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WSJ: Report on Cargill Fuels Colombia Land Controversy

As seen on the Wall Street Journal

BOGOTÁ, Colombia—U.S. food giant Cargill Inc. acquired 30 times more Colombian land than legal restrictions allow, claimed Oxfam International, the latest allegation amid legislators’ questioning of land purchases by large corporations operating in the South American country.

A unit of the nongovernmental organization which works on poverty-related issues said in a report released on Friday that Cargill accumulated close to 130,000 acres of farmland in eastern Colombia—an area six times the size of Manhattan—in transactions that deprived small farmers of land and could “exacerbate inequality and social conflict.”

Cargill officials deny their purchases violated Colombian law.

“We have a high degree of confidence that what we did was fully within the laws of Colombia,” said a Cargill spokeswoman, adding that Cargill’s investment in growing soy and corn has provided 200 jobs, electricity, housing and bus service in a severely underdeveloped area.

Colombia has one of the highest levels of landownership concentration in Latin America. The purchases of large tracts by single entities have attracted criticism in a country where many people see land distribution as the root cause of a civil conflict that has left nearly a quarter million people dead over five decades.

Concerns about land distribution have contributed to recent widening social unrest in Colombia’s rural areas. In August, farmers disgruntled over free trade and the cost of supplies went on strike for nearly two weeks, blocking roads and disrupting food supplies.

In the government’s ongoing peace negotiations with the Revolutionary Armed Forces of Colombia, the country’s violent, rural insurgency group, land distribution has also been a sticking point.

Government officials and legislators have also raised questions about land purchases by Colombian sugar producer Riopaila Castillo SA, financial firm Grupo Aval SA,GRUPOAVAL.BO +1.08% and others.

Riopaila declined to comment on its land purchases. Officials from Grupo Aval said land-acquisition restrictions didn’t apply to the company’s purchases.

The deals took place in Colombia’s scantly populated high plains, considered one of the world’s last untapped agricultural frontiers.

The acquisitions by Cargill and others mostly took place from 2010-2012, and cumulatively involve the acquisition of around 300 square miles of land.

The transactions have become a flashpoint for debate because the parcels were originally federal land that was awarded to small farmers through a program aimed at land reform and poverty reduction.

The small farmers have a right to sell, but in most cases, Colombian law limits how much a single buyer could acquire to prevent concentration of property in the hands of a wealthy few, according to legal experts.

The Oxfam report said Cargill created 36 companies to purchase 39 properties, allegedly evading such limits.

A Cargill spokeswoman didn’t dispute the facts of the purchases as laid out in the Oxfam report, but denied the acquisitions were illegal. Cargill said that multiple purchases are a typical way to invest in real estate, offering flexibility to sell the land in the future.

The company also acquired some land at inflated prices, according to Oxfam. For example, according to the report, Cargill in 2012 bought a 2,730 acre parcel for $2 million that earlier in the year had been sold for $10,000.

A Cargill spokeswoman said the company paid fair market value given the desirability of land in that area.

Some government officials said the farmers’ sales of land to corporations suggest a failure of the government policy of awarding plots to small farmers to spur rural development.

“The government shouldn’t give land that needs much investment to small farmers who don’t have the capacity and resources to exploit it,” said Francisco Estupiñán, Colombia’s former Agriculture Minister.

A law passed in 1994 prohibited the accumulation of former federal lands, and “apparently what some investors have done is to exceed those limits,” Mr. Estupiñán said.

“These companies clearly looked for a formula that would allow them to acquire large amounts of land” and must be judged by the courts, he said.

In July, questions about land acquisitions resulted in the resignation of Colombia’s ambassador to the U.S., Carlos Urrutia, whose former law firm, Brigard & Urrutia, advised Cargill and others.

Mr. Urrutia said he didn’t want to be seen as using his position of ambassador as a shield from accusations about improper land purchases.

Legal advisers to President Juan Manuel Santos, along with officials from the country’s agriculture ministry, have been searching for a way to find a solution to the uproar over corporate land purchases, according to several people familiar with the talks.

It is a sensitive subject for a government eager to attract investors to the country’s poor, agricultural areas. A number of foreign deals have been put on hold awaiting clarification about the purchases by Cargill and others, according to people familiar with the situation.

One proposed solution under consideration by government legal advisers and agricultural officials would be requiring companies to give a portion of their land to small farmers. The solutions could be announced in coming weeks in proposed legislation on broader agricultural measures.

Cargill´s spokeswoman said it was premature to comment on potential solutions.

President Santos has said investors shouldn’t worry, as “Colombia has enough land where peasants and companies can complement one another.”

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