«RUSSIA`S INTEGRATION INTO THE WORLD ECONOMY: THE NEW PARADIGMS OF THE ECONOMIC CULTURE ИНТЕГРАЦИЯ РОССИИ В МИРОВУЮ ЭКОНОМИКУ: НОВЫЕ ПАРАДИГМЫ ЭКОНОМИЧЕСКОЙ КУЛЬТУРЫ ...»
- President Frizon has taken part in the Landless Peasants movement and thus has met many from the socially excluded classes. From these experiences, she has come understand their worldview and she is fully aware of the difficulties encountered when seeking to further social inclusion of the penurious families through communitarian programs.
- A final and non negligible advantage for Livnia Frizon is her profession :
she works for the Rio Grande do Norte’s Agricultural and Fishing Administration;
hence, Ms Frizon is directly involved the state’s agricultural development policy and has the means to mobilize local actors in projects at Cear-Mirim and at Joo Cmara.
The Holistic COPEC project As previously mentioned, the COPEC cooperative comprises merely families. A cluster of complementary activities have been implemented within the association to better the living conditions of the member families. Ms Frizon hopes that success in this case will serve as an example for other families on the site, those little inclined to change their behavior. All families engaged in the project spontaneously offered to take part in it and strongly motivated families were accepted through an on-going basis.
A 20 hectare homestead will not in itself lift a family from poverty. If these families, in Livnia’s eyes, through lack of resources, merely work the soil with hoes (enxada), both the land under cultivation and the crop yield would not meet their most basic subsistence needs. A farm with a sufficiently large surface area requires a minimum amount of equipment that an impoverished family could not afford.
As a 600-hectare sunflower plantation requires tractors, the cooperative purchased a seeder and an oil press. As a result, rather than selling sunflower seeds, the COPEC sells unrefined oil to Petrobras, thus upgrading their position on the value chain and adding greater value on the cooperative itself as well as retaining the pressed residue for use a animal feed and fertilizer. Sunflower cultivation give rise to honey production as a natural co-product: beekeepers taught their craft to members of the cooperative and beehives were placed near the fields.
With assistance from the EMBRAPA, the Brazilian Institute for Agronomic Research, another highly profitable culture—papayas or “mamo”—was introduced on a 15 hectare farm. A strong demand exists for this fruit, both on local markets and for export. A papaya plantation, properly fertilized and tended, provides a high yield and a favorable income for the farmers.
Fish farming within the framework of the holistic project.
Given the overall policy goal of maximum diversification in revenue sources and value enhancement through by-product use, one project particularly stands out:
fish farming. Although rainfall is sporadic and low, there is abundant groundwater in the aquifer and this fact gave birth to the plan to raise Tilapia fish for which a strong demand exists. Financing originated from the Banco do Brasil and the EMATER of Rio Grande do Norte. Within 2 years favorable development ensued. The project’s novelty lies in its collective organization: 6 ponds are used and one family is responsible for each. Hence, with 6 families a continuous annual production is possible. As the fish mature in 6 months, each of the families provides the workforce for one month. The families have shown a strong common spirit, fish farming requires daily work, should one family need leisure time, another family will pitch in and provide the temporary help. As further proof of the project global connectedness, not only are sunflower products used to feed the fish, but 10% of the water from the ponds is used to fertilize and irrigate family gardens where, besides the traditional manioc crop, lettuce, tomatoes and onions are also grown. Finally, within the framework of value adding activities, a crafts program has taken root where leather goods are made from tilapia skin whose leather is as durable as that od crocodiles.
Since its inception, the fish farm has produced 17 metric tons of fish, and the 7-year loan granted by the Bank of Brazil was reimbursed within less than 2 years!
The fish farm has grown so that there are now 18 ponds varying in size from 25 to square meters using some 1.3 million liters of water.
On average, according to Ms Frizon, each family earns 1,700 reals per month from the fish farm (somewhat less than 700 euros), three times Brazil’s minimum wage. Today’s monthly production exceeds 5,000 kilos of tilapia. The Bank of Brazil uses this program’s success in their public relations material as an example of it social engagement policy favoring small farmers. To reward the cooperative for their initiative, the bank gave the COPEC a pick-up truck; through media coverage, the cooperative has gained a solid reputation. Through the snow-ball effect, Ms Frizon enjoys an enhanced ability to implicate local and national actors in the communitybased projects.
In Ms Frizon’s eyes, the cultural aspect is a crucial for developing the project, and for this reason during our open interview, she spoke a great deal on this point.
First, she raised the issue of the poor’s lack of longterm vision. Even when belonging to an organized group, once the families receive a homestead, they rarely manage to produce beyond their immediate needs. Given their concerns for survival, they insist on short term results rather long-term planning.
Some 95% of the family farmers in the region, affirms Ms Frizon, cannot obtain loans: often the funds lent for farming were used to purchase consumer goods like televisions or motorcycles. This form of embezzlement seems to routinely condoned by movement leaders. Given the standard indictments that politicians are corrupt, should it be surprising to see the poor renege on their debts?
Moreover, the overall background of local corruption and kickbacks to authorities, practices deeply rooted in the Northeste, all lend themselves to a cultural acceptance of swindling.
With little long term perspective and a fatalism as regards their living conditions, the small are imbued with what Ms Frizon terms “the culture of misery”;
to her mind, “they are convinced that the only way to survive is to take from others and to take from nature”. At the project’s outset, some farmers had asked whether Petrobras would financed tree cutting; other farmers sold the fertilizer provided by the cooperative; even others, incapable of tending their crops on a daily basis only took part in the work at planting and harvesting times. A further risk is that the peasants having received homesteads sell them and thus remain in poverty. For the latter reason, the sites herein studied all have collective property rights with a long waiting period before any peasants may sell their land.
The major challenge, in Ms Frizon’s mind, is to reeducate a people who feel that a better is life is unattainable and that they find acceptance of any project as beyond their capacity. She affirmed without mincing her words that “to get them out of poverty, their mindsets have to change, they have march in a direction opposite to the path to destitution.” To do such, the director of a cooperative must not make a show of compassion but must exercise strong authority, impose discipline, convey her ideas and occasionally punish. If families receive financial help, they must fulfill the corresponding obligations.
The major wager lies on modifying the peasant culture by providing examples of successful projects. On the one hand, these projects prove to the individualistic peasants that collective actions can yield rapid results. The reluctant farmers can observe the clear improvement in living conditions of those families engaged in the collective projects. On the other hand, the participants in the collective actions have taken credit for their success and have persevered in their efforts to increase productivity and to diversify the range of activities. Today, the participants no longer receive state-paid benefits and the farmers are proud to have left the welfare ranks, particularly those who survive only through federal government aid, the so-called “family stipend”. This family stipend is a welfare benefit program for the poorest families with dependent children, from the newly born to those aged 16. On average benefits amount to 61 reals a month (about 24 Euros). To receive such, families must agree to allow their children to attend school as well as to vaccinate their children. In 2008, 11 million Brazilian families, some 40 individuals out of a population of 180 million, benefited from this system, The family subsidy, affirms President Frizon, forms an essential means of improving the lives of the poorest; but she also believes it must be considered as a transitional measure to lift the poorest from the wretched condition. As one can image, the benefits could lead the recipients the consider the subsidy as a perpetual crutch, leading to a permanent relation of dependency on state aid, detrimental to social inclusion and finding a means of earning a better living through one’s own work. As to our question concerning the role of Petrobras in the development program, Ms Frizon affirmed that the company’s role was crucial to success. Without the unwavering assistance from Petrobras, the project would not have been realized.
Concluding Remarks This field study has enabled us to verify Petrobras’s sincere intention to undertake development projects within the framework of the Brazilian National Biodiesel Project while satisfying the federal government’s desire to improve the living conditions for family farmers in semi-arid regions.
During an interview conducted at Petrobras’s headquarters in Rio de Janeiro, Jefferson Souza, the Petrobras consultant for social responsibility, outlined the following policy orientation. Among the options for biodiesel production, Petrobras has an overall interest in producing family agriculture-based biofuel production rather than capital intensive large-plantation soy production. The strategic interest shown by Petrobras in the Cear-Mirim and Joo Cmara sites within the framework of the firm’s social and environmental policy gives cause for optimism. The company, 32% state-owned, with sales of 96 billion dollars and 74,000 employers, has both the means and the capacities for achieving its goals.
In addition, Petrobras, with its public financing, has long been tasked with ensuring Brazil’s energy independence (Drouvot, 2005). Yaziji (2004) has insisted upon the importance of strategic alliances between industry and social development organizations. Firms gain a more favorable image by their social commitments and thereby obtain a competitive advantage. A firm’s ability to foresee novel social requirements arising from the concept of sustainable development can be seen an integral part of the firm’s innovative capacity and as well as the ability to acquire new skills which ultimately contribute to fixing new social standards for production.
