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Public institutions and private transactions : the legal and regulatory environment for business private transactions in Brazil and Chile
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Public institutions and private transactions : the legal and regulatory environment for business private transactions in Brazil and Chile

Author

Listed:
  • Stone, Andrew
  • Levy, Brian
  • Paredes, Ricardo

Abstract

Drawing on the new institutional economics, the authors examine the impact on businesses of Brazil's relatively complex, nontransparent legal and regulatory institutions and compare their costs with those of Chile's institutions, which are relatively simple. They examine four basic areas where legal and regulatory institutions could create critical obstacles to efficiency in the garment industries of Sao Paulo and Santiago: (a) the start-up of a new business (entry); (b) the regulation of business; (c) orders by customers of garment firms; and (d) sales with credit. They find that Chilean business transactions benefit from legal simplicity and more consistent enforcement than in Brazil, but that these perceived advantages are offset because of the differences between formal law and practice in Brazil. In two of these areas, Brazil has evolved some effective institutional substitutes to reduce the costs that would otherwise have been imposed by inefficient formal institutions. In the entry of new businesses, professions have evolved to transform the process of registering a new business from a potentially tortuous obstacle path into a fairly affordable one-stop process. In debt collection, information systems limit the need to resort to the formal legal system. Nevertheless, regulation raises the cost of transactions for Brazilian businesses. Costs are further raised by greater uncertainty and frequent renegotiation of orders.

Suggested Citation

  • Stone, Andrew & Levy, Brian & Paredes, Ricardo, 1992. "Public institutions and private transactions : the legal and regulatory environment for business private transactions in Brazil and Chile," Policy Research Working Paper Series 891, The World Bank.
    • Handle: RePEc:wbk:wbrwps:891
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    Citations

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    Cited by:

    1. Meyer-Stamer, Jorg, 1998. "Path dependence in regional development: Persistence and change in three industrial clusters in Santa Catarina, Brazil," World Development, Elsevier, vol. 26(8), pages 1495-1511, August.
    2. Mary Hallward-Driemeier & Lant Pritchett, 2015. "How Business Is Done in the Developing World: Deals versus Rules," Journal of Economic Perspectives, American Economic Association, vol. 29(3), pages 121-140, Summer.
    3. Mick Moore, 1997. "Societies, polities and capitalists in developing countries: A literature survey," Journal of Development Studies, Taylor & Francis Journals, vol. 33(3), pages 287-363.
    4. Fafchamps, Marcel, 1997. "Trade credit in Zimbabwean manufacturing," World Development, Elsevier, vol. 25(5), pages 795-815, May.
    5. Aradhana Chouksey & Yamini Karmarkar, 2017. "Sustainability of Microbusinesses and Success of Microfinance," Paradigm, , vol. 21(1), pages 91-105, June.
    6. Sebastian Galiani & Federico Weinschelbaum, 2012. "Modeling Informality Formally: Households And Firms," Economic Inquiry, Western Economic Association International, vol. 50(3), pages 821-838, July.
    7. Ricardo Paredes & Andrés Crisosto & Philippe Martí, 2014. "Judicial versus Private Auctions: Better without Protection?," Estudios de Economia, University of Chile, Department of Economics, vol. 41(2 Year 20), pages 171-186, December.
    8. Araújo, E. & Gama, C. A. F., 2004. "Replicando características de ciclos econômicos: um estudo comparativo entre Redes Neurais Artificiais e modelos ARIMA," Insper Working Papers wpe_45, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    9. Lant Pritchett & Mary Hallward-Driemeier, 2010. "How Business is Done and the 'Doing Business' Indicators: The Investment Climate when Firms have Climate Control," CID Working Papers 211, Center for International Development at Harvard University.
    10. Woodruff, Christopher, 2002. "Non-contractible investments and vertical integration in the Mexican footwear industry," International Journal of Industrial Organization, Elsevier, vol. 20(8), pages 1197-1224, October.
    11. Woodruff, Christopher, 1998. "Contract enforcement and trade liberalization in Mexico's footwear industry," World Development, Elsevier, vol. 26(6), pages 979-991, June.
    12. Brunetti, Aymo, 1998. "Policy volatility and economic growth: A comparative, empirical analysis," European Journal of Political Economy, Elsevier, vol. 14(1), pages 35-52, February.
    13. Chobanov, George & Egbert, Henrik & Gyuredzheklieva, Albena, 2006. "Предложения За Измерване На „Транзакционния Сектор“ От Официалната Статистика [Suggestions for Measuring the Transaction Sector by the Official Statistics]," MPRA Paper 56685, University Library of Munich, Germany.
    14. Fafchamps, Marcel, 1996. "The enforcement of commercial contracts in Ghana," World Development, Elsevier, vol. 24(3), pages 427-448, March.
    15. Lazzarini, Sérgio G., 2012. "Strategizing by the Government: Industrial Policy and Sustainable Competitive Advantage," Insper Working Papers wpe_289, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    16. Fredriksson, Anders, 2014. "Bureaucracy intermediaries, corruption and red tape," Journal of Development Economics, Elsevier, vol. 108(C), pages 256-273.
    17. Duvanova, Dinissa, 2014. "Economic Regulations, Red Tape, and Bureaucratic Corruption in Post-Communist Economies," World Development, Elsevier, vol. 59(C), pages 298-312.
    18. Edgardo Campos, J. & Lien, Donald & Pradhan, Sanjay, 1999. "The Impact of Corruption on Investment: Predictability Matters," World Development, Elsevier, vol. 27(6), pages 1059-1067, June.
    19. José Alberto Garibaldi-Fernández, 1999. "Formal enforcement and rationality. The impact of mental models in institutional performance," Apuntes. Revista de ciencias sociales, Fondo Editorial, Universidad del Pacífico, vol. 26(45), pages 121-141.
    20. Lazzarini, Sergio G. & Carvalho de Mello, Pedro, 2001. "Governmental versus self-regulation of derivative markets: examining the U.S. and Brazilian experience," Journal of Economics and Business, Elsevier, vol. 53(2-3), pages 185-207.
    21. Eggertsson, Thrainn, 1997. "The old theory of economic policy and the new institutionalism," World Development, Elsevier, vol. 25(8), pages 1187-1203, August.

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