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123-603: Agrarian society, in most rural areas, prior to the reform consisted of an extensive network of haciendas , which were a result of extreme land concentration from colonial times where Spanish landlords were assigned large pieces of land that previously belonged to indigenous groups. The indigenous groups that previously owned and cultivated the lands became workers at these newly founded haciendas. Indigenous workers were unpaid or underpaid, some hacienda workers were given housing and food in exchange for their labor, and others were paid small wages and charged rent for their housing. After

246-710: A market-based economy aimed at the Hispanic sector and cultivated crops such as sugar , wheat , fruits and vegetables and produced animal products such as meat, wool , leather, and tallow . The system in Mexico is considered to have started when the Spanish crown granted to Hernán Cortés the title of Marquis of the Valley of Oaxaca in 1529, including the entire present state of Morelos , as well as vast encomienda labor grants. Although haciendas originated in grants to

369-537: A $ 1,000 Treasury bond. As Dr. Alonso and Dr. Muñoz explain in their report, it makes no economic sense to use a short-term interest rate with respect to a long-term bond such as the Land Reform Bonds. Also, the Guidelines stop paying interest altogether as of 2013, and make the mistake of converting back to Sol at the average foreign exchange rate of 2013, instead of the exchange rate in effect at

492-559: A 2006 opinion, the Congressional Agricultural Committee noted that the Ministry of Finance had made a "net bond placement" equal to "13.285 billion" old sols (~ US$ 380 million). That report also indicated that "payments were made for 10.763 billion" sols of the principal and that there was an outstanding balance of some 2.521 billion sols , approx. ~ US$ 71.2 million. Pursuant to article 29 of

615-420: A 4%, 5% or 6% interest rate, or an interest rate of a 20- or 30-year U.S. Treasury bond, the Guidelines offer bondholders interest rates that are currently less than 0.15%. Dr. Alonso and Dr. Muñoz actually test the outcome of using such different rates and conclude that doing so “has a significant effect on the updated value of the bonds.” Table 3 of their report shows the dramatic difference in compound value for

738-654: A compulsory interest bearing loan to the State into a compulsory interest free loan. Additionally, the Emergency Decree authorized free negotiability of the Bonds only for certain purposes – for instance, to acquire very specific agricultural land (such as fallow lands; or land that was undergoing an irrigation project); or to purchase stock in State-owned agricultural companies. Various bondholders objected to

861-587: A criminal complaint against a court secretary involved in a 2013 court decision about the agrarian bonds. Criminal charges were brought upon Óscar Arturo Díaz Muñoz by the Peruvian Provincial Criminal Prosecutor's Office No. 12 of Lima. To date, the major credit ratings agencies have avoided evaluating this debt. As outlined in a June 2016 article in the Financial Times, Moody's stated the bonds weren't "ratable in

984-431: A fairer payout from the government of the remaining outstanding bonds. In February 2017, Peru confirmed once again that the agrarian reform bonds are a valid sovereign debt obligation via a new administrative decree, Supreme Decree 034-2017-EF. The decree was signed by President Kuczynski on February 23, 2017 and provides for two clarifications to the mathematical formula from the 2014 decree in narrative form. However,

1107-497: A government that has not provided compensation for U.S. certified claims against confiscated property, including expropriated land. It has commonly been associated with U.S.-Cuban relations , as it has been used in practice following the expropriation of property formerly owned by Cubans who have since become U.S. citizens . In the case of Cuba, property was expropriated “without the property having been returned or adequate and effective compensation provided,” which directly triggered

1230-607: A legal opinion regarding the Peruvian agrarian bonds. His legal opinion advised that Peru's disclosures provided to investors in their SEC prospectuses and prospectus supplements were incorrect. Such disclosures claimed that the country was “not involved in any disputes with its internal or external creditors; ” but, citing a memo, among other things, from the MEF identifying at least 400 pending lawsuits and 47 unpaid judgments, Coffee concluded that such statement would be in violation of

1353-454: A manner that is consistent with rated government bonds," and Standard & Poor's stated that it considers the bonds to be "contingent liabilities" but "official documentation and information on the terms and conditions for these bonds has not been established." In April 2016, U.S. Congress shed light on potential conflicts of interest of the major credit ratings agencies. At this hearing, Representative Brad Sherman stated, "we still have

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1476-405: A reasonable rate. Helms-Burton Act The Helms-Burton Act ( Pub. L.   103–236 , 108 Stat. 475, 22 U.S.C.   § 2370a of Chapter 32 –Foreign Assistance ) is a United States federal law enacted as an amendment in 1994 under the U.S. Foreign Assistance Act of 1961 . A key purpose of the act is to protect the property rights of U.S. nationals by prohibiting recognition of

1599-550: A system where the umpire...is paid by one of the teams, and selected by that team." The U.S. Securities and Exchange Commission does not have specific regulations in place to prevent ratings agencies from picking and choosing particular bond rating engagements. Representatives Mike Fitzpatrick and Stephen Lynch also discussed similar conflicts of interest concerns. The Peruvian Provincial Criminal Prosecutor's Office No. 12 of Lima brought criminal charges against Óscar Arturo Díaz Muñoz for “falsification of documents in prejudice of

1722-470: A two-year process to hear each individual claim. This two-year period consists of eighteen months for the MEF to “register” the application; and six months to finalize the “administrative updating.” The Guidelines provide that no payment of any kind can occur until an unspecified “minimum” quantity of claims has been submitted. More generally, the Guidelines say nothing about the form of compensation bondholders might ultimately receive, leaving it unclear if

1845-504: A unilateral offer to pay the Land Reform Bonds in an amount equal to less than 0.5% of the amount owed (i.e. a 99.5% haircut). In addition, Peru’s proposed process subordinates both holders of the bonds who are entities rather than individuals, and purchasers of the bonds on the secondary market. The process also requires bondholders to waive all rights to future legal remedies as a precondition to register their Land Reform Bonds.” In December 2015, Egan-Jones reaffirmed their ratings following