Environmentally friendly, socially-oriented projects as those we have just described not only give birth to synergies between the main actors (a rural community and Petrobras) which redound to their mutual interest, but also induce a much broader range of benefits accruing to local society. This field study has highlighted the varied cultural aspects of a project requiring the active engagement of farmers and the need for a strong leader who could mobilize the farmers. The president Frizon, leader of the COPEC, undoubtedly fills the role needed to ensure a holistic, community-based, value creating development project.
The economic results obtained by the cooperative, clearly demonstrate that this mode of collective action can serve as a true means to reinsert a group of family farmers in the social economy. The range of activities performed within the cooperative not only confer greater earning, but more crucially greater autonomy and sense of enterprise, all more so given that the limited number of members in the COPEC allow direct participation in the decision making.
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A SOCIAL INCLUSION POLICY FOR SMALLHOLDER FAMILY
FARMERS: A CASE STUDY IN BRAZIL’S SUSTAINABLE PRODUCTION
OF PALM OIL WITHIN THE FRAMEWORK OF REFORESTATION ON
DEGRADED LANDS IN AMAZONIA
СТРАТЕГИЧЕСКАЯ ПРОГРАММА ПРОИЗВОДСТВА
ПАЛЬМОВОГО МАСЛА В РАЙОНЕ АМАЗОНКИ: МОБИЛИЗАЦИЯ
ЗАИНТЕРЕСОВАННЫХ ГРУПП ЖИТЕЛЕЙ В ВОССТАНОВЛЕНИИ
ЛЕСОВ НА ДЕГРАДИРОВАННЫХ ЗЕМЛЯХЭто важная программа нацелена на развитие производства растительного масла из пальмы на землях, подвергшихся эрозии в районе Амазонки. При государственной поддержке участниками программы являются семейные и мелкие кооперативы сельхозпроизводителей занимающихся также производством биодизельного топлива. Мировой и национальный рынок пальмового масла как дизельного топлива показывает хорошие перспективы.
Цели исследования и программы – анализ условий конкурентоспособности производства пальмового масла малыми группами сельхоз производителей с учетом их реальных условий и их интеграция в программу.
Brazil’s Sustainable Production of Palm Oil legislation has the specific goal of mobilizing public administrations, private business, social aid agencies and family farmers with the following overall objectives:
Create employment and increase income.
Reforest degraded lands in the Amazon (over 20% of the territory in state of Par) with a reintroduction of native species on part of the area and Oil Palm plantations on other areas.
Inducing family farmers to participate in the program and thus favor their social inclusion.
Hubert Drouvot - Associate Professor, University of Amazonia, UNAMA, Brasil). President of the FrancoBrazilian Business Institute. Email: firstname.lastname@example.org Cludia Magalhes Drouvot - Associate Professor, University of Amazonia, UNAMA, Brasil). Email:
email@example.com Preston Martin Perluss - Associate Professor, Grenoble University Graduate Business Institute (Institut d’Administration des Entreprises—IAE Grenoble), historian, member of the research group LARHRA (Laboratoire de recherche historique Rhne Alps). Email: firstname.lastname@example.org Each family is meant to cultivate a maximum of 10 hectares of oil palms;
businesses provide technical aid and the government provides financial support. As regards the smallholder farming communities involved in the project, the present study seeks to evaluate the local governance conditions for the national program.
What institutional arrangements must be created to allow a true participation of smallholder farmers within the program and further their social inclusion?
1. Introduction On May 6th 2010 in the Tom-Au municipality, located in the Brazilian state of Par he Program for Sustainable Production of Palm Oil in Amazonia was publicly launched, amid fanfare and with the presence of Brazil’s President Lula Incio da Silva. According to the Federal Government, the ambitious project seeks to foster palm oil production on degraded lands, mainly in the Amazonian region and, for part of the production, by involving family farmers.
This undertaking brings together a plurality of actors: public authorities (foremostly Brazil’s Federal Government and the State Government of Par), businesses, and financial and technical aide organizations, non-governmental organizations and peasant farmers. With the goal sustainable development, the project aims to achieve economic, social and ecological objectives. As for the latter objective, the project is meant to reduce greenhouse gas emissions through carbon capture and storage as a result of a reforestation program for degraded lands. The present research, conducted on the basis of a documentary study, seeks to more specifically to identify the various stakeholders as well as to grasp the necessary conditions for the successful “social inclusion” of family farmers involved in the program. The objective of social inclusion is clearly enunciated as one of the program’s overarching goals; this article shall conclude by presenting a set of requisite conditions and fundamental questions related to the program’s ultimate realization.
1.1 Main Aspects of the Program for Sustainable Production of Palm Oil The Program for Sustainable (sustentvel) Production of Palm Oil (dend) follows the same logic as the National Program for the Production and Use of biodiesel fuel initiated in 2004 (Law N°.11.097/05. This initial program has sought to improve the living conditions for family farmers in semi arid regions of Brazil, mainly in the Nordeste (Magalhes, 2009). The current program has the specific goal of regenerating degraded zones of the Amazon region through plantations of oil palms and the recovery of native forest with the firm intent of involving smallholder farmers in the project. In accordance with the legislation, to commercialize their production, the businesses involved in biofuel production must obtain from the government, the “Social Fuel Stamp” (Selo Combustivel Social) which ensures the at least part of the said product originates from crops raised by peasant farmers. The criteria required for obtaining this so-called “stamp” remain imprecise and information provided by industry to the Brazilian administration on the degree of participation of family farmers does not always fit with actual conditions.
Abramovay et Magalhes (2007) conclude that the Brazilian program for biodiesel production is innovative on a worldwide scale to the extent that it is based on state intervention which mobilizes firms in the sector and a range of public and private organizations within the overall framework of a tightly defined project. In the present instance, an array of actors (industrialists, finance organizations (Pronaf) and agronomic research agencies (Embrapa), NGOs, peasant farm unions and local government) have all been urged to coordinate their efforts and respective contributions to community projets involving cultivation of oilseed crops for biodiesel production.
A study conducted by UNCTAD (2006) comparing worldwide biofuel production practices has confirmed the novelty of the Brazilian project. “It is instructive to observe that the Brazilian Federal Government’s objective of stewarding biodiesel production towards smallholder farming received the immediate support from two actors who generally either ignore each other or in conflict : large corporate biofuel producers and rural workers’ organizations.” (Abramovay and Magalhes, 2007). Such a judgment that relations between the two organizations are harmonious seems in our eyes both excessive and premature as regards the Program for Sustainable Production of Palm Oil in Amazonia; nonetheless, little doubt surrounds the program’s capacity to engage a wide array of actors in a common project.
1.2 The present article has the following aims:
First, we wish to present the main features of the national program, afterwards, we shall justify the program’s theoretical base by a description of the advantages offered by palm oil crops within the Brazilian context and, more generally, we shall justify the national policy with a broader international context. Despite its enormous potential, Brazil still occupies a marginal position with respect to Indonesia and Malaysia, two countries having drawn great criticism for their policies (massive destruction of virgin forest, disappearance of native fauna and expropriation of small landholders). The Brazilian governmental authorities wish to adopt the opposite stance insisting on their attention to sustainable development. To achieve such, the small landholders must be enlisted. Is their engagement possible?
By means of documentary research, we herein seek to ascertain the stakeholders in the Program for Sustainable Production of Palm Oil and discern the conditions underlying both peasant participation and true improvement in their social conditions.
2. General Features of Program for Sustainable Production of Palm Oil and specific features in the state of Para:
2.1 Guiding principles of the program:
The program as announced in the Tom-Au township on May comprises several directives grouped in five categories:
1. Finance: while the project embraces large, medium and small holdings, emphasis is placed on participation by peasant farmers with the grant of subsidized loans.
So to avoid a substitution of food crops by oil palm plantations, small holder plantations will be limited to 10 hectares. With that surface area under cultivation, the Ministry of Agriculture predicts that the monthly income for peasant farmers will rise for 415R$ to 2000R$ (approximately 870€). This estimate is based on the specific experience of the Agropalma company which brought together families for oil palm farming. (Magalhes and Drouvot, 2009).
2. Investment in research and development: a 60 million R$ fund will be created to improve oil palm genotypes and joint research projects will be undertaken with foreign institutes. The Embrapa (the main public agronomic research institute in Brazil) will oversee the research projects; the Embrapa already enjoys a worldwide reputation for excellence (Garcia Colares, 2010).
3. Technical aid: 160 technicians will be trained so to provide both technical and administrative assistance to smallholders and promote sustainable agriculture in the Amazon region.
