10.6092/issn.2531-6133/6812
The establishment of strategic collaborative partnerships is of great value to innovate under uncertainty. The agricultural sector could not be different. Brazil has one of the most complete and complex agricultural research structures in the world and this article focus on the Brazilian soybean, considering its economical relevance. In this context, this article explains the Brazilian Agricultural Research Corporation (hereinafter Embrapa) central role in articulating networks to develop soybean with efficiency gains and overcoming market uncertainties.
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Raphaela Ladeia
University of Bologna Law Review
Brazilian Soybean Research
Collaboration for Innovation in the Brazilian Soybean Market
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Articles & Essays
2017-04-10
2017-04-10
2016-10-26
2017-05-09
309-340
UBLR
Raphaela Ladeia
2016
10.6092/issn.2531-6133/6812
309
Columbia University
2531-6133
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Brazilian Soybean Research
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340
Collaboration for Innovation in the Brazilian Soybean Market
https://bolognalawreview.unibo.it/article/download/6812/6599
1
ARTICLES & ESSAYS                                                                       DOI 10.6092/issn.2531-6133/6812




        Collaboration for Innovation in the Brazilian Soybean Market

                                       RAPHAELA MACIEL LADEIA†




TABLE OF CONTENTS: 1. Introduction; 2. The Brazilian Soybean History and Relevance; 3.
The Evolution of the Agricultural Sector in Brazil; 3.1. The Evolution of the Soybean
Research in Brazil; 3.2. The Applicable Brazilian Legislation; 4. Embrapa; 4.1. The Main
Similarities Between the Argentinian National Institute of Agricultural Technology –
INTA and Embrapa; 4.2. Embrapa Public Private Agreements; 5. Governance; 5.1.
Governance in the Local Soybean Production Arrangement; 6. Conclusion.



ABSTRACT: The establishment of strategic collaborative partnerships is of great value to
innovate under uncertainty. The agricultural sector could not be different. Brazil has
one of the most complete and complex agricultural research structures in the world and
this article focus on the Brazilian soybean, considering its economical relevance. In this
context, this article explains the Brazilian Agricultural Research Corporation
(hereinafter Embrapa) central role in articulating networks to develop soybean with
efficiency gains and overcoming market uncertainties.




KEYWORDS: Collaboration; Innovation; Uncertainty; Brazilian Soybean Research.




                                            UNIVERSITY OF BOLOGNA LAW REVIEW

                                                    ISSN 2531-6133

                                                    [VOL.1:2 2016]

           This article is released under the terms of Creative Commons Attribution 4.0 International License


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     1. INTRODUCTION

Brazil has one of the most complex and complete agricultural research
structures. The Brazilian Agricultural Research Corporation (hereinafter
Embrapa) plays a central role collaborating with the several actors who
contribute to that research.

         Considering the broad range of agricultural cultivars in Brazil and the
different ways the actors who develop, produce and commercialize them
interact, it was necessary to delimit the study to one specific cultivar. Hence,
we chose the soybean because of its relevance to the Brazilian economy.

         The main purpose of this paper is to explain the collaborative structures
for soybean research under uncertainty and Embrapa’s role in this scenario.1 As
explained by Professor Charles F. Sabel2, contracts are mechanisms employed
to enable communication and avoid opportunistic behaviors among the actors.
Moreover, rules are necessary to decrease or mitigate the undesired behaviors.
Therefore, this paper analyzes the agreements and legislation in these
collaborative structures.

         This paper proceeds in four parts. The first part explains the history and
the relevance of the soybean in the Brazilian context. The second part analyzes
the evolution of the agricultural sector in Brazil, including the evolution of
soybean research and the applicable legislation. The third part then explains
what Embrapa is, showing its main features. It also compares the Brazilian
Embrapa and the Argentinian INTA and reviews Embrapa’s agreements. The
fourth part focuses on governance and specifically, about the local soybean
production arrangement in Santarém and Belterra. In conclusion, the main
differences between Embrapa’s relationship with private and with public
partners are highlighted.


†
  Brazilian Lawyer; LL.M., Columbia Law School 2016; recipient, Parker School Certificate in
International and Comparative Law.

1
  In this paper uncertainty refers to the knightian concept FRANK HYNEMAN KNIGHT, RISK,
UNCERTAINTY AND PROFIT (1921), explained by Ronald J. Gilson, Charles Fredrick Sabel & Robert E.
Scott, Contracting for innovation: Vertical disintegration and interfirm collaboration, 109 COLUM. L. REV.
431 (2009). According to them, uncertainty differs from risk because of its impossibility to
quantify the probability of occurrence. Uncertainty also differs from asymmetry (one party detains
the information).
2
  Charles F. Sabel is the Maurice T. Moore Professor of Law and Social Science at Columbia Law
School.




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    2. THE BRAZILIAN SOYBEAN HISTORY AND RELEVANCE

According to Bonato and Bonato, the soybean is a species of legume of the pea
family whose main products are grain, oil and bran. Its ancient history is
unclear.3 The Chinese literature states that it was domesticated hundreds of
years before the first records dated 2838 B.C. in Pen-tsao Kang-mu herbarium.
Based on this, it is believed that the soybean is one of the oldest types of
cultivars on earth. However, the soybean evolved over time because of the
natural and artificial crossing of different species.

        Despite the disagreement in research on the origin of the soybean, it is
certain that its origin is in East Asia. Between the 2nd century B.C. and 3rd
century A.D., the soybean was brought to Korea and Japan. In 1790, England
planted soybeans in the royal botanic garden in Kew. Later, the Professor of
Vienna University Friedrich Hamberlandt, distributed soybean seeds to Austria,
Germany, Poland, Hungary, Switzerland and the Netherlands. The soybean
came to the United States in 1840, but only in 1980 did American producers get
commercially interested in it. In Latin America, it was introduced in Brazil in
1882, in Argentina in 1909, in 1921 in Paraguay and in 1928 in Colombia.

        Until the beginning of the 1940s, the production of soybean was
concentrated in Asia. Production in the West, especially in the United States,
started growing in 1940 and in 1942 it was the first ranked country in world
production.

        The São Paulo Agronomic Institute did the first studies about soybean in
Brazil in 1892, which were published in 1899. In order to encourage soybean
cultivation in Brazil, the Department of Agriculture of São Paulo distributed
soybean seeds to farmers in 1900. The first Brazilian state to produce soybeans
on a commercial scale was Rio Grande do Sul in 1901. Paraná held the title of
the biggest producer of soybean in Brazil for many years, until the production
in Mato Grosso surpassed it. Other Brazilian states, such as Minas Gerais,
Santa Catarina, Bahia, Goiás, Distrito Federal and Maranhão also produce
soybeans, despite not being relevant for commercial production.




3
  See generally EMIDIO RIZZO BONATO & ANA LIDIA VARIANI BONATO, A SOJA NO BRASIL: HISTORIA E
ESTATISTICA [SOYBEAN IN BRAZIL: HISTORY AND STATISTIC] (1987).




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In the opinion of Guimarães, the expansion in the soybean market in Brazil is a
result of many factors such as market favorable conditions, cooperatives’
participation in production and commercialization, and the possibility of total
automation.4 However, among all the factors, it is believed that the key to the
success of soybean cultivation is the establishment of an articulated research
network.

         The data reveals the importance of soybean cultivation in Brazil. As
stated by Embrapa, Brazil is the second largest producer of soybeans in the
world.5 In the 2014/2015 harvest, the total production was 95,070 million tons,
while the United States, the largest producer of soybeans, produced 108,014
million tons. Currently, the agricultural sector corresponds to 30% of the
Brazilian GDP and 40% of total exports. In accordance with Albuquerque and
da Silva, Brazilian agriculture productivity has grown at an annual rate of
2.51% in the last 30 years due to the investments in research, technology and
human capital.6




     3. THE EVOLUTION OF THE AGRICULTURAL SECTOR IN BRAZIL

According to Lopes and Arcuri, the agricultural research in Brazil started in the
19th century with the establishment of the Botanical Garden in Rio de Janeiro,
followed by the inauguration of the Baiano Imperial Institute of Agriculture
and the Pernambucano Institute.7 Later, the Agronomic Station of Campinas
established by the federal government was subsequently transferred to the
state government of São Paulo.

