A $40 million loan will encourage land-related investment and increase agriculture productivity in Andean
Peru will improve its rural land registration and titling to encourage land-related investment and agriculture productivity with financing from a $40 million loan from the Inter-American Development Bank (IDB).
Agriculture is the main source of livelihood for the rural poor. In Peru, 60 percent of the poor people live in rural areas, most of them are farmers who rely on small plots of land and their own labor to produce food for their own consumption and income.
One of the main challenges facing landowners in the Peruvian Andes and Amazon regions is that 90 percent of their land lacks a formal land title. Insecure land rights, in turn, reduce the incentives for farmers to invest in their lands because farmers risk not reaping the short and long-run benefits of their investment.
“The costs of informal rural land rights for smallholders are huge – in lost opportunities to make land-related investment to improve productivity and incomes. Also, unclear lands rights are an important source of social conflicts with indigenous communities. As such, the land titling project complements other public policies already in place to increase the productivity of land in the agriculture sector and to reduce social conflicts over land disputes,” said Eirivelthon S. Lima, IDB project team leader.
The Ministry of Agriculture in Peru with support from the Bank designed a land titling project – a sweeping effort to scale up the delivery cost-efficient land titling services to small farmers and indigenous communities. It is expected that 220,000 small farmers and 380 indigenous communities will receive formal land titles.
Considering the complexity of the project, the Government will implement a conflict resolution mechanism and extensive beneficiary participation.
The Bank has been assisting Peru with land titling efforts since 1996, providing two previous loans worth a total of $41 million.
This latest loan has a 5.5-year grace period and an interest rate based on LIBOR. It matches $40 million in local counterpart funds.