4. An agro-ecological land survey will be undertaken in those areas where palm oil plantations are authorized. Over the entire Amazon region, 31,8 millions hectares have been judged suitable for oil palm plantations (as way of comparison, total world production today covers 12 million hectares). For such plantation, the program forbids the destruction of native forest and equally excludes planting in nature reserves or in reserves for native peoples.
5. Creation of a Palm Oil Commission formed of various representatives from the Federal Government, palm oil companies, agricultural workers unions and consumer organizations. The Commission will organize and monitor the sector’s activities.
2.2 The State of Par’s Social-Environmental Protocol for the production of palm oil:
Accompanying the foregoing federal disposition, the state government of Para adopted a protocol which stipulates the mutual engagements for both the State and all the business signatories to ensure the long term viability of the program. Among the list of economic, social and environmental directives listed we have singled out the provisions specifically aimed at the smallholders: “the signatories agree to “promote the social inclusion, the creation of employment, and income improvement for both the urban and rural populations” as well as “to develop those activities which shall ensure food supplies and diversify incomes for smallholder family farmers.” Such engagements are similar to the recommendations advanced by Ignacy Sachs (2005). The type of agriculture to foster must not be considered a mere juxtaposition of monocultures, but rather a part of a complex of integrated systems for producing both food and energy. “The second generation of the Green Revolution must surpass the first (whose goal was essentially to increase crops yields) and must involve an agriculture with reasonable yields, yet maintaining a harmony with nature and crucially oriented to smallholders, that is, family farmers.” By the end of 2010, eight of the twelve firms involved in Par’s palm oil production project had signed the protocol. According to Mrcia Tagore, secretary of state for strategic projects, the protocol forms an official document based on the voluntary engagement of businesses and will permit those which pledge their cooperation to enjoy tax deductions and receive public subsidies (Reporterbrasil, 2010).
The two largest projects in the state of Par are being undertaken by the following firms :
- The Vale Group, the world’s leading iron ore producer, mines a major deposit at Carajs in southeastern Para. Together with Biopalma, the corporation has invested 500 million dollars in the purchase of 130,000 hectares of which 60,000 hectares will be devoted to plantation and the remaining 70,000 hectares will be used to reestablish native foret cover. 15,000 hectares will be cultivated by 2,000 families (Viega Filho, 2010). The initial objective is to supply biodiesel fuel to the mining trucks and the 216 locomotives which transport ore from the mines to the coast at So Luis over a distance of 890 km. Vale expects to save 150 million dollars annually and reduce carbon dioxide emissions by 12 million tons (Globo Amazonia, 2010).
- Petrobras, Brazil’s major petroleum group, has undertaken two projects in the state of Par : the Par Biodiesel project with a 330 million R$ investment intends to furnish northern Brazil in biodiesel fuel extracted from palm oil. To this end, two extraction plants and a biodiesel refinery are under construction.
The Belm project involves a 500 million R$ investment in a joint venture with avec the Portuguese firm GALP with the aim of producing biodiesel for the European market. Table 2 displays the main features of these projects.
Tableau 2: Petrobras’s two current projects in the state of Par:
PAR PROJECT BELM PROJECTPalm oil production:120,000 Palm oil production 300, million liters/annually. million liters/annually.
Direct employment: nearly Direct employment: prs de 2.3. Main regions with the state of Par:
The so-called “Guajarina” region, located south-east of the city of Belm, known as dend land, comprises seven townships: Tailandia, Moju, Tome-Au, Acar, Igarap-Miri, Concrdia do Par et Bujaru, Rural population density is relatively high 7 to 8 inhabitants per km2. The 26,000 km2 zone counts some 300, inhabitants. Human presence has left its mark on the region, at Tailndia, man has modified or affected more than half the surface, together agriculture and husbandry cover 125.000 hectares. Droulers et Alli, (2010 assert that in this territory, with over 50 years of human occupation, demand for land is fierce and conflicts for ownership and use are rife. The territory harbors numerous quilombolas (villages comprising families of ex-slaves), where communities struggle to gain recognition of the property rights. In Azevedo’s words (2009) the Guajarina region is “an epicenter in the struggle the expansion of industrial corporations”. The latter have been accused of polluting rivers, contaminating the soil with herbicides and disrespect for labor laws. Within this context the Ministry for Agrarian Development (MDA) has sought to enlist the participation of smallholder farmers in the agro-industrial activities and foster a dialogue between the different parties.
3. Why Choose Palm Oil?
Palm oil has been chosen for its capacity to restore degraded lands.
3.1 The crucial question of degraded lands in the Amazon:
Soares de Almeida (2010) has defined degraded soils as those which have lost the biological and chemical capacities to support agriculture. In the state of Par alone, the Brazilian National Insititut for Statistical Research has evaluated the percentage of deforested land at 21.30% of the total forest area (data from 2008, Fanzeres, 2010). These lands have suffered degradation largely due to extensive grazing and cattle raising. Approximately 30% of the pastures are abandoned after years and the animals’ grazing leaves these lands highly compacted while slash and burn agriculture impoverishes them—the resulting soil impoverishment is difficult to rectify.
Moreover, Amazonian soil is chemically poor, the soils suffer from leaching due to the combined effects of high temperatures and heavy rainfall (Meirelles Filho, 2006). As regards social and economic development, cattle raising has had little influence on the region’s economic improvement, such husbandry created little employment (one job per 100 hectares) and to this very day «fazendeiros» have been convicted for employing workers in conditions resembling slavery.
With 70% of all national production in 2009, Agropalma is Brazil’s ranking palm oil producer (Magalhes and Drouvot, 2009). In the words of Marcelo Britto, Agropalma’s director: « To give you an idea, merely the degraded lands in the state of Par exceed the quantity of land in Indonesia currently devoted to palm oil cultivation, bearing in mind that Indonesia is the world’s leading producer of palm oil with 6 million hectares under cultivation. » (Lan, 2010). In Homma’s eyes Homma(2005): « Public policy in the Amazon should give its highest priority to the recovery of 67 million hectares which have been deforested and which form a ‘second nature’ ”». According to this agronomist, one solution for recovering these lands is partly based on the rational use of agro-forest systems.
3.2. Advantages afforded by Palm Oil Cultivation:
As a species introduced from Africa during the 17th century, palm oil production only began on an industrial scale from the 1960s in the state of Bahia (region of the Nordeste) and only as of the 1980s in the state of Par (Amazonia).
The Embrapa has published a study which depicts the advantages of oil palms (dend): “A perennial plant which allows for a perfect soil cover and offers a favorable reconstitution of the floral environment providing an acceptable ecological stability with little adverse environmental affects. Socially this perennial crop has the advantage of year-long labor intensive harvests. Under these conditions it can support a fixed rural population. A 10-hectare palm plantation provides a profitable activity for a family during a 25-year period. Given it economic, social and ecological features, such crops provide an excellent opportunity for agrarian reform projects, cooperatives or other rural development models (Barcelos et al., 2002).
In terms of market demand, palm oil is the most widely used oil in the world (30% of the market) with an ever rising demand. According to Marcelo Britto (Agropalma), 80% of world production is for the food industry, 10% for the cosmetic industry and the remaining 10% is used for biodiesel. While Brazilian palm oil biodiesel production is insignificant (a mere 0.9% is used for this purpose), Britto feels that palm biodiesel offers the greatest growth potential (Lan, 2010). A vision shared by Zaparolli (2008), ancient director for National Petroleum Agency and bioenergy consultant for United Nations Food and Agriculture Organization, who affirms “the palm is for biodiesel what sugarcane is for ethnanol: the best solution”.
The National Program for Biodiesel Production was launched in 2005 to promote biofuel production by smallholder farmers in semi arid regions through the use of crops adapted to specific local conditions (Castor Oil Plant «mamona», jatropha «pinho manso» ou sunflower). In terms of mass yields, however, no substantial results have been forthcoming. Thus, in 2010, 85% of all biodiesel (which Brazilian legislation requires as a 5% additive to petroleum diesel) originates from soybeans. Reliance on soybeans is controversial since this oil seed plays a worldwide role as a major animal fodder and its cultivation is highly mechanized required extensive monoculture plantations. Such harvesting methods are unfit for smallholder farmers. A further argument against soya is that its yield per hectare is one tenth that of palm oil. Estimated yields for plantation palms give an annual output of 5 tons of oil per hectare while for the same surface area, a soybean plantation yields merely 500 kg of oil.
3.3. Avoiding Malaysia and Indonesia’s mistakes In 2008, producing a mere 0,5% of the world’s total palm oil, Brazil ranks 13th among palm oil producing nations. In 2009, with a 235,000 ton production and a 445,000 ton consumption, Brazil imported 55% of its palm oil (Herzog, 2010).
