August 6, 1999
by Richard Plevin, Global Exchange

QUERÊNCIA DO NORTE, BRAZIL -- The yellow jeeps of the Brazilian Military Police dominate the sleepy town of Querência do Norte in the northwest corner of the state of Paraná in southern Brazil. Roadblocks clog the muddy road connecting the town to a farm called Rio Novo, where three hundred poor families have occupied the unused land to farm it and to force the government to comply with the country's agrarian reform laws.

The families are members of Brazil's Landless Peasants' Movement (Movimento dos Trabalhadores Rurais Sem Terra) or MST. With 1.2 million activists, the MST is the largest social movement in the hemisphere and the largest agrarian reform movement in the world. Since its founding in 1985, the MST has won the settlement of over 200,000 families.

But a World Bank project aims to replace the constitutionally-mandated land reform with a market-based program that opponents fear will only increase poverty.

Constitutional Land Reform

The Brazilian Constitution of 1988, enacted in the wake of the military dictatorship, guarantees the right to property and requires that all land be used for the benefit of society. It also provides the federal government with the power to disappropriate, for the purpose of agrarian reform, rural property which is not fulfilling its social function. The law of the land literally is "use it or lose it."

These laws are implemented by INCRA, the National Institute for Colonization and Agrarian Reform. The agency manages all aspects of the land reform process, including determining which land is subject to disappropriation (taking with payment) or expropriation (taking without payment), drawing up legal and technical documentation, deciding the land's value, and issuing special government bonds which pay the landowner over a period of twenty years, with 6% annual interest.

INCRA also funds the Special Credit Program for Agrarian Reform (PROCERA), which offers subsidized credit to land recipients for infrastructure and production. PROCERA loans carry a 6.5% interest rate, a ten year repayment period (with a three-year grace period) and a generous 50% rebate.

Federal Foot-dragging

Given the foot-dragging by federal government, the MST relies on land occupations like the one in Querência do Norte to force the government to comply with the law. The MST looks for high-quality, idle land that is most easily disappropriated, such as land with fraudulent title or for which the owner is heavily indebted to the government. A surprise occupation is then organized, with dozens or hundreds of families arriving under the cover of darkness. The squatters erect plastic-covered tents for housing and plant crops for subsistence and income. Sometimes families remain in these crude encampments for years before being settled permanently.

Once settled, MST families decide how to divide the land, where to build homes, and whether to farm cooperatively or independently. Most settlements organize themselves cooperatively, sharing heavy equipment and facilities such as supermarkets and credit unions. MST technicians teach settlers organic farming methods that control pests naturally while restoring the health of the chemically-damaged land.

Although best known for dramatic land occupations, the MST would prefer to concentrate its energies on cooperative development and education projects, such as the ITERRA institute, a state-funded adult school in Rio Grande do Sul that teaches activists how to manage settlements and run farming cooperatives. The MST also organizes schools in encampments and settlements, where 150,000 students attend more than 1,200 primary and secondary schools.

A Feast for the Wealthy

Land owners are quite pleased with the project. It pays for their land in cash rather than in twenty-year bonds. It allows them to negotiate the price of the land, and to determine which plots to sell. Cédula da Terra allows landowners to dump less-desirable plots in return for immediate cash, protecting their prime holdings--idle or not--from disappropriation.

The MST calls the project "a buffet" for landowners. Its concern is shared by the members of the National Forum for Agricultural Reform and Justice in Rural Areas, an umbrella group uniting Brazil's most important organizations of rural workers and civil society including the MST, the Pastoral Land Commission and the National Confederation of Agricultural Workers. In December, 1998, the Forum filed a formal request to have the World Bank's Inspection Panel review the Cédula da Terra project. The request alleges that the project will harm family farmers and impair the land reform process in Brazil.

The request raised financial concerns such as the high interest rates proposed and possible increases in land prices due to speculation. In response to these claims, the loan terms were changed in December from an adjustable rate based on the long-term interest rate, to a fixed rate of 4%. The request also questioned the "pilot" nature of the project and suggests that the project is intended to subvert, rather than compliment constitutionally-mandated land reform.

