Economic Development and the Legal Foundations of Regulation in Brazil

Schumpeter (1954, p. 545).

Cf. Idem, ibidem.

As was the case of a recent and much publicized decision by which, in December 2012, amidst momentous political and economic difficulties surrounding the so-called crisis of the Euro area, the Constitutional Council of France rejected a tax hike that would make the rich contribute more to reduce the fiscal deficit. See Conseil Constitutionnel, Décision n° 2012–662 DC du 29 décembre 2012. See also Reuters (2012) Dec. 29, “French court rejects 75% millionaires’ tax”.

See, for example, Mayagna (Sumo) Community of Awas Tingni v. Nicaragua, a decision by which the Inter-American Court of Human Rights affirmed in 2001 the right of indigenous peoples of Nicaragua to ancestral tenure of land, thereby rendering illegal the logging concessions granted by the Nicaraguan government to a foreign company. For a discussion of the case, see S. J. Anaya and C. Grossman, The Case of Awas Tingni v. Nicaragua: A New Step in the International Law of Indigenous Peoples, 19 Arizona Journal of International and Comparative Law, no. 1 (2002). The decision ultimately led to the effective issuance of a title to land in favor of Nicaragua’s Mayangna Awas Tingni Indigenous Community. See Inter-American Commission on Human Rights (2008).

See, for example, the landmark decision by the German Federal Constitutional Court (BVerfG, 2 BvR 1390/12 of Sep. 12, 2012), in which the court passed judgment on the constitutionality of legal instruments adopted for the creation of the so-called European Stability Mechanism (ESM). Among other stipulations, the court set a limit of EUR 190 billion to Germany’s budget commitments to ESM programs. For a discussion of the decision in the broader context of the politics of European integration, see Vranes (2013).

As stressed by Gunnar Myrdal in his book on the political dimension of economic theory, “There has never been a free market in the sense in which the term is used in economics. Long before there was any market to speak of, exchange transactions had been subjected to rules of those in power. (…) They have influenced the content and the results of the transactions.” Seee Gunnar Myrdal, The Political Element in the Development of Economic Theory (New Brunswick: Transaction Publishers, 2004), pp. 197–198.

See, for example, Caio Prado Júnior, História Econômica do Brasil (48th printing of the 1st ed. of 1948, São Paulo: Editora Brasiliense, 2008), Celso Furtado, Formação Econômica do Brasil (34th ed., São Paulo: Companhia das Letras, 2007).

See, for example, Themístocles B. Cavalcanti, Curso de Direito Administrativo (5th ed., Rio de Janeiro: Livraria Freitas Bastos, 1958), Oswaldo Aranha Bandeira de Mello, Princípios Gerais de Direito Administrativo, vol. I (São Paulo: Malheiros Editores, 1967), Hely L. Meirelles, Direito Administrativo Brasileiro (18th ed., São Paulo: Malheiros Editores, 1993), Diogo de Figueiredo Moreira Neto, Curso de Direito Administrativo (14th ed., Rio de Janeiro: Editora Forense, 2006), Celso Antônio Bandeira de Mello, Curso de Direito Administrativo (25th ed., São Paulo: Malheiros Editores, 2009). Maria Sylvia Zanella Di Pietro, Direito Administrativo (20th ed., São Paulo: Editora Saraiva, 2007), N. Eizirik et al., Mercado de Capitais – Regime Jurídico (2nd ed., Rio de Janeiro: Renovar, 2008).

See for example, Mario G. Schapiro, Novos Parâmetros para a Intervenção do Estado na Economia (São Paulo: Editora Saraiva, 2010), Diogo R. Coutinho, Linking Promises to Policies: Law and Development in an Unequal Brazil, 3 The Law and Development Review, no. 2 (2010 May), 3–40, Emerson Fabiani, Direito e Crédito Bancário no Brasil (São Paulo: Editora Saraiva, 2011), Mariana Mota Prado, “Presidential Dominance from a Comparative Perspective: The Relationship Between the Executive Branch and Regulatory Agencies in Brazil”, in S. Rose-Ackerman and P. L. Lindseth (eds.), Comparative Administrative Law (Cheltenham: Edward Elgar Publishing, 2011), pp. 225–245, Sheila C. N. Cerezetti, “Regulação do Mercado de Capitais e Desenvolvimento”, in C. Salomão Filho (ed.), Regulação e Desenvolvimento: Novos Temas (São Paulo: Malheiros Editores, 2012), pp. 190–248.

