and harvest) they prefer to work on their own plots rather than on the fields of their coop or SAIS. (4) The reform not only creates new agricultural enterprises, but new supply and marketing systems as well. For many enterprises credit -122- has been especially problematic, delaying field preparation and seeding beyond the optimal dates, and increasing the likelihood that rain and frost will destroy the crop. The harvesting and marketing of some crops, such as potatoes, requires a permit from the 14inistry of Agriculture, and Ministerial delays have jeopardized the harvests of some new enter- prises. Supplies of seed potatoes and fertilizers are also regulated by the government, and here too delays and scarcities are very serious matters. In addition to seasonality, natural conditions in the highlands present serious risks for the reform enterprises. Prolongued droughts occur from time to time, and can bankrupt a livestock operation. Agriculturalists are plagued by more frequent, and much less violent aberrations in climatic conditions. Even slight alterations in the periodicity and degree of annual rains and temperature can produce marked fluctuations in crop yields. Thus highland cropping enterprises are subject to far greater risks than are the highland livestock enterprises and coastal crop producers. Economies of Scale Five distinct types of economies of scale (ES) are relevant to the study of reform enterprises: (1) ES in production planning and adminis- tration; (2) ES in production operations; (3) ES in delivery, marketing and processing; (4) ES in the land reform process itself; (5) ES in public services (especially technical assistance). In most of the Highlands ES in cropping operations are of very little importance. ES in livestock operations are much more significant, especially where complementary ecological zones are contiguous. In both cases, ES in planning and administration are more important than ES in direct produc- tion, but due to the importance of unpredictable climatic variability in cropping, planning and administrative ES are more significant in livestock operations than in cropping. ES in delivery, marketing and processing are more important than ES in operations, planning and administration, especially in the case of highland cropping. Ministry of Agriculture officials emphasize the importance of economies of scale in large part because their own land reform and technical assis- tance programs are more easily implemented where a few large enterprises are -123- involved than where thousands of'smallholders are concerned. For this reason-the Ministry of Agriculture is likely to fuse estates into coopera- tives-and SAIS which are larger than optimal from the standpoint of production planning and operations. In highland cropping areas, ES in technical assistance are likely to be overestimated, due to the impor- tance of local variations in soils and weather. Government organized delivery and market systems are likely to be too bureaucratic and sluggish to provide adequate, timely services to agriculturalists. In general, peasant participation in the implementation of reform and in the management of reform enterprises is negatively related to enterprise size. In many cases there is a trade-off between the productivity of reform enterprises and peasant participation. In Santa Lucia, for example, fusion of several ex-estates has seemed to help boost livestock production, but members participate only marginally in management. In extreme cases, such as the CAP TUpacAmatu II, large size reduces both productivity and participation. This large "model land reform enterprise," designed by outsiders unfamiliar with practical aspects of crop and livestock production, is simply too large to manage. On the Coast, the unimportance of variability in natural conditions and the potential for managerial control over production processes favor large-scale production. However not all crops are grown on a large scale. Sugar cane is the most important large plantation crop; cotton is the next most important. Some cane is, and always has been, grown on small plots. In the Lambayeque Valley, small cane cultivators in the peasant community Monsefu border an the immense agro-industrial complex Pomalca. However, cane destined for the production of granulated sugar has been cultivated on an increasingly large scale since the latter part of the nineteenth century. Two principal reasons account for this fact: (1) ES in the manufacturing of granulated sugar; (2) ES in financial and marketing operations. In order to compete on the world market, Peruvian sugar producers imported large-scale modern equipment and kept their factories operating at near full-capacity. In order to guarantee an adequate, steady supply of raw cane they needed control over land. Small producers were both less efficient and less able to get credit during periods of crisis (e.g., the 1930s), and sold out to the few remaining large producers. -124- The small producers of Monsefu sell to small millers with low overhead costs, who in turn market unrefined juice ("miel") to small scale local producers of alcoholic beverages ("chicha"). Not all crops destined for industrial processing are produced on a large scale. Rice, which can be easily transported and stored prior to processing., is produced by smallholders as well as large estates. Sugar cane is extremely bulky and must be processed immediately after cutting. Cotton is generally not produced on small holdings because of the problems of disease and pest control. Truck crops are grown primarily by smallholders. Marketing of truck crops presents problems which are inversely related to the scale of operations. A principal reason why large estates and cooperatives prefer cotton and sugar cane over more labor-intensive truck crops is the difficulty of timely marketing. With improvements in marketing and in production plan- ning techniques (e.g., programming) large units could plant, harvest, and market a variety of truck crops year around, and reduce their comparative disadvantage relative to minifundists. Many (not all) of the advantages of large or small producers outlined in the preceding paragraphs are relative, not absolute. For example, small producers may be able to produce more cotton per hectare than large producers (according to a Ministry of Agriculture official) but have a greater advantage in truck crop production. On the other hand large producers have an absolute advantage in granulated sugar production. There seem to be few inherent advantages in favor of any size group. Advantages for 3pecific activities often depend upon the nature of non- agricultural institutional arrangements -- e.g., the adequacy of delivery, marketing, and technical services for different size groups -- and these change over time. Where smallholders are isolated and ignorant of techni- cal improvements originating outside their region, they cannot be expected to innovate or adopt modern methods agressively. Under these conditions, an estate managed by a professional who keeps abreast of technical and market developments elsewhere is likely to out-produce and out-market small farmers in his area. One of the reasons why Ministry of Agriculture officials press for the formation of large cooperative production units is that these enterprises, staffed by competent technicians, facilitate the spread of new production -125- methods. Dealing with smallholder areas, technical change could be brought about more quickly if farmers were organized into service cooperatives but minifuiindists are hesitant to hire adequate managers for their CAS. Thus much of the burden for technical assistance remains with the Ministry of Agriculture. Where large production cooperatives are formed, the Ministry can convince (often at great pains) the CAPs to hire professionals, and thus transfer much of the burden for technical assistance to the enter- prises themselves. My field work indicates that small farmers are often rapid adopters of improved methods where these do not require large scale operations (usually the case). However, cultural barriers are important impediments to progress -- small farmers are not rapid adopters where they do not have access to information, inputs, or markets. Thus, we can expect small producers to improve their performance relative to large producers (including production cooperatives) over time, as they become better educated and incorporated into the market economy. It appears that the land reform has maintained, and probably increased several of the pre-reform advantages of large estates (now production cooperatives) over small farms, in the acquisition of resources and the improvement of production methods. Nearly all governmental assistance to agriculture is now concentrated on the production cooperatives. Less technical assistance is available to small farmers than was true prior to the land reform, and it appears that large cooperatives are dispropor- tionately favored by government priorities in the acquisition of machinery, fertilizers, seed, and irrigation water. While this allocation of resources may increase food and fiber marketings in Lima (not the same thing as total marketing, including marketing in provincial towns) it may well lower the total value of agricultural and livestock production and the welfare of rural and provincial people. This is not to say, of course, that the patterns of resource use encouraged by present govern- mental priorities is not justified on political and long-run social grounds as a necessary element in the government's program to consolidate a rural cooperative sector. -126- Collectivization of Production, and Fusion of Estates Production cooperatives function best where estates were organized as wage-labor enterprises prior to the reform. Thus, the estates which the government expropriated first -- the sugar complexes -- were the most easily and successfully cooperativized. Given their rapid success in the sugar complexes, may agrarian reform officials expected cooperativiza- tion to be feasible throughout the country. When the reform moved from the sugar complexes to other areas, however, these officials quickly became aware of the fact that very special conditions were responsible for the relative success of cooperativization in the sugar complexes. The case studies indicate that it is unreasonable to expect hacienda colonos to give up their plots of land voluntarily in order to farm collectively. In many lines of production economies of scale are unimportant. Moreover, cooperative institutions often function very poorly in the absence of adequate managerial personnel and sufficient member support. Of course, the colonos who have most land and livestock oppose collectivization most staunchly and vociferously. In all cases where the government has attempted to impose collecti- vization on peasant tillers it has failed. In these cases production and investment fell and the peasants began to see the land reform process as a threat to their incomes, wealth, and independence. In general they continued to support the national government, and particularly the president, General Velasco, but they damned local officials for inappro- priate implementation of land reform policies. Peasant opposition to collectivization has elicited diverse reactions from the reform agencies (in particular from the Ministry-of Agriculture and from SINA4OS). In most cases, opposition has delayed the land reform porcess while government officials reconsidered their positions and attempted to convince land reform beneficiaries of the advisability of collectivization. In some cases-the government has formed production cooperatives, even though many members continued to cultivate and raise livestock individually. In these cases land was adjudicated to the peasant group under the condition that "if, at some time in the future, the cooperative needs land currently occupied by coop members, the members -127- must relinquish their plots to the cooperative." In a very few cases the government has given up trying to form production coops and has parceled estates among individual land reform. Peasants often, but not always, oppose the fusion of several estates into a single large production cooperative. Economic interests are crucial here. Workers on relatively poor estates generally favor fusion with more profitable estates; workers on profitable estates generally oppose fusion with poorer estates. Colonos on all estates are suspicious of any form of cooperative production, and they oppose the fusion of estates where they may threaten their individual tenure rights. The case of Monteseco and Taulls is illustrative -- The workers of the near-bankrupt coffee cooperative Monteseco agree with the Coop's managers and Ministry of Agriculture officials that fusion with Taulls is the most appropriate way to increase the cooperative's land base and to forestall bankruptcy. The residents of Taulls, who farm individually and have higher incomes than their neighbors in Monteseco, oppose fusion adamantly. Where fusion brings benefits to all groups concerned, as in Lambayeque's rice coopera- tive. J. C. Mariategui land reform beneficiaries are likely to be wary at first but easily convinced that fusion is the best course. Prior to the land reform, one of the most salient features of the large sheep ranches of the Central Highlands was their high level of technical sophistication. Fewer, higher quality animals grazed in the es- tates than in neighboring peasant communities, pastures were utilized more rationally, and sanitary and veterinary care was better. Technology was poor in the peasant communities for several reasons: (1) the Ministry of Agriculture's technical assistnace in highland peasant areas was greatly inadequate, and the peasants were largely ignorant of potential technological improvements; (2) peasants lacked technical service facilities, such as veterinary care; (3) some necessary improvements, such as dipping tanks, required large investments which individual peasants could not make; (4) peasant communities lacked credit and organizational support from the government, both of which would have been necessary for communal investments in productive installations; (5) communal grazing and lack of community organization resulted in poor utilization of pastures (often overgrazing) and made livestock improvement difficult. -128- The typical solution of large estates to these inadequacies of individual grazing has been the reduction of peasant-owned livestock grazing on estate lands (known as huacchas). In the Central Highlands huaccha numbers now amount to only a small fraction of the total number of livestock on estates. In a few estates, in addition to reducing the number of huacchas, estate owners separated these from the livestock of the estate, paid shepherds to pasture them, and upgraded the quality of huaccha animals by crossing them with estate animals and administering sanitary and veterinarial care. The government's solution to the technological lag of individual pro- ducers in the Highlands is essentially the same as the ex-latifundists -- elimination of individual production. In Puno, the Ministry of Agriculture recently organized a meeting in which the departments' CAP and SAIS officials agreed to reduce their enterprises' huacchas. Members are continually bombarded with arguments in favor of the elimination of the huacchas (e.g., that they are of low quality, consuming as much pasture as cooperative sheep but producing less than half; that they carry disease and prevent adequate sanitary control in the enterprise; that they spoil livestock improvement programs by inter- breeding with cooperative sheep). !lost of the ex-haciendas charged flat rates for huacchas, while most cooperatives and SAIS charge progressive rates (e.g., 5 cents per head per day for owners of less than 100 animals; 10 cents per head per day for owners of 100-200; and steeper rates for owners of over 200 head). Where management is determined and pasture rental is charged, the number of huacchas has shown a downward trend. Where management is weak, the number of huacchas seems to have remained constant or increased slightly. It should be kept in mind that in all cases cooperative and SAIS members oppose the elimination of their huacchas. Z_iLhland peasants have always owned livestock, and it is difficult to change such a basic part of the culture. But equally as important, the huacchas provide their owners with a source of cash income and products, and with a capital reserve which can be drawn upon in times of crisis. In the case of huaccha sheep, it seems clear that the elimination of traditional individual production could increase.total productivity -- the huacchas produce far less than do the sheep of the reform enterprises. -129- However, the members of new reform enterprises oppose the elimination of the huacchas because they fear total economic dependence upon the enter- prise and the leveling of incomes which this implies. The leveling of in- comes would benefit the majority of the reform enterprises' members, but would not, of course, benefit the large producers -- the most vocal spokesmen for huaccha interests. Dependence upon the new reform enter- prises is feared for several reasons: (1) If the enterprises fail the members would suffer. (2) Dependence upon the