1968-455: A “mandatory” procedure for bondholder claims. To initiate that administrative procedure, however, any bondholder that is a party to ongoing judicial proceedings seeking payment of the value of the Bonds must first “abandon” those proceedings and any rights to participate in any other legal proceedings in the future. Sovereign debt restructuring is not uncommon, and Peru has – as a matter of fact – restructured its sovereign debt several times in

2091-566: Is an estate (or finca ), similar to a Roman latifundium , in Spain and the former Spanish Empire . With origins in Andalusia , haciendas were variously plantations (perhaps including animals or orchards), mines or factories , with many haciendas combining these activities. The word is derived from Spanish hacer (to make, from Latin facere ) and haciendo (making), referring to productive business enterprises. The term hacienda

2214-407: Is imprecise, but usually refers to landed estates of significant size, while smaller holdings were termed estancias or ranchos . All colonial haciendas were owned almost exclusively by Spaniards and criollos , or rarely by mixed-race individuals. In Argentina, the term estancia is used for large estates that in Mexico would be termed haciendas . In recent decades, the term has been used in

2337-528: The Inti . to the Nuevo Sol . As a result, the nominal equivalent of one Sol de Oro is now equal to 0.000000001 – one billionth – of a Nuevo Sol . In a 2006 report, a Congressional Committee opined that the State had “acknowledged the debt and promised to pay it” by issuing the Land Reform Bonds, but “as the value of the currency deteriorated,” it had become “essential” to apply an adjustment factor that “to

2460-629: The Reconquista of Andalusia in Spain. The sudden acquisition of conquered land allowed kings to grant extensive holdings to nobles, mercenaries, and religious military orders to reward their military service. Andalusian haciendas produced wine, grain, oils, and livestock, and were more purely agricultural than what was to follow in Spanish America . During the Spanish colonization of

2583-589: The Chilean land reform (1962–1973). In the Philippines , the hacienda system and lifestyles were influenced by the Spanish colonisation that occurred via Mexico for more than 300 years, but which only took off in the 1850s at the behest of Nicholas Loney , an English businessman and the British Empire 's vice-consul in the city of Iloílo . Loney's objective, according to Alfred W. McCoy ,

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2706-650: The Columbian Exchange and produced significant ecological changes. Sheep in particular had a devastating impact on the environment due to overgrazing . Mounted ranch hands variously called vaqueros and gauchos (in the Southern Cone ), among other terms worked for pastoral haciendas. Where the hacienda included working mines , as in Mexico, the patrón might gain immense wealth. The unusually large and profitable Jesuit hacienda Santa Lucía, near Mexico City, established in 1576 and lasting to

2829-611: The Securities Act of 1933 . U.S.-Peru trade agreement In February 2016, as reported in the Financial Times , a Connecticut-based hedge fund filed a "Notice of Intent to Commence Arbitration Under the US-Peru Trade Agreement ". Gramercy Funds Management filed this claim for $ 1.3 billion against Peru with respect to an alleged refusal to repay defaulted local bonds (agrarian reform bonds) at

2952-528: The Snow White brand name. In the late 19th century, Mercedita became the site of production of Don Q rum. Its profitable rum business is today called Destilería Serrallés . The last of such haciendas decayed considerably starting in the 1950s, with the industrialization of Puerto Rico via Operation Bootstrap . At the turn of the 20th century, most coffee haciendas had disappeared. The sugar-based haciendas changed into centrales azucarelas. Yet by

3075-521: The market economy . Peru has expressed an eagerness to become a member of the OECD, stressing a friendly climate for investors. While Peru participates in OECD Bodies, Guidelines and Legal Instruments, it is not currently a member and has not yet received a formal invitation to apply. However, the current administration has signaled a strong interest in becoming a full member. OECD members must enforce

3198-466: The rule of law , develop and support democratic institutions, support free markets and allow unrestricted access to foreign investors. Noting Peru's current dispute with holders of agrarian reform bonds, Peru's failure to repay runs counter to the OECD's commitment to the rule of law, sound debt management , free markets and unrestricted access by foreign investors as embodied in OECD principles, guidelines and rules. Additionally, Peru's failure to report

3321-428: The 17th century more haciendas were formed as the economy moved away from mining and into agriculture and husbandry. Beginning in the late 17th century Chilean haciendas begun to export wheat to Peru . While the immediate cause of this was Peru being struck by both an earthquake and a stem rust epidemic , Chilean soil and climatic conditions were better for cereal production than those of Peru and Chilean wheat

3444-474: The 1933 Constitution, which was valid when the Land Reform Act was enacted, landowners were entitled to the payment of fair compensation for the expropriated lands. Available sources on this topic indicate that the Land Reform Act did not set forth a fair method for assessing the value of the land, but that it indicated that the amount of the justiprecio would be set, among other ways, on the basis of

3567-642: The 1990s, and despite significant government fiscal support, the last 13 Puerto Rican centrales azucares were forced to shut down. This marked the end of haciendas operating in Puerto Rico. In 2000, the last two sugar mills closed, after having operated for nearly 100 years. An " estancia " was a similar type of food farm. An estancia differed from an hacienda in terms of crop types handled, target market, machinery used, and size. An estancia, during Spanish colonial times in Puerto Rico (1508 – 1898),

3690-630: The 2017 decree does not include a copy of the full mathematical formula proposed by Peru and thus does not disclose the amount Peru is offering to pay. HR Ratings Company In October 2015, credit rating agency HR Ratings issued a rating of HR D (G) to the Peruvian Agrarian Debt Bonds, classes A, B & C as a result of the government's failure to make payments on the bonds in accordance with their original terms. Egan-Jones Ratings Company In November 2015, independent rating agency Egan-Jones Ratings Company (non-SRO) issued