In 2008, the world’s leading palm oil producers were Indonesia (47% of world production) and Malaysia (36%). Palm oil production has a tarnished reputation given the massive deforestation of virgin forests in Malaysia and Indonesia (Seibel, 2007). In 2005, the NGO, Friends of the Earth, estimated that from 1985 to 2000, % of Malaysian destruction of the native forest resulted from oil palm plantation.
During the same period, in Indonesia, 6 million hectares of tropical forest were transformed into palm groves, largely on the island of Borneo and on Sumatra (Barros, 2008). Not only do such policies threaten the very survival of native species such as the orangs-outangs, but as well it imperils the existence of native peoples.
Numerous NGOs, (Amis de la Terre, Greenpeace, CCFD, Walhi, Friends of the Earth…) have published studies on major Indonesian investors practices (Duval, 2007). One study has shown that for the year 2007 alone, over a 196,000 hectare territory, nearly 25,000 smallholder families were expelled from their land in Indonesia with the support of corrupt local authorities (Grisa, 2010).
Given these worrisome cases, NGOs have exerted pressure on transnational corporations so that they reconsider their attitude towards oil palm imports. Unilever has become involved in a campaign surrounding the Dove soap brand and Nestl as welle for its Kit Kat candy bar (Chabas, 2009). Marcelo Britto, Agropalma’s chief executive has said: “Brazil is just beginning to undertaken massive palm oil production. We must avoid the mistakes the Indonesians have made” (Lan, 2010). In particular, the expropriations must be avoided. A priori, the Brazilian program seeks to implicate the smallholder farmers.
4. Ascertaining the stakeholders in the Sustainable Palm Oil Production Project:
4.1. Participants attending the second Latin-American conference of the RSPO, held in Belm, August 24th-27th 2010:
Given the risks of a boycott, the major Indonesian groups have sworn that today they shall pay close attention to social and environmental questions. To improve their image, several Indonesian corporations, such a s Wilmar, have joined the “Roundtable on Sustainable Palm Oil” (RSPO), the principle certification agency for responsible production of palm oil (Doan Bui, 2009). Founded in 2004, the RSPO, boasts a membership of 336 companies from 37 countries. The agency has already certified 316,000 hectares around the work. From August 24th to 27th 2010, the agency’s second Latin-American conference took place at Belm in the state of Par. The event drew the main actors involved in the Sustainable Palm Oil Production Project and a wide range of papers was presented. High officials from the Federal Government and the State of Par described the policies and corporate leaders from the most engage firms (Vale, Petrobrs, Agropalma) presented their projects as well. Aside these corporations, major clients for palm oil (Unilever, Bunge), equipment manufacturers and fertilizer suppliers (Uniamerica, OuroVerde, Alfa Laval) and NGOs Ethos, Ver te Verde, Amigos da Terra, The Nature Conservaty) all had exhibition stands.
The occasion was thus afforded to identify the main stakeholders. General agreement prevailed among all the actors as to the nature of overall national program and in particular as to the implication of smallholder famers. Nonetheless, a striking fact was manifest, aside from the laudatory testimony by a representative from the Association of smallholder farmers attached to Agropalma (Benedita Nascimento), no peasant organization attended nor expressed their expectations on the behalf of family farmers chosen to take part in the project.
4.2. Documentary Study Results In 2010, from August through October, a documentary study was conducted to identify and analyze the maximum of articles concerning the program for Amazonian Palm Oil Production. The compilation of texts included article from Belm’s main newspaper (O liberal) and national magazines (Exame, Isto, Valor, Globo Rural...).
Using Google Research and Google Scholar, further publications were incorporated (research articles and internet sites). Four key works were used to build the corpus:
Amaznia (Amazonia), leo de palma (palm oil), reas degradadas (degraded lands), agricultura familiar (family agriculture). In all, 56 documents were processed.
No definitive list of stakeholders exists in the sense of the ISO standard (Afnor 2004), which defines stakeholders as «All individuals or groups affected by or which could be affected indirectly or directly, in the long or short term, by the strategies, actions or messages which the enterprises use to attain their objectives».
In the present case, the initiative is not totally that of the corporate actors since these latter are following the guidelines and policies clearly set by public authorities (Federal government and the state of Par). On the following page, Table 3 presents the word frequency lists for the various stakeholders, each actor is indicated only once per article although several occurrences might appear within a specific text.
Thirty articles mention governmental initiatives. Among the politicians speeches, two declarations seem to best illustrate the various expectations:
- The statement taken from a speech delivered in the Brazilian Senate by Flexa Ribeiro, a senator from the state of Par, “The major challenge for Amazonia is its sustainable development, and this will only be possible with help of a definitive covenant between the public sector, the private sector and civil society” (www.senado.gov.br).
-The second choice in declarations come from a speech delivered by exPresident Lula da Silva on May 6th 2010 in Tom-A township (State of Par) during the inaugural ceremony for the Sustainable Production of Palm Oil program:
“Guaranteeing income, recovering degraded lands and arraying in an ever more rational manner the occupation of the territory, this program shall contribute to transform what one day was called the Deforestation Arc into a Protection Belt for Amazonia. This will be one of the major accomplishments that our children and grandchildren shall inherit” (Blog do Planalto, 06/05/2010).
The “Deforestation Arc” refers to the northward shift of the agricultural frontier towards the heart of Amazonia (from East to West, the main states concerned are Par, Tocantins, Gois and Mato Grosso). Besides the high number of references to politicians, Table 3 indicates the high number of references to the Embrapa (agency for technical assistance in oil palm cultivation). Thirteen NGOs are cited with respect to program’s implementation. The articles contain nearly a dozen references to firms involved in palm oil production; among these firms, the most often encountered references are made Petrobras, Agropalma and Vale. These corporations are the major players in the program. It is equally noteworthy that eight multinational corporate clients for palm oil figure among the references; these elements in the corpus evidence the extent to which foreign buyers are attracted by the project. Finally, six universities or research centers have been identified as they have conducted various studies While the terms “family agriculture” and “smallholder farmers” have at least 24 occurrences in the articles, as noted earlier, no declaration from peasant organizations or rural workers unions has appeared in the texts. This absence raises serious doubts about the implication of the peasant in the program. Despite the intentions manifested by the various institutional actors to include the peasants within the project, no clear proposal has been developed to ensure such participation nor has any attempt been forthcoming to guarantee the smallholders’ power to negotiate when confronting the major industrial partners.
Table 3: Corpus Frequency for the actors involved in the National Program for Palm Oil Production (Programa Nacional Sustentvel de leo de Palma).
- references to the Federal Government:- declarations made by high officials of the Federal
- references to the State Government of Par:- declarations made by high officials of the State of Par: - Amigos da Terra, CCFF, Proforest, PACs (Catholic Church), Firms involved in production:
- Marborges, Oleoplan, Felda, ADM, Braspalma, Palmasa: Nestl, Danone, Unilever, Arisco, Ajinomoto, Sanbra, Gessy Professional Associations:
- Pension fund of the Brazilian Federal Savings Bank (FUNCEF) and of Petrobras (Petros), Banco da Amaznia, University Research Centers:
Paranese Museum Emilio Goeldi, Federal University of Par, 5. How can the smallholder farmers participate and improve their social inclusion 5.1 Risks of Failure - Risks of firms’ pressure on smallholders to surrender their lands Since the plantation project does not exclusively involve peasant farmers, the major corporation might be tempted to seize lands. Rporter Brazil has observed land-ownership problems surrounding Biovale, a joint-venture by Vale and the Canadian company Biopalma. By 2008, at Concrdia and at Bujar, Biopalma had been accused of pressuring smallholders to sell their land, threatening legal measures for expropriation since the peasants lack deeds of trust ; this situation occurs quite frequently in the region (Reporterbrasil, 2010).
According to the president of the rural workers’ union of Tom-Au, in the Tom-Au township, farmers often fear being unable to reimburse the debts incurred when planting the palm oil crops. Moreover, according to the union leader, production is much too costly. To cultivate 10 hectares, 1,470 plants must be purchased at a unit cost of 15 reais (more than 6 euros). To these base costs, must be added the price of fertilizer and farm equipment. On this basis, the union activist concludes the program is not feasible for a smallholder and the latter, often importuned by potential buyers relinquishes his land and sells out.
The smallholder Jos Geraldo Barroso negotiated the sale of his 194 hectare, for in his opinion, given the lack of government support, cooperation with the major corporations is unbearable. In particular, Barroso feels the procedure for implementing the agreements is excessively bureaucratic (Flexa, 2011).
On the basis of a study conducted by the Tom-Au Rural Workers’ Union (STTR), 40% of the local farmers have sold their lands and now dwell on the outskirts of the town. The union fears that this percentage will reach 70% by and the municipality will lack the necessary infrastructure to harbor such a population. Land buyers are intermediaries (“atravessadores”) who resell these lands to the major industrial corporations involved in biodiesel production program (Flexa, 2011).