         Important events such as the First World War, the economic crisis of
1929 and the Brazilian Revolution of 1930, forced Brazil to rethink its


4
  Thiago André Guimarães, A Dinâmica da Cultura da Soja no Estado do Paraná: O Papel da Embrapa
entre 1989 e 2002. [The Dynamic of the Soybean Cultivation in Paraná State: Embrapa’s role between 1989
and 2002], VITRINE DA CONJUNTURA, Aug. 2011, at 1, 4-6.
5
   See BRAZILIAN AGRICULTURAL RESEARCH CORPORATION (EMBRAPA), Soybean, EMBRAPA.BR,
http://www.Embrapa.br/soja/cultivos/soja1 (last visited May 9, 2016).
6
   See generally ANA CHRISTINA SABEGIN ALBUQUERQUE & ALIOMAR GABRIEL DA SILVA, BRAZILIAN
AGRICULTURAL RESEARCH CORPORATION (EMBRAPA), AGRICULTURA TROPICAL: QUATRO DÉCADAS DE
INOVAÇOES TECNOLOGICAS, INSTITUCIONAIS E POLITICAS [TROPICAL AGRICULTURE: FOUR DECADES OF
TECHNOLOGICAL, INSTITUTIONAL AND POLITICAL INNOVATION] (2008).
7
  See generally Mauricio Antonio Lopes & Pedro Braga Arcuri, Ph.D., Brazilian Agricultural Research
Corporation (Embrapa), The Brazilian Agricultural Research for Development (R&D) System, (Feb.
8 - 10, 2010).




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agricultural production, which was mainly focused on coffee and sugarcane.
According to Alves and Souza, by that time the agriculture was harmed because
of thoughts that it did not respond to incentives, demanded a great deal of
work force on the farms, and the international commerce was unfavorable to
raw material exporters.8 Only from 1960 on it is possible to perceive a
modernization process of the agricultural sector with the creation of a National
Rural Credit Program (provided financing to the acquisition of modern inputs
and equipment), the Warranty Policy for Minimum Prices (improved stock
control, commercialization and logistics), and the PROAGRO (a rural insurance
program). By that time, many state governments created their own agricultural
research organizations. Thus, Embrapa and agricultural schools became part of
the National System for Agricultural Research (hereinafter SNPA).

         As noted by Mathias, the modernization also resulted from policies that
increased R&D.9 The idea was to expand the agriculture production through
technological advancements that included research, especially related to
genetic engineering, and reduce its costs. Nonetheless, as stated by Rivaldo,
most of these policies were discontinued due to economic crisis and high
inflation.10 The stabilization of the Brazilian market in the 1990s attracted
private investors. Hereafter, the government started assuming a new role.

         Brazil has one of the most complex and complete agricultural research
structures. Embrapa plays a central role collaborating with the several actors
who contribute to that research, as demonstrated in the figure below. 11




8
   See generally Eliseu Alves & Geraldo da Silva e Souza, A Pesquisa Agrícola numa Agricultura Integrada
ao Mercado Internacional - O caso da Embrapa e do Cerrado. [The Agricultural Research as an Integrated
Agriculture in the International Market - Embrapa and Brazilian Savannah Case], 2 REVISTA DE POLITICA
AGRICOLA 56 [REV. POL. AGR.] (2007).
9
   See generally JOAO FELIPE CURY MARINHO MATHIAS, Modernização e Produtividade da Agropecuária no
Brasil [Modernization and Productivity in Brazil’s Agriculture in How is Brazil?], in COMO VAI O BRASIL?
[HOW IS BRAZIL?], Imã (2014).
10
   See generally ORMUZ FREITAS RIVALDO, Estratégias para o Fortalecimento do Sistema Brasileiro de
Pesquisa Agropecuária [Strategies to Strengthen the Brazilian System of Agricultural Research], Brazilian
Agricultural Research Corporation (1986).
11
   Despite Embrapa’s important role, the actors also have their own projects and relates to the
others without Embrapa’s interference. It is important to note that Embrapa’s Directive No.
14/2000 that will be reviewed in the Brazilian legislation section, prohibits the actors to develop
parallel programs when they are collaborating with Embrapa, to avoid mixing the results.




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Embrapa’s adapted figure.12




           As aforementioned, the public structure started in 1970 with the
creation of SNPA, of which Embrapa is the most important component. In
1962, the Agriculture Research and Experimentation Department (DPEA),
which was later transformed into the Research and Experimentation Office
(EPE), substituted SNPA in 1971, EPE was finally transformed into the National
Department of Agriculture Research (DNPEA). Also linked to the current
DNPEA, Brazil has the State Organizations for Agricultural Research (OEPAS).
OEPAS are composed of public and private educational institutes and public
institutions that support general research, like the National Scientific and
Technological Development Council (CNPq).

             In accordance with Fuck and Bonacelli, it is possible to observe a shift
in the agriculture research model from a totally public environment to a model




12
     The fig. is available at http://embrapa.br




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with more private sector participation.              13
                                                          Currently the private sector is the
main agent in agriculture research, motivated by possible financial gains. The
concern about this model is that in developing countries, poor and small
producers cannot access the benefits of the private research.

           Considering the expected growth of the world population, estimated at
nine billion people in 205014, Vieira Filho asserts that the world’s agricultural
R&D biggest challenge is to promote sustainable development.15 Therefore, the
specific goals are to develop safe and healthy products that are competitive and
meet the environmental needs.

           The most important element to agricultural innovation is the
establishment of strategic collaborative partnerships. The main purpose of this
type of cooperation is to develop the technology with efficiency gains (reducing
possible mistakes, disseminating knowledge and transferring technology),
ensuring the competitiveness and overcoming the market uncertainties. The
key to success of such partnerships is the establishment of a plain policy
regarding the intellectual property of the produced knowledge.




         3.1. THE EVOLUTION OF THE SOYBEAN RESEARCH IN BRAZIL

The first soybean researcher in Brazil was the private company Francisco
Terasawa (FT), by the end of the 1960s in Paraná. In the 1980s, FT developed
the first Brazilian soybean variations. In 1973, the Federação das Cooperativas de
Trigo e Soja do Rio Grande do Sul Ltda [Federation of Wheat and Soybean
Cooperatives of Rio Grande do Sul Ltda] was created. In the 1970s, the
Organização das Cooperativas do Paraná – OCEPAR [Cooperatives Organizations
of Paraná State] was created and later transformed in Cooperativa Central de
Pesquisa Agrícola - COODETEC (Central Cooperative for Agriculture Research). In
1975, Embrapa Soja [Embrapa Soybeans] was created in Paraná. This unit’s

13
   See generally Marcos Paulo Fuck & Maria Beatriz Bonacelli, A Pesquisa Pública e a Indústria
Sementeira nos Segmentos de Soja e Milho Híbrido no Brasil [The Public Research and the Seed Industry in
the Soybean and Hybrid Corn Segments in Brazil], 6 REVISTA BRASILEIRA DA INOVAÇAO 9 [REV. BRAZ. IN.],
87-121 (2007).
14
   See generally EMPRESA BRASILEIRA DE PESQUISA AGROPECUÁRIA, SECRETARIA DE C        NI     O, EMBRAPA
EM NÚMEROS [EMBRAPA IN NUMBERS] (2015).
15
   See generally JOSÉ EUSTÀQUIO RIBEIRO VIEIRA FILHO, Technological Trajectory and Learning in the
Agricultural Sector in Brazilian Agriculture Development and Changes, Brazilian Agricultural Research
Corporation (Embrapa), 2012.




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central role is to research conventional, organic and transgenic soybeans and
study sunflowers.

         Influenced by the international organizations and bound by GATT at the
Uruguay round, that by the time was trying to standardize the legislation
regarding intellectual property, Brazil promulgated, in 1997, the Federal
Statute No. 9.456, known as Lei de Proteção aos Cultivares [Protection Act to
Cultivars]. This legislation safeguards the intellectual property for cultivars
and requires producers to pay royalties and tax to use the technology. As a
result, several multinationals came to the Brazilian market. In order to enter
the market, these multinationals bought some small national companies. An
important example in the sector was the purchase of FT, Sementes Hatã and
later, Calgene, Asgrow, Monsoy, Dekaland and Agroceres by Monsanto. In
2005, Monsanto also bought Seminis, the largest producer of vegetable seeds
and Emergent Genetics in the world. Other multinationals that entered the
Brazilian market in this M&A movement were Agr-Ev and Du Pont. These
companies had a lot of expertise, but did not have the germplasm16 adapted to a
different environment. From the M&A transaction on, these corporations have
been using licensing, integration and collaboration instruments to develop
joint researches. It is essential to mention that the soybean market in Brazil is
a differentiated oligarchy; the entrance barriers relate to the access to genetic
material and the technical and financial capacities.