enterprises means depen- dence upon outsiders in most cases -- managers and the state -- and outsiders have been notoriously good at exploiting such dependency relations. (3) Dependency upon the enterprise implies dependency upon markets, and adverse price movements could wipe out whatever gains result from increases in productivity. In the case of highland agriculture there is no clear reason why the elimination of individual production should increase total production. The central needs of agriculture are improved methods and timely provision of inputs. Planning and especially operations can best be carried out on a small scale. Public Agencies The land reform has placed severe strains on public agencies involved in the process.Of the various agencies, the Ministry of Agriculture has responded most adequately, but after an unfortunate initial delay. The BFA continues to frustrate cooperatives with what appear to be excessively legalistic procedures, more appropriate for privately operated estates than for cooperatives. (A reform of BFA procedures is now under way). SINAIOS' staff must be increased and its quality upgraded in order to meet the cooperatives' needs for training and motivation. .. The Ministry of Agriculture. Due to the severe manpower shortage, and the high priority placed by the government on land reform, for the past several years a very high proportion of the Ministry of Agriculture's personnel and resources has been occupied with tasks of estate expropria- tion and the formation and consolidation of production cooperatives. Con- sequently, technical assistance and other programs serving small private farmers have been severely curtailed. -130- Interviews with employees of the Ministry of Agriculture indicate that: (1) Ministry of Agriculture officials feel unduely burdened with tasks associated with provision of credit to new land reform beneficiaries; (2) the Ministry of Agriculture's technical assistance programs for small farmers, which received particular attention under Belaunde, have been largely abandoned, in favor of programs aimed at the creation and consolidation of production cooperatives; (3) SINAMOS' activities have adversely affected the interests of many small and medium-sized farmers in ways which Ministry of Agriculture officials consider unnecessary and counterproductive. In all parts of the country "agricultural development credit" is supervised by the Ministry of Agriculture. Ministry of Agriculture officials note that they do not have the time and manpower to attend all cooperatives and all private farmers. Production cooperatives, peasant communities and SAIS have top priority, and individual land reform bene- ficiaries come next; private farmers who have not benefited from the land reform program often must be denied loans for the lack of administra- tive capacity. Many Ministry of Agriculture officials feel that they spend too much time (at critical periods nearly all their time) attending loan requests, and disregarding technical assistance and other responsibilities The land reform program initiated by the 1969 law began an the national elvel in June of that year with the intervention of sugar estates. However, the reform did not affect non-sugar estates until 1970, and Special Committees were not set up to manage expropriated estates until even later. Before the Committees were established some coastal owners abandoned their estates. In these cases serious and frequent labor-management disputes had often plagued hacienda operations in recent years, administra- tion had degenerated, and the estates were near bankruptcy. Strikes in 1970 and 1971 motivated the owners of these estates to close their offices and cease operations. In two such cases in the Caete Valley the hacienda unions organized workers and maintained vital field operations, although on a reduced scale. In Santa Barbara work proceeded 5 months in this fashion, without pay; in Casa Blance 7 months. At the end of the crop -131- year the owners of Santa Barbara attempted to carry off the harvest, but failed. The Ministry of Agriculture ordered that it be embargoed, but to date the workers have not received any compensation for their 5 months' work. The reform-related breakdowns in estate management and operation in Canete motivated the Ministry of Agriculture to: (1) set up a Sepcial Administrative Committee, and (2) establish procedures for rapid intervention of estates in case of abandonment or other actions constituting a threat to the land reform process or to the maintenance of production and adequate social conditions on estates. According to the head of the Ministry office in Canete, private owners are now maintaining or increasing their production levels under threat of immediate expropriation. Growing conditions during recent years have been quite good, and the targets set by the Liaistry of Agriculture's production plan have been met. . - The Agricultural Development Bank (BFA). The BFA comes in for scathing criticism frommany- cooperative officials, as a result of the numerous "picayune requirements and unwarranted delays" involved in the lending process. Bank officials note, however, that most of the delays in the lending process resulted from sins of commission and, more often, ommision on the part of the prospective borrowers, not the Bank. The first year any enterprise seeks credit from the BFA it is considered a "new borrower" and must demonstrate its credit-worthiness; cooperative officials are often dumbfounded by these procedures and slow in complying with them. Another significant problem, and one the BFA can do little to solve, stems from the fact that cooperative officials do not prepare their final production plans, and hesitate to sign binding loan documents, until the planting season is upon them and they have made their final appraisals of growing conditions. Once the planting season has arrived, they want credit immediately, but the BFA's procedures require 10-15 days at minimum for processing loan requests. When confronted with the fact that many cooperative officials complain bitterly of the lengthy delays in acquiring credit, BFA officials in Cuzco presented me with a list of credit operations over the last year which demon- strated that most "known borrowers" had received credit within 10-15 days of application, and most "new borrowers" within 40-60 days. -132- Over time credit problems should become less critical than they presently are for three reasons: (1) The first loan an enterprise requests from the BFA requires considerably more paper work and delay than subsequent loans. (2) With time cooperative and SAIS officials will become familiar with banking procedures and will be more likely to present timely loan requests to the BFA. (3) A reform is now in progress which should simplify BFA lending procedures and make them more appropriate for the new reform enterprises. The BFA's performance was seldao± mentioned by cooperative officials in Puno)primarily because timely short-term financing is not nearly as critical in the department's livestock enterprises as in enterprises which depend upon crop production. One livestock cooperative visited had not borrowed short term capital since its formation in 1966, and had received long term credit for the first time in 1973, for the importation of breeding stock. Discussions with BFA officials indicate that they are highly sensi- tive to the fact that certain cooperatives are viable economic units, worthy of credit "on Bankers' terms," while others are not money-making enterprises, and need subsidization, not credit per se. The BFA is in the uncomfortable position of determining, to a large extent, the future of near-bankrupt cooperatives and the wellbeing of their members. As one official noted, As bankers we cannot give money to a cooperative if we feel that there is no way the enterprise will be able to pay it back after the harvest. But, on the other hand, Lima pressures us to attend these people. So we have to use our imaginations, stall the cooperative leaders, fudge our figures, and try to find some way -- any way -- to give them credit, and then hope for a good year. This year in the case of Monteseco we were lucky; the price of coffee doubled. The National Cooperative Development Office (ONDECOOP). ONDECOOP played a more important role in the process of cooperativization in the sugar complexes than it did in other estates. Soon after the intervention of these complexes in June 1969 cooperative training courses for administra- tive candidates were initiated in Lima, and groups of "promoters" were sent to the estates to prepare estate residents for participation in their pro- duction cooperatives (the technical aspects of estate management were handled -133- largely by Special Administrative Committees). Cooperativization of the sugar plantations received top governmental priority,. and the estates were adjudicated to prodttion cooperatives in June and October of 1970. ONDECOOP's problems in the sugar complexes were many, and eventually led to the expulsion of most ONDECOOP people from the sugar estates, and to a drastic reduction in the institution's cooperativization program for non-sugar estates. Several of the factors responsible for ONDECOOP's problems are the following: (1) the urgency of the program (cooperativiza- tion within a year) meant that ONDECOOP employees had to be hastily selected and trained for their jobs. (2) ONDECOOP employed young, college-aged, urban-born people with little or no previous contact with rural people. (3) the training material available at the time was based on 19th century principals of cooperation (e.g., equality of membership in ownership, management, and income) often inappropriate for the cooperativization process under way. (4) In its courses ONDECOOP treated these principals of cooperation as sacred rules, whereas other public agencies were more conservative and pragmatic in their approach. ONDECOOP people often dictated courses which were ill-prepared and couched in university jargon not understood by the sugar workers. More- over, the cooperative principals espoused by ONDECOOP -- e.g., member equality -- were often practically unattainable in the context of the existing land reform and cooperativization program. Workers were led to believe that they would not only determine the course of their cooperatives' future, but that a new era of social equality was being ushered in. ONDECOOP's capacitaci8n program was cut back sharply and its approach bec ie less radical after a crisis which occurred in the sugar estate T man in June 1970. The ONDECOOP group in Tuman was among the most aggressive and radical in the country; its members had promised the estate's workers that democratic elections would be held, and pay rate equalization would occur. However, just before elections were held, the government announced a set of rules which allowed workers to elect representatives to cooperative bodies only in inverse proportion to the cooperative's agrarian debt to the government. This meant that the vast majority of assembly delegates' would be named by the government. (Only in Cayaltl were the majority of delegates elected by workers). .. . .... ... ... ..... ... .I -134- On the first anniversary of the pronouncement of the land reform law (June 24, 1970) Tumin was formally adjudicated to the cooperative, with a special ceremony attended by the Minister of Agriculture. The occasion was less than festive, however, and worker dissatisfaction became blatantly manifest during a dance in the evening when the lights were cut ad rock throwing erupted. ONDECOOP "agitation" was denoucned as a cause of the melee, and the ONDECOOP teams were hastily bussed out of all the estates of Lambayeque.12 After the crisis of June 1970, ONDECOOP lost prestige and power within the land reform bureaucracy, which it was never able to recover. As a result, the Ministry of Agriculture was forced to take on greater responsibility for "social aspects of the reform process" -- preparing hacienda residents for participation in their cooperatives. ONDECOOP never played a significant role in the land reform process in non-sugar estates. Later, with the creation of SINAMOS, which absorbed what remained of ONDECOOP, part, but by no means all, of the burden for cooperative pro- motion and capacitacign was removed from the Ministry of Agriculture. The Government Supervision System for Sugar Cooperatives (SAFCAP),13 Another institution which has played an important role in the sugar com- plexes, but not elsewhere, is the SAFCAP. The original "interventores" in the sugar complexes were military officers, and since that time military officials have been stationed in the complexes. Each complex has a local "military coordinator" under the jurisdiction of SAFCAP's regional and na- tional offices. Formally, the SAFCAP system is a dependency of SINAMOS, but in practical tErms its operations are quite independent of the national SINAMOS bureaucracy. Local and regional coordinators are Majors or Colonels, the national head is a General. The national head of SAFCAP, stationed in Chiclayo, is both the regional head of SIAMOS and General of the Military Division located in the department. Chiclayo's regional SAFCAP office has a large staff, including specialists in capacitacisn, social work, agronomy, factory operations, agrarian and social legislation, 12. I do not know whether or notthey were removed from estates outside the department. 13. Sistema de Asesor'a y Fiscalizaci6n para Cooperativas Agrarias de Produccion. -135- auditing, accounting, and general administration. In addition to the Military Coordinator, SAFCAP maintains a group of civilians (generally young social.scientists) in each sugar cooperative. The civilians give courses in cooperative principals and technical operational aspects -- e.g., accounting and the role of assembly delegates. The regional coordinator stated that his office was still growing, and that he needed two new types of specialists: an inspector who could investigate and analyze any type of problem which arose in the complexes, and a political advisor who could analyzetne political factors involved in these problems. Recently the SAFCAP's sphere of activities has expanded to include supervision of the CECOAAP. The National Mobilization System (SITAMOS). SINAMOS works with estates during the process of their cooperativization, but after adjudica- tion SINAMOS visits reform enterprises only sporadically. Cooperative and SAIS members interviewed did not seem to think the work of SINAHOS was very effective, although most emphasized the need for capacitaci6n and training courses. The principal problems seem to be that: (1) SINAM1OS lacks personnel, and (2) SINA4OS employees are young and inexperienced, unable to communicate effectively with cooperative and SAIS members, or to provide them with competent advice on technical problems. A cynic's in- terpretation of SINAMOS' role in the reform process is reflected by the following epigram, painted neatly on the wall of a cooperative's dining hall: El hombre propone, la mujer dispone. Viene SINAMOS, lo descompone. Institutional Coordination and Collaboration. In general, activities of the several public agencies involved in the land reform process have been well coordinated. However, in the Ancash department, which was severely affected by the earthquake of May 1970, problems have arisen. ,Due to the special circumstances created by the earthquake, a num- ber of public and semi-public institutions operate in this region which are not found in other parts of the country. CRYRZA, the government's special earthquake reconstruction and development agency, coordinates -136- the activities of all public and private institutions involved in these activities in the area. In the coastal Santa Valley, where Peru's first central cooperative at the PIAR level was established, a non-governmental development research and training institution, known as DESCO, works with the valley's cooperatives and the central cooperative. AID, Caritas, and several other institutions provide financing, and in some cases technical assistance, for development projects in the striken area. The Ministry of Housing, SIAMOS, and other public agencies also have special programs in the valley. In mid-1972 DESCO was charged with the implementation of the valley's cooperative development program. This involved 2 main activities: (1) establishing and consolidating a central cooperative; (2) providing technical assistance and cooperative education for the Santa Valley's 8 production cooperatives (then in process of formation), all of which were to become members of the central cooperative. According to Ministry of Agriculture and DESCO officials, the plethora or institutions operating in the Santa Valley has several negative conse- quences. First, there is no clear division of functions between them. This results in duplication of efforts and confusion. This problem seems especially critical in the area of peasant cooperative capacitacion, where not only the Ministry of Agriculture and SINANOS, bu.t DESCO intervene. A Ministry of Agriculture official stated that he had pulled his capacitacion personnel out of the field and given them other work because (1) DESCO's resident "promotores" had seen the Ministry of Agriculture people as unwelcom trespassers in DESCO's territory, and (2) cooperative members complained that DEV"CO and 71inistry of Agriculture people presented conflicting informa- tion and interpretations of government policy. Second, the existence of many public and private agencies in the area, each attempting to justify its presence and competing for a place in the lucrative limc!light, strains inter-agency relations and makes coordination of their activities difficult. Third, the lack of a clear deliniation of responsibilities has led to problems in placing responsibility for actions taken or not taken. -137- Fourth, in the special case of DESCO, which is.