Abstract
This paper discusses the land and agrarian reform programs in Cuba and Nicaragua and investigates their success in achieving their proposed goals. It argues that the Cuban Castro government went too far in breaking clientelist oligopolies and ended up erecting state monopolies as an end result which generated a food shortage in the domestic markets. In contrast, the more market-based approach in Nicaragua, where agricultural cooperatives were used as means to protect property rights was much more successful in enhancing agricultural productivity and the living standard of the rural peasants. The main thesis of this paper is that the land reform in Nicaragua has been far more productive than the centrally planned state farm-based model in Cuba specifically due to its marginally liberal.
Keywords: Agrarian reform, land reform, Cuba, Nicaragua, agriculture.
Introduction
Land reform or agrarian reform has been in the center of radical development programs for structurally underdeveloped countries. Countries that have followed a socialist development model have especially taken such reform as one of their central goals. Especially because of such ideological motivations, these sets of reforms have often released land from clientelist or colonial oligarchies only to resign them to the state monopolies and therefore rendered suboptimal outputs in terms of production maximization and improvement in the standard of living of the rural poor.
Cuba provides a great example of this trend. The Cuban revolutionary government expropriated unused land from large farms but hardly ever redistributed the land to the landless peasants. Instead, the Castro administration created state-owned farms in which small farmers were appointed as wage laborers. Suffering from lack of incentives, the state farms failed to increase productivity which created, coupled with US-backed sanctions and other aggressions created an agricultural shortage and food dependence on Soviet aid. On the other hand, the Nicaraguan experiment largely involved the expropriation of land previously owned by the dictatorship and its associates and the distribution of those lands to agricultural cooperatives of peasants. Land titles were given to the peasants and they were able to protect those rights through cooperation. Between the two, the Sandinistas were much more successful in raising the standard of living and overall food production through their programs and a rural middle class was created.
Both Cuban and Nicaraguan land reform policies came from socialist revolutionary governments in overlapping time frames. Both of these countries faced similar US-sanctions, aggressions and natural disasters. The only thing that was different between these two programs were that the Nicaraguan program was marginally more liberal than its Cuban counterpart. Overall, the Nicaraguan reform was more successful than its Cuban counterpart due to decreased dependence upon central planning and increased utilization of Credit and Service Cooperatives as a mechanism to uphold property rights and pooling resources. If stronger property rights mechanisms and lesser government planning is defined as a marginally liberal approach, with the motivation and end goal being similar for both of the cases, the success of the Nicaraguan endeavor compared to its Cuban counterpart can be contributed to that marginal liberalism.
Needs, Goals, and Definitions of Land Reform
The idea of land reform may seem redundant from the point of view of the free market and free enterprise. Just like any other private property, possession of land can be seen as just if acquired by voluntary exchange. However, the land is not always acquired by the means of voluntary exchange, especially in countries with colonial or despotic legacies. Large holdings acquired by means of land grants from colonial exploiters or dictators may be ethically unjust while being legally legitimate. Colonialists, imperialists, and dictators have historically granted large estates to holders of certain offices and influential families on whose support the rulers were dependent. These were legally legitimized over time and became hereditary possessions. Many of the lucky holders of land dispossessed the powerless smallholders and exercised land-grabbing. At a later stage, large holdings from both origins were converted to freehold private ownership. In these cases, the land-grabbing legacy needs to be undone by the postcolonial or post-despotic state before a truly free enterprise-based society can start.
Aside from the moral arguments, land reform that gives property rights to landless peasants also makes economic sense. It helps to boost agricultural production. Sharecroppers or peasants are incentivized to produce more crops when they received ownership of some land since the profit made from owned land would belong solely to the peasant. Under such circumstances that generate unethical practices in land distribution and generate a system that inhibits agricultural production, land reform can be defined as the following:
A public action assigning a specific role to land tenure to amend what are considered by the State to be iniquitous practices against the public interest—practices that create conditions inhibiting rural development. In concrete terms, land reform is (…) a redistribution of private land property rights and use under different institutional arrangements enforceable by law.