         3.2. THE APPLICABLE BRAZILIAN LEGISLATION

Brazil has an extensive legislation in agriculture and R&D. This confirms the
theory that under uncertainty, regulation is necessary. Firstly, the Brazilian
Constitution dedicates an entire chapter (IV) to scientific and technological
development, where R&D is included. According to Tavares, since the
promulgation of the Brazilian Constitution, scientific development is not only a
manner of producing knowledge but also generating capital and resolving
social problems.17 This proves the relevance of science and technology to the


16
  Simply put, the germplasm is the genetic material of germs cells.
17
  See generally André Ramos Tavares, Ciência e Tecnologia na Constituição [Science and Technology in
the Constitution], 44 REVISTA DE INFORMACAO LEGISLATIVA, 7, 7-20 (2007).




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economic development. Despite some Constitutional scholars defending the
idea that the constitutional narrative on this topic is abstract serving only as a
recommendation, it is believed that chapter IV is completely self-applicable.

       The Federal Statute No. 8.171/1991, also known as Agricultural Law,
establishes the objectives and institutional competences of the agricultural
research in Brazil. The statute also institutes resources and instruments to
achieve these objectives.

       The Federal Statute No. 9.279/1996 that protects the industrial
property, permits, for example, the patenting of GMOs, complements the
Federal Statute No. 9.456/1997, known as the “Protection          ct to       ultivars”.
This legislation is the base for GMO soybean production in Brazil. The
Protection Act to Cultivars creates the National Service for Cultivar Protection
(SNPC) and is regulated by two Federal Ordinances, No. 527/1997 and No.
199/1998 that, respectively, establish the National Cultivars Register (RNC) and
the National Service for the Cultivars Protection.

       Following the Federal Statute No. 9.456/1997, Embrapa established the
Directive No. 14/1998 to regulate its collaborations. This Directive was updated
and resulted in a new Directive, the No. 14/2000, which specifically regulates
its collaboration with the private sector for research. It prohibits its private
partners from being the proprietors of possible cultivars conjointly developed
with Embrapa. In addition, Embrapa forbids its collaborators from creating
parallel programs in genetics enhancement, to avoid the mixture of results, the
loss of control and quality information. Another concern that can be seen in
this Directive is the maintenance of Embrapa’s germplasm, to which the
collaborators may have access through the genetics enhancement program. By
the end of the research, Embrapa collaborators must return all the genetic
material to Embrapa. The Directive made explicit the possibility for Embrapa
to receive funding resources from its partners. All the collaborations are
established by written agreements that must contain an annual work plan that
meets some specific technical conditions. Some of these conditions are the
number and denomination of the lines that are going to be studied; the number
and identification of the progenies that are going to be studied and multiplied,
if the work contemplates segregating germplasm; and all the required
infrastructure, including the human resources. Embrapa supervises all the




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work based in two instruments: the spreadsheet and notebook field. The
collaborator fills the first with information of the implementation and follow
up of the tests. Embrapa fills the second whenever it sends segregating
germplasm with the crossings and/or the advances, among other important
information. In a later stage, the partner also fills this document with the
enhancement methods, which must be very detailed. Embrapa audits all its
agreements, the consequent resources and the eventual remittance of
germplasm through an internal audit. The celebration of agreements is
preceded by negotiation with the partner, involving the decentralized unit of
Embrapa interested in the partnership, Embrapa Technological Deals and the
Intellectual Propriety Secretary. Embrapa Technological Deals is responsible
for updating Embrapa system with all the information generated by the
research. The Directive also establishes three different models of collaboration,
which will be analyzed in the “Embrapa public-private agreements” section.
The drafting and signing of agreements that does not follow the Directive are
subject to fines. Since the establishment of this Directive, Embrapa had to
review all its previous agreements.

       Embrapa has several other Directives, among which the most relevant
for this study are the No. 22/1996, that establishes Embrapa’s Institutional
Policy of Intellectual Property Management; the No. 15/1998, which creates a
uniform denomination and identification process to Embrapa’s cultivars and
establishes Embrapa’s cultivars bank – BCE; the No. 26/1998 that establishes
the bylaws of its Intellectual Property Secretary (SPRI) and the No. 4/2012 that
established its Business Secretary – SNE.

       The Federal Statute No. 10.711/2004 establishes the national system for
seeds and seedlings. The statute’s main goal is to ensure the identity and
quality of the seeds and seedlings in the Brazilian territory. In addition, the
statute classifies the seeds and seedlings into two categories: certified and
non-certified. The public structure is responsible for providing the certification
through a formal public structure.

       The   Federal   Statute   No.   10.973/2004   establishes     incentives          for
innovation and scientific and technological research.




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The Federal Statute No. 11.105/2005 regulates biosafety and introduces safety
norms and inspection mechanisms to the GMOs.

       According to De’ arli the Federal State No. 11.079/2004 is relevant for
establishing public private partnerships (hereinafter PPP) in Brazil, which,
according to him, Embrapa is the precursor. 18 However, this does not seem to
be the most correct perspective. The definition of PPP varies if it is applied its
sensu lato and sensu stricto meaning. In the sensu lato meaning, PPP
comprehends      any   partnership    where     the   public   and     the      private        are
collaborating with one shared goal. Therefore, Embrapa could be the PPP
precursor in this sense. On the other hand, the Federal Statute No. 11.079/2004,
in its second article, defines the sensu stricto meaning of PPP, as the
administrative concession agreement in the sponsored or administrative
modalities. In the first section, it is explained that the sponsored concession is
the concession of public services or public construction when it involves,
besides the tariff (the pecuniary amount paid by the user), a pecuniary
payment from the public to the private partner. Certainly,                           Embrapa
collaboration for research cannot be framed into this category, since there will
never be pecuniary payments from the public to the private partner. The
administrative concession, in turn, is explained in the second section as the
service agreement where the Public Administration is the direct or indirect
user, even if it involves construction, installation or supply of goods. The
concept here is that the Public Administration is the user and not the
contractor. An example of this type of concession is the construction and
maintenance of prisons. In this case, the Public Administration pays 100% of
the tariffs to the private partner. Hence, we can affirm this is not Embrapa’s
case when it collaborates with the private for research. Finally, in the fourth
section, the legislation prohibits the celebration of PPP agreements which total
amount is less than BRL 20,000,000 (about USD 5,000,000), that lasts for less
than five years and that the only purposes are services, supply or installation
of goods or public construction.       ost of Embrapa’s agreements do not fulfill
these conditions. In addition, Di Pietro explains that in Brazil the public
concession is more clearly related to maintenance, charging and construction

18
  See arlos Ricardo De’ arli. Embrapa: Precursora da Parceria Público Privada no Brasil.
[Embrapa Precursor of Private Public Partnership in Brazil] (Jun., 2005) (dissertation,
Universidade de Brasília, UnB Centro de Desenvolvimento Sustentável).




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of highways, airports, ports and railways. In other words, it is intrinsically
related to infrastructure projects.19

         Finally, the Federal Statute No. 8.666/1993 states that a public bidding
must precede all agreements involving the Public Administration. Nonetheless,
Embrapa does not bid to celebrate agreements to research because the federal
law explicitly excepts the cases of research, education and technical services.

         Due to its massive legislation in comparison with trade and services,
Brazil agribusiness is one of the sectors most susceptible to the effects of
judicial decisions.




     4. EMBRAPA

According to Moreira and Teixeira, Embrapa is a publicly held corporation
created in 1973 through the Federal Statute No. 5.851/1972. 20 Eliseu Alves, a
Brazilian scientist, headed Embrapa’s establishment as an answer to the
supply crisis between 1960 and 1970, and the necessity to diversify products
and reduce prices. Embrapa is attached to the Ministry of Agriculture,
Livestock     and     Supply     (hereinafter      MAPA)       and    operates        through          47
decentralized units that are present in almost all the Brazilian states.
Embrapa’s success can be attributed to its diversified R&D portfolio,
continuous        support      from       the     Federal      Government,           interactivity,
decentralization, independent reviews and specialized staff. Currently Embrapa
has 2,427 scientists of which 1,789 have a doctorate degree and 242
postdoctoral degree.

          Each of Embrapa’s units has an R&D sector with administrative and
patrimonial autonomy and is supervised by the deputy head of R&D with the
Internal Technical Committee support. The group of the R&Ds has an Advisory
Committee that is composed by the bosses of the units that are chosen by the
Board of Directors. Their competence is related to analyzing, systematizing and
consolidating information regarding eventual problems with the R&D policy,
sending them to the Board of Directors proposals and updates of the policy.

19
   See generally MARIA SYLVIA ZANELLA DI PIETRO, DIREITO ADMINISTRATIVO [ADMINISTRATIVE LAW], (19th
ed. 2006).
20
   See generally Gustavo Carvalho Moreira & Erly Cardoso Teixeira, Polìtica Pùblica de Pesquisa
Agropecuària no Brasil [Public Policy for Agricultural Research in Brazil], 3 REV. POL. AGR. (2014).




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According to Silva an R&D policy is important to guide its professionals and
partners.21 Hence, they can always identify the main problems to draft and
execute efficient projects.