3813-471: The 20th century. In Spanish America , the owner of an hacienda was called the hacendado or patrón . Most owners of large and profitable haciendas preferred to live in Spanish cities, often near the hacienda, but in Mexico, the richest owners lived in Mexico City, visiting their haciendas at intervals. Onsite management of the rural estates was by a paid administrator or manager, which was similar to

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3936-648: The Americas , the hacienda model was exported to the New World, continuing the pattern of the Reconquista . As the Spanish established cities in conquered territories, the crown distributed smaller plots of land nearby, while in areas farther afield, the conquistadores were allotted large land grants which became haciendas and estancias . Haciendas were developed as profit-making enterprises linked to regional or international markets. Estates were integrated into

4059-565: The Andes, mostly organized in the CCP, recuperated lands by massive occupations, the last of which were the spectacular land occupations in the Department of Puno between 1987 and 1989. By the end of the 1980s, according to Enrique Mayer, the indigenous communities (peasant communities) got most of the land in the Andes, and only partly the cooperatives had been a phase in between, for in many cases,

4182-486: The CCP ( Confederación Campesina del Perú ) under the leadership of Hugo Blanco Galdós who were organizing a regional agrarian reform on the own, expelling the hacendados. The third agrarian reform law was adopted by the Peruvian Congress in 1964 when Fernando Belaúnde Terry was president (Ley de Reforma Agraria N° 15037). This reform did not include the large estates on the northern coast, and its application

4305-627: The Civil Code and Article 70 of the Constitution. The Tribunal declared article 1 of Law N° 26597 unconstitutional because “the criteria for the valuation and payment of the adjusted value of the expropriated land” responds to “a sense of basic justice, in accordance with article 70 of the Constitution,” which that law ignored when it provided for payment of “the face value amount only.” The Constitutional Tribunal also found article 2 of Law N° 26597 unconstitutional because it attempted to validate

4428-581: The Civil Code – the Tribunal held that there was no such violation so long as Emergency Decree N° 088-2000 was merely an “option” and was not mandatory. As argued below, at a minimum, the Tribunal's 2004 resolution should serve as persuasive precedent for the Tribunal now as it assesses the Guidelines. Due to the Government's delay in resolving the Land Reform Bond problem, on October 5, 2011,

4551-579: The Emergency Decree N° 088-2000. On February 3, 2004, the Ica Bar Association filed an unconstitutionality claim against several articles of the decree. It was argued, among other things, that the Emergency Decree violated the right to property; and the principle of judicial independence, by unlawfully interfering with proceedings that were pending before Peruvian courts dealing with the payment of compensation for expropriations; and

4674-598: The Engineers’ Bar Association filed a petition seeking enforcement of this Tribunal's Decision of March 2001, which had declared Law N° 26597 unconstitutional. On July 16, 2013, the Tribunal deemed it necessary to address the request so as to “monitor and ensure definitive compliance with the order” contained in its March 2001 Decision (the “Ruling”), and that is why the Tribunal enacted an enforceability declaration. It reaffirmed its March 2001 Decision that expropriation without payment of fair value, or for which “only

4797-617: The Executive Branch shall issue a supreme decree regulating the procedure for the recording, valuation and forms of payment of the land reform bond debt.” Subsequently, on November 4, 2013, after interested persons and organizations – including the Association – filed motions for annulment and clarification of the Ruling, this Tribunal provided that although the MEF had the authority to issue Guidelines, “the process of adjusting

4920-484: The Gildemeister family (merchants from Bremen ). In the Peruvian constitution enacted in 1920 under Augusto B. Leguía , indigenous communities were recognized as legal entities for the first time in Peruvian history, which gave them the right to land property and legal protection against expropriation by the haciendas. However, in the 1920s there was an uprising of Quechua peasants in the province of Anta against

5043-471: The Government ever will pay in cash or will simply issue another bond with below market terms and long maturity. In fact, article 17.1 merely indicates that the MEF, “taking into account principles of fiscal balance and financial sustainability,” as well as “fiscal rules” and the “multi-annual macroeconomic framework,” shall “define the options that the bondholders may choose from” for the purposes of collecting. The Guidelines also contain provisions stating how

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5166-419: The Government proposes to calculate the debt due to each bondholder. It describes these calculations by a series of complex equations. The equations are not easy for a lay person to understand. They purport to convert a nominal amount of Soles Oro into U.S. dollars using what they call a “parity exchange rate.” However, instead of using a well- established international reference for such a parity exchange rate,

5289-480: The Guidelines calculate that rate with another complex equation that is unusual and unfounded. As Dr. Ivan Alonso and Dr. Italo Muñoz explain in their report submitted along with this brief, the Guidelines’ yield the absurd result that as Peruvian currency weakens against the dollar, each Sol is worth more and therefore fewer dollars are required to achieve parity. This makes no sense. This basic error in

5412-470: The Land Reform Bonds, but also rates that are considerably lower than U.S. Treasury bonds of durations closer to those of the Land Reform Bonds, as the following chart shows: The information from the table above comes from the U.S. Treasury Department's webpage. It shows the dramatic difference between the interest rate of a 1-year T-bill and a 30-year Treasury bond. There can be no doubt that they are fundamentally different securities. So, instead of applying

5535-706: The Maoist Shining Path during the internal conflict in Peru in the 1980s and 1990s, especially in the regions of Ayacucho and Junín. This was the case with the sheep-holding SAIS “Cahuide” in Junín, which was later distributed among peasant communities and smallholders. Under Alberto Fujimori , Absalón Vásquez , the son of an agricultural worker at the sugar cooperative (CAP) of Casa Grande in Chicama Valley , became agricultural minister. He privatized

5658-469: The Peruvian state on the verge of economic catastrophe, Velasco lost support from his former military allies resulting in the end of his regime and large scale reductions to land reform attempts. In 1975, Juan Velasco Alvarado was removed from power in a bloodless coup staged by Francisco Morales Bermúdez , Velasco's former Prime Minister and Minister of War. Morales was considered a political moderate by military leaders in Peru, who were looking to reduce

