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Fig. 4.2. Economic value (NPV net present value) of a parcel of land on the frontier as a function of distance from markets where products from that parcel could be sold. (Adapted from Schneider 1995)

Economic frontiers are those areas most remote from markets. Often these are settled by landless peasants who practice shifting cultivation. Such areas are not only distant from markets but also distant from any type of infrastructure such as roads, railroads or small cities. Even if the land is legally owned by a corporation, an individual investor or by the government, the land is essentially "free" to the peasant. The cost of keeping out the squatters is more than the land is worth to the official owners. The only cost to the peasant in such areas is his and his family's labor.

As infrastructure begins to develop in such regions, the logistical "distance" to markets begins to decrease, and we enter the "zone of conflict and the emergence of government". As a road is built across a region, property rights begin to be an issue. If the land officially belongs to someone or some institution, they may try to evict the squatter, either forcibly or through negotiations. Obtaining a legal title to a piece of land through "squatter's rights" requires an investment of time and money on the part of the peasant, and many prefer to sell their "rights", or just to give up and move on to the next frontier. Land is given up or sold not for ecological reasons of decreasing productivity (although that may be a factor), but mainly owing to economic considerations. Often, land is bought up by speculators or by companies engaged in speculation hoping to profit from the increase in value brought about by increasing governmental infrastructure in the area (Schneider 1995).

New capitalist owners of the land often do not begin managing their land right away. Costs of importing fertilizers, herbicides, etc. and of exporting crops are still too high for the landowner to use the land profitably. The landowner assumes, however, that the government will eventually build and improve roads into the region, and establish governmental services such as health care, schools, and market support in local villages. Meanwhile the land lies abandoned.

Usually substantial government services do emerge in a frontier region. As a result, the logistical distance to an existing market decreases, or a new market may emerge. At this point, it becomes worthwhile for the owner to begin investing in infrastructure and supplies that will cause the land to yield a profit. The investor may build a ranching complex or a farm, buy trucks and tractors, hire labor, and import agricultural chemicals. At first, profits are small, but as transportation logistics improve, and the market becomes larger and more economically diversified, profits increase. Because the operation is logistically close to the market, transportation costs fall, and the entrepreneur can successfully compete in the emerging market against producers in other regions. Profitability on lands close to the markets is increased by intensification and by specialization. This is not a phenomenon exclusive to the Amazon. Rather, intensification and specialization have been the essence of development in all regions of the world (Barbosa 2000).

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