Peru's Constitutional Tribunal [4] on July 16 issued a decision ordering the government to honor debt owed for land confiscated under the agrarian reform that began in the 1960s. The ruling stated that the government must uphold a similar order issued by the nation's highest court in 2001, which has gone unenforced. The new ruling sets a timeline, saying the government must pay off the debt within 10 years, and that the Finance Ministry must issue a payment plan within six months. The issue sparked a public spat last week when President Ollanta Humala asked the court to refrain from issuing any rulings on "sensitive issues"—an obvious reference to the land compensation question—until the Congress votes on appointing six new members to the court. The court's president, Oscar Urviola, charged that Humala had overstepped his bounds by trying to order the court.
Some 5,000 properties were expropriated during the agrarian reform between 1969 and 1981, under left-wing dictator Gen. Juan Velasco, who sought to redress the legacies of Spanish colonialism. Bonds were issued to the former owners, with 20, 25 and 30-year maturities. But the government defaulted on payment of the paper in the face of financial chaos—including the collapse of the state bank that held the debt. The Banco Agrario was formally declared bankrupt in 2008.
While the government has estimated the outstanding debt at $1.23 billion, bondholder associations put forth figures as high as $4.6 billion, including interest. Only some 20% of the bondholders are the original landlords; the remainder are speculators—most notably including the Gramercy [5] investment house of Connecticut.
Hugo Blanco [6], who oversaw an agrarian reform in the valleys of La Convención and Lares in Cuzco region in the early 1960s as leader of a campesino union, rejects the idea of payment to the ex-landlords. He points out that under the peasants' own Agrarian Reform Law, promulgated by the campesino union in 1962, no restitution was to be offered for the redistributed lands. The threat of such independent peasant initiatives prompted Velasco to seize power and put in place a more controlled and moderate reform in 1968. (Servindi [7], July 18; Reuters [8], Reuters via Terra [9], WSJ [10], July 17; WSJ [11], July 11; Reuters [12], March 13, 2012; Peru21 [13], Dec. 24, 2010; Deuda Agraria PDF [14])
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