Land Policy Issues in Latin America

Martim Smolka and Laura Mullahy, September 1, 2000

While it is known as a region of great diversity, Latin America is also characterized by common legacies that directly or indirectly affect land issues. These include a heritage of patrimonialism based on a land ownership structure in which political influences determine the spatial allocation of public investments and services; strong central administrations with weak fiscal accountability at the local level; and a legal tradition with elitist codes and rigid, even anachronistic, land-related legislation. Urban planning, with its physical design bias, has tended to focus on the “legal” city while overlooking the “real” city. At a broader level, investments in the fast-growing built environment (i.e., urbanization) are relatively autonomous from the industrialization process. In a context of weak capital markets and high, often chronic, inflation land frequently takes on the role of a capitalization mechanism or a surrogate for the lack of social security.

Regional Trends

One of the main features of the functioning of urban land markets in Latin America is the magnitude and persistence of illegal, irregular, informal or clandestine activities in accessing and occupying land, largely resulting from the insufficient supply of serviced land at affordable prices. This scarcity of serviced land plays an important role in the region’s social culture, since access to land is often a tacit condition for citizenship and social mobility.

Perhaps most important are the multifaceted trends that are sweeping the continent and are opening new opportunities for urban land policy. First is the widespread re-democratization of many countries after long periods of authoritarian or military regimes, which has had numerous implications on land policy. There is a generalized increase in awareness of public officials’ liability and accountability in urban land management as in other aspects of public administration, as well as the emergence and public recognition of new social agents such as non-governmental organizations (NGOs). New forms of community participation and civil action are the expressions of a heightened consciousness of the need to legitimize alternatives to land access by the urban poor, including innovative modes of collective ownership and attention to gender issues in the regularization of illegally occupied land.

A second and related trend reflects the need for institutional and constitutional reforms accompanied by the redefinition of state roles. This process has had a number of manifestations, including:

  • fiscal decentralization, resulting in pressure for new revenue sources at the local level and opportunities to improve on property tax collection;
  • political and administrative decentralization, which has increased the power and autonomy of local and intermediate level authorities. This process has created many new responsibilities associated with land market regulation for the provision of services and social housing;
  • new instruments for regulatory and fiscal intervention, including the implementation of tools associated with the mobilization of land value increments for the community’s benefit;
  • privatization or removal of statutory restrictions on the availability and release to the market of previously state-owned land, thus increasing opportunities to use or reuse existing vacant land;
  • new modes of service provision caused in part by the widespread privatization of utilities, with direct implications on the process of land use and redefinition of patterns of spatial segregation;
  • the emergence of public/private partnerships in urban development and redevelopment, resulting in a variety of new kinds of urban sub-centers.

A third major development of recent decades has been macro-economic restructuring, which has resulted in the stabilization of the region’s historic and often chronic problems with inflation and has influenced the evolution of land prices. Latin America also has experienced broader trends toward globalization, the opening of national economies, and technological changes. Among other consequences, these trends have led to greater competition among cities for private investments, ranging from the use of strategic planning as a city marketing device to giving up local incentives through fiscal wars. This has greatly affected the economic base of the cities and the nature and scale of urban poverty. Also affected are the types of urban interventions (ranging from large-scale rehabilitation projects of abandoned or depressed areas, to new mixed-use developments in urban fringe areas) that are redefining urban form, city dynamics, and patterns of spatial and social segregation.

Building a Presence

Since 1993, the Lincoln Institute has made a concerted effort to participate in the lively debate over land and taxation policy in Latin America. We adopted a multi-country approach to work wherever we can find issues closely related to our own agenda, pursue opportunities to make a difference for local capacity building, or develop initiatives that could be disseminated and potentially replicated in other countries. This strategy allows us to be present in places where significant policy changes are imminent or where important land-related issues are under discussion.