- The risks of smallholder disinterest due to financial hardship ReporterBrasil has also noted the in the municipalities of Bujar et de Concrdia, 85% of the smallholders are unable to obtain loans from the special fund for small scale agriculture (Pronaf) given the farmers did not respect earlier loan payment agreements. For these farmers’ participation, a renegotiation of earlier loans will prove necessary. The STTR’s financial director, Maria de Nazar Souza, asserts that the large producers offer purchase prices much lower than market prices : “ hectare farms which are worth 40,000 reais were sold for 5,000 reais (little more than 2000 euros). Most peasants has scant education and have no idea as to the value of their lands”. With the income from the sales, the farmers pay off their debts, and, should they have a money left, they settle on the outskirts of the town with hope of finding work in the city (Flexa, 2011).
- The risk of excluding various farmers from the programs In addition, a real threat exists that only the most well-to-do farmers might be inducted into the program. In order to appreciate this risk, it behooves us to know what criteria dictate the corporations’ choice of farmers. In four townships, IgarapMirim, Camet, Baio et Mocajuba, Petrobras has conducted a land survey of 3, smallholders’ properties; among these, the firm selected 1,250 to take part in oil production (O Liberal, 7/08/2010). On what grounds were they selected?
5.2 Empowerment as a solution:
To avoid these pitfalls which hinder and curtail smallholder participation, several solutions exist, all of which contribute to reinforce farmers’ power.
- Smallholders must have greater negotiatory force In the words of Francisco de Assis Costa, economist at the Center for Advanced Studies on the Amazon (NAEA), at the Federal University of Par: « On the basis of its structure, the model is highly unilateral. But this does not preclude peasant organizations from changing the game plan» (Reporterbrasil, 2010). While it is specifically mentioned in the program that rural associations and cooperatives are to involved in the projects, no concrete proposal has been advanced that would favor the creation of such organizations and would reinforce the power of smallholders to negotiate with the major corporations (Fronzaglia, 2005). On the other Vale and Petrobras envisage programs which shall involve large numbers of smallholders— between a thousand and two thousand families—depending on the project, spread over numerous townships. Under these conditions, direct participation by the farmers appears impossible. The program itself contains not the slightest mention under what form farmer participation would take. Creating a new institutional arrangement for smallholder representation appears indispensable given the pressing need to grant these farmers a power to negotiate directly with the gamut of the program’s participants.
- The smallholders’ technical skills need to be enhanced Recall that the two directives in the Social-Environmental protocol by the state of Par bound the signatory firms to “promote social inclusion, employment creation and income improvement for the rural and local urban population”, as well as “to contribute to developing activities that could guarantee food sufficiency and diversified earnings for farm families”. From that perspective, “the firms must provide technical instruction and training to develop farmers’ work skills through free, effective and high quality continuing education programs”. With goal of diversifying farmers’ income sources, the question arises whether technical training and advice will be restricted to oil palm cultivation (as is the case with Agropalma) or whether through cooperative efforts with other institutions, firms will adopt a broader vision enabling families to have a lesser reliance on oil palm cultivation.
- The necessity to improve social and economic infrastructures It is impossible to envision social inclusion when in the state of Par only 39% of rural homes are electrified and only 11% of the roads are paved” (Homma, 2010).
Given this situation, that writer concludes the major groups exploiting the natural resources in Par, such as Vale, Petrobras, Alunorte, Albras or Jari can not adopt a selfish attitude and merely improve the infrastructure in the areas where they operate and transport. A share of their profits must be devoted to local investments which should improve living conditions and transportation for local populations. Most often, rural families have links with the town whether for schooling their children or selling of part of their crops. Becker et Lena (2002) affirm that smallholders experience great difficulties transporting, storing and selling their production : “These adverse conditions call for rationalizing the value chain of productiontransformation-commercialization and entail that relations between town and country dovetail. To this end, network organizations should be designed including unions, cooperatives and associations enjoying support for public authorities, particularly as regards infrastructure improvement”.
- Contracts should be adapted to family needs There exists a degree of incoherence involving the time a family must alot to cultivate 10 hectares of oil palms. In the community of Araua, in the Moj township, Agropalma has settled a community of landless peasants (communities denoted Calmaria I et II). In response to the complaints that the families had little time to devote to their own food crops, the contractual areas of oil palms were reduced to hectares per family. More generally, contracts must be reviewed from a global perspective, taking into account the point of view of the peasant families, so that the contracts provide a viable framework for the long term.
Conclusion:To conclude, this present study has shown that the Brazil’s Sustainable Production of Palm Oil (PNOP) in Amazonia, has regrouped a large range of actors:
the Federal Government, the state government of Par, an array of multinational and national corporations, various NGOs and diverse agencies specialized in agricultural techniques and financial assistance. All the partners apparently share the program’s social, economic and environmental goals. In the words of Agropalma’s CEO, «Success will depend upon a whole set of factors which concern not only the public sector whether on the national, state or municipal level but also the firms, the smallholder farmers and civil society in general» (Istoeamaznia, 2010). All said, behind this apparent unanimity, there is a strong probability that the program, which is in its early stages of implementation, will give rise to heated discussions once production begins. Our aim is to follow the project’s progress focusing on the manner in which smallholders will take part in the oil palm production and to determine what improvement in their living conditions these farmers might obtain from such production. One conclusion that arises from the present documentary study and our attendance at the second Latin American Conference of the RSPO, held in Belm, is that the group of actors does not apparently include representative institutions on behalf of smallholder farmers. None took part in the RSPO conference in Belm and in the lists of documents that we have analyzed, no declaration made by peasant organizations has been identified. Yet the terms “family agriculture” and “smallholder farmers” appear in almost half the articles or publications belonging to our corpus.
Abramovay, R. and Magalhes, R. (2007) ‘O acesso dos agricultores familiars aos mercados de biodiesel: parcerias entre grandes empresas e movimentos sociais’, Project proposal to regoverning markets components, FIPE, USP, So Paulo.
Azevedo, R. (2009) Bioindstria, territorialidades e relaes sociais no Par;
http://www.ufrr.br/component/option,com_docman/Itemid,0/task,doc_view/gid,1410/ Barcelos, E., Dos Santos J. and Do Rosario Lobato Rodriguez, M. (2002) Dend, alternativa de desenvolvimento sustentvel para agricultura familiar na Amaznia brasileira, Manaus, Embrapa Amaznia Ocidental.
Barros, B. (2008), ‘Bicombustvel sustentvel j tem a sua cartilha’, Valor, 13/O8/2008, p B14.
Becker, B. and Lna P. (2002) ‘Pequenos empreendimentos alternativos na Amaznia’, Rede de Sistemas Produtivos e Inovativos Locais, UFRJ, setembro 2002.
Carta capital, ‘dossier Carta Verde’, 8 de dezembro 2010.
Chabas, S. (2009) ‘Biocarburants : chronique d’un dsastre annonc’, Documentaire, France 5, 2009, 50 mn.
Coase, R. (1993) ‘The nature of the firm’, In: Williamson, O.E and Winter, S.G, The nature of the firms: origins, evolution and development, Oxford University Press.
Da Silva, O. C., Stella, O.,Varkulya Jr. A. and Teixeira Coelho S. (2003) ‘Potencial de mitigao de gases estufa pela indstria de leo de palma visando a captao de recursos do mecanismo de desenvolvimento limpo (MDL)’, Paper presented at the 3th Encontro Energia no Meio Rural, Scielo Proceedings.
Doan Bui. (2009) Les affameurs, voyage au cur de la plante de la faim, Paris, Editions Priv.
Droulers, M., Venturieri A., Mouro M., Thales M., Thery H., Poccard R.
(2010), ‘L’huile de palme, un avenir pour l’Amazonie?’, Confins, Revista francobrasileira de geografia, No.10, 2010.
Duval G. (2007), ‘L’essence de la faim’, Alternatives conomiques, n 259, juin 2007, p 44-48.
Fanzeres, A. (2010) ‘Pesquisa desvenda aplicaes inovadoras para a flora amaznica’, Valor Estados Par, avril 2010, p.52.
Flexa, Jr E. (2011) ‘Programa planta xodo e colhe misria’, O Liberal, 3 de abril de 2011.
Fronzaglia, T. (2005) ‘Monitoring farm cooperative governance’, Paper presented at the 5th International PENSA Conference, USP, School of Business and Economics of Ribeiro Preto,, 27 de julho 2005, Etat de So Paulo.
