CONTRACTING UNDER WEAK

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