Roberto C. Simonsen, História Econômica do Brasil (1500/1820) (São Paulo: Companhia Editora Nacional, 1978), p. 432.

Ordenações Filipinas, prepared under Philip II of Spain and enforced since 1603 in Spanish and Portuguese territories.

See Prado Júnior (2008, supra note 7, pp. 123–129).

Orlando Gomes, Raízes Históricas e Sociológicas do Código Civil Brasileiro (São Paulo: Martins Fontes, 2003), p. 22. The year mentioned by Gomes – 1888 – was that in which slavery was abolished in Brazilian law by means of a statute known as Lei Áurea. Unless otherwise indicated, translations into English of texts published in other languages are mine.

See Vera Alves Cepêda, “O Sentido da Industrialização: Políticas Econômicas, Mudança Social e a Crise do Liberalismo na Primeira República”, in G. N. Ferreira and A. Botelho (eds.), Revisão do Pensamento Conservador: Ideias Políticas no Brasil (São Paulo: Editora Hucitec, 2010).

See Cepêda (2010).

As remarked by Prado Júnior (2008, supra note 7, p. 192), in the 1850s, “Brazil suddenly enter[ed] a period of genuine prosperity and widespread activation of its economic life.” This economic activation is, thus, described: “In the 1850s the most clear indications of [it] can be seen: in this period were created 62 industrial enterprises, 14 banks, 3 savings banks, 20 steamboat shipping lines, 23 insurance companies, 4 companies of agricultural development, 8 mining companies, 3 companies of urban transportation, 2 companies of natural gas, and finally 8 railways.” Idem, ibidem.

See Paola d’Andretta Iglézias, “A Legislação Comercial e o Movimento de Codificação Civil no Segundo Reinado”, in Carlos Guilherme Mota and Gabriela Nunes Ferreira (eds.), Os Juristas na Formação do Estado-Nação Brasileiro (São Paulo: Editora Saraiva, 2010), pp. 169–186.

Mauá’s bank was therefore driven out of business. Cf. Idem, ibidem, pp. 176–178.

Cf. Idem, ibidem, pp. 170–174.

José Murilo de Carvalho, A Construção da Ordem. Teatro das Sombras (3rd ed., Rio de Janeiro: Civilização Brasileira, 2007), p. 154.

Cf. Idem, ibidem, pp. 154–156.

See Vicente Pereira do Rego, Elementos de direito administrativo brasileiro comparado com o direito administrativo francês segundo o método de P. Pradier-Fodérer (1857) [Elements of Brazilian administrative law compared with the French administrative law according to the method of P. Pradier Fodérer, 1857]; and Antonio Joaquim Ribas, Direito administrativo brasileiro (1866) [Brazilian administrative law, 1866].

Odete Medauer, O Direito Administrativo em Evolução (São Paulo: Editora Revista dos Tribunais, 1992), pp. 60–64.

Paulino José Soares de Sousa, “Ensaio sobre o Direito Administrativo”, in José Murilo de Carvalho (ed.), Visconde do Uruguai (São Paulo: Editora 34, 1862/2002), p. 497.

Celso A. Bandeira Mello apud Bucci (2002, p. 155). The reference to “case law” in this context designates the law elaborated by the administrative law judges of the Conseil d’État.

Angela Alonso, “Apropriação de Ideias no Segundo Reinado”, in K. Grinberg and R. Salles (eds.), O Brasil Imperial, vol. III – 1870–1889 (Rio de Janeiro: Civilização Brasileira, 2009), pp. 83–118, 93–94.

Cf. Idem, ibidem, pp. 92–96.

