# **1. Introduction**

After decades of stagnant or declining commodity prices when agriculture was considered a ̳sunset industry‘, recent increases in the level and volatility of commodity prices and the resulting demand for land have taken many observers by surprise. This phenomenon has been accompanied by a rising interest in acquiring agricultural land by investors, including sovereign wealth and private equity funds, agricultural producers, and key players from the food and agri-business industry. Investors‘ motivations include economic considerations, mistrust in markets and concern about political stability, or speculation on future demand for food and fiber, or future payment for environmental services including for carbon sequestration. Some stakeholders, including many host-country governments, welcome such investment as an opportunity to overcome decades of under-investment in the sector, create employment, and leapfrog and take advantage of recent technological development. Others denounce it as a ―land grab‖ (Zoomers 2010). They point to the irony of envisaging large exports of food from countries which in some cases depend on regular food aid. It is noted that specific projects‘ speculative nature, questionable economic basis, or lack of consultation and compensation of local people calls for a global response (De Schutter 2011). In a context of diametrically opposite perceptions, the objective of the present paper is to provide greater clarity on the numbers involved and the factors driving such investment. This is done by quantifying demand for land deals, and exploring the determinants of foreign land acquisition for largescale agriculture using data on bilateral investment relationships. This work is an important first step to assess potential long-term impacts and discuss policy implications.

The analysis of large-scale land deals is relevant for a number of key development issues. One such issue is the debate on the most appropriate structure of agricultural production. The exceptionally large poverty elasticity of growth in smallholder agriculture (de Janvry and Sadoulet 2010, Loayza and Raddatz 2010) that is reflected in rapid recent poverty reduction in Asian economies such as China, and the fact that the majority of poor are still located in rural areas led observers to highlight the importance of a smallholder structure for poverty reduction (Lipton 2009, World Bank 2007). At the same time, disillusion with the limited success of smallholder-based efforts to improve productivity in Sub-Saharan Africa (Collier 2008) and apparent export competitiveness of ―mega-farms‖ in Latin America or Eastern Europe during the 2007/8 global food crisis have led to renewed questions about whether, despite a mixed record, large scale agriculture can be a path out of poverty and to development.

Whatever the envisaged scenario, renewed pressure on land raises the issue of whether there is sufficient competition and transparency to ensure that land owners or users are able to either transfer their land at a fair price or hold on to it as opposed to having it taken away without their consent and in what may be perceived an unfair deal. This resonates with recent contributions to the literature that suggest that 2