5781-668: The State and of Carlos Mesía Ramírez”. Carlos Mesía Ramírez is an ex-magistrate of the Constitutional Tribunal in Peru. The allegedly tampered ruling abruptly reversed multiple prior court decisions, leaving the agrarian bonds essentially worthless. Criminal charges cite direct evidence that a draft decision ruling in favor of bondholders was manipulated with white-out to become a dissenting opinion of ex-judge Carlos Mesía Ramírez without his consent. In January 2016, as reported by The Wall Street Journal , Columbia University law professor John C. Coffee provided

5904-445: The State and was subsequently distributed among peasants and campesinos organized in cooperatives and agricultural associations. Those whose property was expropriated were entitled to compensation based on an appraisal conducted by the State and payment of the fair value was required by constitutional mandate. The State promised to pay over time, with interest, by issuing and placing the Land Reform Bonds. Landowners had no choice in

6027-629: The State has failed to establish criteria for the ‘valuation and payment of the adjusted amount of the debt,’ much less paid it. On the contrary, as counsel for the Engineers’ Bar Association has shown, the Executive Branch, in various responses given to persons whose property was expropriated under the Land Reform, and through its government attorneys in claims filed to collect the fair price owed, has consistently denied

6150-488: The State's obligation to pay the fair value of the land, which had the “State’s unreserved guarantee” pursuant to article 175 of the Land Reform Act. The website of the Ministry of Agriculture and Irrigation indicates that between June 1969 and June 1979, more than 9,000,000 hectares of land were expropriated, consisting of some 15,826 land lots. According to that source, this benefited approximately 370,000 families. In

6273-597: The United States for an architectural style associated with the traditional estate manor houses. The hacienda system of Argentina , Bolivia , Chile , Colombia , Guatemala , El Salvador , Mexico , New Granada , and Peru was an economic system of large land holdings. A similar system existed on a smaller scale in the Philippines and Puerto Rico . In Puerto Rico, haciendas were larger than estancias ; ordinarily grew sugar cane, coffee, or cotton; and exported their crops abroad. Haciendas originated during

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6396-796: The United States or HM Treasury in the United Kingdom. Agrarian bonds in Peru Beginning in 1969, the government of Peru issued sovereign bonds as compensation for land expropriation during the Peruvian land reform under General Juan Velasco Alvarado . The government's aim was to redistribute land and reform the country's agrarian infrastructure. Payments on these bonds halted in 1992 due to periods of hyperinflation. The agrarian bonds have been recognized as outstanding sovereign debt obligations by Peru's highest courts, who have stated that these bonds should be repaid. However, today

6519-437: The agrarian reform”. Properties redistributed under Velasco and Morales were not returned to the oligarchies, but work-led cooperatives were converted into independent enterprises that could be easily dissolved by their members. In the following years, most of the cooperative land in the Andes was distributed among indigenous communities and smallholders, resulting in a radical restructuring of land distribution in Peru. Peasants in

6642-528: The amendment is not currently being applied to the government of Peru, a review of the situation of U.S. citizens holding agrarian reform bonds fits squarely under an application of the Helms-Burton Amendment as bondholders await a fair compensation. Organisation for Economic Co-operation and Development (OECD) The OECD is an intergovernmental economic organization to which countries apply for membership upon commitment to democracy and

6765-473: The arrangement with the encomienda. Administrators were often hired for a fixed term of employment, receiving a salary and at times some share of the profits of the estate. Some administrators also acquired landholdings themselves in the area of the estate they were managing. The work force on haciendas varied, depending on the type of hacienda and where it was located. In central Mexico near indigenous communities and growing crops to supply urban markets, there

6888-456: The authorities had not even started expropriations of landlords. The agrarian reform, initiated by Juan Velasco Alvarado, occurred from 1969 to 1978. The reform efforts were successful in redistributing land to indigenous communities, campesino communities, individual families, and to agricultural businesses and some corporate structures. The reform benefited approximately 334,108 of the around 700,000 families that did not own land in Peru prior to

7011-453: The classifications in paying bondholders. The fact is, no Bond has priority over any other. To the contrary, all the Bonds received the same guarantee and are equal in entitling the owner – whoever that may be – to payment of the debt. The Guidelines also make the procedures and the updating methodology established therein the exclusive remedy for bondholders to collect the value of their bonds. A movement has arisen among Peruvians to request

7134-620: The coastal haciendas producing cash crops such as sugar cane , cotton and rice for the external as well as for the internal market, but also in the Andean region of Cuzco, among them the CAP José Zúñiga Letona at the former hacienda Huarán in the Calca District , where the film Kuntur Wachana was made, the cooperative of Ninamarca, whose first director was the famous peasant leader Saturnino Huillca Quispe , and

7257-417: The cooperative did not even speak the language of the peasants, Cuzco Quechua . The land occupations were organized by the oppositional peasant organization CCP, which had already occupied lands in the 1960s. In the following years, the lands of the cooperative were distributed among the indigenous communities, and in 1980, it was dissolved. Other land occupations took place in the department of Apurimac where

7380-577: The crops for exporting. Some estancias were larger than some haciendas, but generally this was the exception and not the norm. In the present era, the Ministerio de Hacienda is the government department in Spain that deals with finance and taxation , as in Mexico Secretaría de Hacienda y Crédito Público , and which is equivalent to the Department of the Treasury in

7503-537: The debt if calculated using the CPI method. Accordingly, in an act of purported balancing of the bondholders’ constitutional rights against this asserted threat to the general welfare, the Tribunal endorsed a different method: “calculating the adjusted value of the bonds by indexing the existing obligations to the equivalents in foreign currency” and then “applying the interest rate for United States Treasury Bonds.” The Tribunal thus ordered that “within six months of this Ruling,