Although the conseil du roi existed in medieval times in France, the beginning of “modern” droit administratif may be conveniently associated with the creation of the Conseil d’État by the Constitution of the 22 Frimaire, Year VIII (13 December 1799). According to Maurice Hauriou, the development of the droit administratif from the inception of the Conseil d’État in 1799 until the 1890s, can be arranged in three separate phases. First, there was a “secret phase”, in which there was virtually no public knowledge of the content of the jurisprudential work carried out by the Conseil d’État. This phase lasted until 1818, when there was a return to restored “normalcy” after the fall of Napoleon and the end of occupation of France by foreign troops. The second period, which Hauriou calls the “phase of public awareness building” (période de divulgation), ended in 1860. Finally, the third phase was that of “systematization” of administrative law doctrine by jurists, which extended until the 1890s. See Maurice Hauriou, De la Formation du Droit Administratif Français Depuis l’An VIII, 2 and 3 Revue Générale d’Administration (1892), 385–403, 15–28.

Vicente Pereira do Rego, Elementos de Direito Administrativo Brasileiro (Recife: Typographia Commercial de Geraldo Henrique de Mira, 1860), p. 4.

José Antonio Pimenta Bueno, Direito Público Brazileiro e Analyse da Constituição do Imperio (Rio de Janeiro: Typographia Imp. e Const. de J. Villeneuve E. C., 1857), p. 257. The idea of enhanced discretionary power of the bureaucracy is also advanced by the Viscount of Uruguai. See Sousa ([1862] 2002, supra note 24, p. 102).

Rego (1860, supra note 31, p. 8).

Cf. Idem, ibidem, p. 64.

Cf. Idem, ibidem, p. 132.

Cf. Idem, ibidem, p. 122.

It appears, for example, in the treatise by Viscount of Uruguai. In it the Viscount of Uruguai writes that when there are complaints against bureaucratic action deemed “excessive” and illegal, the decision to amend the administrative procedures in question “can only be made by an administrative authority and by administrative means”, not by “the decisions of the judicial power”. Sousa ([1862] 2002, supra note 24, p. 146).

Between 1806 and the 1870s, the doctrine of puissance publique was modified by French jurists. Cf. Chevallier (1979). Puissance publique became a less rigid category and came to imply that, in many cases, bureaucratic action might not entail mandatory application of an “administrative law regime”, resulting therefore in a more deferential stance toward the “civil law” jurisdiction, which admittedly was more protective of private property. The famous arrêt Blanco of 1873, which refined the distinction between state actions having an administrative character (État puissance publique), and those having a merely civil character (Etat propriétaire ou personne civile), provided the basis for the more efficient organization of decentralized “distributive” actions in a manner that would mitigate adverse impact of policy on existing property. Under the standard derived from the arrêt Blanco, judicial scrutiny of actes de gestion is permissible, but only where it is specifically authorized by statute.

See Antonio Joaquim Ribas, Direito Administrativo Brasileiro (Rio de Janeiro: F.L. Pinto & C., Livreiros-Editores, 1866), pp. 173–174.

Viscount of Uruguai was a case in point. See Sousa ([1862] 2002).

Ribas (1866, pp. 181–182).

The designation “developmentalism” refers to the set of economic ideas and “activist” policies oriented to promote what has been named “state-directed development”. See Atul Kohli, State-Directed Development: Political Power and Industrialization in the Global Periphery (Cambridge: Cambridge University Press, 2004). It should be taken in contradistinction to what has been called “new” developmentalism in recent Brazilian debate about economic policy. See, for example, L. Morais and A. Saad-Filho, Da Economia Política à Política Econômica: O Novo-Desenvolvimentismo e o Governo Lula, 31 Revista de Economia Política, no. 4 (October-December 2011), 124, São Paulo, 507–527. For the use of the term in international debate, see Khan and Christiansen (2010).

See supra note 36. Many other doctrines of droit administratif of course evolved over time. See, for example, the analysis of the evolution of the doctrine of règlement made by Michel Verpeaux, La Naissance du Pouvoir Réglementaire (Paris: Presses Universitaires de France, 1991). See also the account of the evolution of legal criteria for the definition of the extent of administrative power (compétence administrative) in France in the 19th century, offered by François Burdeau, Histoire du Droit Administratif (Paris: Presses Universitaires de France, 1995). In describing this evolution, Burdeau (idem, p. 134) remarks that, “the combination of various criteria enabled the Conseil [d’État] to expand or restrain the field [of administrative power] according to its conveniences”.

See Richard Bellamy, Liberalism and Modern Society (Pennsylvania: Penn State University Press, 1992), pp. 58–63.

