Why corporations, emerging powers and petro-states are snapping up huge chunks of farmland in the developing world



AlterNet | August 11, 2009


By Scott Thill

In the past six months, big players in the global economy have grabbed 50 million acres of arable land, from Africa to Southeast Asia.

Stop me if you think you've heard this one before:

Investment banks, sovereign wealth funds and other barely regulated financial entities in search of fat paydays go on buying binges structurally adjusted to maximize their earnings reports and employee bonuses, while simultaneously screwing their business associates and everyone else in the process. It's all done in near-total secrecy, and by the time everyone finds out about it, they're already in the poorhouse.

That's more or less the playbook for the derivatives and credit-default swaps gold rush that ruined the global economy, which cratered in 2007 and has yet to recuperate.

The bubble money has now moved on from housing and turned to the commodities markets, especially global food production. Given what that money did to the housing market, things don't look good for local communities whose land is being bought up by governments, sovereign wealth and hedge funds, and other investors on the hunt for real value in a hyperreal economy.

Entrenched and developing economic powers -- the U.K., China, South Korea, India and more -- have launched land rushes to outsource production of everything from staples like rice, wheat, corn and sugar to finance bubbles like biofuels. That includes oil-wealthy Gulf States, which recently feasted on commodities speculation that exploded oil prices in 2008.

The hard numbers are alarming: According to the Guardian, in the last six months over 20 million hectares (around 50 million acres) of arable land, mostly in Africa and Southeast Asia, have been sold or negotiated for sale or lease. That's about half the size of all arable land in Europe, or the size of entire U.S. states North Dakota or Oklahoma.

The aptly titled report, "'Land Grabbing' by Foreign Investors in Developing Countries," from the International Food Policy Research Institute, which declined to be interviewed for this article, explains that "details about the status of the deals, the size of land purchased or leased, and the amount invested are often still murky."

It's no wonder: The economic valuation of land and water has increased in concurrence with both price commodities and the ravages of climate change, whose droughts, wildfires and other extreme environmental events are quickly shrinking what's left of the planet's arable land and clean water.

That exponential process will only be intensified by the biofuels some of these lands will be used to grow, which is a particularly shameless insult. Rather than use the 2.8 million hectares China bought from the Congo -- or the tens of thousands of hectares the U.K. bought from Ethiopia, Mozambique and Tanzania, and so on -- to feed the hungry, those investor nations will use them to grow food for our cars. What biofuels will do is make a few outsider nations very rich at the expense of a great many locals who could use the land to feed themselves.

But don't call it a land grab, cautioned Rodney Cooke, technical advisory division director of the International Fund for Agricultural Development (IFAD), who, along with the United Nations' Food and Agriculture Organization (FAO), also declined to comment on this article, commissioned a study from the International Institute for Environment and Development (IIED) to analyze the disturbing trend. "I would avoid the blanket term 'land-grabbing,' " Cooke said. "Done the right way, these deals can bring benefits for all parties and be a tool for development."

Keep dreaming, argued Patrick Woodall, research director for Food and Water Watch.

"These investments are effectively land grabs for a number of reasons," he told AlterNet by phone. "They're going to be used to grow crops for exports. They're taking arable land out of the domestic food supply. Most of these deals are totally secret, and there are no standards of access to public information. We're also concerned about places with weak legal systems, where farmers and pastoralists won't even know these lands are being sold from beneath them. Some don't even have formal land-titling systems, so this is going to push people off the land and take away their access to food."

It already has, said the FAO's Trade and Market division representative David Hallam, using the kind of maddening opacity made legendary by economists and other hedging professionals.

"There are economic, political, social and ethical concerns surrounding these investments. The record of foreign direct investment in agriculture over the years does, unfortunately, suggest that many of those concerns are well-founded. A review of the literature on the impacts of foreign direct investment in agriculture leaves us with some unease, and at least not a conviction that there are definitely positive effects to be had."

Of course, these diluted revelations didn't stop Hallam from blaming the host countries for its investment partners' shock-doctrine policies. "Most of the onus of actions to attract investment and to make sure it meets the requirements of developing countries," he concluded in a speech to the Woodrow Wilson Institute, "falls very much on the developing countries, on the host countries rather than the investing countries. It's not so much to say no to these investments perhaps, but rather to make sure that the policy and legislative framework is in place to maximize the benefits and minimize the risk."

"That's obviously misguided policy prescription," Woodall countered. "The local leadership are usually not interested in cutting good deals for the people who are actually living on the land, so these questions should be dealt with openly. But that is just not always the case. There's no reason to expect the investment houses that have brought down the global economy to treat countries in the developing world fairly."

But all of this is prologue. This type of opportunist land-grabbing is not new, nor has its recent escalation gone unnoticed by those with a healthy sense of reality. Ever since the housing bubble popped under the weight of political corruption, financial crime and environmental destabilization, the smart money had its eye firmly on more earthbound commodities.