The aim of any land reform is to remove barriers to entry into the factor and credit markets and to provide peasants with command over the production of arable land and therefore creating conditions for promoting growth in rural areas. Under these definitions, the success of land reform will be measured by the following metrics for the purposes of this paper:
- Reversing historical unethical practices exercised by colonialists and despots.
- Ensuring more accessible and efficient land distribution.
- Providing the landless with the means to protect their newfound land rights.
- Generating means of capital formation and access to the credit market.
- Increasing agricultural production by enhancing economic incentives.
- Increasing standard of living and promoting upward mobility for the landless.
This paper argues that the land reform in Cuba failed to meet these standards and thus can be categorized as a failed reform. It will also argue that the Nicaraguan model of reform was much more successful than the Cuban version and will indicate towards its marginally liberal nature as the cause of such a result.
Failure of State Farms in Cuba: More State, Less Stake
Cuba’s US-backed dictator Fulgencio Batista fled into exile on January 1, 1959, and the 26th of July movement leaders led by Fidel Castro triumphantly entered Havana. The revolutionary government nationalized both domestic and foreign property and led the country towards an authoritarian single-party system. Castro himself maintained that he was not a Marxist prior to the revolution and was not a member of the pre-revolutionary communist party. But he declared himself a Marxist-Leninist after the Bay of Pigs invasion by the United States and much of his policy decisions depended upon further acrimony with the US and creating a strong alliance with the Soviet Union. Therefore, the Soviet-style centralized agriculture had a lot of stakes for the Cuban government.
Land reform in Cuba was taken as a revolutionary measure and the incentives behind it were more political than economic. The reform was the most important “class issue” of the revolution and the first important economic issue to divide Cuba and the United States. Pushing through the agrarian reform policy was a way for the Cuban revolutionary government to send a political message to the United States and its interests and was in many ways shaped and instigated by the United State’s foreign policy towards Cuba. The reforms became more aggressive and more socialistic as American intervention increased. At the same time, central planning increased as Cuba’s dependence on Soviet aid and imports increased.
The first reform law expropriated unused land from large farms while leaving the middle farmers untouched. Although article six of the first law had provisions for the expropriation of lands worked by the middle farmers, it was systematically avoided by the National Institution for Agrarian Reform (INRA). Therefore, after the first round of reforms, most small and medium farmers were left untouched. In this process, less than 5 percent of the landowners on the island were actually divested of their property and no real political resistance was seen. However, the land reform laws under INRA chair Che Guevara were socialistic in nature from the very beginning.
Agrarian reform laws enacted in 1959 and 1963 by the new socialist state turned the state into the principal planner of the farm economy, the sole source of farm supplies, the collector of all harvests, the distributor of all food, and the sole marketer and vendor of Cuba’s export crops. By expropriating large farms and taking control of other lands, the state also became the owner of four-fifths of Cuba’s arable land. Large state farms were established which were centrally planned and heavily mechanized. The remaining twenty percent of farmland was in the hands of individual families, some on land they had long owned, others on parcels redistributed under agrarian reform.
The Revolutionary Government originally meant to seize only the very largest ranches but it also started to expropriate many of the medium-size ranches due to the demand crisis triggered by the passage of the Reform Law. Surprisingly, a small amount of land was given out to the small peasants. Of about 125000 small peasants, only 32000 were actually given land. Much of the expropriated land was given to Cane Cooperatives and Granjas del Pueblo (People’s Farms or state farms). In these state farms, workers are paid wages and have no role in the governance of the farm. Historically, these farms have underperformed in relation to the CCS cooperatives and private farmers.