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7626-408: The debt remains unpaid, and the government of Peru has yet to clarify means and ultimate value of compensation to current bondholders. Beginning in 1969, the Peruvian government under General Velasco implemented a series of measures aimed at transforming the country's social landscape by addressing the wealth-distribution system, particularly the economic and land ownership system. One such measure

7749-560: The debt” should “under no circumstance” lead to a “result that reflects the practical application of a nominal criteria” and it reserved its jurisdiction to monitor calculation processes leading to a nominal payment. In January 2014, the MEF issued the Guidelines containing the “Regulations for the Administrative Process of Recording, Adjusting and Paying the Land Reform Bond Debt.” The Guidelines set out

7872-588: The decision, and the use of white-out to alter court decisions. To date, Peru has neither denied nor condemned the procedural irregularities associated with the Constitutional Tribunal's July 2013 decision, nor has the Constitutional Tribunal or the Executive Branch taken any steps to remedy or address the forgery . The altered decision still exists on the Constitutional Tribunal's website and its proposed dollarization methodology

7995-582: The double effect of strengthening England and Scotland's textile industries at the expense of Iloílo's and satisfying the growing European demand for sugar. In the late 20th and early 21st centuries, attempts to abolish the hacienda system in the country through land-reform laws have not been successful. The expiration of the Laurel–Langley Agreement and the resultant collapse of the Negros sugar industry gave President Ferdinand E. E. Marcos

8118-412: The elite, many ordinary Spaniards could also petition for land grants from the crown. New haciendas were formed in many places in the 17th and 18th centuries as most local economies moved from mining toward agriculture and husbandry. Distribution of land happened in parallel with the allocation of indigenous people to servitude under the encomienda system. Although the hacienda was not directly linked to

8241-485: The enactment of N° 26597 in April 1996, the government took the position that physical delivery of the bonds was tantamount to effective payment. In 1996, however, the Engineers’ Bar Association asked this Tribunal to declare Law N° 26597 unconstitutional on the basis that it affected the valuation criteria and payment for expropriated lands enshrined in article 70 of the Constitution. The Engineers’ Bar Association argued that

8364-400: The encomienda, many Spanish holders of encomiendas lucratively combined the two by acquiring land or developing enterprises to employ that forced labor. As the crown moved to eliminate encomienda labor, Spaniards consolidated private landholdings and recruited labor on a permanent or casual basis. Eventually, the hacienda became secure private property, which survived the colonial period and into

8487-505: The end of that month, the same amount of money would have the power to buy only 1/4 of the goods and services it could have purchased at the beginning of that month. In other words, prices were more than 100 times higher by August 1990 than they had been a year earlier; more than 7,000 times higher than they had been the year before that; and more than 30,000 times higher than they had been just three years earlier in August 1987. For bondholders,

8610-420: The equation thus turns the purpose of using a parity exchange rate on its head. The Guidelines then apply to this incorrectly restated principal amount not the interest rate stated in the Bonds, but an interest rate for U.S. Treasury bills (also known as T-bills) of just one-year duration. The one-year U.S. Treasury bills have interest rates that are not only considerably lower than the interest rates specified in

8733-530: The expropriations – slightly over 15 billion sols – is pretty low,” as it corresponds to “approximately half of the national budget for agricultural loans in 1977,” and “only 20% more than the national investment in irrigation in 1978.” During the 1980s, Peru began defaulting on the payment of the Bonds’ coupons. This default has been attributed to the deteriorating economic situation, which resulted in terrible hyperinflation (as described in paragraphs 45 and 46),

8856-469: The expulsion in 1767, has been reconstructed by Herman Konrad from archival sources. This reconstruction has revealed the nature and operation of the hacienda system in Mexico, its labor force, its systems of land tenure and its relationship to larger Hispanic society in Mexico. The Catholic Church and orders , especially the Jesuits , acquired vast hacienda holdings or preferentially loaned money to

8979-552: The extent possible, would allow the value of the confiscated assets to remain constant.” While the Engineers’ Bar Association unconstitutionality claim was pending, in 2000, Peru passed Emergency Decree N° 088-2000, recognizing the land reform debt and purporting to implement a mechanism for crediting and paying it, using new bonds issued by the Public Treasury. To adjust the value of the Land Reform Bonds, Emergency Decree N° 088-2000 ordered them converted “to U.S. dollars at

9102-461: The face value of the debt owed to them – as denominated in Soles Oro – virtually disappeared. In response to the profound inflation and currency devaluation crisis, the administration changed the currency twice in a span of six years. In 1985, Peru switched from Sol Oro – the currency in which the Bonds were issued – to Inti . In 1991, the State once again changed the official currency from

9225-515: The face value was paid,” violated “a basic sense of justice” in accordance with article 70 of the Constitution. In its Ruling, the Tribunal reproachfully summarized the Government's conduct with respect to the payment of the Land Reform Bonds: “(…) although the Executive Branch initially showed willingness to honor the debt resulting from the expropriations conducted as part of the Land Reform [...] it later abandoned its efforts and to date

9348-413: The fair value system presented in the Bonds while treating this value “in an unalterable way that failed to take into account the effects of time.” The Tribunal further declared these legal provisions unconstitutional “as they violated the valuation criteria inherent to property.” The “sense of basic justice” to which the Tribunal's March 2001 Decision referred arose from the effect of hyperinflation on

9471-441: The following three ratings on Peruvian sovereign debt: Egan-Jones’ sub-investment grade sovereign ratings for Peru were primarily due to weak institutions. Egan-Jones cites the spotty track record of the government, specifically the ongoing default on the agrarian reform bonds. Their press release states, “The Land Reform Bonds were issued between 1969 and 1982 and remain unpaid. Through a recent administrative decree, Peru has made

