Fernando Vergara / AP Photo Anti-narcotics police stand guard on a farm in Caceres northwest of Colombia, Monday Dec. 20, 2010.

It is no surprise that Sudan, blighted by unceasing years of loud civil war, has the largest population of internally displaced people in the world: perhaps as many as 6 million. But which country has the second? Colombia, right smack in the middle of the western hemisphere, has an estimated 4 million.

The main reason so many Colombians have been uprooted is because, over the past 25 years, cocaine traffickers, paramilitaries and rebels are believed to have taken control of some 13 million acres of land. Sometimes the land was stolen from Colombia's farmers. In some cases, owners were forced to sell out to gangsters at rock-bottom prices. Those who balked were warned that the deals would be closed with their widows. The land was coveted for growing and smuggling narcotics, trafficking arms, consolidating territory in the war and, in some cases, for setting up legal enterprises such as cattle ranches and palm oil plantations. These land grabs have contributed to one of the most lopsided ratios of property distribution in Latin America  and a reason why more than 60% of people living in Colombia's countryside are poor. All that inequity convinced many peasants to join the guerrillas or the paramilitaries in a war already exacerbated by the drug trade. (See an interview with Colombia's new president Juan Manuel Santos.)

As part of a new strategy to pacify the countryside and recharge the rural economy, the Colombian government aims to return ill-gotten acreage to small farmers and provide them with all-important land titles and loans. The policy is also designed to blunt the appeal of Colombia's Marxist rebels, who blithely pontificate about land reform even as they force poor people off their homesteads at gunpoint. "We are convinced that if there's no rational and just solution to the land problem in Colombia we will never achieve a lasting peace," Agriculture Minister Juan Camilo Restrepo told TIME.

In much of the world, property titles are a foundation for building wealth because they can be used as collateral for loans. A well-established system of property rights helped turn the United States and other Western nations into prosperous capitalist societies. But in Colombia, legalizing property in remote areas can be an expensive 50-step nightmare involving numerous trips to far-off provincial capitals. That's why 40% of rural properties in Colombia lack legal titles, according to the Agriculture Ministry. (See why Santos' victory is a win for the U.S.)

Without land titles, poor Colombian farmers have no access to credit to buy seeds and fertilizer and improve their standard of living. Deeds also raise property values and can help convince people in the outback that they have a stake in the system. Yet even though they have lived on the land for years, many Colombians have the legal status of squatters. That makes it easier for narcotics traffickers, who are quick to provide start-up money, to convince them to grow drug crops, like coca and opium poppies, and for rebels to recruit their sons and daughters.

"The people who are physically on the land don't have a sense of ownership and so they're not willing to work it or protect it," says Ken Yamashita, the director of the U.S. Agency for International Development in Colombia, which is supporting the government's land-to-the-people initiatives. "So it's easy for others to come and push them off. The displaced population of 4 million that we have here in Colombia is partly because of that." (See how the fight against insurgency is giving hope to Colombia.)

To empower small farmers President Juan Manuel Santos launched a fast-track program in which government workers travel to isolated towns to hand out land titles. And so, earlier this month in the remote mountain town of Chaparral, impoverished farmers wearing straw hats and broad smiles shuffled across the stage at a high school auditorium where officials presented them with deeds. Given the country's history it was a milestone and a cause for celebration. VIPS arrived for the ceremony via chartered airplane. A brass band provided a triumphant soundtrack. The newly landed peasants were treated to a pig roast. "This document says we are the owners of a small plot of land," said coffee grower Maria Alvirian. "And this will allow us to get the loans we need to invest in our farm."

A far greater challenge is the government's goal of putting 5 million acres of poached property into the hands of landless peasants over the next four years. But President Santos claims it can be done with the help of pending legislation that would provide land, financial compensation and other benefits to war victims. "We will accelerate the expropriation of lands that are in the hands of bandits," Santos said in a recent speech. "And if the Congress gives us the tools, we will return these lands to the peasants even faster than the criminals stole them."

The catch is that many of these plots are still controlled by outlaws but are registered to third parties who've never been convicted of crimes. A new seizure law places the burden on suspect land holders to prove they acquired their properties fair and square. Still, expropriation can take years. For example, drug lord Pablo Escobar was gunned down in 1993 but it's taken the government 15 years to gain control over just a fraction of his vast holdings. According to Colombia's National Narcotics Department, authorities have seized less than 3% of misappropriated properties.

Yet when the seizure process works it can change lives. Just ask Francisco Gomez, a sharecropper who has never owned a square inch of land in his life. Gomez and 26 other farmers grow cacao, the raw material for chocolate, on a piece of land once owned by Escobar. If the crop succeeds and the farmers stay put, they will have the option to buy the plot at a low price from the government. As he chops open a cacao pod and pries out the seeds, Gomez says: "I'm very happy. This is the inheritance that Pablo Escobar left for us."

See TIME's Top 10 of Everything of 2010.