Although the World Bank calls Cédula da Terra an exemplary pilot project, key features argue otherwise. The pilot was designed to run for three years, and thus coincides with the grace period on loan repayments. The project has already been expanded, yet the first payments under the pilot project won't be due until 2001. To further skew the results, the "pilot" included grant funds that will are not available in the expanded project.

After a week long visit to Brazil by two members of the Inspection Panel, the Bank concluded that the case didn't warrant a full investigation. However, their report does point out several areas in which the Bank's own project management misrepresented or misunderstood critical information in response to the request for inspection. For example, the management response dismisses the request by claiming that the requesters are not project beneficiaries. The panel report points out a number of the requesters are potentially affected by the project, which allows them to file a request. Bank management questions whether the requesters were representative of their supposed constituencies, but the panel report notes that these organizations' representation of the intended beneficiaries is widely accepted throughout Brazil. Management purports that project beneficiaries would remain eligible for highly-subsidized PROCERA credit; the panel report rightly rejects this claim as false.

Either Bank management is confused about internal procedures, misinformed about project terms, and ignorant of the Brazilian political landscape, or they simply lied to prevent a full inspection, knowing they would suffer no repercussions for doing so. By pointing out these "errors" the Inspection Panel appears almost even-handed while rejecting the request for a full inspection. It's important to note that they weren't in a position to reject the project at this stage--the question was simply whether to invoke the full Inspection Panel process to review the project.

In a rare meeting last month between the MST and President Cardoso, the MST pointed out that the most vocal opponent to an inspection was Brazil's own representative to the World Bank. According to the MST, Cardoso said he considered these inspection an affront to his country's sovereignty, and that in his youth, such behavior was called "imperialism." He insisted that an inspection would never be allowed.

Expanding the Program

Loans under Banco da Terra will be indexed to Brazil's long term interest rate, known as the TJLP. According to the MST, Brazil's national monetary board, whose members are aligned with the IMF, overrode the Minister of Agrarian Reform to require annual interest rates of TJLP + 6%. Currently, TJLP hovers around 14%, but it will rise if inflation picks up. This is the same rate used initially in the Cédula da Terra project, but there the rate was reduced to a fixed 4% just prior to the inspection panel visit. The MST is worried that financial turbulence could render these loans unpayable. Currently in Brazil, 82% of home loans have become unpayable, requiring banks to renegotiate with borrowers.

The MST insists it will not take part in the Banco da Terra. Instead, they plan to renew their request for an inspection of the Cédula da Terra project, based on new evidence of corruption.

A World Free of Subsidies

While the Bank calls Cédula da Terra a complement to constitutionally-mandated land reform, it is clearly intended as a replacement. Recipients of Cédula da Terra funds are ineligible for subsidized INCRA/PROCERA loans, and disappropriated lands are ineligible for Cédula da Terra loans. This year, as per IMF requirements, the Cardoso government cut funding for INCRA by 47% while spending $220 million on Banco da Terra.

According to MST founder and national board member João Pedro Stedile, the fundamental problem with Banco de Terra is not that the interest rates are too high or the payment period to short. The landless movement believes in proactive government intervention to correct inequitable structures in the name of society. The country's constitution supports this notion. But the Brazilian government and the World Bank consider this "old" thinking. "New" thinking says land reform is best achieved through market forces. This approach relieves the Brazilian government of its constitutional obligations to ensure democratic access to land.

The MST is maintaining the pressure with increased land occupations. As of the first week of July, the movement has 500 occupations underway throughout Brazil, in which 102,000 families are waiting to be settled. But progress is difficult in places like Querência do Norte. A month into the land occupation, the families still hold the land, but the Military Police have yet to release several trucks containing the families' belongings, and five people remain jailed on trumped-up charges. While the right-wing governor of Paraná offers large land owners physical protection from land reform, the Cardoso government and the World Bank aim to provide financial protection.