-the principal agency responsible for rural cooperative development, lack of wholehearted government support severely hampers its pperations. This points up the degree to which land reform activities are tied to public sector activities in related areas. A cooperative system simply cannot be established as an isolated "development project;" generalized support from the public sector is necessary. A fifth problem related to inter-institutional collaboration and coordination relates to the special role of CRYRZA. All development- related projects must be reviewed and approved by this agency, which has its offices in the highland town of Huaraz. Consequently many projects which DESCO or the central cooperative has planned and even financed cannot be brought to fruition until they have received the bureaucratic go-ahead from Huaraz. According to DESCO officials, this is no simple matter -- drafting numerous project proposals, bearing travel expenses, politicking, detail mongering, and the patience of a saint are all required. Specific Adjudication Models Regional Central Cooperatives. It is unfortunate that Peru's central cooperative at the PIAR level is the Santa Central. The physical destruction produced by the 1970 earthquake left the CAPs of the Santa Valley in very poor financial shape. The flood of charity to the zone has led cooperative members to expect the help of outsiders. The central cooperative was created by "benevolent outsiders" -- a research and train- ing ip,titution from Lima (DESCO), funded by charitable institutions. The CAPs are, of course, grateful for this help, but they have participated only marginally in the establishment, funding, and management of the central cooperative, and are now both hesitant and unprepared to take on the responsibility for its operation. The CAPs hesitancy to take on full responsibility for operation of the central cooperative is based primarily on economic considerations. DESCO has carried out some very expensive programs, such as capacitaci6n, which the cooperatives see no way of continuing. DESCO also pays the entire staff of the central cooperative, and the member cooperativesdread the process of hiring new technicians and paying their salaries. To date the services -138- of the central cooperative have been provided free to its members. The valley's cooperatives are not wealthy, and they fear the high costs of operating the central. According to government plans, central cooperatives will fulfill important functions in Peru's new agrarian structure. But the experience of the Central Santa indicates that potential economies of scale in delivery, marketing, and service activities can be more than offset by poor management, inadequate support from public institutions, lack of member support, and sabotage from the private sector. The concept of the central cooperative is a new one which must be "sold" to the members and staff of individual cooperatives. To be convinced of the value of higher-level integration cooperatives must see concrete benefits. And for benefits to be forthcoming, the state must provide dynamic, flexible support to the new central cooperatives. Many of the problems of the Central Santa derive from the fact that it was established by a non- governmental institution which cannot demand (and does not have) the full support of the Ministry of Agriculture, the Agricultural Development Bank, and other public agencies. In making a non-governmental institution responsible for the creation of the central cooperative, the state made a serious error. One of the principal objectives of the Ministry of Agriculture in es- tablishing central cooperatives is to turn over the responsibility for technical assistnace to these peasant-supported institutions. In the specific case of the Algol'an project (Case No. 15) member support for the production and communal cooperatives was adequate, but the small cooperatives could not afford competent managers or accountants, and the Ministry of Agriculture incurred heavy expenses in providing these services. By turning these functions over to a central cooperative, the Ministry of Agriculture not only reduces its expenditure, bnt may help to improve the quality of technical and managerial services -- technicians em- ployed by the Ministry of Agriculture provided services to the cooperatives and their members, but could not be sanctioned by them; technicians employed by the Central are indirectly employed by the cooperatives and -139- their members, and thus are likely to take their service functions more seriously than would be the case if they were public employees. On the other hand, the individual cooperatives may not place as high a priority as the government on social and technical programs which influence productivity and rural development. They might vote to reduce the scope of the central cooperatives' activities is order to reduce expenses and increase the profits accruing t.o individual coop- eratives and their members. Successful operation of central cooperatives implies a significant flow of funds from the member enterprises to the central cooperative which the peasantry may not vish to allow. The SAIS. When Algolin was taken over in 1963, the Ministry of Agriculture decided to split up the complex (some 300,000 has.) and ad- judicate its lands and livestock to the workers and neighboring peasant communities in 23 independent cooperatives. This form of adjudication resulted in two principal types of dislocations: (1) By breaking up an efficient administrative structure and creating legal boundaries between ecologically complementary zones the reform has reduced productivity. Prior to the reform, management could shift livestock between ecological zones in order to exploit natural resources to their utmost--pastures. in different zones have differing comparative advantages at different times of the year; pregnant and lactating animals need better pastures than do others. By breaking up the large unit the reform has also created management problems. No small cooperative can afford the services of technical personnel who are as competent and highly paid as those em- ployed by Algol9n prior to the reform. (2) By creating 23 new enter- prises, each with a distinct membership and natural endowment, the reform has helped to maintain and possibly increase income disparities within the region--cooperatives with many members and poor natural resources are poorer than those with few members and better resources. The production'and distributional problems resulting from the reform in Algol9n motivated land reform officials to design an entirely new adjudication model for highland areas where haciendas and peasant communi- ties compete for land--the SAIS. It was clear to officials that the peasant communities must be incorporated somehow into the reform process. But the experience of Algolin indicated that it was highly inadvisable to split up efficient production units into smaller independent enterprises. -140- The new Peruvian solution is to form complex legal and operational uni',s -- SAIS -- owned and managed by ex-estate workers and by the estate's neighboring peasant communities. Typically, the government affects one or more estates which were owned by a single landowner prior to the reform and transforms these into a service cooperative (which differs from a produc- tion cooperative in that its members are not the owners of the land and capital their cooperative uses). The serivce cooperative and several bordering peasant communities become members of a SAIS. The integrity of the pre-reform production units is respected, and both the workers of the ex-estates and the members of neighboring peasant communities participate in the ownership, management, and profits of the ex-estates. Of the SAIS' principal goals -- to avoid a drop in production, help equalize incomes, and eliminate the traditional land conflicts between estates and peasant communities -- the first has been most nearly achieved. Decapitalization and the disorganization of production during and shortly after the reform have not been nearly as significant in the new SAIS as they were in Algolan. Since the adjudication of the SAIS they have generally been able to maintain or increase livestock numbers and production. The principal development which may threaten production in the future is the high rate of turnover of high-level personnel. The large estates of the Central Highlands differed radically from those of Puno and especially Cuzco in that they were managed by large technical staffs - not by a single technician or "prActico." With the reform the majority of these technicians have left the estates and have been re- placed by intermediate-level employees or younger, less-experienced tech- nicians. The problems associated with income disparities and land conflicts have been less successfully attacked by the SAIS. The peasant communi- ties participate in the income of the SAIS, but the value of profits recieved per comunero is very small. Each SAIS has a Development Division which provides technical assistance and implements development projects in the communities, but in general, the budget of the Develop- ment Division is inadequate to produce major changes in the community. In most cases officials of the Division visit each community only a few -141- times each year. At the end of each accounting year the communities each receive a share in the SAIS' profits, not in cash, but in the form of social or productive capital -- e.g., expenditures on a bridge or irrigation canals. The amount of expenditures on such projects is small in terms of the needs of the communities. The communities of the Central Highlands participate more significantly in the economic returns of the SAIS than do the communities of Puno, but still the disparities between income levels of laborers on the ex-estates and community members are great; and in general community members feel antagonistic toward the workers of the ex-estates (and vice versa). What the communities expected from the reform, and still want, is land. In the SAIS the service cooperative (made up of the ex-workers of ex- estates) and a number of peasant communities each have equal representation in the SAIS' governing bodies. Since there are several communities and only one cooperative the comunities control these bodies. Profits are distributed in accordance with need, and thus the communities also receive the bulk of profits. This produces the strange result that the SAIS is managed not by its workers but by its neighbors. Moreover, profits are distributed not among the workers but among the needy, who are also the majority owners. These results are not totally acceptable to either groups. The workers compalin that they are not the "partners" of their communal neighbors but their "servants." They denoucne the unholy alliance of technicians and comuneros which seeks to reduce huaccha numbers and hold wages down. They demand greater participation in management and in profits. In one important case (SAIS Cahuide) the workers have formed a labor union. The communities, on the other hand, complain that what they have always wanted and sorely need is not some sort of abstract "partici- pation" in something called a SAIS - which many mispronounce as SEIS (the number 6 in Spanish) -- but land! In the SAIS Cahuide year-end profits received by the peasant communities in 1971-72 and 1972-73 amounted to only about 13 and 30 U.S. dollars per comunero, respectively. The budget of the SAIS' Development Division amounts to less than 20 dollars per comunero each year. Moreover, the comuneros do not receive profits individually, but in the form of communal development projects, -142- many of which benefit only a part of the comuneros and/or produce tangible benefits only over a period of years. Thus, both workers and comuneros tend to see the SAIS as "a great deal more in theory than in practice." Since workers and comuneros- now compete for income generated by the SAIS, in effect the tensions that existed between the estates and the peasant communities prior to the land reform have been internalized by the SAIS. This reduces member support and threatens the long-term viability of this novel reform enterprise. Restructuring Peasant Communities. In spirit, the restructuring process tends toward the "cooperativizationr" of peasant communities. Cooperative structures are not indigenous to the highlands. Peasant communities exhibit traits of'self-government and labor pooling and exchange, but these alone do not constitute a strong base for the adoption of cooperative institutions. Communities resist many of the measures which the government attempts to impose upon them, since these threaten the existing power structures of the communities and the economic interests of many comuneros. Individual comuneros occupy and often own the bulk of good land in peasant communities, and these individuals staunchly oppose collectivization. To date the principal changes brought about by restructuring are in the sphere of internal administrative organization; the traditional governing bodies have been replaced by new bodies with names analogous to those of cooperatives'-- Administrative and Vigilance Councils, Special Committees, and the Assembly. There is no sign that the communities will soon begin to operate as collective production units. Community members everywhere fear the confiscation or expropriation of their livestock and land. Despite the fact that peasant communities are not likely to become converted into communal farms or production cooperatives in the foreseeable future, this does not mean that cooperatives can play no role in their development. Where new land has been acquired, as in Algolin, production cooperatives are acceptable to the communities, although it should not be expected that all comuneros will join the new cooperatives. And where new activities are undertaken, such as poultry production, marketing, or large-scale purchase of inputs and/or consumer goods, constitution of -143- cooperatives is often the most appropriate solution (even though local merchants are bound to oppose cooperative delivery and marketing schemes). Where production or marketing are to be cooperativized, either the cooperative must be introduced from outside, or peasant leaders must receive cooperative capacitaci n, encouragement and technical, organizational, and financial assistance in establishing their cooperative. It seems that in general the most socially viable (although not necessarily the most productive) cooperatives have been established by peasants, with encouragement and support from outsiders, but a minimum of outside control. Implementation of the Land Reform Program The Transformation of Estates into Reform Enterprises. The cases studied have followed several different paths in their conversion from haciendas to reform enterprises. The "normal course" involved a pacific intervention on the part of the state, the formation of a Special Admiistrative Committee or (less often) a Provisional Administrative Commission, preparation of the workforce for membership in their coopera- tive or SAIS, and finally, adjudication. Where this course has been followed, economic and social dislocations have generally been minor. Where landlord abandonment or parcelization schemes motivated worker strikes and occupation of the estate prior to the formation of formal pre-cooperative management bodies, interim dis- locations were inevitable and consolidation of reform enterprises has been somewhat more difficult. As might be expected, the performance of public agencies has been most adequate where the process of cooperativization has been most tranquil and bureaucratically controlled. Peasant participation in the transitional period results in uncertainties which public agencies are hard pressed to cope with. However, peasant intervention has usually resulted in adjudi- cation models which are more adequate to peasants' needs (and with which they are more strongly identified) than has been the case under the normal, bureaucratic course. While peasant participation in the cooperativization process seems important for ensuring active member support for new cooperative institutions, the Ministry of Agriculture and SINAOS should by no means let peasants "work things out" entirely on their own. Close -144- and amicable ties should be maintained with pre-cooeprative groups and technical and managerial assistance should be provided even where not directly requested. In one case where the government virtually abandoned the enterprise -- Vilca Huaura -- the cooperative has not proven to be a viable social or eocnomic unit, despite the fact that the estate's workers are certainly better off in a production