9594-580: The former haciendas to cooperatives controlled by bureaucrats and engineers led to great dissatisfaction among the indigenous peasants and the traditional peasant communities who wanted to get back their lands taken from them by the hacendados. Land occupations of cooperative lands started as early as 1973 in the huge cooperative “Tupac Amaru II” also called Machu Asnu (“Old Donkey”) in Anta Province (department of Cuzco), formed out of 105 former haciendas expropriated between 1971 and 1973. The leadership of

9717-414: The hacendado, and owed a portion of their crops to him. Stock raising was central to ranching haciendas, the largest of which were in areas without dense indigenous populations, such as northern Mexico, but as indigenous populations declined in central areas, more land became available for grazing. Livestock were animals originally imported from Spain, including cattle, horses, sheep, and goats were part of

9840-638: The hacendados. As the hacienda owners' mortgage holders, the Church's interests were connected with the landholding class. In the history of Mexico and other Latin American countries, the masses developed some hostility to the church; at times of gaining independence or during certain political movements, the people confiscated the church haciendas or restricted them. Haciendas in the Caribbean were developed primarily as sugar plantations were dependent on

9963-409: The huge CAP Tupac Amaru II in Anta Province , which produced for the internal market. These cooperatives were owned by the agricultural workers in form of collective ownership. The SAIS were organized as cattle-holding cooperatives owned by agricultural workers grazing livestock and associated with traditional neighboring peasant communities. On 9 May 1972, Law Nº 19400 was promulgated, which dissolved

10086-507: The independence of Peru, the few restrictions for landowners to protect the indigenous peasants were lifted, and the haciendas expanded largely at cost of the indigenous communities. In the years between 1900 and 1918, the sugar cane haciendas in Chicama Valley in the Department of La Libertad were acquired by three industrial giants: the Larco brothers (related to the family of José A. Larco), Graham Rowe and Co (British export company) and

10209-590: The indigenous peasants of the former haciendas simply refused to turn them into cooperatives, and after that they got the land as a community directly. According to him, “the landowning class was totally eliminated from the countryside” in the highlands. Few cooperatives remained, such as the sheep-holding SAIS Tupac Amaru N° 1 located in Pachacayo (Junín) with more than 200,000 hectares of land as of 2012, still active in 2021 with 30,000 peasants and 16 associated communities. Some cooperatives were destroyed by actions of

10332-426: The labor of African slaves imported to the region and staffed by slaves brought from Africa . In Puerto Rico, this system ended with the abolition of slavery on 22 March 1873. In South America , the hacienda remained after the collapse of the colonial system in the early 19th century when nations gained independence. In some places, such as Dominican Republic , with independence came efforts to break up

10455-720: The land from the hacendados and redistributed it to the peasants. The first haciendas of Chile formed during the Spanish conquest in the 16th century. The Destruction of the Seven Cities following the battle of Curalaba (1598) meant for the Spanish the loss of both the main gold districts and the largest sources of indigenous labour. After those dramatic years the colony of Chile became concentrated in Central Chile which became increasingly populated, explored and economically exploited. Much land in Central Chile

10578-478: The land reform expropriations had actually been “seizures,” because landowners had received Bonds that were worth far less than the expropriated land, and that due to the “inflation process,” the value of the Bonds had been “eroded in relation to the actual value of the expropriated land.” The Constitutional Tribunal noted that Congress “denied and opposed” the Engineers’ Bar Association's petition, arguing that “the land reform bonds are valid payment and are governed by

10701-410: The landlords which was repressed by security forces. In 1936, the rights of the indigenous communities were also included in the Civil Code (Código Civil). The indigenous communities that could prove their historical existence as legal entities got land titles, which gave them legal protection against expropriation by the haciendas. By the year of 2000, 5660 communities were recognized. In November 1962,

10824-535: The large plantation holdings into a myriad of small subsistence farmers' holdings, an agrarian revolution. In Bolivia , haciendas were prevalent until the 1952 Revolution of Víctor Paz Estenssoro . He established an extensive program of land distribution as part of the Agrarian Reform . Likewise, Peru had haciendas until the Agrarian Reform (1969) of Juan Velasco Alvarado , who expropriated

10947-438: The law, armed soldiers entered the sugar haciendas of the northern coast to take the installations and expel their owners. In contrast to Belaúnde's reform, no exemptions for owners of large estates were allowed. Between June 1969 and June 1979, more than 9 million hectares of land representing 15,826 lots were expropriated, benefitting some 370,000 families, much more than the approximately 1 million hectares from 546 haciendas in

11070-628: The matter, for the law made surrender of land and acceptance of the Bonds mandatory. The State, therefore, not only took the land but effectively compelled the landowners to loan the State the funds with which to pay compensation for the takings. The Government ultimately issued three classes of Land Reform Bonds: ( i ) Class A, with 6% annual interest over twenty years beginning as of their placement; ( ii ) Class B, with 5% annual interest over twenty-five years; and ( iii ) Class C, with 4% annual interest over thirty years. These Bonds stated that they were payable annually in cash until maturity. They represent

11193-684: The military government of Ricardo Pérez Godoy enacted the Agrarian Reform Law D.L. N° 14328. In 1963, the military government of Nicolás Lindley decreed the Agrarian Reform Law (Decreto Ley No 14444) creating the Institute of Agrarian Reform and Colonization (IRAC, Instituto de Reforma Agraria y Colonización) and started a process of Agrarian Reform in La Convención Province and Lares Valley ( Department of Cuzco ), reacting to land occupations by peasants organized in

11316-484: The need to adjust the amount of the debt, given that there is no court or administrative order to do so, and the judgment of this Court ‘cannot apply to events that occurred before the judgment was rendered.’” While the Tribunal’s decision reaffirmed that the Government is obliged to pay the current value of the debt, it also went further and considered several methods for calculating that current value. Among those methods

11439-449: The nominal payment principle, under which the creditor receives the exact sum of money appearing on the bond, regardless of any changes in its purchasing power.” On March 15, 2001, the Tribunal issued a landmark opinion. The Tribunal upheld the Engineers’ Bar Association unconstitutionality claim and confirmed the principle that the Land Reform Bonds should be adjusted in accordance with the valuation principle enshrined in article 1236 of