The serious questions worth asking arise after the ink has dried on its secretive contracts: What happens when global warming really takes hold and starving locals get tired of watching their homegrown food and fuel leave their borders? Whose army will enforce these contracts, once they are rendered moot by uprisings and internecine warfare?

The answer is: the same thing that's happening already, just on a much, much larger scale.

"This is already causing a lot of political upheaval," Woodall said. "The government of Madagascar fell recently because of public fury over of a land deal with South Korea's Daewoo Logistics," which would have given the investor over a million hectares, roughly half the size of Belgium, for literally nothing. "China's deal with the Philippines also got scotched because of resistance. The problem is that most people don't know these deals exist."

"We are not against the idea of working with investors," Madagascar's new president Andry Rajoelina explained, after being installed by the military and a constitutional court months after violent protests chased his predecessor, Marc Ravalomanana, out of Iavoloha Palace to an undisclosed location. "But if we want to sell or rent out land, we have to change the constitution, you have to consult the people."

Involving people, especially the poor, in deals that sell arable land from underneath them just isn't in the investment playbook. After all, even the $700 billion doled out by ex-U.S. Treasury Secretary and ex-Goldman Sachs CEO Hank Paulson is practically impossible to track, on purpose. And that's America handing out American money to American banks.

So what cutthroat land-grabber in his or her right mind, which is focused like a laser on maximum profit by any means necessary, is going to clue in a bunch of poor farmers, who already have little recourse, to food-rush schemes designed to lock down production and pricing for richer countries half a world away?

For its part, the FAO believes that some kind of binding global code of conduct is a possible solution, but it admits that such a possibility is closer to fantasy than reality.

"Its enforcement is likely to be problematic," the FAO said in a somewhat laughable policy brief called 'From Land Grab to Win-Win.' "It might nevertheless offer a framework to which national regulations could refer, especially if parties realize that compliance with common standards is in their mutual self interest."

But it never is, which is why these deals are made in the first place. To be brutally honest, mutual interest is the opposite of what investor countries are looking for, which is a one-sided interest arrangement in which already-rich nations and investors, lost in a haze of wasteful consumption and economic and political corruption, hopscotch the world in search of naive hosts to feed upon. And whether it is rice or sugar cane or palm oil or other fuels for their bloated bodies or cars, they are not invested, literally, in the health and well-being of those hosts. They are survivalists in the purest sense, and survivors just don't share when they can hoard.

"Investors are looking at this as scarce land and water in a world of increasing scarcity," Woodall argued, "which is one reason they are pursuing it so actively. They're bringing the plantation mentality to the 21st century and driving people off their land. This is crazy stuff. If the deals that people know about are as big as North Dakota, what does that say about the deals they don't know about?"

Scott Thill runs the online mag Morphizm. His writing has appeared on Salon, XLR8R, All Music Guide, Wired and others.
Original source: AlterNet


  1. gspencer
    12 Aug 2009

    Real wealth and real monetary value is created only when an individual or a family grew and harvested something from the earth, extracted something of commercial value from the earth, provided services (medical, dental, engineering, technology, etc.), and/or made (manufactured or constructed) something that is consumable (or useful), and then sells these items to parties outside of that family in return for a net transfer of gold or currency from other parties to that family. The members of that family reflect their real wealth with the accumulation of grain, gold, cattle, jewels, land, commodities and/or other marketable products for reserve use in times of emergency and/or also to raise the standard of living for the members of that family. A country and its citizens can prosper or become debt ridden in accordance with their industrial behavior and economic actions. If that country purchased imported things from outside of their country, but not of more value than the value of the items that they sold and exported to foreign countries, then they would have a net positive foreign trade balance, and that would have increased the value of the real wealth assets of that country. The USA government policies and recent laws has caused our wealth generating factories to close, and then lay off the US workers for labor cost savings and to escape environmental regulations. The USA has almost entirely ceased to generate wealth for future US generations. Instead the USA has elected to sell or export title to US wealth including real estate, farms, agri-businesses, food supplies, dairies, forests, industries, breweries, hotels, factories, casinos, financial institutions, retail businesses, and most other assets located in the USA in order to pay people in foreign countries to manufacture the things that US citizens consume, and also to pay for US government expenses when the expenses exceed the taxes raised by the government. The USA government is selling our means of creating future wealth to pay for imported products that US citizens consume and US government expenses. My children and my unborn grandchildren will have to work hard and buy back these assets. Am I entitled to sit idle and not have to work in some dirty factory making the things that US citizens consume? This entitlement might end when the USA runs out of property that foreigners will buy for cash to pay the foreigners in foreign factories that are making the things that US citizens consume. We also now have a very clean environment, since we closed all of our factories and relocated those factories (and those jobs) to the foreign countries that lack environmental regulations. When and if foreign individuals and governments stop buying our freshly printed US paper T-Bills, US paper bonds, and other paper US securities at Federal Reserve public auctions, and/or start buying these items at the foreign currency exchange equivalent of a few pennies on the dollar, the government checks, social security checks, government payroll checks, and private paychecks will then not buy very much food or anything else that we consume. Your life savings might only sustain you for a couple of weeks.

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