          The internationalization of Embrapa started almost simultaneously to
its creation, through a post-graduation program that sent hundreds of
professionals abroad. This was important to establish relationships worldwide.

         Simultaneously, Embrapa had the cooperation of the Inter-American
Development Bank, the World Bank, the Food and Agriculture Organization of
the   United    Nations,     the   Inter-American        Institute      for   Cooperation             on
Agriculture, the Consortium of International Agricultural Research Centers,
Agricultural Research for Development, among others, to establish its
international structure and implementation of its research program. Initially,
the cooperation model was very simple; Embrapa only received benefits. In a
later stage, Embrapa was involved in more complex cooperation models. The
first example was the Cooperative Program for Agrifood and Agroindustrial
Technological Development of the Southern Cone in 1980.

        Another important project to internationalize Embrapa is the Virtual
Laboratory (hereinafter Labex). This project started in 1990 in the United
States and is currently present in France, Germany, United Kingdom, Korea
and    China.    The     program      was    conceived      to     innovatively         strengthen
international scientific cooperation. The concept was to create a faster
communication flux in the research and development area by the physical
presence of Embrapa’s researchers in the most advanced research centers,
intensifying the collaboration with research organizations around the world.
The area of study, which is defined based on Embrapa’s priority agenda and
made explicit in its master plan, determines the international partner. The
potential partners are identified based on a study of excellence in its field of
study (this is measured in a range of ways, for instance, by the number of
scientific publications and patents), the infrastructure available, the interest in
participating in the program, the history and the current technological and
scientific performance of the institution. Next, Embrapa starts a negotiation
process. In this phase, a technical and governance mission is realized in the

21
  See generally RENATO CRUZ SILVA, Política de P&D [R&D Policy], Brazilian Agricultural Research
Corporation (Embrapa), 1999.




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institutions to support the decision process. Strategic purposes and operational
mechanisms        are   discussed.      If   the     negotiation      succeeds,        collaboration
agreements are drafted stating its areas of study, mechanisms, obligation of
the parties, and funding resources. The following step is to designate the
researches, that working together draft a common interest project (PIC),
specifying the objectives, the possible results and the methodologies to develop
the research. Embrapa’s internal committees select the participants of the
program, who can be designated as coordinator or researcher, depending of his
personal,     academic      and    professional       abilities.    Each      researcher          and/or
coordinator is firstly allocated for a two-year term, but with Embrapa’s
internal committee approval, this period can be extended in one year.
Embrapa’s internal committee can also early terminate the researcher
agreement when it understand that the researcher and/or coordinator is no
longer    required      abroad.    A   committee        composed         of   the      secretary          of
international relations, the coordinating body of scientific cooperation, and the
R&D department, annually evaluates the participant of Labex and the program
itself. In this annual analysis, the technical reports developed by the
researchers that are working abroad and their coordinator and interviews with
them and the appointed responsible in the recipient institution are evaluated.
Labex has a guiding document, which states as its objectives: promote
international cooperation for innovation in agriculture; generate knowledge
and innovative technologies to the development of the agricultural production
chains; monitor and identify scientific, technological and innovative tendencies
with potential to solve problems.22

         Labex program also receive senior researchers of international partners
at Embrapa in what is called “inverted Labex”.

         Currently Brazil has seventy international collaboration projects with
Africa, Asia and Latin America, including Caribbean, involving more than
thirty-seven countries.23

         An important collaboration raised in the international scenario was
with Japan. After the increasing concerns with food safety in 1973, the United

22
   See generally Secretary of International Relations. Coordinating Body of Scientific Cooperation,
Documento Orientador do Programa Embrapa-Labex [Guiding Document of the Program Embrapa-Labex],
Brazilian Agricultural Research Corporation (Embrapa) (2015).
23
   See generally EMPRESA BRASILEIRA DE PESQUISA AGROPECUÁRIA, supra note 14.




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States, Japan’s only supplier of soybean by this time, imposed a control in the
export of the grains, which resulted in the exponential rise of the price of
soybean. Therefore, Japan started searching for different suppliers. In 1975, the
collaboration between Japan and Brazil created the Brazilian Savanah (known
as cerrado) Development Program (PROCEDER). Also, the Japan International
Cooperation Agency (JICA) gave technical and financial support for over twenty
years to Brazil. Both goals were to promote the cultivation and the consequent
capitalization of agriculture at cerrado, increasing the production and
productivity of the soybean. These programs were executed in collaboration
with cooperatives and farmers under the supervision of the MAPA.

         According to Fuck and Bonacelli, Embrapa also has collaboration
agreements with public and private foundations. 24 Their presence all over the
country enables Embrapa to test its cultivars in different regions and
consequently adapt them. The foundations main obligations are to provide
partial financial, physical and human resources to researches, in addition to
supporting Embrapa’s collection of royalties.            n the other hand, Embrapa’s
obligations are to provide germplasms according to the region and the
foundation interest, transfer technology, researchers and technical team. The
main benefit for the parties is the possibility of improving and enlarging the
genetic enhancement.

         Despite being a Brazilian successful example of publicly held
corporation, recently Embrapa’s President,           aurício Lopes, in an interview for
a Brazilian Newspaper, asserted that Embrapa is not improving in the same
rhythm of the other competitors.25 Annually, Brazil invests only 1.9% of its
GDP prevenient from agriculture in research. This amount is proportional to
half of the United States investment. Thus, Brazil must double its investment
to maintain its competitiveness. Currently, Brazil only contributes with 5% of
the world’s investment in agricultural research.              oreover,        aurício Lopes
argues in favor of the establishment of a subsidiary to Embrapa, which will be
named “EmbrapaTec”. This institution would receive the technology developed
in Embrapa’s laboratories and would work with the private sector, which

24
  Fuck and Bonacelli, supra note 13, at 87-121.
25
   Cristiano Mariz, Estamos Ficando para Trás, Diz Presidente da EMBRAPA. [We Are Losing
Competitiveness, Says    Embrapa’s     President], Exame   (last   visited May    9,  2016),
exame.abril.com.br/revista-exame/edicoes/1095/noticias/estamos-ficando-para-tras-diz-
presidente-da-Embrapa.




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would bring investments. The former Brazilian Minister of Agriculture,
Livestock and Supply, Kátia Abreu, agreed with this project. Hence, the
government drafted a bill to create this subsidiary, which was sent to Congress
in May 2016. Currently the draft is being examined by the Brazilian House of
Representatives. The idea is that EmbrapaTec should have more liberty than
Embrapa.      aurício Lopes concluded the interview emphasizing that Embrapa’s
roles must evolve with society. Considering the biggest investments in
agricultural research are made by the private sector, the government should
invest in different areas.

        Embrapa’s master plan for 2014-2034 asserts its proposal to expand its
partnerships, facilitating innovative mechanisms and models of interaction,
and prioritizing open innovation models.26

        The 2013 Embrapa’s activities report stated that during that year 102
technologies were developed in 230 cultivars. The developments include three
new soybean variations, that were launched in partnerships with Fundação
Meridional (BRS 360RR), with Epamig and Fundação Triângulo de Apoio à
Pesquisa (BRSMG772), Centro Tecnológico para Pesquisa Agropecuária, and
Emater from Goiás (BRSGO 6955 RR). 27 Embrapa currently owns 260 variations
of soybeans. In April 2015, Embrapa totaled 3,185 agreements with national
and international organizations.28




        4.1. THE MAIN SIMILARITIES BETWEEN THE ARGENTINIAN NATIONAL INSTITUTE OF

AGRICULTURAL TECHNOLOGY – INTA AND EMBRAPA

Publicly held corporations, such as Embrapa, are very important to the
scientific research and the development of new technologies benefits all
society. Therefore, the Brazilian Embrapa and the Argentinian INTA develop
these activities in collaboration and in competition with several actors.

        Despite the fact that they lived through a financial and institutional
crisis that resulted in a necessity of institutional reorganization, they were


26
   See generally BRAZILIAN AGRICULTURAL RESEARCH CORPORATION, VI PLANO DIRETOR DA EMBRAPA 2014-
2034. [VI EMBRAPA MASTER PLAN 2014-2034] (2015).
27
   See generally LABORATORIO NACIONAL DE ENERGIA E GEOLOGIA, BRAZILIAN AGRICULTURAL RESEARCH
CORPORATION (EMBRAPA), RELATÓRIO DE ATIVIDADES 2013 [2013 ACTIVITIES REPORT] (2015).
28
    See generally EMPRESA BRASILEIRA DE PESQUISA AGROPECUÁRIA, supra note 14.