11562-449: The official exchange rate in effect on the issue date,” applying “to the result an annual interest rate of seven point five percent (7.5%) up to the month immediately prior to the date the calculation was made, compounded annually.” Emergency Decree N° 088-2000 provided that payment would be made by swapping the Land Reform Bonds for newly issued sovereign debt with a maturity of 30 years but with no interest . In other words, it converted

11685-436: The opening to strip the hacenderos of their self-appointed roles as kingmakers in national politics . Hopes were short-lived, however, as protests revolving around Hacienda Luisita , as well as massacres and targeted assassinations in the Negros provinces , continue to this day. The opportunity that had earlier arisen was squandered and any significant gains stillborn. Haciendas in Puerto Rico developed during

11808-418: The operation, marking the end of attempts at agrarian reform in Peru. In 1980, the revolutionary government of Peru and Morales' Administration was unable to continue, and reinstated constitutional rule in Peru. Belaúnde, the president who was originally ousted by Velasco, won the first election in the newly established electoral system. According to Enrique Mayer, Fernando Belaúnde Terry “did his best to derail

11931-492: The option of going to Court to demand payment of the adjusted amount of the debt, plus applicable interest.” In other words, the Tribunal left open the possibility for Land Reform Bond holders to seek compensation before a competent court. Similarly, with regard to the alleged violation of the principle of equality under the law – petitioners in that case argued that the Emergency Decree N° 088-2000 used an adjustment method “different from that normally provided for creditors” under

12054-606: The organizations of the hacendados: the National Agrarian Society (Sociedad Nacional Agraria, SNA), the Association of Stockbreeders (Asociación de Ganaderos) and the Association of Rice Producers (Asociación de Productores de Arroz). Instead, the organization of the beneficiaries of the agrarian reform, the National Agrarian Confederation of Peru ( Confederación Nacional Agraria , CNA), was founded on 3 October 1974. The ascription of

12177-440: The outstanding debt to the U.S. Securities and Exchange Commission or International Monetary Fund does not adhere to the OECD's leading practices for reporting public debt and runs counter to the OECD's commitment to transparency standards. Irregularities surrounding the Constitutional Tribunal ’s 2013 decision conflict with the OECD's commitment to the rule of law, including public pressure from then President Humala prior to

12300-422: The past. But it has never asked creditors to waive their procedural rights just to reconcile the amount due. This is followed by a complex, bureaucratic and uncertain administrative process. That process could take up to seven years before the bondholders receive any value: five years for bondholders to file their “applications” to be “officially identified and registered” as the Bonds’ legitimate holders, followed by

12423-544: The reform. The start of the downfall of Peruvian Agrarian Reform was when Peru began to experience a severe economic depression around the mid 1970s which continued through the 1980s. This economic crisis resulted in high levels unemployment, inflation, and food shortages, and was in part caused by the economically protectionist policies and high spending of the Velasco regime and the increasing resistance to state actions from political opposition and business elites in Peru. With

12546-503: The remaining sugar cooperatives in this traditional region of sugar production, which by then had been severely indebted to banks, and sold them to the agricultural corporations Gloria (Rodríguez Banda family), Wong and Oviedo at the end of the 1990s. Hacienda An hacienda ( UK : / ˌ h æ s i ˈ ɛ n d ə / HASS -ee- EN -də or US : / ˌ h ɑː s i ˈ ɛ n d ə / HAH -see- EN -də ; Spanish: [aˈθjenda] or [aˈsjenda] )

12669-469: The right to due process, since it attempted retroactively to impose a procedure that did not exist at the time the underlying events occurred. That claim was the basis for this Tribunal to set another historic precedent. On August 2, 2004, the Tribunal upheld the independence of the judiciary and concluded that “the procedure governed by Emergency Decree N° 088-2000” should be interpreted “as an option that may be freely chosen by creditors as an alternative to

12792-507: The same priority for people under 65 years of age, and thereafter, give preference to legal entities that are holders of the land reform debt, followed by legal entities that have acquired the bonds as part of the payment of obligations provided for under law, and finally, legal entities that acquired the obligations for “speculative ends.” The Guidelines do not explain why these classes were established, how any individual bondholder will be classified under them or precisely what use will be made of

12915-437: The scope of the revolutionary actions of Velasco without entirely abandoning the revolutionary government . Francisco Morales Bermúdez undid many of the left-wing policies from the Velasco administration, and became a part of Operation Condor . Under Morales political regime, the expropriations of land (initiated by Velasco) continued, although in different areas, and the scope of the operation of seizing and redistributing land

13038-487: The sworn declaration of self- valuation ( autoavaluo ), or “on the basis of the land’s economic capabilities” and that the Land Reform General Directorate fixed the justiprecio on the basis of the land's quality using a representative hectare sample for agricultural lands. In their publication Quantitative Aspects of the Land Reform , Caballero and Alvarez indicate that “the total amount of

13161-595: The time of Belaúnde's government. In the beginning, the expropriated estates were not distributed, but were left intact, concentrated and collectivized. 15,000 expropriated estates were transformed into 1,708 cooperatives. The expropriated landowners had to accept agrarian bonds within 20 to 30 years at an interest rate of 4 to 6% p.a. as compensation. Two types of cooperatives were formed: Agrarian Production Cooperatives (Cooperativas Agrarias de Producción, CAP) and Agrarian Societies of Social Interest (Sociedades Agrícolas de Interés Social, SAIS). The CAPs were formed mainly in

13284-526: The time of Spanish colonization. An example of these was the 1833 Hacienda Buena Vista , which dealt primarily with the cultivation, packaging, and exportation of coffee. Today, Hacienda Buena Vista, which is listed in the United States National Register of Historic Places , is operated as a museum, Museo Hacienda Buena Vista . The 1861 Hacienda Mercedita was a sugar plantation that once produced, packaged and sold sugar in