The unsustainability of the central planning was soon visible through the food shortages, much more so after the collapse of the Soviet Union. Responding to such realities, the Cuban government started opening up the agricultural market. In 1993 and 1994, the state redistributed about two-thirds of its lands, primarily to newly created cooperatives that were smaller than the state farms and, in theory, were to enjoy managerial autonomy. Smaller parcels of land also went to thousands of individual farmers. As a result, the land tenancy pattern was reversed, with one-fourth remaining in state hands, the rest held by cooperatives and private farmers. A private market for agricultural sales was established by allowing all producers to sell surplus production after delivering their quota to the state. All producers operated under annual contracts that committed them to deliver a fixed amount of produce in return for fuel, seed, fertilizer, and other items provided by the state. Farmers’ markets were created to bring this surplus production to consumers. Except in the case of price caps imposed after the 2008 hurricanes, prices have been determined by supply and demand. In short, the state increasingly became a patronizer of the agricultural sector, rather than a direct producer and planner.
The cooperative building policies taken from September 1993 through early 1995 constitute a reversal of the early 1960s policies that converted the agricultural and sugarcane cooperatives to state farms. During the crisis of the early 1990s, the inefficiencies of the huge state-managed farms that controlled over eighty-five percent of Cuba’s agricultural land area became increasingly untenable. The relatively more efficient CPA would provide the organizational model for a fundamental, widespread, and permanent transformation of the structure of agricultural production. This process of transformation of state farms into cooperatives, called basic units of cooperative production (UBPC), began in September of 1993 and unfolded very rapidly during the following year and a half. In early 1995, there were a total of 2855 UBPCs, with 1415 in sugarcane and 1440 in other crops and livestock. These farms, with a total membership of about 260,000, occupied 3,161,000 hectares, or forty-eight percent, of Cuba’s agricultural lands.
After all these cooperative formations, most of the Cuban land was distributed among these different types of cooperatives. While many of them were not voluntary cooperatives at all, but just state farms in disguise as cooperatives, the distribution of cooperative access and production still shows the extent of control that the cooperatives had in the agricultural process. However, in comparative analysis, the state-sponsored UBPCs performed far worse than did the privately organized CPAs. The UBPC’s fall behind the CPAs was substantial, as shown in Table 1.
Table 1. Quantities of Profitable Agricultural Production Cooperatives, Year 2001
Source: Frederick S. Royce, “Agricultural Production Cooperatives: The Future of Cuban Agriculture?,” Mexico Solidarity Network.
Under such economic circumstances, the UBPCs had proven to be less efficient methods of agricultural production, and the CPAs and the other cooperatives seemed to be far more efficient and productive forms of agriculture. In the light of such revelations, the Cuban government soon started moving further away from state-directed agriculture and started to invest in voluntarily collectivized agricultural organizations.
The Cuban Government’s transition to more Liberal Practices
In a major speech as acting president in July 2007, Raul Castro set the stage for a broad range of changes in the agricultural practices in Cuba. The government is now betting heavily on land grants, which is essentially the privatization of government-owned land and redistribution of those land to the peasants and the cooperatives. This clearly proves that the government has now realized that its policy of state-planned agriculture has failed to perform as well as individual or collectivized farmers. The government is therefore expecting a rise in the overall production of agricultural goods through privatization.
Cuban officials have also recognized that the agriculture bureaucracy needs to be restructured as part of a government-wide personnel reduction, and also to fit new policies that give a larger role to market mechanisms. This provides a perfect example of how the Cuban economy is opening up for market forces and abandoning its bureaucratic principles to give space for the rise of a market-based shared economy. Further steps are currently being taken to help the producers directly gain access to the market of the end users and bypass the state as an intermediary.
If further progress is made in enabling private producers and cooperatives to sell directly to end-users, it would allow a major reduction in the state’s collection and distribution apparatus. That apparatus would then be left handling the food supply of hospitals, schools, and other institutions, while the rest of the food supply would move through market channels.
Market access has long been an important issue, especially for collective farmers. The union of Cuba’s private farmers and CCS cooperative members, ANAP (Asociación Nacional de Agricultores Pequenos) would like to sell directly in the farmer’s market without any state intermediary. And the government seems to be responding to the demands of ANAP. In December 2011, direct sales between farm producers and tourism industry businesses were permitted “to simplify the links between the primary producer and final consumer,” a Granma article said, and to allow tourism installations to “take better advantage of the potential of all the forms of production at the local level.”