In the 1930s, Georges Ripert would be able to offer a survey of the transformations undergone by the civil law in France as a result of the rise of democracy. See Georges Ripert, Le Régime Démocratique et le Droit Civil Moderne (Paris: Librairie Générale de Droit et de Jurisprudence, 1936).

See Alonso (2009).

See Idem, ibidem, pp. 96–98. See Also José Murilo de Carvalho, A Formação das Almas (São Paulo: Companhia das Letras, 1990), pp. 17–33.

See Idem, ibidem, pp. 17–33.

According to Sergio Buarque de Hollanda, Brazilian positivists, however, influenced by French philosophical positivism, had no distinct ideas about institutional reform. “In Brazil,” he explains, “positivists have remained paradoxically dedicated to negation. They were not positive – one might say – in any of the senses attributed by Auguste Comte to this word in his Discourse on the Positive Spirit. (…) [The] fundamental spirit of negation [of Brazilian positivists] prevented them from offering any constructive, positive meaning to our public affairs.” Sérgio Buarque de Hollanda, Raízes do Brasil (15th ed., Rio de Janeiro: Livraria José Olympio Editora, 1982), p. 118.

See Cepêda (2010).

Idem.

The Taubaté Agreement was originally a policy adopted in 1906 by the governments of the states of Rio de Janeiro, Minas Gerais and São Paulo, but was later absorbed by federal policy under the Decree-Law no. 4548 of 1922. See Alberto Venâncio Filho, A Intervenção do Estado no Domínio Econômico (Rio de Janeiro: Fundação Getúlio Vargas, 1968), pp. 84–85, 461–463.

The “coffee valorization” policy was in essence a scheme by which coffee reserves were acquired and stocked up by the state in order to drive prices up, while the cost of inventory was absorbed into periodically renewed financial arrangements. See Furtado (2007, pp. 253–256).

For a summary of changes brought to the political process and to institutions in this period, see M. F. de Castro and M. I. V. de Valladão, Globalization and Recent Political Transitions in Brazil, 24 International Political Science Review (2003), 465–490.

Cf. Fiona Gordon-Ashworth, Agricultural Commodity Control under Vargas in Brazil, 1930–1945, 12 Journal of Latin American Studies, no. 1 (1980), 87–105, at 91.

Furtado (2007, pp. 251–285).

See James M. Malloy, The Politics of Social Security in Brazil (Pittsburg: University of Pittsburgh Press, 1979), pp. 51–82.

As indicated by Carlos von Doellinger, “Introdução”, in Instituto de Pesquisa Econômica Aplicada (ed.), A Controvérsia do Planejamento na Economia Brasileira (3rd ed., Brasília: Ipea, 2010), pp. 19–35, at 26. “[i]f we take planning, in a broad sense, to mean the organization of the economy under the guidance of departments or collegiate bodies of government, if we do not confuse it with the often irrelevant process of elaboration of a ‘plan’ by a ‘central agency’, we will see that since 1934 experimentations of this kind were present in the Brazilian administration.”

On the financial regulation underlying the Brazilian import-substitution policy in 1955–1963, see A. C. Caputo and H. P. Melo, A Industrialização Brasileira nos Anos de 1950: Uma Análise da Instrução 113 da SUMOC, 39 Estudos Econômicos (São Paulo), no. 3 (2009), 513–538.

See Wilson Suzigan, “As Empresas do Governo e o Papel do Estado na Economia Brasileira”, in Fernando Rezende et al. (eds.), Aspectos da Participação do Governo na Economia (Rio de Janeiro: IPEA/INPES, 1976), pp. 77–134, at 81–91 and Venâncio Filho (1968, pp. 373 et seq.).

The practice of providing “guaranteed interest” to investors was often adopted since the monarchical period in Brazil. See, for example, Decree no. 641 of 1852, which authorized the government to allow investors to build railways with guaranteed interest of up to 5% of the invested capital. The replacement of this kind of arrangement by rate setting under the notion of “service at cost” was due to influence of American practices incorporated from the common law. Cf. Caio Tácito, Temas de Direito Público (Estudos e Pareceres), vol. I (Rio de Janeiro: Editora Renovar, 1997), pp. 15–19.

