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Contracting Under Weak

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  • Zylbersztajn, Decio
  • Machado, Claudio Pinheiro Jr

Abstract

After many years of debate, in 2005 Brazilian environmentalists, religious groups, scientists, farmers and seed companies reached an agreement on the rules for biotechnology research in general and of genetic modified crops in particular. While the debate at the two houses of congress was carried, Brazilian soybean growers have already adopted genetic modified soybean varieties since 1999 especially in the state of Rio Grande do Sul. Long lasting discussions in the congress offered no solution to the question of the legality of the adoption of GMO seeds particularly the cost saving technology owned by MONSANTO. Most farmers have taken the decision to buy uncertified seeds in the shadow market originated from Argentina creating a de facto situation where the illegal use of proprietary technology was predominant. Since Brazil recognizes property rights of plant varieties as well as of utility patents, in case of adoption the legal owner has the right to collect royalties. However how to harvest the rights if the transaction was carried in the shadow market? How to write contracts to bound transactions in the absence of law? The focus of this paper is the description of the institutional arrangement designed to collect royalties in a situation of weak property rights. The paper describes how a private solution has been designed, however at a higher transaction cost

Suggested Citation

  • Zylbersztajn, Decio & Machado, Claudio Pinheiro Jr, 2006. "Contracting Under Weak," 44th Congress, July 23-27, 2006, Fortaleza, Ceará, Brazil 148300, Sociedade Brasileira de Economia, Administracao e Sociologia Rural (SOBER).
    • Handle: RePEc:ags:sobr06:148300
    DOI: 10.22004/ag.econ.148300
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    References listed on IDEAS

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    1. Alston, Julian M. & Venner, Raymond J., 2002. "The effects of the US Plant Variety Protection Act on wheat genetic improvement," Research Policy, Elsevier, vol. 31(4), pages 527-542, May.
    2. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    3. Evenson, Robert E., 2003. "GMOs: Prospects for Increased Crop Productivity in Developing Countries," Center Discussion Papers 28504, Yale University, Economic Growth Center.
    4. Robert E. Evenson, 2003. "GMOs: Prospects for Increased Crop Productivity in Developing Countries," Working Papers 878, Economic Growth Center, Yale University.
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