Decentralization and market liberalism have increasingly become the government’s policy because of economic realities. The Unidad Basica de Producción Cooperativa (Basic Unit of Cooperative Production) which was created in 1993 in response to the loss of Soviet bloc support by breaking up large state farms and creating smaller units is on track for further decentralization and autonomy. Essentially being a state farm alternative since 1993, the UBPCs have underperformed terribly. 23 percent of total UBPC land is idle. At the end of 2010, 15 percent of UPBCs had financial losses and six percent were unable to provide an end-of-year accounting. The UBPCs have 2.1 billion pesos in debts, some due to their operating losses and some carried over from the state farms from which they were created. The renewed measure for agricultural restructuring would seek to solve this problem by primarily defining UBPCs as cooperatives and not state enterprises.
This restructuring of UBPC will probably make the UBPCs almost identical to the Cooperativas de Credito y Servicios (Credit and Service Cooperatives), where individual farmers unite to take out loans and make major equipment purchases, but work their own land which is very similar to the sharing economy model of pooling resources. The CCS members are the most productive farmers in Cuba, consistently producing more than half the country’s farm output on about one-fourth of its agricultural land. The government is probably planning to duplicate the CCS model to increase the productivity of the UBPCs.
Agrarian Reform in Nicaragua: The Collective Success Story of Marginal Liberalism (1979-Present)
In the face of the rising guerilla movement under the dictates of the FSLN-led Sandinista coalition, Nicaraguan dictator Anastasio Somoza ultimately gave up and left Nicaragua for Miami on July 17, 1979. When the guard collapsed two days later, the Sandinista-led rebel coalition took power. The revolutionary government was markedly different than the dictatorship. It sought to destroy the Somoza regime and its economic power base, and replace its brutality and inequities with a fairer, more humane, and less corrupt system, and reactivate the economy that would provide greater upward mobility to the working class.
Under its goal of economic growth, the Sandinista government distributed 2,523,388 manzanas benefiting 83,322 families, from 16 October 1981 to December I985 under the agrarian reform law. However, only 838,454 manzanas of the total land distributed to cooperatives, individual farmers, and indigenous communities, consisted of new land. Of the remaining 1,684,934 manzanas, 1,421,951 manzanas constitute land already held by farmers in the agricultural frontier who were merely given secure titles for their properties.
The Nicaraguan reform, at least in its early stages, concentrated more on reversing historical ills than redistributing property from the rich to the poor. The first phase of the agrarian reform started by confiscating all rural properties owned by Somoza and his associates under decrees no. 3 of 20 July 1979 and no. 38 of 8 August 1979. A total of 2,000 farms, representing more than 20 % of Nicaragua’s arable land, were affected. This resulted in a drastic reduction of privately owned large landholdings since these farms represented 43 % of all the land held in properties larger than 500 manzanas. Secondly, decree no. 782 targeted the owners of largely unused land holdings and initiated land redistribution to cooperatives. After the expropriation and redistribution, however, the state sector still received twice as much land as the cooperative movement and the individual farmers together.
However, the socialist government of Nicaragua soon gravitated towards confiscation. In January 1986, Nicaraguan President Daniel Ortega declared law no. 14, the reform of the agrarian reform law. Article 2 of this law eliminated of the limits established under the old law for the expropriation of idle, underused, or rented land. The new law also treated owners of idle land the same as owners of abandoned land. Thus owners of idle land were not compensated. With the passage of this law, land expropriation became much more aggressive than it was before.
Between 16 October 1981, when the agrarian reform law was applied for the first time, and January 1986 only 523,403 manzanas were expropriated. A total of 448 agricultural producers who owned 580 farms were affected. Most expropriations occurred over the period from 1981 to 1983. In 1984, only 60 landowners were affected and this figure declined to 54 in 1985. Due to increasingly intense land pressure, the government was forced into entering into negotiations with producers themselves in order to buy the land. In 1985 alone the state acquired 340 properties through negotiations at a cost of more than 500 million cordobas.
