The International Land Market: Development Opportunity or Neo-Colonialism?

1 
INTRODUCTION 
 
Land is a precious resource: source of life, energy, nourishment. There are several 
reasons and implications to better understand the international land market. 
Commercial interest for this resource strongly increased after the financial crisis 
that hit the international markets in 2008 and still is actual. Land is in fact at the 
center of political and economical debate in many countries, in a world seeking 
for energy, food and profits. Experts of the international community look with 
fear to the recent increases in basic foodstuffs price: rich countries, but poor in 
resources, may want to ensure the necessary food reserves elsewhere. Thus would 
result in a new wave of acquisitions, making the land a profitable investment to 
speculators. In addition, concerns about oil availability led many countries to 
launch programs towards the use of biofuels, implying more pressure on arable 
land. Also the constant population growth, climate change and water over-use all 
contribute to the actual situation, where fertile lands of the South have become 
increasingly precious. In this complex and cumbersome background emerge the 
“land grabbing” phenomenon, the 21
st
 century gold rush. Countries like Saudi 
Arabia, China and India as well as the multinational agribusiness are interested in 
creating huge plantations for the food production or for biofuels, while several 
financial companies, such as hedge funds and pension funds, are convinced that 
agricultural investment can guarantee safe profits. The point is that arable land is
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not an unlimited resource. The wave of large-scale acquisitions has also brought 
several consequences, promptly condemned by the media and non-governmental 
organizations.  Indeed, for many countries the phenomenon is a double-edged 
sword: on the one hand it attract capital and investments, providing employment 
opportunities and infrastructure development in backward economies, on the other 
there is the risk of threatening the already delicate food security and human rights 
protection in these countries. International organizations have seen the increase in 
agricultural foreign direct investment as an opportunity to revitalize an area short 
of capital. Aware of the risks arising from a land rush, they drafted a set of 
principles to regulate the investments and strengthen the position of millions of 
peasants, still representing the most significant source of agricultural investment 
for developing countries. Yet, evaluating the environmental, economical and 
social impacts is really difficult. The complicated system of land tenure or land 
ownership, characterizing different poor countries doesn’t protect the customary 
rights of rural communities. Without formal documents attesting to the actual 
possession of the land, they run the risk of being expropriated of their resources at 
any time. Therefore, the main motivation behind the development of this research 
is the better understand of a problem still little known, trying to assess the actual 
impact of large-scale land acquisitions. The thesis is developed in three chapters. 
In the first chapter I will introduce the land grabbing phenomenon, explaining its 
origins, the actual scenario and analyzing the numbers of the modern land rush.
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I will start then to focus on the main drivers that triggered the land acquisitions. 
At first, we will analyze the biofuel market impact. It turns out to be important 
understanding why the biofuel market development affects so much the land 
resources and how it interacts with the food production. I will also examine the 
policies that many countries established to encourage biofuel consumption and 
production. Afterwards, we will consider all the other factors driving the land 
rush: from the food security, to the financial speculations, to the carbon credit 
market. In the second chapter I will analyze initially all the actors involved in the 
international land market.  We will see that both private sector and governments 
are implicated. The role of China, India and Gulf States will be underlined, but 
also Italy will turn out to be involved in the business. After examining the investor 
countries and the target countries I will consider the international community role 
and position. It will emerge that there’s a debate opposing two different and 
incompatible economic models, two development ideas. On the one hand the 
international organization, on the other hand the NGOs and the farmers. Finally, 
in the third chapter we will look in depth to the characteristic of the large-scale 
land acquisitions and their effects. I will start looking at how the land deals are 
made, considering the counterparts involved, the transparency and the local 
communities consultation. Then I will analyze the terms of the contracts: the 
economic benefits intended for hosting countries, the job creation and the 
compensation for the rural communities. Having a complete picture of the
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phenomenon it will be possible then to assess the economical, environmental and 
social impacts for the rural communities.  In conclusion, I will try to show that not 
all the land grabbing implies bad consequences. Through case studies I will try to 
determine such factors that may avoid negative externalities. Therefore, the aim of 
this research is to understand if this phenomenon might represent a development 
opportunity for all the parts involved, or a sort of neo-colonialism, exploiting the 
developing countries resources and taking advantage of the weak legislations. In a 
winning approach, the company or the country investing in large land plots 
provide capital, infrastructures and job opportunities to the host countries.  
However, given the scarcity of resources that our planet is facing, I will try to 
understand which is the most limiting resource today, why is reflected in land 
scarcity and which alternatives do we have to land exploitation.
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CHAPTER ONE: 
LAND GRABBING, AN INCREASING PHENOMENON 
 