cooperative than in any alternative institutional arrangement (including individual smallholdings). Special Characteristics of the Sugar Estates. For several reasons the implementation of land reform was siLplerin the sugar estates than it was later in non-sugar areas: (1) The sugar operations were centrally managed, facilitating their takeover by government "interventores." (2) Workers were accustomed to wage labor) held no, or extremely small, individual plots, and thus did not oppose collectivization. (3) Most estates were in good financial shape (the one glaring exception being Cayalti), and thus expropriation did not entail government subsidization. (4) The sugar businesses had not felt the threat of expropriation under the 1964 law, and thus had not decapitalized. (5) Being the first to be affected under the new law, their owners had not had time to dismantle their estates. (6) Most estates were unionized, and thus workers had experience with workers' organizations (although little experience with cooperatives per se.) (7) The estates are all on the coast and can be easily reached by auto (and in some cases, by airplane). (8) Being very large operations, the sugar estates could more easily support the costs of land reform activities (planners, cooperative courses, military overseers, visits from national and foreign experts and curiosity seekers, etc.). The lessons learned in the cooperativization of the sugar estates were not often directly transferable to the smaller, more remote, less profitable, undercapitalized, non-unionized haciendas operated under variants of the colono system. A crucial point is that, given the generally successful experiences in the sugar estates, land reform personnel (especially ONDECOOP personnel) was convinced that collectiviza- tion was a generalizable solution, appropriate for all estates. This was later found not to be the case. The Case Reports for Espinal, Udima, and Santa Clemencia relfect unsuccessful attempts to force collectivization on an unwilling peasantry. -145- Implementation in Highland Crop and Livestock Estates. Within the Highlands, implementation of the land reform program has proceeded more smoothly in some areas than in others. The cases of Puno and Cuzco -- adjacent highland departments -- are illustrative. In Puno, for example, the land reform program has produced far fewer social and economic disloca- tions than in Cuzco. Several factors are responsible for this: (1) Most estates in Cuzco were operated by their owners or owned by persons living in the area, so that no formal administrative staff was necessary; in Puno the majority of estates were absentee-owned and each had its own small administrative staff and accounting personnel. Thus, after expropriation the estates of Puno were generally left with better qualified management and leadership candidates than were the estates of Cuzco. (2) The estates of Puno are larger, more profitable, and more able to afford the services of full-time, professional managerial personnel. (3) Large livestock operations are more easily managed than are large crop- producing units, and thus the estates of Puno can be more easily fused to form units capable of supporting a professional manager than are the estates of Cuzco. (4) Prior to the reform estate decapitalization was severe in both Cuzco and Puno, but capitalization of Puno's livestock enterprises has been easier than capitalization of Cuzco's agricultural enterprises -- Puno's livestock enterprises capitalize "naturally" through the reproduction of cattle and sheep, while Cuzco's cropping units can be capitalized only through the purchase of tractors and equipment. (5) Cropping in the tighlands is much more demanding on delivery and market systems than is livestock production, and thus poor performance of the M1inistry of Agriculture (which coordinates input purchases for many cooperatives) and the BFA (which provides credit) causes more serious dislocations in Cuzco than in Puno. (6) Highland cropping is subject to unpredictable climatic variables which make productivity highly dependent upon timely management decisions; livestock production is not nearly so dependent upon the agility of management. Thus, management problems common to interim management bodies and new reform enterprises cause more serious dislocations in the Cuzco region than in Puno. (7) Livestock production requires a few full-time workers. Cropping demands labor primarily in the seeding and harvesting seasons, causing a conflict of -146- interests between cooperative members who cultivate small plots and the cooperative's management, which is responsible for seeding and harvesting crops on the cooperative's fields. Prior to the reform, the haciendas could force their residents to work on their fields, but the cooperatives cannot do so without seriously jeopardizing member support. Both undercapitalization and the labor shortage have caused serious declines in crop production on estates subject to land reform in the Cuzco region. (8) The stock of technical improvements which can be relatively easily introduced in cattle enterprises in the Puno region is greater than the stock of known improvements which can be introduced in cropping in Cuzco. This is due in. part to the greater influence of climatic and ecological factors over crop production than over livestock production in the highlands. It is also due to the inherent differences of scale in these two types of operations -- an improvement introduced in an immense livestock operation such as Santa Lucia (58,000 sheep) can have a much greater effect on production than can an improvement in, e.g., potato production in Tahuantin- suyo (10 hectares). Paternalism and Neglect. If the government has exercised excessive control over any aspect of the reform process it is in the design of adjudication models. Officials invariably confront land reform beneficiaries with an already-prepared adjudication model. They explain the model to the workers, emphasizing its strong points and avoiding- discussion of its weak points, and then exhort the workers to vote in favor of its adoption. If the workers reject the proposed adjudication model the government officials have failed at their job. Most Ministry of Agriculture officials are convinced that they "know what is best for the peasantry," and they consider rejection of their ideas as the result of ignorance on the part of the peasantry or political agitation on the part of anti-government (leftist or rightist) groups. Hy case studies indicate, however, that quite often rural workers have good economic reasons for opposing collecti- vization. In traditional haciendas rejection of collective adjudication models is both spontaneous and widespread. Often a paternalistic attitude on the part of government agencies is combined with neglect. The government makes promises to the peasantry -147- which it does not keep. In Espinal, for example, a military officer promised that if the residents made adobes, SI1TAMOS would provide a plan and technical advice for construction of a school. The adobes were made, but when no plan arrived they were ruined by the winter rains. The next year adobes were made again, but again the plan did not arrive, and for the second time the adobes were ruined by the winter rains. More than one cooperative member noted to me that they would have been better off without the "help" of the government. Social Problems in New Reform Enterprises (1) Reform Turmoil. In some instances "reform turmoil" and direct peasant intervention in the land reform process (e.g., occupation of es- tates) had led to the consolidation of a cooperative spirit, in others it has been exploited by peasant and political leaders who oppose the formation of production cooperatives or the land reform process. In three cases of peasant takeovers (Santa Barbara, Casa Blanca, and San Nicolas) the principal dislocations seem to be temporary and principally the result of insufficient or tardy Ministry of Agriculture support and supervision, not of peasant intervention per se. In a fourth case (Vilca Huaura) the negative social.and economic effects have been more last- ing, and appear to threaten the cooperative's success. In this parti- cular case the local,Peasant Federation 11has played an active role in pro- moting anti-cooperative sentiment. In all cases where estate workers intervened directly in the land reform process, they have tended to be skeptical of the need for professional management in reform enter- prises. This is due partly to the government's own political statements on land reform, emphasizing peasant participation and self-management. Cooperative and SAIS members generally do not seem to reject management personnel out of hand. In Santa Barbara, San Nicola's, and Casa Blanca workers now agree that professional management is necessary for the success of the enterprise. Only in Vilca Huaura is member sentiment strongly anti-management. (2) Member Sumort. Cooperatives work best where production was collectivized prior to the reform, and where land reform beneficiaries support the cooperative performance of new activities. Peasants who occupy small plots of land oppose collectivization Der se. -148- Member support is generally positively related to the benefits derived from participation.in the reform enterprise, and negatively related to the importance of members' individual economic activities. Thus, in production cooperatives full-time laborers and employees are. the principal supporters; part-time workers who own livestock remain disinterested. Wherever peasants occupy small plots of land and/or graze their own livestock, they oppose collectivization. In no such cases has the government been successful in forcing peasants to farm jointly. A Ministry of Agriculture official in Huancayo stated to me that one of the principal problems facing the land reform process in the Highlands was the lack of peasant interest in and support for produc- tion cooperatives. According to him, "they would rather live from their individual cultivation and grazing." It seems that peasants fear and oppose collectivization for four basic reasons: (1) They fear outside control of production cooperatives and the extraction of surplus. (2) They fear that the internal distribution of income will be unfavorable to them. (3) They fear that the cooperative will fail and that they will lose both their life's savings and their source of current income. (4) They fear "peonization"--loss of the right to manage their own af- fairs,and conversion into simple wage laborers. What the neasant seems to want most is independence from outsiders, since dependence has always led to exploitation. He fears that without outside help (technical, managerial, financial) the cooperative is likely to fail. But with outside help the peasants are likely to lose control of their enterprise, and the cooperative is likely to become an instrument of oppression, not of progress. In some cases the peasant is probably justified in opposing col- lectivization; in other cases he is not. For example, in highland crop production technical economies of scale are relatively unimportant, and managerial problems are formidable; thus, collectivization is in most cases not advisable. But in livestock production there are strong ar- guments in favor of large-scale production. In many service functions, too, large-scale facilitates efficient operation; accounting is certainly one of these. Since peasants fear exploitation, it is difficult to -149- convince them of the advantages of any form of cooperation which implies dependence on outsiders. For example, in the Algola'n Project the coop- eratives hesitated to turn over their account books to the Central Ac- counting Office, even though the Ministry of Agriculture promised that the new accounting facility would greatly improve accounting services and cut costs to the individual cooperatives. In the livestock cooperatives and SAIS of Puno, members seem to support their reform enterprises, but passively. Great cultural bar- riers exist between the membership of most enterprises and their mana- gers. Ministry of Agriculture officials note that rural people have always been exploited and tricked by the misti (white man, patr6n, todos nosotros) and are justifiably suspicious of the motives of reform per- sonnel. One perceptive official stated that for the rural people to support their cooperatives actively it would be necessary for government officials and managerial personnel to first convince workers that the reform was, in fact, intended to benefit them. Then, adequate managers must be found for the new reform enterprises. This, he went on to say, requires: a very special, very scarce type of technical per- sonnel capable of speaking to rural people in their own language and in terms they understand, ... tell- ing them the truth and not offering things neither the government nor the cooperative will be able to de- liver. The very special, very scarce type of technical personnel which this man speaks of, and which the cooperatives seem anxious to hire, must have a particular combination of qualifications: technical training, bilingualism, identification with the agrarian goals of the government, and experience in estate management in the region. Very few technicians possess these characteristics, and those who do demand high salaries. This is one of the reasons cited by Ministry of Agriculture officials for the fusion of several ex-haciendas into larger production coopera- tives--only a large unit can support the salary of a competent techni- cian. (Low population density and poor transportation would ma'e the adequate provision of management services to several cooperatives, by a central cooperative or by the Ministry of Agriculture, very difficult.) -150- But interviews with management personnel in large reform enterprises indicate that this reasoning may be faulty, since: (1) no single per- son possesses the technical and other skills, and the time and energy necessary for the efficient management of very large units, and (2) members often oppose hiring technical-administrative personnel. More- over, the larger the unit the less members are likely to participate in management. In smaller units participation is more active, socio- cultural disparities between members and the manager are smaller, and member support for the reform enterprise is greater. There seems to be no simple solution to the "size of enterprise" dilemma in the short run. It would seem best to form moderately sized units managed by trained local perple, but qualified local people are not yet available in suf- ficient numbers. A general conclusion is that the government must be very astute in promoting cooperativization in rural areas. Projects should be selected which will elicit peasant support or a minimum of peasant opposition. Moderate initial opposition can be tolerated if positive results will be forthcoming in the short run. The government should be careful not to impose cooperative models where they are not likely to function well, or to create production units which are too large to manage. In the special case of the regional central cooperative in the Santa Valley, the affiliated cooperatives withhold unconditional sup- port from their central cooperative for several reasons. First, tech- nicians of member cooperatives are jealous of powers delegated to or assumed by (either in fact or in theory) the managers of the central cooperative. Second, they were forced to join the central cooperative under clauses written into the land transfer documents prepared by the government. Third, cooperative members are skeptical of new coopera- tive institutions in general, and particularly of those far removed from their control and vigilance. Fourth, cooperative members see the central cooperative as an alien institution managed and financed by outsiders. Fifth, they are skeptical of the central cooperativets ability to provide services to the members at a saving. Sixth, they oppose the central cooperative's attempt to channel funds from rich to poor cooperatives (within the PIAR) and from the affiliated cooperatives -151- to other sectors of the economy (via the PID). According to a high- ranking DESCO official, this last point is the principal focus of dis- content. Social Conflict. The principal causes of social conflict and strife are the following: (1) dissatisfaction with the adjudication model; (2) government attempts to curb member participation; (3) severe economic problems; (4) dissatisfaction with services provided by the reform enterprises and frustrated expectations; (5) distrust and sus- picion of high-level employees; (6) conflicts between collective and individual production; (7) conflicts between old and new members or between "insiders" and "outsiders." In the sugar estates, where beneficiaries were on the whole in agreement with the formation of production cooperatives, social problems have stemmed from two major factors: (1) The government attempted to maintain control of the cooperatives by appointing the majority of as- sembly delegates. (2) The majority of members are suspicious and jealous of the power of technical and administrative personnel within the coop- eratives (some are members, others are not; the majority worked in the sugar industry prior to the land reform). These and other, related