The overall record of the Sandinista agrarian reform is impressive. The landholdings of the dictatorship and its affiliates had been redistributed and the cooperative movement grew increasingly stronger, and more than 83,000 families had benefited over the course of seven years. Table 1 shows the appropriation percentage of the land reform from 1978 to 1986.
Table 1. Percentage Distribution of Land by Size and Tenancy
Source: Ilja Luciak, “National Unity and Popular Hegemony: the Dialectics of Sandinista Agrarian Reform Policies, 1979–1986,” Journal of Latin American Studies 19, no. 01 (1987).
Thousands of families benefitted and the standard of living for the rural poor indeed was improved. Of the land redistributed, a lot went to the cooperatives and the cooperatives became stronger over the years in terms of acting as an effective unit for the agrarian society to organize and produce.
Cooperatives in Nicaragua after the 1900s
The revolutionary Sandinista government undertook an extensive program to promote agricultural cooperatives. The government designated the year 1987 for consolidating cooperatives and by the end of 1988, 3151 cooperatives existed with 76715 members.
Although these cooperatives may seem like state-sponsored organizations forced on the people, at first sight, the cooperatives had actually become a method of protecting land rights and pooling resources for the rural peasants. Since the Sandinista revolution was not as long-lasting as the Cuban revolution and as the Sandinistas were elected out of office in the 1990s, the Nicaraguan agricultural producers were faced with a choice of leaving the cooperatives or staying with them. As the government no longer provided any preferential treatment for the cooperatives, it would also follow that the members of the cooperatives should disband and form their own individual farms, a model of production that has proven to be more productive and profitable than collective farming in many cases. Especially if you look at the issue from a classically liberal point of view, it seems obvious that people would be more willing to have their own personal private property rather than collectively owning a farm with another individual.
But in the case of Nicaragua, a country where the institutions have not developed enough to uphold the land rights of the peasants, agricultural collectives became a tool for protecting property rights as well as pooling agricultural resources. A data analysis conducted by Ruerd Ruben and Zvi Lerman shows that rural families that left the cooperative usually retained limited land and capital resources whereas peasants who stayed in the cooperative could avoid major uncertainties regarding land ownership and outstanding debts. The cooperative members also benefited from better access to services and used their social capital to gain access to credit. The study also conclusively shows that former cooperative members are ‘short-changed’ when they leave the cooperative: they get less than their fair share of land and assets and are thus handicapped from the outset in the new and risky endeavor of private farming.
Membership in an agricultural cooperative gives people better access to physical capital and human capital. For example, membership in the cooperative provides easy access to collective pastures at a relatively low cost. Buying cattle was one of the main strategies for collective members to accumulate individual wealth, making use of free grazing rights at collective rangelands.
However, for other reasons than access to capital also Table 2 presents the reasons given by respondents for remaining in a cooperative. Income earned in the cooperative is given as the main reason by only 5 percent of the respondents and it is thus a marginal factor in the decision to stay. One-third of the respondents attribute their decision to stay to the perceived advantages of cooperation and joint action: 12 percent indicate that they like working jointly with others and 21 percent see distinct advantages in the provision of cooperative services. Yet more than 60 percent of the respondents explain their choice to remain in a cooperative to institutional and organizational constraints dating back to the creation of APCs under the Sandinista regime. Fully 43 percent of respondents remain in a cooperative because of the uncertainty associated with the ownership of land that had been expropriated from the large estates and distributed to the population by the Sandinista government in the 1980s. Another 19 percent do not leave because of a lack of legal arrangements for the resolution of an outstanding debt burden, which was accumulated as a result of the generous credit support available to the cooperatives during the Sandinista era.
Table 2. Reason given by respondents for staying in a cooperative.
Source: Ibid
Overall, the agricultural production cooperatives provide their members with significant non-collective benefits, including access to physical capital and social capital that help them to increase their production and gain access to credit. Collectives also help them to protect their private property in a society with a weak judicial institution. Therefore, even after the collapse of the socialist Sandinista government in 1990 and the dismantling of the incentive programs erected to protect and promote collectives, many farmers chose to remain in collectives in lieu of starting their own individual farms. This provides evidence to the hypothesis that agricultural collectives have been the most productive way of protecting reformed land and agricultural practices in Nicaragua.