ECONOMIC INTEGRATION IN THE GLOBAL ARENA –
THE SIGNIFICANCE AND CONTENTS OF THE NECESSARY RULE OF
ЭКОНОМИЧЕСКАЯ ИНТЕГРАЦИЯ НА ГЛОБАЛЬНОЙ АРЕНЕ –
ЗНАЧЕНИЕ И СОДЕРЖАНИЕ НЕОБХОДИМЫХ ПРАВОВЫХ НОРМFor every state, the integration of its economy in the global arena holds promises, first and foremost to its citizens, who will be able to sell their products and services on foreign markets, and be able to enjoy a larger choice of goods and services, for better prices, at home. It is through the success of its citizens that the State achieves prosperity in the benefit of society, the members of which can expect to enjoy a higher standard of living and an improved quality of life.
Economic integration does not take place in vacuum. Its successful implementation requires adherence to a rule of law, the intricate and inter-dependent components of which are outlined in this paper. It is the invisible hand of the market that informs and guides individuals, remote from each other, to take decisions that will be advantageous to them, and thereby to the rest of society. But it is the visible hand of the law that makes such exchanges possible in the first place.2 Most important, the rule of law binds not only private citizens but, no less importantly, the State and its organs, institutions, agencies and all those acting on its behalf.
The Role of Constitutional Law The functioning of the invisible hand of the market depends upon the information collected by individuals for their private purposes. Each individual pays attention to the market signals that are of interest to him and to his business. It is only by trial and error that a person learns to identify the relevant signals and interpret their meaning correctly. There is no way to substitute this huge mass of exchanges of information by the State, or any of its agencies, collecting the information for everybody and taking centralized, collective decisions. Even if the person acting on behalf of the State is deeply interested in engaging in such an endeavor (a doubtful assumption), there would be no way for him to replace all interested persons and come up with a meaningful interpretation of the results of his search.
Talia Einhorn, The Department of Economics and Business Administration, Professor of Law Ordinaria, http://www.ariel.ac.il/economics/ E.-J. MESTMCKER, "Die sichtbare Hand des Rechts: ber das Verhltnis von Rechtsordnung und Wirtschaftssystem bei Adam Smith", in: E.-J. MESTMCKER, Recht und konomisches Gesetz, 2.
Aufl. (Baden-Baden: Nomos 1984) 104.
With these understandings in mind, it becomes clear that, for each individual to realize his potential and maximize his profits, the State must have constitutional law rules that guarantee:
a. Equal rights and freedoms to all;
b. Protection of the right to human dignity and liberty and private property rights;
c. Strict observation of the freedom of information, freedom of speech, freedom of occupation, the freedom to carry out research and development, freedom of movement within the State, and the freedom to organize and form associations.
The Role of Private Law The sale and purchase of goods and the provision of services will not take place in the absence of private law rules that govern property rights and the transfer of property from one person to another, as well as the exchange of services (i.e., contract law). Furthermore, since individuals often need to act collectively to achieve their goals, and acquire the necessary financing, there is need for private law rules that govern private corporations and other forms of business organizations, and the relationships between the shareholders who invest in these companies, the managing director, the board of directors and the creditors who give loans or provide goods to the company.
These private law rules are neutral rules of just conduct. They are not resultoriented. They do not prefer one result over another. But they make it possible for people to act with confidence in a decentralized manner on the market and, to the extent that there are risks, to have those insured. The rules must be transparent, stable and enforceable in a fair and efficient manner.
The Role of Competition Law The abstract rules of just conduct need to be complemented by rules of competition law. “Competition is not merely the only method which we know for utilizing the knowledge and skills that other people may possess, but it is also the method by which we all have been led to acquire much of the knowledge and skills we do possess”.1 The importance of competition is not due to the fact that people act rationally, but just the other way around: it forces people to act rationally. If not hindered, it provides them with the signals that they should follow in deciding what they could best produce at prices which buyers will find attractive. By acting as a discovery procedure,2 it encourages innovation, entrepreneurship and development of talents and skills.
Self-interest and profit maximization are driving forces of competition. But their benefits will only be achieved if the legal framework limits the potentially F.A. HAYEK, Law, Legislation and Liberty, vol. 3 (Chicago: University of Chicago Press 1979), at p. 75; E.-J. MESTMCKER, A Legal Theory without Law – Posner v. Hayek on Economic Analysis of Law (Tbingen: Mohr) 2007, at pp. 33-34.
HAYEK, ibid., Competition as a discovery procedure, at pp. 67-70.
destructive forces of self-interest and the love of power. The temptation of selfinterest is to eliminate the uncertainties and risks inherent in the competitive process:
“The best of all monopoly profits is a quiet life”.1 This is why the prohibition of cartels and concerted practices has high priority in a competitive order. It has pertinently been pointed out that "the legal challenge is to prevent the abuse of private law institutions to restrict competition. The economic challenge of competition and competition law is to provide for market conditions where competition contributes to a spontaneous division of labor, efficient allocation of resources and free choice and well-being of consumers". Society (i.e., the plurality of people subject to the same legal order3) today is organized in States. Each State has its own legal order. To integrate in the global society, the State does not, and should not, have the power to coerce individuals to take part in the exchanges of goods and services. But the State must make it possible for them to do so.
The Constitution of the State guarantees basic rights and fundamental freedoms. The State is subject to the Constitution. It acts through institutions that form and effect its will.
The legislature adopts and enacts the private law system that enables private persons to engage in trade and pursue their economic interests. It adopts legal rules governing property rights, contractual rights, torts (i.e., how people who have suffered damage through the acts of others, who owed them a duty of care, should be compensated for neglect of that duty), and rules governing company law. In order to encourage people to pursue their creative skills and invest in new development, the legislature must adopt a system of intellectual property (IP) rights, necessary to protect the products of the mind that are reducible into tangible form. Intangible property is especially vulnerable and requires a comprehensive system to protect all IP rights, as well as trade secrets. One missing part may endanger the whole system, like a dam with a hole in it. The executive branch implements the laws in compliance with the enumerated powers delegated to it under law. It establishes agencies that supervise and enforce private law obligations and public laws which assist in protecting these private rights (e.g. a company registrar, a security exchange commission, a competition authority, etc.). The influence of the government has to be neutral as to its results.
An independent judiciary enforces the law in a fair and equal manner.
J. R. HICKS, "Annual survey of economic theory: The theory of monopoly", Econometrica 3/1 (Jan. 1935), p. 8.
E.-J. MESTMCKER, "The Development of German and European Competition Law with special Reference to the EU Commission’s Art. 82 Guidance of 2008", Max Planck Private Law Research Paper No. 10/1, http://papers.ssrn.com/sol3/papers.cfm?abstract_id= F. BHM, "Rule of Law in a Market Economy", originally published in German in Ordo, 17 (1966), trans. and reprinted in A. Peacock and Hans Willgerodt (eds.), Germany's Social Market Economy. Origins and Evaluation (London: MacMillan 1989), 46 at p. 49.
R.M. SHERWOOD, Intellectual Property and Economic Development (Boulder: Westview, 1990), pp. 53-55.
It is thanks to these functions of the State that individuals are able to plan and act in relation to their fellow men.
The Role of the International Economic Law When a State protects its industries from imported goods, it is quite clear that it cannot protect everybody, since that would mean protection to nobody. Thus, the whole structure of the economy must be affected by protecting some industries and not protecting others. Inefficient patterns of both production and consumption are fostered, as it is the inefficient industries that need to rely on the protection, and the other unprotected industries who must, at the end of the day, bear the costs of protection. These include e.g. the increase in wages in the protected domain which expands rather than close down and the demand for increase in wages elsewhere to counter the higher cost of living imposed by the protection.
Economic research emphasizes that those least able to absorb the economic burden of protection are the exporters, that protection in fact taxes the exporters!1 The exporters must sell on the world markets and they can hardly pass any increase in costs on to their consumers, as their competitors would then undercut them. What makes things even worse for them is the strong connection existing today between the exported goods and the imported ones. Exporting industries must in many cases use as inputs goods manufactured by locally protected industries.
However, the role of each State in establishing and enforcing a rule of law that promotes free trade is rendered very difficult. Whereas the public at large stands to gain, there are naturally also losers, and those exert pressures. Politicians, whether belonging to the legislature or to the executive branch, exercise endless efforts to buy majority support, or other kind of political support, through bargaining. "Dispensing gratuities at the expense of somebody who cannot be readily identified became the most attractive way of buying majority support".2 Furthermore, the observation has correctly been made that, "what lawyers tend to describe and analyze as 'international trade conflicts' are often, from an economic and political perspective, to a large extent conflicts of interests within states rather than between states".3 The interests of the manufacturers of end-products conflict with those of the manufacturers of inputs to those products, and the interests of all conflict with those of the consumers.