Land market has gained a central role over the world economy in the last few 
years. Foreign investments in agriculture showed a growing trend: land 
acquisitions made by several actors mainly in developing countries contributed to 
the phenomenon of land grabbing. In this first chapter I will examine the 
international scenario to understand at first how the land grabbing originated. 
Then I will quickly look at the amount and the trends of this phenomenon, even if 
several factors make difficult to obtain precise estimation. In the following 
sections I will look deeply into the causes that stand behind the land grab, with a 
particular focus on the biofuel market, which is booming in the last years. The 
chapters conclude with the explanation of the other drivers that brought to the 
actual land rush.
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1.1 FOREIGN INVESTMENTS IN CULTIVABLE LAND 
 
1.1.1 Origins of the phenomenon: an overview 
 
It was summer 2007 when the global stock market was shocked from a deep crisis 
due to subprime lending
1
. Suddenly, given the general uncertainty, investments in 
commodities gained more importance. Food commodities started to attract the 
interest of international investors, as a secure alternative to the stock market, with 
good prospects of returns. The constant increment of world population and the 
relative growth of world food demand played an important role on the actual 
scenario. In 2008 the crisis spread to foodstuff, causing a substantial rise in the 
cost of food, especially in staple foods such as rice, wheat and corn.
2
 Considering 
also the rising cost of oil, the scarcity of storages and the adverse climate 
conditions, as well as the riots in different parts of the world following the 
restrictions on exports by manufacturer countries, many governments depending 
on food imports started to search for a solution
3
. At the same time, financial 
companies, sniffing the deal, began to invest substantial funds in an attempt to 
                                                 
1
 Originated in USA, the financial crisis of 2008 has seen the bankrupt of various 
banks. The main cause of this crisis was the speculative bubble created with 
subprime lending, mortgage loans supplied from credit institutes or financial 
intermediaries to people with a low level of reliability. 
2
 The UN (FAO) released a study in December 2007 projecting a 49 percent 
increase in African cereal prices, and 53 percent in European prices, through July 
2008. 
3
 In Northern Africa countries, between 2007 and 2008, there have been numerous 
protests and riots, as well as in Latin America. In 2007, over 75 million people 
were pushed into the abyss of poverty mainly from the rise in prices of basic 
foodstuff.
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acquire vast areas of arable land. In this complex context emerged the 
phenomenon of “land grabbing”. The definition, introduced for the first time in a 
study published by the NGO GRAIN in 2008, refers precisely to the agreements 
or transactions involving the purchase or lease in multi-year concession (usually 
30 to 99 years old) of large pieces of land in developing countries, by domestic 
and transnational companies, governments, and individuals. The International 
Land Coalition (ILC) in his assembly in Tirana, Albania, reported and defined the 
land grab characterized by lands rented or purchased: 
 
 Infringing the human rights, in particular women’s rights; 
 Ignoring the principle of free, prior and informed consent for the 
communities utilizing the land; 
 Ignoring the social, economic and environmental impact deriving from the 
agreements; 
 Avoiding clear contracts, with serious and binding commitments. 
 
The concept of scarcity and struggle for resources as well as the pressure of 
finance into new international markets are the guidelines in the analysis of the 
growing trend of foreign direct investment in agriculture.  These, if on one side 
are seen as a means to resolve nutritional deficiencies and rural unemployment in 
the countries of the Third World, on the other represents ideally the opening of a 
further chapter in the capitalist expansion over the African continent and more 
generally in various areas of the southern world.  The current wave of investment 
in fact, if doesn’t essentially differ from the previous way of grabbing resources, 
certainly stands out for the extraordinary range of the agreements in question and 
for the speed in which these are achieved.