Contract farming in Brazil: an approach to Law and Economics

Abstract

Contract farming is based on agreements settled prior to the farmer deciding about agricultural production, and influence their judgment regarding inputs and production systems. Therefore, they provide means of production coordination and safety for both farmer and agro-industry/distributor. However, contract farming has its gaps since it is written in abscence of complete information, due to the behavioral assumption of bounded rationality of economic agents. A specific law might generate legal certainty for economic agents, insofar as the Judiciary fulfills the contractual gaps. From the other side, private agents may also fulfill the contractual gaps. As an effort to understand the role of institutions in contract farming, this study aims to analyze the Bill 6,459/2013, which intends to rule contract farming and takes private instituctions into account, through the agency of the Monitoring, Development and Reconciliation of Integration Committee (Cadec). This is an applied research with qualitative approach. The research concludes that the approval of bill might lead to effective typical law for contract farming, provided that the creation of Cadec is encouraged.