Admittedly, besides efficiency there are other interests that may need to be taken account of. Yet, "the world is not rich enough to despise efficiency". Even though each State stands to benefit economically from applying a liberal foreign trade regime on an autonomous basis, it is only by ‘tying their hands to the K. W. CLEMENTS AND L.A. SJAASTAD, How Protection Taxes Exporters (London: Trade Policy Research Centre 1984).
HAYEK, supra n. 2, p. 103.
E.-U. PETERSMANN, Constitutional Functions and Constitutional Problems of International Economic Law (Fribourg: University Press Fribourg 1991), p. xxvii.
R. NURKSE, "International Trade Theory and Development Policy", in: H.S. Ellis (ed.), Economic Development for Latin America, Proceedings of a Conference Held by the International Economic Association (London: MacMillan 1961), 234.
mast’, that States make themselves capable of resisting the siren-like temptations to yield to interest groups at home.1 Reciprocal international treaties, that improve access to foreign markets, attract political support, especially from exporting industries, more readily than policies of unilateral free trade, which cannot, by their own operation, open to them the foreign markets.
The most important examples of such coordination are the World Trade Organization (WTO) agreements, which cover international trade in goods (covered by the General Agreement on Tariffs and Trade, GATT); services (covered by the General Agreement on Trade in Services, GATS); protection of IP rights on a global level (covered by the agreement on Trade Related aspects of IP Rights, TRIPs), all of which are supplemented by the enforcing mechanism of the Dispute Settlement Understanding (DSU). In these agreements, each WTO Member State has undertaken to make all necessary amendments to its primary and secondary legislation, administrative orders, procedures, etc., to comply with its WTO undertakings. These agreements prevail over all other international agreements concluded by the Member States.
In addition to the WTO Agreements, there are numerous regional and bilateral international agreements, most prominent among these are the Customs Unions and Free Trade Area Agreements, which liberalize trade even further among participating states, and bilateral investment treaties, known as BITs, under which States commit to protect, on a reciprocal basis, the investments of foreigners in their territory.
All of the above are public law treaties, but there is also a noteworthy private law treaty – the Vienna Convention on the International Sale of Goods (CISG), drafted and promulgated by UNCITRAL (UN Committee on International Trade Law), which harmonizes international sales substantive, private law rules.
The Coordinating Role of Private International Law (PIL) Private international law is a part of the national law of every State. It regulates three aspects of private law problems which have a foreign, cross-border element:
(1) the international jurisdiction of domestic courts, i.e., their competence to adjudicate such disputes; (2) the law which that system applies to such a problem;
(3) the rules concerning recognition and enforcement of foreign judgments. It is neither private law nor international law, yet when planning transnational activities, its rules must be taken into account. To that end, one must know the rules that apply in the relevant States. In order to prevent disparate results, according to where a case may be brought, the Member States of the European Union have unified substantial parts of their PIL rules, and others are in the process of being harmonized. Other States, e.g., Switzerland and, to an extent, Quebec, have taken a similar course unilaterally. Courts, too, are capable of coordinating results, at least to a certain extent, by paying attention to the results which may obtain in other pertinent jurisdiction.
PETERSMANN, supra n. 10, p. 221.
Conclusion: The Challenge of Establishing the Rule of Law The successful integration in the global economy is dependent upon the implementation of an international economic order based upon open markets and undistorted competition. However, attaining free trade requires not only cooperation on the international level, but also the implementation of transparent national rules of public and private law, abided by private citizens and public authorities alike.
Whereas liberalizing international trade is a matter of public law, its functioning has to be guaranteed by the commitment to private law rules of competition mandated by an open market economy. Private sector initiative requires legal rules that govern property rights, their transfer and the settlement of disputes, as well as the protection of basic rights and fundamental freedoms that will enable each person, on an equal basis, to collect the information which is necessary for his business and organize it as he considers best. The rules should be transparent, stable and enforceable in a fair and efficient manner.
Two major questions need to be answered: How to create legal mechanisms which are incentive compatible? And who should design the mechanisms?
With respect to the first question, it is important to note that the law of every society is a mirror reflecting the problems that arise in that society, but it is a peculiar mirror. If the rules are drafted poorly, businessmen will behave accordingly, and the distorted legal system will produce distorted behavior. The objectives of such a system will be frustrated by its very provisions. Creating legal rules that provide the market operators with the proper incentives to promote their business yet refrain from anti-competitive behavior is one of the greatest challenges that every State must meet.
With respect to the second question, the answer is easier. Even though at the end of the day it is the legislature and the executive branch who adopt the necessary laws, it is up to the academics to design the proper rule of law, on the basis of deep understanding of the problems encountered and in-depth research of the existing legal institutions, to what extent they are appropriate and what needs change, in view of economic, technological and social needs.
To this end, Prof. Leonid Strovsky Evgenjevich specialized in the fields of international economic law and industrial organization and became Chairman of the Department of Foreign Economic Activity of Enterprises in your distinguished Ural State Federal University in Yekaterinburg. He was also a member of the Russian Human Rights Association. May this lecture be a tribute to his memory.
CSR AND THE PURSUE OF SELF INTEREST
КСО И ПРЕСЛЕДОВАНИЕ СОБСТВЕННЫХ ИНТЕРЕСОВAccording to Adam Smith self interest should be given free way, since the “invisible hand” turns it into social benefit. He argues, that the strife for individual profit does automatically result into a social benefit if the profit seeking behaviour is combined with moral judgement (theory of sympathy): An aspect to profit seeking activities which implies a long term view on the market and therefore lies within the own interest of the individual. The governments’ role of providing a framework (such as access to ground) is paired by the profit seekers positive mindset and ability to form moral judgement and free will to accept his role within the framework (such as paying taxes).
The question now is: can this particular mindset of “sympathy” be delegated to a Corporate Social Responsibility (CSR) Department? Is CSR better of in a Department, or should it rather be anchored within the very heart of the company and its approach to business? In order to outline the different implications of each approach a case study of an Austrian multi-national business corporation is provided, showing that Adam Smith “sympathy” is still a valid approach infiltrating every aspect of the company’s business model.
Key Words: social benefit, business model, bauMax
FROM CRISIS MANAGEMENT TO CORPORATE SOCIAL
RESPONSIBILITY: THE CASE STUDY OF EHI
ОТ УПРАВЛЕНИЯ КРИЗИСОМ ДО КОРПОРАТИВНОЙ СОЦИАЛЬНОЙ
ОТВЕТСТВЕННОСТИ: НА ПРИМЕРЕ EHIFrom the very outset, the EHI Retail Institute had to deal with crisis management. The roots of the EHI go back to 1951 when it was founded by retailers/wholesalers to help solving the distribution disaster in post-war Germany, and since 1957 it faced the challenge to transform ‘Mum and Papa’ service-stores into modern supermarkets. The institute is committed to the idea of Applied Science:
its central method is based on the screening of problems along the total supply chain, to create round-tables or focus groups to elicit the reasons for these problems, to structure the input of the operative staff of companies by academic competence, to support solutions by field-studies, to discuss the results first in the workshops of the “round table” and then in public seminars, before, finally, penetrating those ideas via essays of sector-magazines or in special brochures of EHI.
EHI follows the inductive way of case-studies, never the deductive approach to survey academic literature to build some enlargement of theory. Nevertheless, EHI’s findings have been quoted often in academic papers as a source of knowledge.
Within this paper, the EHI activities with regard to coping with a food scandal are mirrored. Twenty-five years ago, food-scandals like manipulated wine from Austria or, fifteen years ago, the British Cow Disease (BSE), led in retail to heightened operative crisis-management to limit the slowdown of sales in the specific food-sector affected by the occurring problems. Within the total supply chain the players of each level, from agriculture to processing, packaging, wholesale distribution, logistics, and retail accepted their responsibility only in their respective field of competence rather than taking a supply chain wide perspective. The frame of business-operations was benchmarked only by legal demands or businesssuccess/failure. In cases of misbehaviours punishment followed by government or by bankruptcy.
The EHI food-security-contributions since the first BSE-scandal in referred to:
aa) Creating in 1994 a round table for the Total Supply Chain of Cows/Beef.
ab) Briefing all stakeholders in 1995 on the new concept/philosophy of “responsibility of the total chain”, which obliged every member of the chain to exchange control data with all members of the chain.
ac) Establishing in 1996 Orgainvent (www.orgainvent.de) for the facultative tracing and tracking of cows and beef as a counter-action to the second BSE-scandal.
By forming this joint venture with 50 percent shares for the agricultural and processing side and 50 percent shares for retail institutionalized tracing and tracking in this sector in Germany.
ad) Enforcing the facultative system by contracts accepting financial sanctions of a “sanction committee”. Based on this pioneering work focussing on a system solution and its dialogue with international partners, the EU, later, formed the obligatory EU-tracking and tracing regulations.
ba) Confronting in 1995/96 the EHI round table for fruit and vegetables with food-security-problems in agriculture.
bb) Transforming the national fruit and vegetable round table to a European one: EUREPGAP, today GlobalGAP (www.globalgap.org), is a proactive measure to create “Good Agricultural Practice” for European Retail Produce.
bc) Transforming that round table to a non-profit oriented company in its own right.
bd) To penetrate the standards of EUREGAP worldwide to more than countries which is mirrored by the change of the name form EUREPGAP to GlobalGAP.
