The Rule of Law, Economic Development, and Modernization of the State in Brazil: Lessons from Existing Experience for Policy and Practice

Is it true that enforcing the law often jeopardizes economic development in Brazil and elsewhere? With respect to environmental and labor standards, does enforcement more often than not increase firms' costs to the point that it is difficult for them to compete, particularly in the post trade-liberalized world? Should governments, therefore, "go easy" on enforcing environmental and labor standards –even though strengthening "the rule of law" and its regulatory institutions has become part of the centerpiece of today's desiderata among international development agencies?

Judith Tendler, professor of political economy at the Massachusetts
Institute of Technology, and Salo Coslovsky, assistant professor of
international development at New York University, shed light on these
questions during a discussion at the Wilson Center on the results of a
two-year research project that often defied the misconception that labor
and environmental standards cannot coexist with business growth. Tendler
had found this view and the contentious politics around it to be so
widespread that she decided to embark on a two-year research project in
Brazil (supported by the World Bank, DfID, MIT, and IPEA)–delving into
cases in particular states or micro-regions with long histories, and in
which regulatory actors brought businesses in a particular sector into
compliance without jeopardizing firms' ability to compete–and sometimes
even enabling them to move into more profitable markets. To carry out
the fieldwork, Tendler teamed up with then-advanced doctoral candidates
Coslovsky, Roberto Pires and Mansueto Almeida–the latter two now senior
researchers at IPEA (the Brazilian government's Institute of Applied
Economic Analysis).

The team fanned out across more than 17 states in Brazil in search of such cases–guided by suggestions from prosecutors, labor inspectors, environmental officers, and others. Each of the 27 cases studied in depth involved a large number of workers, produced a significant share of a particular product, and had a long-enough history to reveal the various triggers toward compliance along the way. The cases ran the gamut from classic manufacturing clusters like footwear, garments, fireworks, quarrying and processing of granite and marble/ornamental stones; to single large firms producing petrochemicals, paper, automobiles, iron; to sugar cane, grains, pig-raising, shrimp production in mangroves; and, in the service industry, the thousands of workers hired for the Carnival in Salvador.

Coslovsky, who focused on several cases involving prosecutors, noted that "In the end of the process, most people were better off than in the beginning.....You had compliance with the environmental laws and more competitiveness." He illustrated the nature of the findings with the case of shrimp farming in the mangroves of the Brazilian Northeast.

The case of shrimp farming in the Brazilian northeast

Shrimp farming is an industry typical of developing countries, where Brazil ranks as the 8th largest exporter, with more than 20,000 jobs. Shrimp thrives in Brazilian mangroves, which are publicly-owned, legally protected areas that preserve the ecosystems.

Coslovsky observed the work of prosecutors in an area of about 100 shrimp farmers. The prosecutors asked the farmers to move out, but they refused to leave because that was their main livelihood and there was nothing else going for them. Their unwavering resolve put the prosecutors in a difficult position because, according to Coslovsky, there is a strong sense of social mission among many prosecutors: "They are there to protect the weak guy, the small guy. What to do when it is the small guy who is doing the bad deed?"

What happened next was what Coslovsky called "to stitch a solution together" or to adopt a pragmatic searching approach. The prosecutors contacted the environmental agency to obtain data and then the land-grant agency to identify an appropriate plot of land. Next, they tried to obtain pipes, pumps, and subsidized electricity to allow these farmers to operate far from the mangrove, which spurred them to next look for a green seal from a certification agency. Only then would agree farmers to move to the new location, because they would be better off.

"They [prosecutors] realize that compliance requires costly and/or risky changes that individually managed firms are unable or unwilling to undertake on their own," Coslovsky said.

According to Coslovsky, in labor and environmental law, there is a lot of room for maneuver. "The law is open for interpretation, and if you look carefully enough you can find whatever you want," he said. Therefore, prosecutors can play an important role in enforcing labor and environmental laws and, at the same time, encouraging economic development in Brazil.

The study also pointed out that these prosecutors often rely on NGOs, church groups, community organizations, and internal congresses, study groups, and informal networks to obtain the resources and information that they need to produce these kinds of results.

Findings of the research project can be found in the papers posted below.

By Renata Johnson and Paulo Sotero
Brazil Institute