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created in different contexts. INTA was created much earlier than Embrapa, in
1956, during the Green Revolution, and its main purpose was to modernize the
agriculture in Argentina. Since then, the institution is located in the most
important producing regions in its country. Embrapa, on the other hand, was
created in 1973 focused on research.

           While Embrapa’s participation in the soybean market is expressive,
collaborating with different partners to enlarge the competition, INTA’s
participation is decreasing.29




          4.2. EMBRAPA’S PUBLIC-PRIVATE AGREEMENTS

Adam Smith observed in 1776 that the main source of innovation and
improvement comes from the men who work with machines and discover ways
to improve it, and the manufacturers that developed such improvements. 30
Edwin Mansfield later confirmed this theory, when he evaluated that less than
10% of the new products or processes in the United States were introduced by
academic research.31 According to him, the successful development of a product
or process depends on a detailed knowledge of the production and market. This
comes from experience in the company.

         As stated by Fuck, Bonacelli and Carvalho,32 in the recent years the
organization for research has been changing. Based on an investigation in
twenty different countries, the most relevant elements that are being changed
are its funding sources, space, actors and roles and the interaction and
coordination between them. The public institutions are collaborating each time
more with the private sector.

         According to Alves and Souza the main benefits of a public-private
collaboration for research are: a) increase the public’s research pragmatism,
helping it focus in current problems; b) preserve talented researchers in the

29
   See Marcos Paulo Fuck and Maria Beatriz Bonacelli, Os Novos Caminhos das Instituições Públicas de
Pesquisa Agropecuária: Observações a Partir dos Casos da Embrapa e do INTA [The New Ways of the Public
Institutions of Agricultural Investigation: Observations from the Cases of Embrapa and INTA], 30 REVISTA
ESPACIOS [REV. ESP.], no.1, 2009 at 29.
30
    See ADAM SMITH, WEALTH OF NATIONS, (Charles Jesse Bullock ed., Bartleby.com 2001) (1901)
(ebook).
31
   Cf. Edwin Mansfield, Contributions of New Technology to the Economy, in TECHNOLOGY, R&D AND THE
ECONOMY (Bruce Smith and Claude Barfield eds., 1996).
32
   Fuck and Bonacelli, supra note 29.




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public sector; c) increase the research’s budget; d) reduce the total costs of
research in the public and private sector; e) increase the knowledge; f)
facilitate the international interaction.33

           In accordance with De’ arli an example of Embrapa’s collaboration
with a private foundation is the agreement with Fundação MT, which is
composed of twenty-two seed producers in Mato Grosso. 34 The partnership was
successful, resulting in the production of several cultivars adapted to the soil
and climate conditions of Mato Grosso. This includes the production of three
types of soybean cultivars (Uirapuru, Crixás and Pintado). Considering the
agreement was celebrated before the Federal statute No. 9.456/1997 and the
Directive No. 14/2000, it had to be amended. Nonetheless, Fundação MT did
not accept the new rules, which among others, established that Embrapa would
be the exclusive proprietor of the soybean cultivars. Hence, Fundação MT
decided to create its own program, which is against Embrapa Directive No.
14/2000. With the breach, Fundação MT proposed Embrapa to divide equally all
the genetic material obtained by the crossings achieved by Embrapa with the
Foundation resources. This would mean that Fundação MT would have a copy
of the enhanced germplasm. Embrapa did not agree with the proposal since the
genetic material is a national patrimony, developed with society’s resources
(considering it is a publicly held corporation). Next, Embrapa required
Fundação MT to return the genetic material that was with the Foundation, and
all the related technical information. Thus, Embrapa proposed Fundação MT to
maintain the exclusive right to commercially use all the cultivars developed in
collaboration, considering this would be sufficient remuneration to the
Foundation’s investment.            fter several months trying to negotiate, the parties
did not reach an agreement. Hence, Embrapa filed a lawsuit against Fundação
MT in the Federal Courts, that held that the Foundation had to return all the
genetic material to Embrapa.

           nother example brought by De’ arli is the collaboration between
Embrapa and Fundação Centro-Oeste, that took place after the collaboration



33
   See Eliseu Alves and Geraldo da Silva e Souza, A Pesquisa Agrícola numa Agricultura Integrada ao
Mercado Internacional O caso da Embrapa e do Cerrado. [The Agricultural Research as an Integrated
Agriculture in the International Market. Embrapa and Brazilian Savannah Case], 16 REV. POL. AGR., no. 2,
2007, at 56.
34
   See generally De’ arli, supra note 18.




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between Embrapa and Fundação MT had finished.                    35
                                                                      Indeed, Fundação Centro-
Oeste was treated as Fundação MT successor. Embrapa aims with this
collaboration to regain its lost market share in the region that is currently
owned by its former ally and now competitor, Fundação MT. The collaboration
works the same as it used to work with Fundação MT, except for the fact that it
does not limit the entrance of new collaborators and respects the rules of the
Directive No. 14/2000.

            ne of Embrapa’s most important private partnership in Brazil is with
Monsanto, a multinational headquartered in St. Louis, Missouri. According to
Moura and Marin in attempt to expand its production diversity Monsanto
started    investing      in   genetics     engineering,       which     was      absorbed          as     a
complimentary asset for the agrochemical. 36 Monsanto was stimulated to start
working with biotechnology when its herbicide Roundup’s patent, that was
expiring, was extended. Their plan was to avoid other companies to use generic
versions of its product. Hence, Monsanto invested in researching plants that
were resistant to Roundup to put in the market a technological combo
consisted of the selling of the GMO seeds and the Roundup herbicide.

          In 1970, Monsanto synthesized the glyphosate, the main component of
Roundup, which was registered in 120 countries. This product revolutionized
agriculture in the world since it efficiently controlled the weeds. Initially, the
product was exported to Brazil, but later, when Monsanto started investing in
research in Brazil, it was technologically improved and started being produced
in the country.

          According to Moura and Marin based on the Federal Statutes No.
9.279/1996 that protect cultivars, the No. 9.456/1997 that protects the
industrial property, and Embrapa’s Directive No. 14 /2000, Embrapa developed
three types of agreements with the private and public sector.37 The first model
is a technical cooperation for crossing planning. In this case, the partner must
have a technical team with its own enhancement program and must participate
in the whole process of the creation of a new cultivar. In this situation, the


35
   De’ arli, supra note 18.
36
   See generally Luís Cláudio Martins de Moura & Joel Bevilaqua Marin, Rede Empresarial: A Estratégia
da Produção de Sementes de Soja Transgênica em Goiás. [Business Networking: The Strategy of Transgenic
Soy Seeds Production in Goiás], 14 INTERAÇÕES (CAMPO GRANDE) [INTER. C. G.], n. 1 (2013).
37
    Id.




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final product is registered in co-participation with the public partner and the
commercial benefits are rated. The private partner can commercially use the
cultivars for ten years. In the second model, the technical cooperation regards
lines. The private partner co-develops with Embrapa soybean cultivars,
receiving genetic material and realizing the necessary tests for an eventual
commercial use. Embrapa owns alone the intellectual property registry and the
private partner can commercially use the soybean cultivars for five years, with
a subleasing option. The third model is a financial cooperation which the
partner provides the financial and human resources and Embrapa research. In
this case, the private partner may exclusively multiply and commercialize the
cultivars for a period to be established between the parties. The production,
distribution and marketing are structured in licensing agreements that
establish obligations to each party linked to this network. According to Santini
and Paulillo Embrapa celebrates two types of agreements. 38 The first one is the
collaboration agreement that must be framed within the three previously
mentioned models and when the research has positive results, the licensing
agreement.

          By analyzing Embrapa’s agreements, it is possible to note the
generality of its terms. In most cases, the agreements state as objectives the
integrated effort among the parties to research in a general area; for example
soybean.39 The technical specifications of the research are part of the first
annex, that are discussed in a later moment (after the signing of the
agreement).      nother possibility for Embrapa’s agreement is the establishment
of an annual work plan that is also discussed after the signing of the
agreement. In both cases, technical specifications or annual work plan, the
projects are formally specified and must accompany a research protocol.
Generally, Embrapa is responsible for guiding the research, but the agreement
does not mention in which ways, which defers to Embrapa lots of authority. In
the agreements, it is clearly stated where the research is going to take place
and the materials (including the quantity) that must be transferred. The

38
   GIULIANA APARECIDA SANTINI & LUIZ FERNANDO PAULILLO, ENCONTRO NACIONAL DE ENGENHARIA DE
PRODUCAO, ASSOCIAÇÃO BRASILEIRA DE ENGENHARIA DE PRODUÇÃO, ESTRATEGIAS DAS EMPRESAS DE SEMENTES
FRENTE AOS ASPECTOS CONCORRENCIAIS [STRATEGIES OF SEED COMPANIES FACING THE COMPETITION
ASPECTS], 2002.
39
   The agreements’ analysis was made considering the agreements that are available on the
internet and other studies. ost of Embrapa’s agreements are not available in full for general
consultation, considering its confidential information.