problems led to a number of strikes and a high rate of turnover of technical-administrative personnel until early 1972 when one estate, TUm91n, was "intervened" by government officials. Soon thereafter the government amended the cooperatives' election pro- cedures in ways which guaranteed democratic election of worker repre- sentatives to cooperative bodies, and reduced formal government inter- vention in cooperative decision-making. Since these measures were taken, social conflict within the cooperatives has declined markedly. It has by no means disappeared, however. In the case of Cayalt', for example, low pay and abysmal living conditions have motivated workers to strike and expel managerial personnel, pushing the cooperative nearer yet to the brink of financial disaster and forcing governmental intervention in late 1973. In most sugar cooperatives, the turnover of high-level personnel remains high, and technical positions remain bacant. Social differences between field laborers and office, technical, and administrative personnel are potential sources of conflict. The -152- principal antidotes are: (1) demonstration to members of the importance of relatively well paid technical personnel, and (2) leveling of incomes within the cooperatives. (This latter course is essential, and involves training new technicians for the cooperatives who will be willing--and forced, as the supply of technicians increases--to work for lower sala- ries.) The principal causes of internal strife notedon the Coast relate to corruption and incompetence of cooperative leaders or highly paid em- ployees, and the low wage rates of most members. Cases of severe dis- content and censuring of enterprise leadership or staff are few. Dissatisfaction with the adjudication model is an important cause of social tension, especially where the government attempts to force collectivization (e.g., Udima, Taulls, Santa Clemencia, and Espinal). Where severe economic problems exist (e.g., Monteseco and the CAP Tipac Amaru II) internal conflicts and leadership crises are bound to proli- ferate. Member dissatisfaction with the services rendered by their enter- prise (e.g., the Central Santa), of course, threatens its viability. Where members have radically different social and cultural back- grounds social divisions tend.to appear. But more importantly, conflict- ing economic interests breed tensions. This is illustrated by the fusion of ex-estates and peasant communities in the formation of cooperatives and SAIS in Puno. In Buena Vista tensions between the residents of ex- estates and community members were overt, but seemed to derive primarily from competition for pastures, cropland, and enterprise profits rather than from cultural differences per se. SAIS officials condemened "ingre- santes" for bringing livestock onto the enterprise's land and for demand- ing plots of cropland. In the Highlands an important question is whether important social and cultural differences separate residents of ex-haciendas from comun- eros and parcieleros. The social assistant of one estate in Puno stated flatly that a clear socio-cultural stratification existed, with parciel- eros at the top, comuneros below them, and estate laborers at the bottom. It must be kept in mind, however, that estates and neighboring com- munities or parcialidades engaged in important social and economic inter- actions. Prior to the reform many hacienda laborers were residents of -153- parcialidades and peasant communities. Others who were stable hacienda residents were sons of parcieleros or comuneros and often "kept a foot in the community." The largest landholders in the peasant communities were often mayordomos from neighboring haciendas and maintained resi- dences (and occasionally families) in both places. Nevertheless, it appears that, in general, income and-educational levels are higher in parcialidades than in communities and that hacienda workers are worse off than their neighbors on both these scores. Another important mode of interaction revolves around border dis- putes between haciendas and neighboring communities and parcialidades. These disputes often placed hacienda workers and outsiders in direct confrontation, since it was the workers who enforced orders given by the hacienda owners and their administrators. As a comunero noted to me: Can you expect the comuneros to make peace with ha- cienda peones who for years have been at the service of a patr6n who stole our lands? What we want is land not 'integration' in the form of a SAIS, which is, after all, merely symbolic. In cases of severe internal conflicts, such as in the CAP Tipac Amaru II in Cuzco, the future of the enterprise is threatened and mem- bers become skeptical of the viability of cooperative ventures in gener- al. In other cases, where internal conflict derives from less fundamen- tal problems, it can help "clear the air" and produce reforms which help consolidate cooperative institutions. As more than one cooperative official stated, where there is no discontent or conflict, there is no interest in the cooperative. A certain level (how much?) of conflict, then, seems to be beneficial for the clarification of important issues and for arriving at solutions which are acceptable to the cooperative membership. SINAMOS and the Ministry of Agriculture can play important roles in helping reform enter- prises introduce reforms which have worked well in other enterprises. The "New Man." Early in the reform process (1969-1970) ONDECOOP employees seemed to operate under the assumption that liquidation of the latifundia system and its replacement with the cooperative system would be accompanied by a radical transformation of the behavior patterns of -154- rural.people. Personal egoism was expected (really assumed) to disap- pear, being replaced by a solidary cooperative spirit. In fact, little character change has been witnessed to date. Interviewees in some cases stated that individualism seemed to have been accentuated by the reform, rather than reduced. The reform process has closed traditional channels for social mobility and opened new ones. Presonal loyalties and com- padrazgo are less important in the new system than in the old; job per- formance and skills are more important. The old pay rates are being questioned and new criteria for pay are not yet generally accepted. Thus, everyone is motivated to compete with his fellow cooperativists and with outsiders for a larger share of the total income produced. In addition to individualism, delinquency and corruption should be expected in the new reform enterprises. Established behavior patterns cannot be eliminated overnight, and these were the order of the day in the hacienda system. Many persons sanctioned for misdeeds shortly after the reform were being punished for actions taken prior to the reform, or during the period of disorganization immediately following the an- nouncement of the 1969 law, and often for acts which would have gone un- noticed or unsanctioned prior to the reform. Standards of performance have risen since the reform, and performance seems to have improved. But since there is still a gap between the standards of behavior and actual performance, corruption and delinquency continue to be problems in the cooperatives. Several instances from the cases visited indicate that elected cooperative officials--especially the first ones-should be expected to abuse their power. The fundamental reasons seem to be the following: (1) In the hacienda system individuals were expected to exploit any power at their disposal for personal gain. In traditional haciendas the right of employees to "use" the,peons and other resources of the estate was a conventional form of payment. Only as the traditional paternal ha- cienda system broke down did such personal use of hacienda resources become viewed as "corrupt." Moreover, corruption was an accepted fact of life in Peruvian politics and union activity. Leaders were expected to take advantage of their positions. Thus, the conventional behavior model for new cooperative officials includes the exploitation of power -155- for personal gain. (2) Group sanctions and "sanctions from below" were imoOrtant innovations of the reform. Previously, no employees feared reprisals from the workers for appropriation of hacienda resources for personal use. Thus, new cooperative leaders have had to learn and ac- cept the new "rules of the game" through experience. (3) In the new cooperative system "ordinary workers" have begun to occupy positions of power and prestige which they had never before dreamed possible, and many have certainly felt an urge to*exploit this once-in-a-lifetime opportunity in ways which they feel might perpetuate their newly acquired status. (4) Cooperative leaders have come into contact with numerous outsiders (notably government officials) whose incomes and living stan- dards are far above their own. This demonstration effect, and envy, may encourage corruption. It seems highly inappropriate to expect new cooperative leaders to behave like saints. On the contrary, one should expect abuses of power, and design mechanisms to control and supervise the actions of leaders and to cope with misbehavior in as effective a manner as possi- ble. In small cooperatives informal supervision and sanctions perform important functions. In large reform enterprises formal vigilance is necessary. The Vigilance Council and Special Committees must be opera- tive, and cooperative officials should be required to make all their decisions public and subject to the scrutiny of cooperative bodies and public officials. 'In this respect the SAFCAP and SIffAMOS can fulfill important functions. Management and SuDervision of Enterprise Activities . Leadership and Management. Daniel Moynihan's remark, "there's little success in politics," seems equally appropriate for cooperative leadership. The majority of leaders in the cooperatives visited have been subject to crises of confidence at one time or another during their tenure in office, and few have held widespread support until the end of their term. In many enterprises visited there seemed to be no truly "natural" leaders. For example, in Pomalca the first president was a mild mannered office employee; the second was the labor union's General Secretary's brother; the third was a dynamic technician who had once been expelled from the cooperative, but readmitted. In Espinal the -156- most politically importaxt men oppose the cooperative, and thus do not participate in any positive sense in cooperative leadership. In Udima the men who promoted the formation of a peasant association and demanded land redistribution prior to the announcement of the 1969 law were later driven out of leadership positions under charges of nepotism. The ex- employees of this ex-hacienda do not have sufficient popularity to win elections in the cooperative; most other members of the cockerative have insufficient experience with administrative and technical matters to serve as adequate cooperative leaders. Leadership problems are particularly severe under tLe following circumstances: (1) where pre-reform peasant organization was weak; (2) where the reform enterprise experiences severe economic problems; (3) where members do not strongly support their enterprise, and see enterprise officials as agents of the state. The most severe leader- ship problems observed were in the CAPs Tipac Amaru II and Espinal. In other enterprises, issues such as the elimination of huaccha sheep have caused the serious erosion of leadership. Reform enterprise managers can also expect "little success" in their jobs. As one manager stated: It is very difficult to work in the cooperatives. One has to be technician, sociologist, and politician at the same time. ... It is fascinating--like driving a car at 120 miles per hour. It is fascinating, but you have no security.... There is never a 'general agree- ment' in the assembly, and at any moment they can throw you out. There is no security.... It is de- finitely not work for timid. men or violent men,.or men with heart trouble! When asked how to solve the problem of job insecurity, this man responded, "There is no way; the first managers must get burned. Later it will be easier." In none of the reform enterprises visited was the manager able to run the business as an "ordinary" private enterprise, disregarding mem- ber opinions and demands. However, various approaches to the "manage- ment problem" were encountered. In Cerro Alegre, for example, the manager saw himself as a rather frustrated, dynamic personality, performing much the same functions as in any other business, but now having 165 bosses -157- instead of one. This meant that he had to involve himself in bother- some social and political problems in order to succeed in his position as manager. In Potao, the manager played a much less dynamic, more paternalistic role, considering himself a technical advisor and "cata- lyst" in a decision process controlled by the cooperative membership and formal management bodies. In San Nicolas the manager felt that he should be allowed to concentrate on administrative matters, and re- sented becoming enbroiled in technical issues related to field produc- tion and social issues unrelated to the technical aspects of coopera- tive administration. In Caldera the manager saw his role as primarily that of a leader--a catalyst of group action, but with a mission! The majority of reform enterprises visited had professional manag- ers, and in these cases a great deal of control over day-to-day tech- nical aspects of enterprise management was generally left in the hands of the manager. In all cases his actions were closely watched by the president, and in general there was close collaboration between these two figures. More weighty issues were discussed in sessions of the ad- ministrative council (which the manager attended). Major production, investment, employment, and pay decisions were deliberated in the general assembly. In practice, there are no rigid criteria for determining which issues are to be settled by specific enterprise officials, coun- cils, committees, or the assembly. The more "important" or controver- sial the issue, the more likely it is that it will be dealt with in the assembly. In general, the specia. committees (e.g., the credit committee, marketing committee, administration committee) do not func- tion to the satisfaction of either cooperative or SAIS members or public officials. Democratic decision-making is more time-consuming than is conven- tional management by a professional technician. This may be a problem in highland reform enterprises where timeliness is important for crop- ping. Cooperative and SAIS members often oppose measures which could 'increase their enterprise's productivity-e.g., the elimination of hua- ccha sheep in Puno. Democratic control also hampers the work of pro- fessional managers, since cooperative and SAIS members--ex-hacienda laborers and comuneros--often act vindictively toward technical -158- personnel. Both democratic decision-making and technical management in large enterprises result in less-than-maximum productivity by seek- ing to maximize profits. In Tahuantinsuyo and elsewhere, members and technicians opposed bringing more members into the enterprise and par- celization of cropland because, while these measures could increase crop production, they would result in lower profits for the cooperative and lower incomes-for the present members. In few cases in the Highlands (especially in Cuzco) did peasants seem capable of managing their own enterprises without the services of a professional manager or the Ministry of Agriculture. In Puno, each of the three cooperatives which functioned well without professional management-Posoconi, Quehuar, and La Uni6n de Soratira--were small enterprises. Two of the three were peasant communities; the third was a very well organized and profitable enterprise prior to the reform where workers were familiar with union organization, and intermediate- level administrative personnel became members of the cooperative. Most of the enterprises in Puno seem too large for their members to manage efficiently without professional management. Many of the enterprises in Cuzco are small, but their members are very ill-prepared for manage- ment tasks--they were generally not unionized prior to the reform, of- fice employees are not among them, and they lack experience in dealing with bureaucratic institutions, such as the BFA. Furthermore, members often seem ambivalent toward their own cooperatives. In Posoconi, Que- huar, and La Uni6n de Soratira members support their cooperatives whole- heartedly. In the crop cooperatives of Cuzco they do not. This is largely because in Puno's live-.tock enterprises economies of scale are far more important than.in Cuzco. In the three enterprises listed, members have also fought for control of their own cooperatives and see clear benefits from cooperative action. In Cuzco, the pressure for cooperativization has come from the government, and members themselves see little reason for supporting the cooperative. If small, poor cooperatives, which do not employ professional manag- ers and which lack active member support and leadership, are to survive, the Ministry of Agriculture must provide continual technical and manage- rial assistance. In three of-the four reform enterprises visited in -159- Cuzco, it could be said that the Ministry of Agriculture managed the enterprise. In the fourth (a peasant community) the Ministry of Agri- culture provided continual technical assistance. The CECOAAP draws up ambitious investment and diversification plans for the sugar cooperatives, but to date, implementation of these plans has lagged. A principal restraint on investment in the agro-industrial complexes is indecision and the lack of cooperative spirit at the "second level." Two examples illustrate this point. (1) For a year, representa- tives of the Lambayeque Valley's sugar cooperatives discussed the esta- blishment of a central feedlot, and construction plans were drawn up (with the assistance of a German technician from the Tinajones Mission). The project was finally dropped, however, since the cooperatives could not agree where to locate the feedlot, how it was to be operated, or how costs and earnings were to be distributed. (2) For several years cooperative officials have discussed the construction of a paper and cardboard factory -in the Lambayeque Valley, but again, the project has not come to fruition. 