Controversy around ZIDRES law points to potential risks for investors in the agroindustrial sector in ColombiaMarch 21, 2016 in Uncategorized
A number of members of Congress have taken out a lawsuit against the recent passing of the Zidres law (Spanish abbreviation: developing agricultural areas of interest for rural, social and economic development), underlining the potential significant challenges that this recent economic initiative will face in Colombia. Since early conversations around the law in Congress, NGOs such as Oxfam, CODHES, the Comisión Colombiana de Juristas, and others have voiced their outright opposition to its passing. However, Zidres is a key focus of the current government and its aims to increase investment in rural regions, particularly profiting on the likely signatory of the peace process with the FARC later this year.
One of the key elements of the law, and what is causing the most controversy, is that to fulfil its requirements, companies will have to present their projects to the Ministry of Agriculture. However, it is the companies themselves who are responsible for taking into account considerations around sustainable environmental issues, security, and the participation of local communities and individual landowners in the zones that they are keen to develop. Companies will have to navigate the complex legal challenges around who has the property rights for the areas included in any project proposals, in ways that may contradict or endanger already existing local and regional land claims or usages. Three points are worth keeping in mind to understand the potential risks posed by these projects.
- Firstly, the legal model aims to implement initiatives that would create partnerships between companies and local communities, whereby the latter would then have a stake in the project by working on it, receiving technical training and access to credit to buy land. However, based on this provision it also underlines that local communities could end up losing their autonomy to such companies, who would have executive control over the projects and by defacto the land they operate on.
- Secondly, the law lays out that territory considered to be national property and marked as wasteland, can be used within these economic projects on the condition that the land rights remain with the state and are not transferred to the company who develops the project on the land. However, those against the law argue that this contingency allows companies – including foreign investors – access to the rights of large of swathes of national lands. The law also states that local communities could gain access to land rights on these “wasteland” areas, and reclaim the rights to them. Moreover, local communities who take part in the initiative can incorporate their land rights into the project, if they want to. At a practical level, such processes over land rights are not only deeply confusing to navigate, but open the door for possible processes of land accumulation. This is particularly problematic in rural Colombia and was one of the key drivers of the 50-year armed conflict. As such this controversial element of the law presents significant political and social tensions, both at a local and federal level.
- Thirdly, all projects from the Zidres law are likely to be in areas with heightened social and political tensions. According to the Colombian Notary and Registry office, the lands that can be used in the project will be distributed across 5 regions: La Guajira, Chocó, Norte de Santander, la Orinoquía y la Amazonía. This is another challenge as these are critical areas in current conflicts between local communities, varying other factions and the complex dynamics of the internal armed conflict. This is highlighted by an analysis study carried out by Verdad Abierta using data from the UN and other social organisations in the country. The study outlines that guerrilla groups and criminal organisations have a presence in all these regions, and there are already claims for collective land redistribution under the “local farmer/community reserve zones” and other areas of agricultural production for self-consumption. The new law does not explicitly recognise such zones, and opens them for future project development. This could cause significant tensions for companies when entering the local market, and is likely to create operational challenges as local organisations, and armed groups, react with hostility to their arrival.
“What to watch out for”
At its core the Zidres law offers the potential for national and multinational companies to invest in a number of agroindustrial projects across the country. However, it is crucial that companies and organisations interested in participating in these joint initiatives move with care, carrying out thorough due diligence at a local level into the potential impacts any investment could have in these regions. Though the law has been declared unconstitutional, the national government under President Santos has underlined their commitment to pushing forward with the initiatives to tackle agroindustrial development in the country.
In the context of the expected signatory of the peace process between the government and the FARC later this year and the changing rural environment to one of post-conflict, it’s important that foreign companies looking to invest in opportunities in rural Colombia monitor two key areas. On the one hand, it is paramount to develop good relations with communities and local organisations that live and work in the project regions. Each community has a different historical and social claim and use of the land. It is important to respect social and political processes behind them to not put these communities in a vulnerable position, which would likely only hinder any long-term progress of the project.
On the other hand, companies must be fully aware of the illicit activities of armed groups in the region. Some may attempt to use the land rights issues to increase their property titles and then make financial gains by re-selling this land, or offer services that could put pressure on local communities living in these regions. In particular, future investors will have to carry out significant due diligence at a local level to understand the dynamics armed groups may play in any future investment, and ensure they are fully compliant with international and Colombian laws, to protect their ability to operate in a peaceful environment.