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parties cannot disclose, in any hypothesis, the technological invention,
improvement or innovation obtained as the result of the agreement. In most of
the situations Embrapa will own the intellectual property. In each agreement,
one representative of each party is designated to coordinate and supervise the
research. It is also estimated a cost and the way in which it will be shared (or
completely privately funded). Considering Embrapa is a public corporation, the
extract of its agreements40 are published in the “ fficial Journal of the                            nion”
and in all cases the disputes are settled by the Judiciary.

           It is important to note that according to Ronald J. Gilson, Charles F.
Sabel and Robert E. Scott in contracting for innovation, hard and soft terms do
not solve problems.41 While the first is inefficient because of its inflexibility,
the latter depends on vague standard that invites subsequent adjustments.
Embrapa’s agreements for research use many soft terms that force the parties
to negotiate all the time. This can create undesired opportunistic behaviors, for
depending very much on good faith.

           According to Fuck and Bonacelli, Embrapa entered into its first
collaboration agreement with Monsanto in 1997. 42 By that moment, the
Brazilian government opted for the GMO technology. Moreover, it chose to
defend the substantial equivalent principle, whereby there are no substantive
and nutrition differences between conventional and GMO products. Hence,
these products are not harmful for the health or environment. This agreement
aimed to develop soybeans resistant to glyphosate herbicide that would be
registered in Embrapa’s name. The agreement was extended and incorporated
in its object the commercial use of the GMO soybean. This agreement was
amended in 2000 and 2002.

           In the original agreement, dated 1997, Embrapa was obliged to use
only the Roundup herbicide. This violates the free competition agreement.
Thence, the Brazilian Administrative Council for Economic Defense (hereinfter
CADE) interfered in the agreement to require its modification. This adjustment
was materialized in 2002. The new wording of the agreement excludes all

40
   The extract of the agreements comprehends its basic information, i.e. the name of the parties,
the object, the amounts involved, and the term.
41
   Gilson, Sabel and Scott, supra note 1.
42
   See generally Marcos Paulo Fuck & Maria Beatriz Bonacelli, A Pesquisa Pública e a Indústria
Sementeira nos Segmentos de Soja e Milho Híbrido no Brasil. [The Public Research and the Seed Industry in
the Soybean and Hybrid Corn Segments in Brazil], 6 REV. BRAZ. IN. 87 (2007).




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references to Roundup, that was substituted for herbicides with glyphosate as
its main component. Despite this, the agreement was still valid and among
other obligations, it was required for the partners indicated by Embrapa to also
sign an agreement with Monsanto to use the cultivar. Afterwards, the seed
producers licensed by Embrapa, after signing an agreement with Monsanto,
would pay royalties to Embrapa for the use of the cultivar. Monsanto would
receive from these seed producers a tax correspondent to the technology use,
which is an agreement and not a classical licensing. The tax amount is
negotiated between Monsanto and the seed producers. Embrapa and Monsanto
continue to be completely independent. Monsanto interest is in receiving the
technological tax and the possibility of increasing its herbicide sales. Embrapa,
in turn, benefits from accessing RR gene that is                        onsanto’s propriety.
According to Santini and Paulillo this new model benefits Embrapa in
obtaining scale and scope economies.43 Both are important factors to reduce the
costs, but the first mainly relates to the increasing investments in R&D,
sharing risks and exploring the complementarity of the assets. Scope economy,
in turn, is gained when they use the same infrastructure to commercialize and
distribute its grains.

          In 2006, Embrapa has published a note mentioning that it received
BRL 800,000 (about USD 200,000) from Monsanto as one of the results of the
research partnership and that it was going to invest in its biotech research
fund. More specifically, the agreement states that this amount is going to be
invested in accordance to the definitions of a manager committee composed by
Embrapa’s and          onsanto’s representatives. In the occasion, Embrapa also
announced the launching of three other conjoint projects with Monsanto: the
book “Basis for the         ollection of Vegetal Germplasm”; another cooperation
agreement to develop cotton with Roundup Ready®Flex technology (also
resistant to the glyphosate herbicide), and the result of the project which also




43
   See generally Giuliana Aparecida Santini & Luiz Fernando Paulillo, Estratégias Tecnológicas e
Aspectos Concorrenciais das Empresas de Sementes de Milho Híbrido e Soja No Brasil. [Technological
Strategies and Competitive Aspects of the Hybrid Corn and Soybean Seed Companies in Brazil], 32
INFORMAÇÕES ECONÔMICAS, no. 10, 2002, at 20.




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involved the MAPA that consisted of empowering farmers to produce different
cultures.44

          Despite the apparent success of the collaboration between Embrapa
and Monsanto, many parcels of the Brazilian society disapproved it. This can
be seen in some of the news of the period. The news informed that more than
1,200 rural workers protested against the collaboration, alleging that it was
harmful to the Brazilian economy. They pled that Embrapa was “giving” to
Monsanto the technology developed by Embrapa to be transformed in
transgenic seeds Roundup’s herbicide resistant. Their dissatisfaction also
regarded the fact that the U.S. multinational would have the monopoly of
transgenic soybean in Brazil and in the herbicide market. Moreover, they
claimed that it is an outrage to the Brazilian technological and food
sovereignty.     Finally,     they    were    against     the    commercial        planting          and
consumption of transgenic products while its biosafety conditions were not
completely proven.45 The discontentment was also manifested by the
Citizenship and Human Rights Commission of the Legislative, who publicly
asked Embrapa to disclose the terms of the agreement with Monsanto, alleging
that rather than being concerned with economics they were trying to defend
the sustainable social and natural environment. 46 A critical term of the
agreement is the non-disclosure term, since it restrains the access to the
research results. Some scholars affirm that this clause is harmful to the
society, since the disclosure of the results would result in a social benefit.

          Embrapa signed the agreement in an unstable scenario since only in
2005 Brazil approved the commercial production of GMO soybeans. In an
attempt to solve this matter, Embrapa and Monsanto asked CADE to further
analyze their commercial agreement that was celebrated in April 2000. In its
opinion, CADE explained the agreement’s objective: commercial use of the
GMO soybean developed to tolerate the glyphosate (that is heavily used in

44
   See Embrapa Media Advisory. Embrapa e Monsanto Apresentam Resultados de Pesquisa. [Embrapa and
Monsanto Present Research Results], Renorbio. Rede Nordeste de Biotecnologia. EMBRAPA.BR (last
visited May 9, 2016).
45
   See MST Brasil, 1200 Trabalhadores Rurais Protestam Contra Contratos com a Monsanto [1200 Rural
Workers         Protest     Against         Monsanto        Agreements],       GALIZA        (2001),
http://www.galizacig.gal/actualidade/200110/mst_brasil_1200_trabalhadores_rurais_protestan_
monsanto.html, 2001, (last visited May 9, 2016).
46
   See generally Vera Monteiro, CCDH Pede Divulgação das Cláusulas do Contrato de Pesquisa Embrapa-
Monsanto [CCHR Request the Disclosure of the Terms of Embrapa-Monsanto Research Agreement], PORTAL
DA AGÊNCIA DE NOTÍCIAS ALRS, Sept. 12, 2001.




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herbicide production). The agreement allows Embrapa to develop, produce and
commercialize directly or through licensed third parties, GMO soybean
cultivars with Monsanto technology that makes the seeds resistant to
glyphosate. CADE concluded for the legality of the agreement, considering it is
not an exclusivity agreement, meaning that Monsanto can license its
technology for other corporations and Embrapa can use technology owned by
the     competitors.47       In    addition,      Embrapa        publicly      explained         the      main
controversial issues of the agreement. Basing in research, Embrapa proved that
     onsanto’s technology is in fact efficient. It also explained that Embrapa owns
the soybean cultivars that are resistant to glyphosate. Thus, Embrapa was not
licensing its germplasm to Monsanto, but Monsanto was licensing its soybean
technology to Embrapa. Based on the Federal Statute No. 9.456/1997 and the
Directive No. 14/2000, Embrapa owns all the GMO cultivars obtained by
Embrapa. Besides, Embrapa decides where, how much and who must produce.
It is also stated that the technological tax due to Monsanto cannot be higher
than       onsanto’s competitors and partners. Embrapa also maintains its
soybean enhancement program and has partnerships to provide alternatives to
the producers. Finally, it highlighted that the farmers can stock seeds for their
own use in a new planting, according to the Federal Statute No. 9.456/1997.
However, this possibility has been intensively discussed, since not determining
the volume limits the farmers can stock may incentivize an informal market.
Fuck and Bonacelli are examples of scholars that vehemently defend this
theory.48

           The idea of          onsanto and Embrapa’s agreement is in some aspects
similar to Warner-Lambert-Lingand agreement, explained by Gilson, Sabel
and Scott.49 Both aim innovation as a result of a collaboration that is necessary
to maintain simultaneously a variety of researches. Its high uncertainty
requires a close monitoring. However, in Embrapa’s case, the Judiciary solves
the eventual conflicts.


