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Argentina - economic aspects of the country's land use
American Journal of Economics and Sociology, The, Dec, 2000 by Fernando Scornik Gerstein
FERNANDO SCORNIK GERSTEIN [*]
THE CONCEPT OF land-value taxation has a long history in Argentina. Some of the country's early national heroes came under the influence of Physiocracy and its theory of the impot unique. Among them were General Manuel Belgrano, principal mover behind Argentina's Declaration of Independence, and Bernardino Rivadavia, its first president.
I
The Law of Emphyteusis [1]
THROUGH Rivadavia's initiative, the Law of Emphyteusis was passed by the General Constituent Congress held in Buenos Aires in 1826. It provided for the granting of long-term leaseholds of public land (which at that time constituted most of the country), with the expectation that land rent would thus become the chief and perhaps the only source of pubic revenue. The way for it had been paved in 1812 by a decree forbidding the sale of public lands.
As enacted, the law was not perfect in its administrative detail. Nevertheless, it established as a national policy necessary for the development of agriculture (then existing only in a very rudimentary form) the long-term leasing of public land instead of its sale. For this reason, the Law of Emphyteusis was certainly Argentina's most important step toward meaningful land reform. While the abuses inflicted by subsequent governments caused it eventually to be repealed under the stigma of "failure," the emphyteutic principle itself survived and has inspired reform-minded circles in Argentina since early in the 20th century.
The law provided for twenty-year leases. During the first ten years, the lessee would pay into the public treasury a rent or annual fee amounting to eight percent of the assessed value in the case of land used for cattle raising and four percent in the case of smaller parcels used for agriculture. The valuation was to be made by a injury of neighbors, and at the end of ten years, the legislature was to determine the rents to be paid thereafter, according to new appraisals.
The principle underlying the government's action in passing this law is well expressed in the words of Dr. Ignacio Nunez, Rivadavia's diplomatic envoy to London at the time, who told the British government that "the spirit of the project is that publicly-owned lands should never be held in any way other than by leaseholds ... The present taxes bear harmfully upon the people and hinder (the county's) development ... The rent of land is the most solid and definite source of revenue on which the State must count." It was confidently believed, according to Nunez, that the public collection of land rent would make it possible to do away with tariffs and all other taxes. [2]
The statements of Julian S. de Aguero, Rivadavia's secretary of state and learned collaborator, serve further to illustrate the benefits which it was hoped the Law of Emphyteusis would bring. Aguero pointed out that the emphyteutic system was beneficial to produces since it enabled them to occupy land without having to purchase it, and, at the same time, gave them security of tenure.
"If the capital employed in the purchase of land is invested in the purchase of cattle, it will yield more profits," he said. "It is in the nation's interest ... that the cultivated area increase, that the countryside be populated with the aid of foreign immigration, that various industries be organized and beautiful cities built. ... If the State collects all the just rent that corresponds to each parcel, let there be no fear that anyone will apply for or monopolize a greater area than that which he can usefully exploit, for who would be willing to pay so much for land which he does not intend to utilize? Nobody!" [3]
The enactment of the law brought immediate results. Young men left the cities to devote themselves to rural occupations, and it seemed that Rivadavia's dream of creating a democracy on a solid foundation was about to be fulfilled.
The reversal of these promising developments must be viewed against the backdrop of the long and bitter conflict between the two great factions in the nascent republic--the Unitarios and the Federales. The Unitarios, of whom Rivadavia had been the dominant leader for more than a decade, were cosmopolitan idealists based in the city of Buenos Aires, who stood for centralized but liberal government reflecting advanced European ideas such as the emphyteutic principle. The Federales, a loose alliance of provincial caudillos, were rough-hewn populists, suspicious of centralization and foreign influence alike, who regarded the Unitarios as elitist visionaries, prone to sacrifice Argentine to British interests. Despite his enlightened sentiments, Rivadavia had an autocratic personality, and made little effort to build consensus. At a moment of crisis, after fewer than 16 months as president, he dramatically resigned, expecting to be implored to remain in office with increased authority. Instead, confidence in him h ad so declined that 48 of 50 legislators voted to accept his resignation.
The ensuing Federale regime (which soon gave way to some half dozen years of civil war and anarchy) took immediate opportunity to point out the shortcomings of the law--shortcomings which, in the year it had been operating, there had been no time to remove: the poor financial yield to the public treasury owing to the low appraisals made by the juries, and the fact that the system allowed too large an area to be placed under a single leasehold. (These defects time and experience would have remedied.) This laid the groundwork for changing the law, and in February 1828, it was amended to establish a uniform assessment for all lands and to fix the rents at the ridiculously low rate of two percent of the arbitrarily fixed value.