14 Individual sugar cooperatives are more able to innovate and invest than are the cooperatives as a group. For example, individual coopera- tives have-established their own feedlots where group action has failed. But indecision remains a problem for two main reasons: (1) No single person or very small group of persons can make decisions of great mo- ment. These must be studied by committees, and approved by the adminis- trative council, the delegates' assembly, and/or the CECOAAP. (2) Coop- erative members have been hasty and severe in sanctioning technical- managerial personnel for inadequate performance; thus t6cnicos hesitate to "define themselves" and take a leadership role in cooperative decision- making. As one observer noted: For years the worker lived in a system in which the t5cnicos were never at fault, and every sanction was applied on the workers; it was always the workers who 14. The ex-owners of the sugar estates claim that this project was initially theirs, that it was funded, and that construction was about to begin at the time of the land reform. -160- suffered. Now the workers have the power and they are vindictive; they want to throw the blame for all problems on the tecnicos. Errors are not permitted. They do not understand or care to understand that where there are changes and improvements errors are bound to be made. On several occasions cooperative technicians have been summarily repri- manded or removed from their positions for alleged poor management. Consequently, they are now very cautious and hesitate to make important decisions. Interviews in the sugar cooperatives and elsewhere indicate that member rejection of technical-administrative personnel is a less impor- tant problem than the scarcity of qualified personnel for technical and administrative positions in the reform enterprises. In 18 of the 27 cases visited, professional managers were employed. In 2 others, managers were being actively sought; in 3 others, cooperative officials stated that managers would be contracted if qualified personnel willing to work for moderate salaries could be found. In 2 coastal cooperatives where members voiced dissatisfaction with management (Andahuasi and San Nicolis), workers were clearly not demand- ing that management be left up to them alone; in both cases member senti- ment seemed to be: We need technical expertise, of course; and we are willing to pay a good salary to a good man; but we want a qualified person, and a man who will work with us, not simply sit in his office pushing papers and giving orders. Qualified technical-managerial personnel willing to work for modest salaries in the Highlands is extremely scarce. In Cerro de Pasco, the manager of the Central "Pasco" stated to me that numerous positions in the central cooperative could not be filled because trained technicians simply did not wish to live and work under the harsh conditions of the region. In Cuzco and Puno, Ministry of Agriculture officials stressed the need to train young local people for management positions, and noted that the majority of pre-reform hacienda administrators were unwilling and unsuited for work in the reform enterprises. -161- In general, member participation in management is inversely related to the size of the production unit. Member participation was most active in 2 moderately sized cooperatives established in the Highlands by peas- ant communities. While small size seems to be a necessary condition for active member participation, it is by no means a sufficient condi- tion. Participation must be cultivated by agencies of the state and by managerial personnel working in the reform enterprises. Supervision. Formally, the vigilance council of each reform enterprise must examine all decisions made by the administrative coun- cil, and place responsibility.for illegal or inappropriate actions. In addition, SINAMOS should make periodic checks of enterprise records and accounts in order to ensure the smooth functioning of reform enter- prises, the legality of their decisions, and the consistency of their activities with public policies (e.g., special committees should be formed, periodic meetings held, and detailed minutes recorded). A spe- cialized office within the Ministry of Agriculture should also make peri- odic visits to the cooperatives and SAIS to evaluate management and review the books. (SINAMOS is responsible primarily for social aspects of performance, the Ministry of Agriculture for technical and economic aspects.) In the sugar complexes vigilance councils meet regularly and gener- ally contract an auditor to check the accounts of the cooperative. In addition, SINAMOS and SAFCAP pay close attention to the performance of the sugar cooperatives. Outside the sugar complexes the operation of formal supervisory and control bodies (both those internal and exter- nal to the reform enterprises) is far less adequate. In most of the enterprises visited the vigilance council met rarely and was not thorough: in its review of decisions made by enterprise officials and the administrative council. SINAMOS provides capacitaci6n prior to the formation of cooperatives and SAIS, but once adjudicated, SINAMOS visits the enterprises only when crises appear. The Ministry of Agriculture concerns itself primarily with technical aspects of pro- duction, often condemning SINAMOS for "stirring up" members with parti- cipatory issues. Members of reform enterprises also tend to condemn SIAMOS for providing more questions than answers, and for bringing -162- conflictive problems into the light, without helping the enterprises to solve them. Within the reform enterprises visited, informal control and super- vision partly offsets the poor performance of formal mechanisms. Coop- erative and SAIS members generally pay close attention to the perfor- mance of their officials and professional staff, and are quick to cen- sure them. Informal mechanisms also exist within the state which .perform im- portant control and supervisory functions. Employees of the Agricul- tural Development Bank and the Ministry of Agriculture are in close contact with cooperative and SAIS officials and perceive many problems of enterprise operation as they develop. A formal system for channel- ing information from BFA and Ministry of Agriculture officials back to cooperative and SAIS officials and public agencies charged with the formal supervision and control of their activities does not exist, how- ever. Economic Dislocations and Short-Term Production Effects In the Highlands a few estates were expropriated under the 1964 land reform, and on the Coast the colonos of several estates received provisional titles to their plots of land. The reform processes in La Convenci6n and Lares Valleys and in the Central Highlands have been discussed above. In other cases the 1964 legislation motivated peas- ants to purchase estate lands. In one such case, the members of a peas- ant community, known as Soratira, hoped to receive the lands of an es- tate, "La Union," free under the Belaunde reform, and negotiated with the government and with the estate's owner for four years (1962-1966) before finally coming to a purchase agreement. In 1966 the goverent expropriated the estate, and in 1967 the peascnt community paid the first of 20 annual agrarian debt payments to the government (Case No. 26). While transfer of land to peasants was rare, a common result of the 1964 land reform legislation and its non-application was decapitali- zation of estates. Peru's 1961 Agricultural and Livestock Census re- ported just over six million head of sheep in the department of Puno. According to Ministry of Agriculture officials, the number of sheep -163- had fallen to less than four million by 1972, a significant part of these being sold prior to 1969. In addition to the decline in sheep numbers, it is also apparent that owners hesitated to make improvements in their land and installations and to purchase or repair machinery. Well-informed Ministry of Agriculture officials state that this was by no means due to a lack of investable profits. Profits were invested elsewhere, due in part to the insecurity of land tenure in the Highlands. Since livestock represents both capital (breeding stock) and pro- duce (meat, not wool) on the estates of the Highlands, the decline in livestock numbers restricted the production of wool but increased meat sales. Decapitalization, however, reduced the productive capacity of the estates. Since the cooperatives and SAIS are now in the process of "recapitalization," their sales of livestock, and thus the meat sup- ply, have temporarily declined. On the Coast, few estates adequately maintained or replaced their tractors and equipment in the 1960s. Commonly, reform enterprises re- ceived little serviceable machinery from the ex-estates, not because the estate owenrs sold their equipment, but because they had little or nothing worth expropriating. A significant difference between the impacts of decapitalization on crop and livestock enterprises is that in the former case undercapitalization jeopardizes the survival of the enterprise (crops cannot be seeded) and recapita3ization strains the finances of the new enterprise; in the latter case, undercapitalization lowers productivity, but does not jeopardize profitability as severely as in crop enterprises, and recapitalization can occur "naturally," through reproduction, without heavy expenditures. Since 1969, economic dislocations have been far more profound than previously. Economic dislocations resulting from the new reform pro- cess can be grouped under the following headings: (1) disruptions of investment and production in expropriable estates prior to government intervention; (2) disruptions during the interim between intervention and the formation of new reform enterprises; (3) disruptions in new reform units; (4) disruptions in the remaining non-reformed sector. In the Highlands, cattle sales were spurred by the reform. A gov- ernmental decree made it illegal to sell or slaughter breeding stock without authorization from the Ministry of Agriculture. However, Minis- try officials admit freely that this was virtually impossible to enforce, since animals can be moved out of the region (on the hoof or in trucks) on so many roads that it is simply impossible to catch all offenders. Animals can also be slaughtered within the estates, and dried meat can be stored for weeks prior to consumption or shipment out of the region. When the Ministry of Agriculture expropriates each estate, government officials appraise its assets and in most cases notify the owner that a part of the livestock will not be expropriated due to low quality. This livestock can be sold freely. At the moment of government notifi- cation of expropriation many owners begin dismantling their estates by carrying off whatever capital (e.g., machinery, office equipment, furni- ture) that is not tied down. As noted above, decapitalization of live- stock herds increased production temporarily. The reform reduced crop production, however. Many landowners were not certain if or when their lands would be affected by the reform, and often sold equipment and re- duced the cultivated area long before expropriation. As noted above, decapitalization of crop estates jeopardizes the survival of new reform enterprises, especially in the Highlands, by delaying seedbed prepara- tion excessively. On the Coast, productivity falls, but the entire crop is not jeopardized. During interim administration (by Special Committee or Provisional Commission) livestock numbers generally begin to increase, and produc- tion of meat declines correspondingly. Usually the interim administra- tion also begins purchasing machinery and equipment and repairing the estates' constructions and installations. Crop production begins to rise, although interim credit problems (hampering the purchase of in- puts and equipment) often cause increases in crop production to lag somewhat behind the turnaround in livestock numbers. Once the cooperatives and SAIS are established and interim credit problems solved (as they are) both livestock and crop production (again not necessarily meat sales) begin to increase. Most cases studied show impressive rates of capitalization since the date of expropriation. On the Coast, nearly all enterprises visited had purchased tractors, field machinery, and trucks. in the Highlands, livestock numbers had -165- increased markedly since the dates of adjudication. Unfortunately, we do not have data which allow us to determine if livestock numbers now exceed their 1960 or 1965 levels. Recapitalization was least satis- factory in the highland crop enterprises around Cuzco. Here, lack of machinery seriously jeopardizes the cooperatives' economic survival. Economic dislocations in the remaining private sector--small- and medium-sized farms not affected by the reform, and a few large estates reduced in size by the reform--remain serious and will probably continue to be so for years to come. This is primarily due to their uncertain position in Peru's new agrarian system. At both the ideological- propagandistic level and in day-to-day implementation, the government's behavior with respect to private farmers has been schizophrenic. On one hand, government spokesmen guarantee the rights of small private farmers; on the othcr, they denounce private farmers as reactionaries who obstruct the advancement of the land reform process. The Ministry of Agriculture has presented private farmers with "Certificados de In- afectaci6n," but these are so encumbered with clauses and restrictions that most farmers (and independent observers) consider them to be of very limited value. Clarifying the future rights of private farmers is very important for stimulating production in the non-reformed sub- sector. As a Ministry of Agriculture official noted, "the uncertainty is far worse than the sentence." Production data for recent years are of limited value, but it seems clear that the land reform process has not caused major disruptions in the production of most agricultural and livestock commodities. (See again Chart 1, in Section I.B., above.) Sugar production has not suffered from the reform process, although it does not seem to have been stimulated by it either. Production of other agricultural and livestock commodities appears to have fallen somewhat in certain cases during the period in which estate owners had no interest in maintaining production and the Ministry of Agriculture was unable to devote sufficient attention to technical and managerial assistance. Production has also suffered where land reform beneficiaries opposed the collectivization plans of the gov- ernment. -166- Meat production has been inflated as a result of reform-related uncertainties and decapitalization. In the next few years, as reform enterprises build up their stocks, meat production is expected to fall somewhat. Employment One of the major disappointments of the reform is its impact on employment. Neither striking increases or declines have been reported, and it seems likely that the net effect is a small positive one. Both the cooperatives and public agencies dealing with them, however, are searching actively for profitable ways to increase employment. Most cooperatives and SAIS have been forced to grant membership to a few previously part-time workers, and the enterprises are now searching for productive ways of employing them. Cooperative members are by no means interested in increasing membership or non-member employment at the expense of profits. On most of the estates visited the trend in pre-reform employment was downward. The reform has greatly diminished this trend, but there is little evidence of a marked increase in employment. A principal new source of employment has been the initiation of social investment pro- jects (community halls, schools, etc.) in many reform enterprises. These projects, however, cannot last forever, in large part because of the strain they place on the financial capacities of the reform en- terprises. In extremely few cases have reform enterprises devised means of employing member labor without paying cash wages. In nearly all cases enterprise officials and members mentioned the need to