Experience has shown that the Institute is well positioned to play three important roles that serve our educational mandate: to promote cross-fertilization of ideas, to act as a convenor and facilitator of debates among different stakeholders, and to offer intellectual leadership. As in all Lincoln programs, we place great value on the dissemination of valuable information based largely on case studies that can be used to foster intraregional sharing of knowledge and problem solving. This role of encouraging the cross-fertilization of ideas through horizontal dialogue is particularly important given the centralist nature of public administration in Latin America and the predominance of vertical channels of communication.

The Lincoln Institute’s international credibility and recognition as a respected non-partisan institution concerned with land policy and property taxation issues places us in a unique position to facilitate complex, politically sensitive discussions among different stakeholder groups, particularly public officials at different administrative levels and representatives of the business sector, NGOs, and the political community.

Equally important is the Institute’s role in offering intellectual leadership by helping to bridge the gap between state-of-the-art knowledge and the more practical, immediate needs of public officials dealing directly with the implementation and administration of land use and taxation policies. This role often involves “translating” academic ideas and arguments into the language of practitioners through both printed materials and face-to-face courses and seminars. By supporting research and curriculum development projects, we also draw attention to critical and sometimes unperceived dimensions of complex topics, such as the economic consequences of informality in the access to land. As a resource provider to our international partners, we help identify experts and provide useful case studies and other materials from different countries and contexts.

Networks and Program Focus Areas

Beginning in 1995, the Institute’s Latin American Program developed a core network of representatives from twelve countries with whom we worked closely on both curriculum development and educational programs. Our strategy has evolved as we have gained a more profound understanding of the issues that are pertinent to the Institute’s international agenda. Today we work with several networks of public officials, practitioners and scholars that are organized thematically rather than geographically. These five transnational networks, whose topics are often overlapping and thus mutually reinforcing, are linked to the Institute’s three main program areas.

In the Program on Taxation of Land and Buildings, value capture is the primary topic for which the Institute has definite comparative advantages in the region. We focus on technical and management conditions for the implementation of instruments through which land value increments have been or may be mobilized directly or indirectly (through taxes, fees, exactions and other regulatory means) to promote urban development and to benefit the community at large.

In addition to the use of value capture mechanisms to control urban growth and territorial expansion and to reduce the perverse effects of land speculation, we are interested in their applicability to circumstances characterized by the large-scale and persistent informality in land markets so typical in Latin America. These include situations where land tenure relationships are poorly defined, where land occupations are mostly irregular or illegal, and where significant land value increments are self-generated by the community, rather than by state action. This network explores whether land value increments (resulting directly or indirectly from public interventions) can be mobilized to mitigate urban poverty in general and improve the access to serviced land by low-income families in particular.

Our second network looks at property taxation, assessment and collection. International comparisons have shown that the collection of property taxes in Latin America is generally considered inadequate to meet the needs of rapid urbanization. Strong vertical and horizontal inequities, inefficient collection systems, poor assessment practices, strong influence of historical values, and fragile legal frameworks are among the drawbacks to property tax systems in many areas. Nevertheless, many national efforts, sometimes supported by multilateral agencies, are promoting reforms and improvements in property tax systems. These improvements include the innovative use of self-declaratory systems and sophisticated information systems, creative shifts to land value taxes, and opportunities to reinstate the property tax in countries where it does not currently operate. This network contemplates more interconnected research and educational initiatives, ranging from studies of the pros and cons of shifting to land value taxes, to the role of the property tax in facilitating access to land by the urban poor, and to the use of new operational tools to improve local property taxation goals in general.

Spatial and social segregation are concerns we share with the Institute’s Land Markets Program. The landscape of Latin American cities is often stigmatized by the social distance between neighborhoods that emulate the most elegant sectors of cities in any developed country and those settlements with precarious physical conditions to which the majority of the poor urban population is confined. The formation of this divisive social pattern of land use may be attributed to a number of factors: “white expulsions” through market mechanisms; more subtle exclusionary policies embedded in legal and administrative standards (i.e., urbanistic norms, regulations and credit requirements); or the direct land evictions and removals by force that have occurred in almost all Latin American cities. Much has been written about these processes, yet little has been documented about the policies to prevent them or reverse their outcomes. This network addresses questions such as: What are the policies that have been or could be used, and how effective have they been? What should urban planners know about spatial segregation, and why?