13407-538: The time of actual payment – which, pursuant to the Guidelines, may occur many years from now. As addressed below, the Guidelines also discriminate among bondholders, classifying them in: ( i ) those over 65 years of age; ( ii ) individuals over legal entities; ( iii ) the original bondholders over the assignees. The Guidelines provide that persons over the age of 65 who are original bondholders are entitled to collect before other individuals who are older than 65 but are not original bondholders. The Guidelines then provide

13530-616: The use of sanctions by the U.S. government against the country. According to the 1994 Helms-Burton Amendment, if the property of U.S. citizens is expropriated by another country without receiving “adequate and effective compensation” in accordance with “international law,” no further U.S. foreign aid is legally permitted. The amendment also requires that U.S. Executive Directors of each multilateral bank to vote against any loans to such expropriating country. The holders of Peruvian agrarian reform bonds include descendants of expropriated Peruvian landowners that have since become U.S. citizens. While

13653-409: The value of the Bonds during the long payment period the State had imposed. Between 1980 and 1987, Peru's annual inflation rate never dipped below 50%. Between 1988 and 1990, the economic situation continued to worsen and inflation spiraled out of control, reaching its peak in August 1990, when annual inflation was 12,378%. In that month alone, existing currency lost 75% of its value. This means that at

13776-462: The winding down of the Agrarian Bank that took place from 1992 and the currency switch from Soles Oro to Inti . Although Peru for a time created some individualized bank accounts and credited those accounts with nominal payments and deposits, it appears that it stopped paying the debt altogether – even on a nominal basis and unadjusted for current value – approximately in 1992. Through

13899-772: Was a plot of land used for cultivating "frutos menores" (minor crops). That is, the crops in such estancia farms were produced in relatively small quantities and thus were meant, not for wholesale or exporting, but for sale and consumption locally, where produced and its adjacent towns. Haciendas, unlike estancias, were equipped with industrial machinery used for processing its crops into derivatives such as juices , marmalades , flours , etc., for wholesale and exporting. Some "frutos menores" grown in estancias were rice , corn , beans , batatas , ñames , yautías , and pumpkins ; among fruits were plantains , bananas , oranges , avocados , and grapefruits . Most haciendas in Puerto Rico produced sugar, coffee, and tobacco, which were

14022-419: Was blocked by a Congress majority of APRA and the right-wing Unión Nacional Odriista . Up to 300.000 peasants in the Andes marched in protest for a real agrarian reform. In 1969, there were an estimated 700,000 families that did not own any land. Many of these families were indigenous and or low-income, worked in haciendas, and were predominately located in rural regions of Peru. A program of agrarian reform

14145-425: Was cheaper and of better quality than Peruvian wheat. Initially Chilean haciendas could not meet the wheat demand due to a labour shortage, so had to incorporate temporary workers in addition to the permanent staff. Another response by the latifundia to labour shortages was to act as merchants, buying wheat produced by independent farmers or from farmers that hired land. In the period 1700 to 1850, this second option

14268-455: Was cleared with fire during this period. On the contrary open fields in southern Chile were overgrown as indigenous populations declined due to diseases introduced by the Spanish and intermittent warfare. The loss of the cities meant Spanish settlements in Chile became increasingly rural with the hacienda gaining importance in economic and social matters. As Chilean mining activity declined in

14391-503: Was greatly reduced. Morales was primarily focused on trying to resolve Peru's economic issues without losing the support of left-leaning Peruvians that supported the revolution. The Morales administration took out additional loans from the International Monetary Fund , and maintained a greatly reduced version of formal land reform programs until 1978 when economic issues and civil unrest made it impossible to continue

14514-412: Was often a small, permanent workforce resident on the hacienda. Labor could be recruited from nearby indigenous communities on an as-needed basis, such as planting and harvest time. The permanent and temporary hacienda employees worked land that belonged to the patrón and under the supervision of local labor bosses. In some places small scale cultivators or campesinos worked small holdings belonging to

14637-487: Was overall more lucrative. It was primarily the haciendas of Central Chile, La Serena and Concepción that came to be involved in cereal export to Peru. In the 19th and early 20th century haciendas were the main prey for Chilean banditry . 20th century Chilean haciendas stand out for the poor conditions of workers and being a backward part of the economy. The hacienda and inquilinaje institutions that characterized large parts of Chilean agriculture were eliminated by

14760-599: Was resumed by the Revolutionary Government of the Armed Forces of Peru of general Juan Velasco Alvarado who overthrew Belaúnde's government on 3 October 1968. On 24 June 1969, the Agrarian Reform Law (Decreto Ley N° 17716 de Ley de Reforma Agraria) was promulgated. The government declared the following objectives of the reform: The agro-industrial complexes on the coast were the first to be expropriated. On 26 June 1969, two days after promulgation of

14883-501: Was the systematic deindustrialisation of Iloílo . This deindustrialisation was to be accomplished through shifting labour and capital from Iloílo's textile industry ( Hiligaynon : habol Ilonggo ), the origins of which predate the arrival of the Castilians , to sugar-production on the neighbouring island of Negros . The Port of Iloílo was also opened to the flood of cheaply priced British textiles. These changes had

15006-400: Was the one most commonly used to update delinquent Peruvian debts, namely the CPI method. However, the Tribunal held, without citing any supporting evidence, that using the CPI method would yield an amount that would jeopardize Peru’s compliance with other obligations, including the provision of “public services.” In other words, the Tribunal appeared to consider that Peru could not afford to pay

15129-471: Was the promulgation of Decree Law No. 17716 (the Land Reform Act) which sought to transform the country's land-tenure structure and replace the latifundio and minifundio system with redistribution of rural land. The land reform consisted of a series of expropriations large of rural parcels . Ownership of these parcels – formerly owned by both individuals and legal entities – initially passed to

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