diversify production and to innovate in order to provide employment for "the next generation." In a few, diversification of crop and livestock activities had been initiated, resulting in modest increases in employment. In no case did members or managers consider it rational to cut back or delay mechanization in order to employ more field hands. Nor were cases found where members cut the number of days each worked in order to take on more outside laborers. In most cases the majority of members work only half days. However, this custom dates from the pre-land reform period, and is not the "fault" of the coopera- tive or SAIS. -167- Land reform alone will not eliminate the specter of unemployment. Crucial factors in determining the extent to which employment will be increased are: (1) the degree to which technical assistance aims at crop diversification and the promotion of labor-intensive truck crops; (2) the adequacy of new marketing systems and the government's price policy; (3) the prices and availability of alternative types of field equipment. Intensification and diversification of productive activities are by no means automatic results of cooperativization or the formation of SAIS, but must be implemented through aggressive policies of the new reform enterprises (especially through the actions of innovative managers) and of public agencies (especially the Ministry of Agricul- ture). Innovation and aggressivity in these areas are scarce. A casual observer (especially one trained in conventional micro- economic theory) might think that decapitalization under the reform process could produce a significant positive employment effect--substi- tution of machinery for labor. However, in the cases visited the result seems to have been a decline in seeding rather than a substitution of inputs. Cooperative and Ministry of Agriculture officials cited two reasons for this: (1) The new reform enterprises cannot seed profit- ably without tractors and heavy machinery any more than ex-haciendas could, because of the need to cultivate and seed rapidly, and because of the currently high level of wages. (2) The members do not want to work in the fields "como burritas," transporting heavy loads on their backs and cultivating with draft animals or by hand. They aspire to a better life. The effect of rapid capitalization on employment is uncertain. In most crop enterprises new capital fills a vital gap in the estates' facilities; previously the estates were undercapitalized, and their productivity suffered as a result. But, given the surplus of rural man- 'ower and the high cost of machinery, overcapitalization would be like- wise counterproductive. Both Ministry of Agriculture officials and enterprise members feel that the buildup of machinery supplies is en- tirely justified, and only marginally relevant to the employment issue. Double or triple cropping, for example, which increases both output and employment, is only feasible where good field equipment is available. -168- Employment is a particularly pressing problem in the Highlands. Livestock raising is labor-extensive and few other job opportunities exist. One cooperative member remarked that whereas in the past the hacienda did not offer employment to the children of estate residents, now everyone hopes to get his children a job in the cooperative. If the cooperative cannot employ them, everyone becomes discontented. In several cases the employment problem has been attacked in very innovative ways. Construction programs often absorb labor as well as provide facilities for education, medical care, and other necessary social programs. However, such socially beneficial programs cannot be carried out indefinitely, both because the needs of the enterprises are finite, and because no enterprise is wealthy enough to finance such construction programs indefinitely. Most reform enterprises need new housing, but hesitate to launch any massive program of housing construc- tion or improvement because of the financial burden implied by such programs. Many enterprises employ workers in excess of the number actually needed, in order to spread work and to provide as many man-days of em- ployment as possible for the membership. In all cases visited, members and officials were preoccupied with future employment problems--how to employ the growing population. Diversification into non-agricultural pursuits was the most often cited means of providing increased employ- ment. In a few cases, increased employment has been provided.through di- versification schemes. In Santa Lucla the manager (ex-functionary of the Ministry of Agriculture) had promoted the creation of three small shops within the cooperative which provided employment for about 30 people. One produced sweaters, another rugs, and the third bed frames and springs. The manager stated that the shops were not making profits, but were breaking even and providing much needed employment. In most of the cases visited, lack of both managerial expertise and dynamism and a skilled labor force limit such diversification schemes. In many highland reform enterprises cropland now lies idle. When questioned about how this land could be brought under cultivation, coop- erative leaders and members indicated two possibilities: (1) mechanize, -169- or (2) turn the land over to individual producers who could seed it with family labor. They universally advocated the first solution, since the second implies increasing the number of families living on the es- tate, and a reduction in the share of enterprise profits received by each. Thus, for very rational reasons the members opposed policies which would increase production and employment and improve the distri- bution of income. If the land reform program parceled estate lands among individual smallholders, total rural employment could be increased substantially. But since the Peruvian government maintains and increases the size of production units, and since new reform units function essentially as profit-maximizing enterprises, the employment effect of the land reform program is marginal. In order to compensate for this, the government is promoting "agro-industrialization." One of the stated objectives of the government in establishing a central cooperative in the Central Highlands is to generate employment through the establishment of processing plants. International finan- cial institutions are presently considering loans for the installation of a textile factory, but consultants state that use of modern indus- trial technology (necessary to guarantee profitable operation) will limit employment in the facility to a very few skilled workers. The principal employment effect of such a venture, they feel, will come from "backward linkages"--a greater demand for wool will spur greater production and thus greater employment on the reform enterprises. It is clear that both agricultural and industrial experts cannot be cor- rect in assuming that the important employment effect will come in the "1other sector." The fact is that neither the Ministry of Agriculture's nor the financial institutions' experts are willing to sacrifice profits for employment. Everyone passes the buck; the employment effect of the land reform and its associated diversification projects seems des- tined to be marginal. Technical Change In technological terms, the coastal sugar plantations (agro- industrial complexes) are the most advanced estates in Peru. Until the expropriation of the plantations in June 1969, their owners never -170- expected land reform to touch them, and the 1964 reform law had produced no decapitalization or stagnation as it had in other coastal and high- land estates. Interim management was satisfactory, and no turmoil or serious social or economic dislocations occurred at the time of expro- priation. However, as pointed out earlier, indecision seems to hamper aggressive investment and technical change. CECOAAP officials note that investment in the sugar cooperatives falls far short of the plan- ning targets, and that worker-management conflicts and lack of techni- cal personnel are the two major causes of poor investment performance. Outside the sugar complexes, government policies are clearly raising technical levels on most coastal estates affected by the land reform. In most cases visited on the Coast, modernization of field equipment was observed. The professional level of managers is also improving; new managers are often younger and less experienced than old ones, but they have more technical training. In the Highlands, the corporately owned sheep ranches of the Cen- tral Highlands were the most technologically advanced, and the reform is unlikely to bring about significant improvements in this area. Never- theless, it appears that even in such "model enterprises" as the SAIS Cahuide and the SAIS Tdpac Amaru, production has been intensified since the reform, and the process of livestock improvement moves forward. Where the Development Divisions of the new SAIS function well, it is likely that the production methods used in peasant communities will be improved. In the department of Puno, prior to the reform the estates of the Sociedad Ganadera del Sur were the most advanced in terms of productive technology, but even these fell behind the estates of Cerro de Pasco and Fernandini in the Central Highlands. Ministry of Agriculture of- ficials state that the reform has facilitated technological advance in the department for three reasons: (1) Prior to the reform invest- ment and technological improvement had been discouraged by the threat of reform. Profits were extracted from the. -region for investment in non-agricultural enterprises in other parts of the country. (2) Admin- istrative personnel employed in the reform enterprises are more highly trained than were the managers of the haciendas prior to the land -171- reform. (3) The state provides more assistance to the reform enterprises than was provided to the estates prior to the reform--e.g., the massive importation of breeding stock organized by the Ministry of Agriculture. For several reasons, technical levels have not improved in Cuzco as they have in many other parts of the country. The principal factors are: (1) poor financial position of the new reform enterprises; (2) administrative deficiencies in both the reform enterprises and in the Ministry of Agriculture; (3) the absence of new types of technology which could be profitably introduced in the area. (Highland cropping and cattle raising are far less amenable to technological improvement than are sheep raising in the Puno and cropping on the Coast.) In general, the land reform process seems to have spurred techno- logical improvements on reform enterprises. However, this has not been the result of technical assistanc.e from the Ministry of Agriculture. In the future it will be important for the Ministry to upgrade its tech- nical assistance programs, and to provide more adequate technical and managerial assistance to both the reformed and the non-reformed sub- sectors, either directly, or through central cooperatives. Income Redistribution Income and wealth redistribution are central goals of the land reform. The Peruvian reform has increased estate workers' incomes under two very different sets of circumstances: (1) on wage-labor estates which earned high rates of profits prior to the refomr (e.g., Pomalca and Andahuasi); (2) on traditional haciendas where the reform has elimi- nated rental payments by the colonos to the hacendado (e.g., Udima). Where estates were unprofitable prior to the reform, income increases in the short run have been small.15In such cases improvements in manage- ment and technology are necessary for marked improvements in incomes. To date little progress has been made on this front. Cropping is not intensified as a result of the division of extensively farmed estates into labor-intensive minifundia (as was the case in Mexico and Bolivia) since the Peruvian reform does not parcel hacienda lands. 15. In bankrupt Monteseco, real income is falling over time. -172- Where laborers have benefited from the land reform without major technological changes (because the profits which used to be received by the landlord are now distributed among the workers) it is unlikely that this once-and-for-all increase in worker income will be sufficient to maintain active member support for the cooperative. Potao's manager warned that, "technical change must be rapid for workers to be paid well and 'subversive movements' controlled; without technical advance the cooperative will fail." On the other hand, both cooperative mem- bers and managers are aware of the potentially negative impact of tech- nical change on employment, both for present members and for their child- ren. A reform which redistributes only barren land can have little im- pact on the welfare of rural people unless the new owners can somehow make the land produce. A reform which redistributes already productive land has a greater short-run impact on income flows; one which redis- tributes capital (livestock, equipment, installations) as well as land has the greatest immediate impact. In the Algolan Project (Case No. 15), both productive land and capital were redistributed among land reform beneficiaries. In the new SAIS (Case No. 16), no physical re- distribution occurred; workers and peasant communities became co-owners of the ex-estates and their capital, but the unity of the pre-reform enterprise was maintained. In both these cases an important aspect of the reform is the degree to which the profits of the ex-enterprises have been redistributed among their workers and the members of neighboring peasant communities. I do not have data on pre- and immediately post-reform wages in Algola'n, and thus can say nothing about the short-run impact of the reform on the incomes of estate workers. In the period 1972-73, the ex-workers of the ex-estates in the Algola'n Project--now members of production cooperatives--earned an average of S/.32,810 per year (S/.22,600 in wages and S/.10,210 in profits). In comparison, the ex-workers of the Sociedad Ganadera del Centro--now members of the SAIS Cahuide's service cooperative--earned an average of S/.28,540 (S/.28,354 in wages and S/.186 in profits). -173- The impact of the reform on neighboring peasant communities is more difficult to estimate. In the Algol6n Project, 14 communities with 3,066 families received land under the reform. However, not all comuneros benefited from the reform. Fourteen "communal cooperatives" were set up, but only about half (52 percent) the comuneros joined the cooperatives. In the SAIS Cahuide, 29 peasant communities with 3,237 families were selected for membership. In this case, however, the reform did not grant the communities direct possession of land, but made them co- owners, along with the service cooperative formed by the ex-workers of the ex-estates of the Sociedad Ganadera del Centro. The communal members derive material benefits from their affiliation with the SAIS from two sources: (1) year-end profit distributions; (2) technical and social services provided by the SAIS' Development Division. The profits distributed among member communities are not received by indi- vidual comuneros in cash, but are invested by the communities in development-related projects. The activities of the Development Divi- sion are also aimed at promoting the social and economic development of the communities. In the period 1972-73, the 14 comcanities which received land in the Algola'n Project earned a total of S/.4,224,000 in wages and salaries and s/.6,622,000 in profits. Since only 1,600 of these communities' members belonged to the communal cooperatives, each cooperative M-mber received S/.6,780. In the SAIS Caauide, profits distributed among the affiliated communities totaled S/.4,287,000 and the budget of the Devel- opment Division amounted to S/.2,358,000. These amounts were not dis- tributed in cash among the communeros; nevertheless, they should indi- cate the approximate value of benefits accruing to the member peasant communities from the SAIS. Assuming this, the reform has redistributed income in favor of the communities in the amount of S/.2,053 per family. The above figures reveal that in the Algola'n Project the benefits of the land reform accruing to peasant communities are concentrated among half the population, but are much more significant on a per-family basis than in the SAIS Cahuide. However, if these benefits are calcu- lated on a per-family basis for all community residents, they amount -174- to only S/.3,500l and*if profits (excluding wages and salaries) are calculated on the same basis, they amount to only S/.2,200--very close to the corresponding figure for the SAIS. When the communal cooperatives of the Algol6n Project were formed, the richest comuneros did not join them because of conflicting economic interests, and the poorest comuneros did not join them because they could not meet the original membership quotas for capital contributions. Since these cooperatives have become profit-making enterprises, many comuneros have sought membership, but the founding members have chosen to exclude them. Thus, the richest and poorest comuneros have not bene- fited from the reform. (Most labor employed by the cooperatives is provided by members.) In the SAIS, all members of the community benefit at least to a degree