47
   See generally Ricardo Villas Bôas Cueva, Minister of Braz, Ministério da Justiça, Conselho
Administrativo de Defesa Econômica (CADE), Ato de Concentração n. 08012.004808/2000-01
[Concentration Act n. 08012.004808/2000-01], www.cade.gov.br (last visited May 9, 2016).
48
   M. P. Fuck & M. B. M. Bonacelli, As Interações entre os Setores Público e Privado no Lançamento de
Novas Cultivares de Soja, Milho e Trigo no Brasil [The Interactions Between the Public and Private Sectors in
the Launch of New Soybean, Corn and Wheat Cultivars in Brazil], ANPAD.ORG.BR, 17- 20 (Oct. 17 - 20,
2006), http://www.anpad.org.br/admin/pdf/RED567.pdf.
49
   Gilson, Sabel & Scott, supra note 1.




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In Goiás State, the most important GMO soybean production is organized
under a public-private agreement between Embrapa, Monsanto and CTPA
(Technological Center for Agricultural Research), which is a non-profit
company created by the private seed production companies. The main purpose
of the partnership it to enhance GMO cultivars in the Brazilian cerrado.
Monsanto detains the soybean GMO’s technology that is resistant to the
glyphosate herbicide and Embrapa, in turn, keeps the property over the
cultivars adapted to the soil and climate conditions of Goiás. According to
Moura and Marin,50 Embrapa and CTPA are responsible for researching to
enable the GMO soybean in Goiás (Embrapa licenses its cultivars and CTPA
offers financial support and contact the producers).

          Another example of a collaboration agreement with the private sector
is with BASF, chemical world leader. The collaboration agreement was signed
in 2001 with an initial five year term, aiming the development of new
technologies that are interesting for both                   corporations regarding the
sustainable growth of the Brazilian agriculture. The agreement follows the idea
of open innovation. Both companies can trigger each other when they identify
new development opportunities, where the partnership can add value. They are
investing together seeking productivity enhancement. For the first two
projects, the partnership is focusing on biotech products, but for the future,
they aim for genetic enhancement, fertility, soil mechanization, plant
protection, and physiology. The largest benefits of the collaboration are
experiences and know-how exchange with the possibility of generating new
agricultural technologies.51 Embrapa received BRL 1,000,000 (about USD
250,000) for this partnership until the final product was launched because
then BASF would also pay royalties to Embrapa. 52 One of the most important
researches conducted by Embrapa in its collaboration with BASF is the
development of other type of GMO soybean cultivars resistant to the herbicide
that belong to the imidazolinones group.



50
   See generally de Moura & Marin, supra note 36.
51
   See Embrapa e BASF Anunciam Acordo de Cooperação. [Embrapa and BASF Announce a Cooperation
Agreement], UOL Rural Centro (June 17, 2011) http://ruralcentro.com.br/noticias/Embrapa-e-basf-
anunciam-acordo-de-cooperação-42418#y=303.
52
   See Daily Trading Industry and Services. Embrapa Reforça as Parcerias Privadas. [Embrapa
Strengthens Private Partnerships] UOL, (2007)     ruralcentro.uol.com.br/noticias.Embrapa-reforca-
as-parcerias-privadas-2019.




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     ccording to De’ arli, in    arch 2005 Embrapa realized a workshop to discuss
its partnerships.53 It was concluded that Embrapa’s operations through
partnerships are successful. However, it still must work in new managing
proposals for its collaboration agreements, which must be approved by its
Board of Directors. The main issue is to improve the definition of each party’s
obligations with a straightforward approach. Nonetheless, it is believed that
under uncertainty, it is impossible to know ex ante all the features of the
agreement. Moreover, according to Gilson, Sabel and Scott contracting for
innovation is a new tool that should use a formal and informal braiding of
governance mechanisms to avoid opportunistic behavior, instead of base only
in formal structures.54

            In order to maintain its competitiveness in the agricultural sector, the
private sector has adopted Embrapa’s similar behavior. It is very open
collaboration with universities, research agencies and even other companies,
and it uses the main appropriation mechanisms and technological transfer.
According to Santini and Paulillo Monsanto is the only company that opts for a
vertical integration, maintaining the integration between the chemical and
seed areas in its own company for biotechnology development, even when
there are several other companies that may offer chemical solutions, like
Sygenta, Pioneer (Du Pont), and Dow AgroSciences. 55                 General perception is
that vertical integration is the most beneficial type of organization. According
to Zylbersztajn, this is not true, especially in the agribusiness R&D sector, for
its uncertainty.56 This confirms the idea of Gilson, Sabel and Scott when they
state that vertical integration is the wrong answer for uncertain markets.
Therefore, there is a historical decrease of its use.57




53
   See generally De’ arli, supra note 18.
54
   See Gilson, Sabel & Scott, supra note 1.
55
   See generally Santini & Paulillo, supra note 43.
56
   Decio Zylbersztajn. Estruturas de Governança e Coordenação do Agribusiness: Uma Aplicação da
Nova Economia das Instituições [Governance Structures and Coordination of Agribusiness: An
Application of the New Institutional Economics] (1995) (dissertation, Universidade de São Paulo,
Faculdade de Economia Administração e Contabilidade).
57
   See generally Gilson, Sabel & Scott, supra note 1.




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     5. GOVERNANCE

The purpose of governing a relation is to reduce its transactional costs, related
to limited rationality and opportunistic behavior. While the first can result in
an agreement with gaps, the second carries the risk of benefiting from these
gaps. The magnitude of these factors depends on each transaction. In order to
choose the most adequate governance standard, it is important to analyze the
frequency the transaction takes place, the available assets and the type of
uncertainty, according to Williamson, cited in Feltre. 58 Still according to Feltre
the frequency is important because the higher the recurrence, the higher the
motivation of its agents to not impose losses on its partners.59 Otherwise, it can
result in the termination of the agreement. Uncertainty, in turn, is important
because in an environment where it is impossible to know ex ante the result of
the external impacts, renegotiations are necessary, and consequently, more
exposed to opportunistic behaviors. As previously mentioned, the research
agreements are a good example of this kind, since the practical and technical
results are not known in advance of the celebration of an agreement, being
impossible to totally define in the agreement terms. Finally, the available
specific assets are important due to the adaptation costs.

        According to Sologuren competitiveness problems are not solved based
only on the individual choice of a governance model based on collaboration,
but also depend on            government policies to reduce opportunism and
externalities, where the collective rationality is not achieved because of the
individual rationality preponderance. 60 However, there are situations that the
government can negatively impact through policies or with its high
interference.

        An agreement is not able to fill all the gaps created by the uncertainty,
because of the limited rationality and the informational asymmetry. This


58
    See generally Cristiane Feltre, A Diversidade de Mecanismos de Governança na Multiplicação de
Sementes de Milho Híbrido e Soja no Brasil [The Diversity of Governance Mechanisms in the
Multiplication of Hybrid Corn and Soybean Seeds in Brazil] (2005) (dissertation, Universidade
Federal de São Carlos, Centro de Ciências Exatas e de Tecnologia).
59
   Id.
60
     See generally Leonardo Junho Sologuren, Integração Vertical, Grupos Estratégicos e
Competitividade: O Caso do Sistema Agroindustrial da Soja [Vertical Integration, Strategic Groups
and Competitivity: The Agroindustrial Soybean Sytem] (2004) (dissertation, Universidade Federal
de Uberlândia, Instituto de Economia)




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results in the need for a combination of agreements and organizational forms.
Gilson, Sabel and Scott also express this concept, when they mention, “the
higher the level of uncertainty, the more difficult it is for parties to write and
Courts to interpret complete state-contingent contracts”.61 The structure to
govern the relation must mix formal and informal tools to foster information
exchange. Accordingly, no contract theory offers a general solution.