A Comparative Analysis Between Nicaragua and Cuba
There have been significant differences between the land and agrarian reform policies in Nicaragua and Cuba. The Cuban agrarian reform policies were mainly responses to the US-backed aggressions and the end goal was to create a more Soviet-style planned economy under the rule of a single-party authoritarian state. Therefore, many elements of the reform policy included excessive use of government force, excessive bashing of the free market, and excessive centralization. However, the failure of the centrally planned agriculture was visible through the food shortages and the government recognized this problem by moving towards more market-based shared economic solutions to land distribution.
Additionally, the Soviet influence on the Cuban government also made the government planning stricter and centralized. That is why only a handful of peasants were allowed to have private properties and others were forced to work on state farms organized by the government. However, after the fall of the Soviet Union, this structure of the agricultural sector could not hold and the government had to take steps to increase the number of agricultural cooperatives.
In Nicaragua, however, the main motivation behind the agrarian reform was not simply political revenge. A deeper economic reform objective lay beneath the agrarian reform of the Sandinista government which wanted to increase the standard of living of the rural poor so that their government could gain support. The expropriations were not as aggressive as in Cuba and the redistribution was not as centralized as in Cuba. The cooperatives were a lot more prominent from the very beginning of the redistribution program and their prominence increased over time. Even after the loss of the socialist revolutionary government in the national election and extensive market liberalization, the farmers elected to stay in cooperatives because of the common benefits and access to the credit market.
The Nicaraguan model was far more successful than the Cuban model and the success was mostly due to its emphasis on cooperatives and individual farmers rather than state farms. The Nicaraguan agrarian reform policy was successful in increasing the standard of living of the rural poor and increasing the overall production of the agricultural sector. The farmers gained access to the credit market and could more easily protect their property rights. Historically unethical practices by the Somoza dictatorship had been reversed through the land reforms and the land was titled to the farmers who worked on the land. Under those metrics, the Nicaraguan land reform model checks all the boxes to qualify as a successful case under the metrics laid out in the first section of this paper.
Figure: Agrarian Reform in Nicaragua and its Achievements.
Overall, the Nicaraguan land reform performed better than the Cuban land reform because the policy’s end goal was oriented toward the economic betterment of the rural poor as opposed to the Cuban’s wish for centralized consolidation to gain Soviet support. As such, the Nicaraguan model was far more decentralized and the land reached the rural people and their standard of living was improved by the policy and overall production rose. The farmers chose to stay in the communal farming cooperatives even after market liberalization because the organizations provided them with vital non-collective incentives. The Cuban agro-economy is now following the Nicaraguan model and shifting its agricultural structure to communal farming based on agricultural cooperatives.
Conclusion
Cuba and Nicaragua are two cases of land reform where two different approaches to reform were taken. Both of these countries have similar cultural, geographical, and historical backgrounds, and the governments that undertook the land reform programs in these countries had similar political backgrounds with the Nicaraguan Sandinistas taking only a marginally more liberal approach than the Cubans. Cubans took a more aggressive and centralized socialistic approach whereas Nicaraguans took a more market-based and sharing economy style approach through communal farming collectives that help rural peasants to pool their resources. The outcome of these approaches leads to a lower performance for the statist method in Cuba and higher performance in the marginally liberal method in Nicaragua. As a consequence, the Cuban government is now exploring opportunities to emulate the Nicaraguan model and increase market-based shared agriculture. The fault of the Cuban model was the lack of land transfer to individual peasants and forcible collectivization through state farms that don’t provide enough incentive to the farmers to be productive, instead of promoting voluntary collective farming like the Nicaraguans. The Cuban and the Nicaraguan experience provide evidence that a marginally liberal approach to redistribution and collectivized agriculture may be the best method of agrarian reform in countries with similar colonial backgrounds and similar socioeconomic conditions.
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