from the development projects financed by profit distributions and the activities of the Development Division. Three principal results of the differing ways in which land reform benefits are distributed among comuneros in the Algola'n Project and the SAIS are the following: (1) in the SAIS the benefits are more widely distributed; (2) in the SAIS the use of profits is likely to have a greater development impact; (3) in the Algola'n Project the immediate, tangible benefits (cash) received by communal cooperative members are greater, and thus ensure greater member support for the reform enter- prises. In the SAIS the benefits are so widely distributed and so "de- velopmental" in nature that individual commneros are likely to consi- der them insignificant. Ideology versus Pragmatism Initially the government attempted to establish "pure" production cooperatives (i.e., with no individual production). In the sugar com- plexes the pure model was consistent with pre-reform labor and land tenure institutions, and land reform beneficiaries supported cooperati- vization. But outside the sugar complexes (particulary in the Highlands) such pure cooperatives were opposed by labor tenants and sharecroppers, and insistence upon collectivization produced serious social and econonic dislocations. -175- Table 43: INCOME ACCRUING TO MEMBERS OF PEASANT COMMUNITIES IN THE ALGOLAN PROJECT AND TEE SAIS CAHUIDE, 1972-73 Algola'n SAIS Project Cahuide (1) Number of Families Residing in Affiliated Peasant Communities 3,066 3,237 (2) Members of Comunal Cooperatives 1,600 -- (3) Profits Distributed to Peasant Communities 6,622,000 4,287,000 (4) Budget of Development Division -- 2,358,000 (5) Wages and Salaries Earned by Members of Communal Cooperatives 4,224,000 -- (6) Total (3) + (4) + (5) 10,846,000 6,645,000 (7) Income per Comunero (3) - (1) 2,160 1,324 (3) + (2) 4,139 -- (6) + (1) 3,538 2,053 (6) + (2) 6,779 -- Note: In the Algola'n Project, wages, salaries, and profits are paid to members of communal coopertives in cash. In the SAIS Cahuide pro- fits are invested by peasant communities in development-related projects. The SAIS' Development Division plans, coordinates, and executes these and other development-related projects in the communities. Source: Appendix A, Tenth Agrarian Zonal Report, p. X.16. In 1970 and 1971, ONDECOOP's capacitaci6n courses were strong on conventional cooperative doctrine and ideology and weak on practical aspects of cooperative operation. Tnis was perhaps inevitable, since Peru had extremely little experience with production cooperatives at this time, and few ONDECOOP employees had practical knowledge in this area. Peasants were bored by abstract, unconvincing lectures on the benefits of cooperative life, and often became hostile toward govern- ment programs and personnel. The Ministry of Agriculture and higher government authorities were less concerned with doctrinaire aspects of cooperation than -Tith prac- tical economic and political matters. Consequently, the first election -176- laws for Peru's sugar cooperatives differed radically from the princi- ples taught in ONDECOOP's cooperative courses. This discrepancy, and the confusion and frustration it produced among the sugar workers, con- tributed to labor unrest in several cooperatives (notably Tum6n) and the ultimate wing-clipping and reorganization of ONDECOOP. More recently implementation of the reform has been guided more by practical considerations, and less by ideological convictions. The policy of cooperativization at all cost has been abandoned. Cooperative and SAIS members have been allowed to keep their own livestock and small plots of land. More public resources have been spent on teaching prac- tical aspects of cooperative management and less on formal principles of cooperation. This change in emphasis is, I think, an appropriate one, since land reform beneficiaries are more interested in practical issues than in theory and doctrine. If peasants are to be convinced of the advantages of cooperation, they must see concrete benefits. Their cooperatives and SAIS must function well, and this depends more upon adequate organization and technical assistance than upon an )inder- standing or acceptance of traditional cooperative doctrine and ideology. Reform agencies continue to press for collectivization and the formation of production units which are larger than those which the peasants would form themselves. Two fundamental reasons for this fact are the following: (1) The government is ideologically committed.to collectivization, and any drift in the direction of small-scale or in- dividual production makes officials vulnerable to claims that they are moving rightward in their policies. (2) Large-scale units are more nearly self-sufficient in terms of technical and service personnel than are small units, and thus help reduce the burden of technical assistance now shouldered by the Ministry of Agriculture. Political Asnects of the Land Reform Agrarian reform is essentially a political process. In Peru the decision to reform or not to reform and the determination of the reform's main objectives and methods were clearly influenced by political con- siderations. Once under way the reform's course has also been altered on numerous occasions in response to political pressures exerted by spe- cific interest groups. -177- In line with the Peruvian military government's basic objective of creating a non-capitalistic, non-communistic society, in which busi- ness enterprises are managed by their workers, the government selected the production cooperative as its model land reform enterprise. * The cooperative model was applied first in the coastal sugar complexes; in the Puna areas of the Highlands the pure cooperative model was modi- fied to allow the integration of peasant communities and ex-estates in SAIS. In both these cases the political goal of large-scale coopera- tive production was compatible with the economic goals of maintaining the integrity of pre-reform production units and of stimulating produc- tion. But in cropping areas of the Highlands, the establishment of large production cooperatives requires the elimination of peasant pro- duction and the fusion of estates, and in these cases the government's political and economic objectives have come into conflict. The most widely publicized case which illustrates this point is the CAP Tipac Amaru II on the Pampa de Anta, north of Cuzco (Case No. 18). Initially the Agrarian Zonal Office planned to fuse the numerous haciendas and small- and medium-sized properties on this fertile plain into three independent production cooperatives. Later, for apparently political reasons--wanting to make as big an impact as possible on both the local and the national levels--it was decided in Lima to fuse all the estates into one giant cooperative. Hundreds of public officials, including delegations of international experts, converged on the area to draw up the adjudication model, motivate and "prepare" the residents, and plan all aspects of the region's post-reform development. Newspaper reporters, high-ranking military officers, Peruvian and foreign students, and loads of tourists dropped in to see the new cooperative. The mem- bers soon got bored with the publicity and especially with the speeches, promises, plans, studies, proposals, evaluations, and meetings, which produced little or no improvement in their own living standard. Many concluded that the reform was a farce. 16, Scurrah, "Neither Capitalist nor Communist: Authoritarianism and Participation in Peru," outlines the principal objectives and pro- grams of the government. -178- Interviews with this cooperative's officials and with employees of the Ministry of Agriculture indicate that this reform enterprise, which was intended to be a showcase for the reform process, is too large to be manageable, and must inevitably be subdivided. The cooperative has no manager, the administrative and vigilance councils seldom meet, crop production has fallen sharply (livestock production less so), and the accounts are a shambles. Ministry of Agriculture officials in Cuzco admit freely that this cooperative is a failure, and that it should be split up. They claim that the Zonal Office never wanted to form such a giant unit, but was instructed to do so by the National Agrarian Re- form Office in Lima. In their view, the principal reasons for forming a single large enterprise were political, not economic, and that now political considerations delay the inevitable disintegration of the unit into a few (say three) smaller, manageable enterprises. Thus, what was intended to be a showcase for the reform process has turned out to be a negative example-how not to implement the reform. As pointed out in Section II.A., above, the 1964 reform law elic- ited a strong political counterreform campaign on the part of large landowners. The military government eliminated the political power of the latifundists by expropriating them first.17 However, the land reform process has encountered strong resistance from small- and medium-sized farmers, and in some cases from farm laborers. In 1973, small- and medium-sized farmers in Cajamarca and Arcquipa organized and forced the government to state more clearly what position private farmers are to occupy in the new agrarian sy;tem.18 The colonos of ex-haciendas have also forced the government to mcderrte its initial drive to collectivize all production on estates affected under the re- form. Colonos are now to receive usufruct rights to their plots, and in some cases, individual titles free of charge.19 Sugar workers called 17. The political power of these families has not been eliminated by the reform, since they had important non-land interests; but their political power as landowners has been liouidated. 18. D.L. No. 20120, August 21, 1973. 19. D.L. No. 19977, April 3, 1973. -179- numerous general strikes,and expelled several technicians before the government liberalized its cooperative election laws in ways allowing .20 more democratic worker control of the sugar cooperatives. In none of these cases did party politics play an important role. Individuals with clear political interests--landowners, union leaders, Apristas, radical leftists--came to the fore, voicing the demands of peasants and workers, and stirring up trouble wherever possible; but the fact remains that there was generally strong, spontaneous grassroots support for these causes. According to government officials, politicization looms large among the reform-related problems of the Central Coast. In the Valley of Huaura, just north of Lima, political issues seem especially crucial. At the time of my visit (November 1973), the: local chapter of Peru's Peasant Confederation (CCP) was actively seeking peasant support through a condemnation of government policies. In Barranca, further to the - north, the CCP was less active, but cooperative members noted that they kept a close watch on CCP activities and listened carefully to their arguments. CCP literature denounces the government's cooperative pro- gram as a counterrevolutionary scheme bent on modernizing the mechanisms by which the peasantry is exploited. Throughout the Central Coast, cooperative officials noted that rural workers had more confidence in their union leaders than in cooperative leaders, and that they had more interest in the CCP than in the recently established pro-government "Agrarian Leagues.tt21 Political groups attack the government by attacking the coopera- tives. As one cooperative official noted, "if the cooperatives fail, the Revolution fails." A principal function of SINAMOS is to counter these attacks, but to date its actions have had little success. Coop- erative members are often skeptical of the competence and even the sin- cerity of SINAMOS functionaries. Small farmers are fearful of their 20. D.S. No. 004-72-PM, March 15, 1972. 21. The government is attempting to foster a new "non-political" type of peasant and worker organization through such organizations. See D.L. No. 19400, May 9, 1973. -180- collectivistic ideology; the CCP denounces SINAMOS as a counterrevolu- tionary agency bent on enslaving peasants in government-controlled pro- duction cooperatives. In conclusion, the land reform has succeeded in eliminating the political power of the latifundists, and with surprisingly little oppo- sition from them. But the government has gained surprisingly little support from the peasantry as a result of land redistribution. Only about one-third of the rural population will receive land under the program, and most of these beneficiaries will be required to join coop- eratives, in which they have little faith. From a political standpoint, a major problem of the land reform is that cooperativism has been an imposed government program; it is not a genuine movement with strong grassroots support. Interactions and Trade-Offs Between Member Suiport, Governmental Supnort, and Reform Entermrise Performance There are several criteria of reform enterprise performance, and innumerable factors which influence these. In this area the importance of interactions and trade-offs cannot be overestimated. Three of the most important types of interactions are the following: (1) member support and responsibility versus governmental support and responsibility; (2) economic performance versus member support and participation; (3) enterprise performance versus governmental support. To the extent that members support and take responsibility for the management of their enterprise, the state can relax. But in many cases new reform enterprises cannot function on their own, and member support and responsibility must be cultivated. Here an important di- lemma arises: If the state takes on responsibility for the management of reform enterprises, and especially if it emphasizes technical- productivity considerations over the development of viable participa- tory institutions, members are likely to lose interest in management and, through non-participation, fail to acquire skills necessary for taking over responsibility themselves. Adeauate economic performance of reform enterprises is necessary for member support-where cooperatives and SAIS experience severe economic problems members tend to conclude that their leaders are incompetent or -181- corrupt, and that cooperation is not viable per se. But member parti- cipation is some cases jeopardizes the economic performance of the enter- prise, especially where members utilize enterprise resources for indi- vidual production and seek to expand individual production at the ex- pense of cooperative or SAIS production. If members are not convinced that.their own interests are served through the strengthening of coop- erative activities, democratic management is likely to wreck the enter- prise. If members are forced to collectivize against their will, the government must take on the burden of management until member support is restored--if ever., One of the most fundamental conclusions of this research is that public support is necessary for the consolidation of most enterprises created under the reform. Production cooperatives and SAIS cannot be expected to flourish on their own. Several areas in which the state must provide support are the following: (1) training.of new management personnel; (2) re-training of experienced managers for service in reform enterprises; (3) training of peasants in practical aspects of coopera- tive management, including basic cooperative principles, but more im- portantly, accounting, credit operations,,and the necessity of formal control and supervision of cooperative and SAIS officials' performance, and in practical aspects of agronomy and livestock management; (4) crea- tion of adequate credit and technical assistance facilities; (5) improv- ing the functioning of state-controlled delivery and market systems; (6) upgrading the quality of the rural school system. All of these pro- grams are now being implemented, at least to a degree, by the Peruvian government. They are costly, and some can be expected to yield bene- fits only in the long run. They are most costly and least beneficial in the short run in isolated, backward areas where peasants are poor. For practical political reasons, the government is likely to invest its funds where it,gets the greatest abort-run return. Since the returns are likely to be calculated in te. of productivity, not participation, more is likely to be spent on, e.g., credit and technical assistance than on adequate capacitacion and training of peasants. Moreover, gov- ernment funds are liely to be invested in the areas which are already most productive, wealthy, and best integrated into the market system. -182- To the extent that this is true, government policies are likely to im- prove the technical performance of the best reform enterprises and dis- regard the poorest ones--perhaps allowing them to disintegrate. Just as public support is necessary for the success of new reform enterprises, adequate performance is likely to be necessary for the con- tinuance of public support. It is very unfortunate that sone of the reform's "showcases," such as the cooperative TGpac Amaru II, have per- formed so poorly. In political terms, such notorious failures are likely to overshadow the numerous less-conspicuous success stories, and dis- courage continued support for new reform enterprises.