         Sologuren based on Williamson, identify three types of existing
agreements. a) classical agreements, which are the most basic ones and must
meet the following conditions: the agent’s identity is irrelevant for the
transaction, the dimension and nature of the agreement is completely defined,
there is no corrective flexibility in the case of non-celebration of the
agreement. In this type of instrument, the judicial form of dispute resolution is
the most used. b) neoclassical agreements, which are long term agreements
celebrated in an uncertain environment. In this type of agreement, the identity
of the parties is relevant, in order to assure the relation continuity. There is
flexibility in the agreements structure that is negotiated every time there is a
need to avoid losing the investments. In this kind of agreements, arbitration is
heavily used. c) Relationship agreements that, as defined by Williamson, are
kind of “mini societies”, where the description is substituted for the exercise
of authority. Based on this classification, Williamson, cited by Sologuren
(2004), defines three types of governance: a) Market Governance (classical
agreements), where there is no effort to sustain the relationship; b) Trilateral
Governance (neoclassical agreements), that is a hybrid form of governance
situated between the market and the integration; c) Specific Transaction
Governance (relationship agreements), where the transactions risks are high
and the possibility of conflicts are expensive and uncertain since there are no
standards.62

          Professor Charles F. Sabel63 explains that in the governance process, it
is important to establish a target, despite not having all the information; a
timeline; the milestone to follow the progress and information exchange, so
people could talk openly.


61
   See Ronald J. Gilson et al., Text and Context: Contract Interpretation as Contract Design, 100 CORNELL
L. REV. 23 (2014).
62
   See Sologuren, supra note 60.
63
   Supra note 2.




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Finally, the most efficient contracting structure must:

          1) induce efficient transaction-specific investment by both parties;
          2) establish a framework for iterative collaboration and adjustment
          of   the   parties’   obligations   under    conditions    of   continuing
          uncertainty – responding, that is, to coordination cascades; and 3)
          limit the risk of opportunism that could undermine the incentive to
          make relation-specific investments in the first place.64




               5.1. GOVERNANCE IN THE LOCAL SOYBEAN PRODUCTION ARRANGEMENT

Considering Embrapa is still incipient in the use of governance in its
agreements for innovation65, in this section the governance in the local
soybean production arrangement in Santarém and Belterra municipalities is
addressed, since it seems to be a more mature type of governance.

        According to Williamson, governance is a coordination structure where
the participants interact to reduce their transaction costs related with
contractual risks.66 Accordingly, the more efficient the governance, the lower
the transaction costs. Also, according to Williamson governance has three
specific features: the specificity of the involved assets, the uncertainty and the
frequency.67 The first feature is the most relevant for governance.

          Santarém and Belterra have a considerable soybean production headed
by Cargill Agrícola S.A that acts as a monopoly in the area. 68 It is the only
soybean buyer and supplier of the low Amazon area. This allows Cargill to
dictate the rules and norms for the producers. The local producers highly
depend on Cargill as a funding partner. 69 Except for the National Program of
Family Farming, all the credit comes from Cargill, which anticipates in up until


64
    See Gilson, Sabel & Scott, supra note 1.
65
     onsidering Embrapa’s documents and contracts that are available on the internet and other
studies. ost of Embrapa’s agreements are not available in full for general consultation, because
of its confidential information.
66
   See generally OLIVER EATON WILLIAMSON, THE MECHANISMS OF GOVERNANCE (Oxford University Press
ed., 1999).
67
    See Oliver Eaton Williamson, Comparative Economic Organization: The Analysis of Discrete
Structural Alternatives, 36(2) ADMIN. SCI. Q. 269 (1991).
68
   At least until 2003, when the analysis was made.
69
   Considering in this region of Brazil it is common for producers not to get bank loans because
they do not have the required documents and due to Brazil’s high level of bureaucracy.




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40% of the production or providing supplies, through a contract named Soja
Verde [Green Soybean]. This is argill’s way to incentivize the producer to keep
producing and minimize the producer uncertainties regarding the cost.

        The soybean production has visible uncertainties such as incomplete
information of all the links of the production, opportunism, necessity of high
investments, and the possibility of financial losses. All this happens in a
rapidly changing market. This proves that in this market, technology is an
important competition element. In the mentioned municipality, other common
uncertainties arise such as price (because of the buyer manipulation or domain
of information in the spot market) and technology (because of the difficulty to
locally access research and information). In this context, the producers’
cooperative is essential to minimize the uncertainty and opportunism.
Governance is crucial to the creation of cooperatives with the aim of reducing
the producers’ limited rationality.

         In global value chains, it is possible to determine three types of
governance, that according to Kaplinsky are the legislative (agreements
between the parties, the environmental and labor law and production and
quality standards), judicial (the performance and applicability of the legislative
rules) and executive (assistance for the chain participants to find operation
rules) governance.70 These forms of governance regulate the economic activity.

         As explained by Gilson, Sabel and Scott in the Deere-Stanadyne
Agreement, Cargill has a set of rules and norms for the soybean producers
integrated in the corporation, being called Cultivo Responsável [Conscious
Cultivation].71 Firstly, there is the Moratória da Soja [Soybean moratorium], that
is the compromise of not commercializing soybean from deforested areas,
since July 2006, inside the Amazon biome. In addition, there is a concern with
the labor laws, in order to incentivize the regular registration of all workers
and avoid the slave work. Hence, similarly to the Deere-Stanadyne agreement,
Cargill has a hierarchy relation with the soybean producers and it does not
depend on them. Nonetheless, Cargill decides most of the time without the



70
   See R. KAPLINSKY, SPREADING THE GAINS FROM GLOBALIZATION: WHAT CAN BE LEARNED FROM VALUE
CHAIN-ANALYSIS?, Institute of Development Studies, (1985).
71
   Gilson, Sabel & Scott, supra note 61.




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participation of the cooperatives.    argill’s relation with the soybean producers
is also an example of an intersection of contract and regulation.

       Cargill rules and norms rise from the concerns in the region regarding
the environmentalists and the organized society. These sectors tend to
influence the public agencies against the soybean production, due to the
potential negative environmental impacts it may produce in a fragile
ecosystem. Another challenge for the soybean production is the Sustainable
Development Plan BR-163 that aims to harmonize the progress and
environmental conservation. In 2003, Cargill had 160 producers, which enabled
it to create an organized society to bargain with the competent authorities to
develop   technologies     that   increase    the   productivity    and     decrease          the
investments.

       Despite importing researches from Mato Grosso, which is considered
the most advanced technological research center of Brazil regarding soybean,
many of the techniques cannot be employed in such a different biome. In this
sense, the lack of specific research for this region increases the producer
uncertainty, provoking losses for the sector. This situation corresponds to a
governance failure. The local soybean production arrangement in Santarém
and Belterra should solve this situation with a governance involving Embrapa,
universities, the private sector and the state and municipal governments to
foster the activity.

       In sum, despite being a source of progress to Pará, the local soybean
production arrangement must improve its governance relations. The best way
to do it would be involve not only the multinational (private sector), but also to
engage the public sector and social organizations.




    6. CONCLUSION

The key to success for the Brazilian expansion in the soybean market is the
establishment of an articulated research network. Considering that the soybean
market in Brazil is a differentiated oligarchy, a collaborative network is
necessary   to   develop    technology       with   efficiency   gains,    ensuring           the
competitiveness and overcoming market uncertainties.




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In this context, Embrapa celebrates several collaborative contracts with other
actors, public and private, mostly based on formal agreements with soft terms
that are structured according to the legislation, its directives and its internal
policies.

       The requirements for a partnership with the public partners are the
signing of a technical collaboration agreement and the use of Embrapa’s
germplasm.    Further,   both   parties    must   have     researchers       working           in
collaboration and have shared infrastructure. The main benefits for both
parties are the co-ownership of the possible future intellectual property, the
royalties share and the indication of the partner’s name in the cultivar.                n the
other hand, the requirements for a partnership with the private partners are
the signing of a technical collaboration agreement, no maintenance of the
private partner’s own genetic enhancement program and the private partner
must perform the technical works described in the annual work plan. The main
benefits for both are Embrapa’s exclusive license, through royalty’s payments
to the private partner, to multiply and sell the seeds (in the crossing program
ten years, in the line program five years).

       Despite being a successful example of a publicly held corporation,
Embrapa still must develop its collaboration tools, especially the informal
ones, in order to give the institution more flexibility, but at the same time
security. The way its contracts are currently structured heavily depends on
constant negotiations. This practice results in opportunistic behavior, even
when each research collaboration has a managing committee composed of
Embrapa’s and the collaborator’s representatives. Improving the definition of
each party’s obligations, as desired by Embrapa, will not be useful, since under
uncertainty it is impossible to know ex ante all the features of the agreement.
This confirms the idea that the most successful way of contracting for
innovation   is   through   the   combination      of    formal      agreements             and
organizational forms.

       The most efficient contracting structure must:




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              1) induce efficient transaction-specific investment; 2) establish a
              framework for iterative collaboration and adjustment of the parties’

              obligations; 3) limit the risk of opportunism.72




72
     See Gilson, Sabel & Scott, supra note 1.




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