Land Formalization: Colombia's Road to Success

Land ownership is rarely a straightforward process, and for foreign investors in emerging markets, it almost never is. Confusion is often the norm in places where land titles are physical, disparate, and easily lost, and a lack of formalized land ownership leads to many complex, interrelated issues. Without consistent land formalization, foreign investment becomes difficult.For example, land cannot be easily transferred between parties if the receipts of ownership are physical. Tangible records of ownership are easily forged or destroyed, leading to multiple claims of ownership over the same parcel of land. This lack of clarity also impacts government taxation efforts.But in some emerging markets, transparency regarding land ownership is beginning to take hold. Colombia is making great strides in formalizing the process of land ownership in the country, paving the way for a boom in foreign direct investment and quality of life in the future.Peace and OpportunityColombia is no stranger to the difficulties associated with the land formalization process and has made huge progress in the past decade. Estimates suggest that between 20% and 60% of Colombian land has been acquired irregularly or without official documentation. For this reason, one of the main focuses of the landmark Colombian peace agreement is to create a dispute resolution mechanism for land ownership. The government considers the process of streamlining dispute resolution as a top priority for the country.Partnering with USAID, the government has allocated hundreds of millions of dollars for processing existing documentation, handling claims, and clarifying ownership of land. Colombia's Superintendence of Notary and Registry (SNR) holds over 80,000 paper records, some dating back to the 18th century. Colombian land titles were not ordered to be digitally stored until 2015 and are now available in digital form for legal reference and posterity.The municipality of Ovejas has served as a model for this process and has experienced numerous successes in recent years. Ovejas has formalized over 1000 land titles as of 2019, the majority of which have women owners. Many of these families have been victims of displacement. Due to this history, the process of land titling is both personally cathartic and beneficial to the overall legal infrastructure of Colombia.Further south in the department of Meta, land reform is taking root. Much like in Ovejas, where the concept began, the newly established Municipal Land Office is serving an instrumental role in interpreting claims to land and issuing ownership titles. The office in Meta expects to finalize ownership of over 4000 titles by the end of 2020, a mammoth achievement given some rural municipalities must complete a mere five titles per year.

Vast areas of land are now registered for formal market transactions in Colombia.

Looking AheadThe creation of these offices demonstrates how the Colombian government is bringing previously disparate government entities together to share information. Simultaneously, localized municipal bodies use the data to address local issues dynamically.Alejandra Saavedra Ochoa, a legal expert at the Municipal Land Office in Puerto Lopez in Meta, is very confident in her office's work. "We have disseminated the legal, economic, and social benefits that formality brings, and residents have understood that in order for a territorial entity at any level to make any investment, it is necessary to have a property title."Colombia is leveraging technology in unique ways to modernize the land registration process. Municipal Land Offices directly link to the National Land Registry, empowering rural areas with a digital representation of land ownership. The government isn't shying away from cutting edge technologies either. The state-run National Agency for Land has implemented a blockchain-based solution to assure the immutability of land ownership data. Such data attestation will remove any ambiguity regarding future land ownership inquiries.

Land formalization is a streamlined process in Colombia.

FDI ImplicationsForeigners intending to purchase land in Colombia face few legal challenges compared to many other nations. Foreign owners of property enjoy the same legal rights as nationals, and strengthening formalization in the country will create more opportunities, especially in rural areas. Legal formalization of land ownership is the basis of entire industries, and will be a driving factor for Colombia’s continued development.Having a stable legal infrastructure for land ownership removes one of the major risk factors for those considering a foreign investment. Colombia’s highly effective and increasingly digital process for land formalization is a prime example of the country’s commitment to economic progress, a commitment that begins with land.On an institutional level, huge capital allocations have been made to infrastructure and industry in Colombia, mainly in the extraction industries. But the country’s rich agricultural resources have yet to access the world at scale. Creating scalable solutions for direct investment into the agriculture sector will be pivotal for the country, and land formalization will be essential for such a solution.

Land distribution in Colombia. Legal formalization will have a tremendous effect on land use.

Final ThoughtsThe road to formalized land ownership in Colombia has been a complicated process, with astonishing progress made in short periods. The dynamic, decentralized solutions implemented in the country have already attracted the eyes of foreign investors, with FDI in the country up over 25% between 2018 and 2019. The formalization process is only beginning, and with vast populations of formerly displaced landowners filing their claims of ownership, Colombia is hurtling towards a brighter future where legal access to land ownership is a streamlined and seamless process.Read more from Farmfolio.