Study of the basket system for rent determination of the national institute of colonization

Abstract

The National Institute of Colonization (NIC) is a public enterprise whose main purpose is related to land reform in Uruguay. To fulfil its mission, which is defined in the first article of the law that was approved in 1948, the NIC owns the land, which is transferred to small farmers under different modalities (leasing and other ways). As a result the NIC receives a rent that comes from the small farmers tenants. The objective of this work is to understand the process of rent determination and study its evolution from 1992-93 until 2002-03. The procedure to calculate the payment is based upon a basket of goods, taking into account the kind of production for which the small farm is most appropriate considering its natural resources. The work shows: i) the way by which the NIC calculates the rent value that each tenant should pay, and ii) the evolution of the rent value for each type of basket of goods. Particularly, the variation of the rent value for the three main set of goods is analyzed: agriculture-cattle raising, cattle raising, and dairy farming. To analyze the evolution of the rent in constant values, in order to facilitate the comparison among years, two procedures were applied: i) rent value was deflated by the consumer prizes index, ii) rent was valued in dollars. The evolution in terms of products was also compared, so as to know the leasing valuated in product.