While the case-studies of Orgainvent and GlobalGAP are very sector specific, EHI is now working on a “roof-brand” for those activities, which are much more complex and interdisciplinary. In 2008, the EHI Retail Institute initiated via its international academic network the European Retail Academy, an environmental virtual portal www.european-retail-academy.org/ERM, to publish in the internet best practice cases of retail in co-operation with its suppliers and to benchmark the activities in an Environmental Flow Chart, which can be used as well for the vertical flow from agriculture up to retail-communication for a live-style of health in sustainability (LOHAS) and horizontally to compare competitors of each level. It is an open and innovative system applying a systematic approach, which is derived from the Orgainvent and GlobalGAP experience. The aim is to place an environmental retail management (ERM-approach) as one potential benchmark to measure Corporate Social Responsibility (CSR) in retail in the future.
The main purpose of this paper is to provide a description of the way retailers create technical standards in workshops co-ordinated by EHI. This paper also intends to document that the results of the workshop in the specific field of food security, meanwhile, reached a strategic dimension linking the case of a crisis of cows /beef via the proactive activity for fruit and vegetables, finally, to the much bigger and complex topic of Corporate Social Responsibility (CSR).
Cross-Company Challenge While, due to the EAN-barcode for fast moving consumer products, each article can be identified together with its producer since the middle of the 70ies of the last century, agriculture was lacking such systems. Up to the middle of the 90ies, meat, for example, was an anonymous product with no hint to the source of its origin When, for the first time in 1994, TV-reports showed pictures from ill cows (British Cow Disease/BSE) and forecasted that thousands of dead consumers might be the result of the consumption of meat from those animals, in Germany, meat-sales declined by 25 to 30 percent. Consumers were afraid that the meat might come from the UK, and German retailers did not know if this could be the case, because the total supply chain of beef could consist of up to 15 companies involved during the birth, slaughtering, cutting and wholesale operations. Each stakeholder kept his source as a secret being afraid of competitors (Pretzel, 1995; Scheper, 1996; Mller, 1996). The EHI Retail Institute in Germany, therefore, created a Round Table as an expert group with all retailers and also with all suppliers from abroad – because EHI did not support an anti-British campaign (“Don’t Buy British”) (Hallier, 1995a; Hallier, 1995b Hallier, 1996; Hallier, 1997a; Mller, 1995; Bornemann, 1996; Atzberger, 1996).
At first in the Round Table the meat-buyers from the main players like Metro, Rewe, Kaufland, Lidl, Spar, Coop Deutschland, AVA discussed the problem to investigate, if an “EHI-draft” of a label for tracking/tracing could be accepted by all retailers especially under the aspect of different organizational structures (consumerco-operation, retailer-co-operation, chain-stores, cash and carry). After the approval derived from three meetings, the decision was taken to discuss the “retail demand” for such a label internationally with national and international suppliers of beef. The international marketing organizations were AgrarMarkt/Austria, the Irish Food Board/Ireland, Vlam Belgium, Charoluxe/SOPEXA France, Vertey Vless/Netherlands and Kodbranchens/Denmark.
From a strategic viewpoint, it was important to integrate the international market-organizations at an earlier stage. From a tactical perspective, it also put some pressure on the German suppliers who were very reluctant to join the retailers’ tracking system for two reasons: first, they perceived a competitive advantage in times were German consumers were afraid to buy BSE-beef and started to campaign “Buy from German farms”; second, foreign suppliers promoted with “Charoluxe” some kind of “branded” products being proud of its origin, while the average German suppliers didn’t want to show the retailers the source of supply because they were feared that the German retailers could outplace them and order directly at the source.
Nevertheless, the German suppliers were also afraid that the German retailers could start a campaign for beef-tracking only with examples from abroad – and, therefore, joined the discussion as a third group.
Together with all stakeholders, a flow-chart was developed starting from the ‘parents’ of the calf through all potential steps of the total supply chain for beef.
Figure 1: Quality Assurance Chain for Cattle beef Unanimously, retailers and suppliers agreed on the point that the roll-out of the system needed time and that it should start from the back-end: for example, the processing had to assure the day of slaughtering at a fixed dead-line. After a timelimit of another three months the slaughtering had to assure the source of the farms which had been delivering the cattle, another three months later the farms had to prove the place of birth of the cattle. Every three months another step toward transparency had been reached by this continuous procedure.
Figure 2: Sample for Tracement-Label Parallel, the idea of the EHI-label was disseminated by essays in magazines, on seminars and conferences, by interviews in newspapers – also in bilateral talks between retailers with transport-business, producers of feedings and other stakeholders.
On the political side, EHI acted by printing a special brochure about the topic of tracing and tracking. It distributed 560 copies to all members of the Federal Parliament (Bundestag) and 100 copies each to all of the regional participants, involving consumer-organizations in discussions. Due to the national pressure but also initiatives of the French SOPEXA partners, VLAM Belgium and Kodbnrachens Denmark, on the international and EU-level, the German Federal Ministry of agricultural started to ear-mark the cows.
Institutionalized Tracking In the second wave of the BSE-scandal in 1996 it became apparent that EHI had been accepted as the leading ‘think tank’, and if the national suppliers could not offer EHI-tracking/tracing as a standard, they would face the danger to be out of business. To calm down mistrust of the farmers in that, via the EHI-Label, there could be a shift of costs from retail to the farms only, EHI started, in 1997, to institutionalize the system in form of a joint venture with the farmers: the company Orgainvent was created ( Hallier, 1997b; 1997c; 1997d; Mller, 1997a; 1997b;
The company structure reflected the balance of power between retail and the total supply side of farming and slaughtering/processing. 50 percent of the board was appointed by EHI, 50 percent by the farmers and slaughters and processing-houses;
the Managing Director of EHI became the chairman of the Board, the Managing Director of Orgainvent was appointed by the farmers and the German government appointed a deputy minister to the Board.
Within a rather short time period, Orgainvent became responsible for three quarters of the beef-industry in Germany, and, on the level of food-retail, more than two thirds of all the chains participated in the Orgainvent-system. Also, the European Commission reacted: they followed the EHI/Orgainvent systematic approach, stipulated by the EU Regulation 178/2002, demanding within the European Union a complete horizontal tracking and tracing of all cows/beef and feed-products from January 1st 2005 (Hallier, 1998b; Jrgens, 1998; Kempcke, 1998; Lambertz, 1998;
Schneehagen, 1999; Roux, 1999).
More and more the daily work changed from crisis-management to nutritional marketing and to gain social competence (Hallier, 2000a; 2000c). Partly, this could be engineered by the activities themselves, but, of course, also by an effective communication strategy. Between 1995 and 2005, EHI Retail Institute published seven special brochures about tracing/tracking and labelling (EHI, 1995; 1997; 2004;
2005). The focus on applied science compared to more traditional academic style of research can be seen in the amount of published articles in special magazines (ranking number 1) and EHI monographs compared to only four articles in readers between 2001 and 2008 (Byrne, in Hallier, 2001, Hallier, 2001, 2008).
Good Agricultural Practice Having become more conscious about the risks at the farm level due to the Mad Cow Disease, EHI started in 1996 a global partnership for safe and sustainable agriculture.
International Challenge While Orgainvent and the EU-Regulation have been a result of an actual crisis, the EHI-initiative for fruit and vegetable resulted from a proactive initiative.
The second point of difference is that, while in the case of BSE each nation had to react immediately with different approaches having been taken between and 1996 (the second peak of the crisis), now, in the case of produce there was not such a fact and time-pressure. The EHI Retail Institute could start an international Round Table for “European Retailers Produce Good Agricultural Practice” (EUREPGAP) to discuss and generate the vision of setting farm-assurance standards of a global reach (Mller, 1997b; 1997c; 1998; 1999a). While in retail all the international fruit buying-departments were invited for the first focus-group, the supply-side referred to citrus related products only. The panel even concentrated at first on the two countries of Spain and Italy only. Here, the first tests for citrussupply base were organized. Only after the successful implementation of a citrusstandard for those two countries, the number was enlarged by further countries and by a wider range of products. At this stage of a widened scope of operations, EHI realized that also other organizations were active in this field. Immediately, the taskforce started the dialogue with other quality assurance initiatives including both, the level of Pre-Farm as well as Post-Farm Gate (Mller, 1999b; 2000a; 2000b).