The fourth network, also in the Land Markets area, recognizes the need to review existing regulatory environments in the Latin American land policy agenda and to design new urbanistic norms and regulations that can be complied with more realistically by low-income sectors. This means adequately assessing the effects of alternative regulations on the pattern of land uses, specifically on the access to land and urban services by the urban poor. In most large cities in the region, new high-income developments are increasingly out-competing the less attractive and accessible land traditionally affordable to the urban poor. City managers struggle with the promotion of sustainable inner-city densification and the reutilization of abandoned industrial areas, while also trying to control sprawling land use in urban peripheries.

As part of the Institute’s Land as Common Property Program, security of tenure, regularization and urban upgrading programs are important themes. Many countries throughout the region are making major efforts to set legal and urban regularization programs. However, the implementation of these initiatives is often met by political and practical obstacles. The signals being given by these essentially “curative” programs have significant impacts on the illegal, irregular, informal or clandestine activities of groups seeking to access and occupy urban land. The resolution of disputes around regularization programs and arbitration of adequately assessed values for public acquisitions of land for social interest projects often runs into legal and institutional bottlenecks at the national and local levels. This network seeks to better understand the economic impacts of these programs on the functioning of land markets in general and on the benefited settlements in particular.

Dissemination of Information

While continuing to sponsor research and educational programs in Latin American countries, the Institute is also developing parallel efforts to disseminate information to broader audiences. We have created a Latin American section within the Lincoln Institute website, where we present the full text of many research projects and papers presented in our seminars and conferences, in their original language. Also available on the site are a number of Land Lines articles translated into Spanish.

The Institute is making a concerted effort to systematize all curriculum materials (research papers, seminar presentations, outlines, supporting audiovisual materials and other teaching aids) and products (books, articles, videos) to facilitate the organization and integration of our present and future academic activities. A number of Latin America-related publications are now available or are in the planning stages. For example, an annotated bibliography of materials related to urban land markets in Mexico was recently published and will soon be available on our website. This bibliography should serve as a model for other members of our Latin American networks to publish materials on their countries. In addition, several collections of papers presented as part of on-site education programs are being edited for publication.

This issue of Land Lines lists funded curriculum development and research projects and dissertation fellowships for the current academic year, highlighting those affiliated with the Latin American Program.

Martim Smolka is senior fellow and director of the Institute’s Program in Latin America and the Caribbean, and Laura Mullahy is a research and program assistant.

Latin America: A Region of Great Diversity

A brief look at the region reveals a wide variety of situations regarding the status of land and land markets, as indicated below. The Lincoln Institute has worked with scholars and public officials in each of these countries to understand and address their land policy concerns.

Chile’s liberalization of land markets and virtual elimination of urban land boundaries in 1979 (only partially reinstated in 1985) stands in contrast with Colombia’s current efforts to implement a strong value capture planning tool, “Participación en Plusvalias.” This legislation requires local governments to designate 30 to 50 percent of the land value increment resulting from changes in land designation from rural to urban use for social housing and infrastructure provision in underserved neighborhoods.

Informal settlements and land occupations are dealt with quite differently among Latin American countries. In Argentina there have been virtually no restrictions on land use, and consequently there are no officially recognized illegal settlements. Peru’s governments have recognized freely accessed unserviced land on the urban fringe (arenales) since 1961, while in Ecuador there is a complete absence of norms and regulations to deal with informal occupations.

Significant variations in national land policies are also important. For example, Cuba is unlikely to give up state ownership of the approximately 70 percent of land under its control, whereas Mexico passed national legislation in 1992 that allowed for the privatization of the land held under its ejido system.