Although it had the political significance of being the result of a multiparty coalition, the Plano SALTE was never implemented, mainly due to conflicts among several groups. Fausto Saretta, “O Governo Dutra na Transição Capitalista no Brasil”, in T. Smrecsányi and W. Suzigan (eds.), História Econômica do Brasil Contemporâneo (2nd revised ed., São Paulo: Editora Hucitec/ABPHE/EDUSP/Imprensa Oficial, 2002), pp. 99–117, at 112–113 suggests that the Plano SALTE, adopted under the “liberal” government of president Eurico Gaspar Dutra, was essentially the brainchild of bureaucrats attached to the Administrative Department of the Civil Service, which were in conflict with the Ministry of Finance, but had the formal power to decide on important budgetary allocations.

See Ricardo Bielschowski, Pensamento Econômico Brasileiro: Ciclo Ideológico do Desenvolvimentismo (2nd ed., Rio de Janeiro: Contraponto Editora, 1995).

An “alliance” between the Brazilian government and the economic thinking of the ECLA became explicit since the V Round of Meetings of the ECLA, which took place in the outskirts of Rio de Janeiro in 1953, and was attended by President Vargas in person. In his speech, Vargas described the economic theory of the ECLA as a “rational basis” for the economic policy of Latin America. Cf. Maria Antonieta P. Leopoldi, “O Difícil Caminho do Meio: Estado, Burguesia Industrial e Industrialização no Segundo Governo Vargas (1951–1954)’ Brasil”, in T. Smrecsányi and W. Suzigan (eds.), História Econômica do Brasil Contemporâneo (2nd revised ed., São Paulo: Editora Hucitec/ABPHE/EDUSP/Imprensa Oficial, 2002), pp. 31–77, 68.

Mello (1967, p. 22).

The welding together of the notions of state and power (Macht) was advanced by authors in late 19th-century Germany, but was criticized by liberal thinkers. For a discussion, see Jeffrey Andrew Barash, Political Mythologies of the Twentieth Century in the Perspective of Hermann Heller, Ernst Cassirer, and Karl Löwith, Bulletin du Centre de Recherche Français à Jérusalem, no. 6 (2000), 121–133. The concept or “administrative law”, according to Mello (1967), hinges on the articulation of an all-encompassing state: “The state, as a legal organization of a people in a given territory, under a supreme power, and aiming at the realization of the common good of its members, presupposes on the one hand the legal organization of the state-as-power (Estado-poder) and, on the other hand, of the state-as-society” Mello (ibidem, p. 13). In Mello’s, view, then, “the state-as-society aims to bring about the common good and is legally ordered in the guise of state-as-power (Estado-poder), so as to give each of its members due participation in such good” Mello (ibidem, p. 174).

Mello (Idem, p. 22). In Mello’s general characterization of the law, individual autonomy exists only at the moment in which individuals choose to express their will through the practice of a given “juridical act” (typically, a contract). But he notes that “the rights and duties encompassed by the situation arising from such act, as well as their nature and extension, are regulated by unilateral acts of the state, are never reached by stipulations created by the parties, being thus determined by technical procedures of authoritative imposition of the state’s will, which establishes the adequate norms and assigns the proper powers for the attainment of its goal, namely the realization of the common good” Mello (ibidem, p. 25).

Mello (ibidem, p. 36) (“o direito constitui o mero instrumento de efetivação da utilidade pública, processo empregado pelo Estado-poder para atingi-la”).

Tácito (1997, p. 97). In writing this, Tácito draws directly on the French jurist Roger Bonnard.

Idem, ibidem.

Idem, ibidem. Emphasis is in the original text.

Di Pietro (2007, p. 203).

Di Pietro, thus, notes that misapplication of power entails the possibility of judicial invalidation since, in using “undue discretion”, the administration “veers away from the ends of public interest”. Idem, ibidem.

Tácito (1997, p. 149). Tácito points out that, in Brazil, only from the 1940s onwards was the doctrine of “misapplication of power” explicitly affirmed in a fully developed form. He indicates seminal works by Victor Nunes Leal, Poder Discricionário e Ação de Administração, 14 Revista de Direito Administrativo (October/December 1948), 53–81 and Miguel Seabra Fagundes, O Controle dos Atos Administrativos pelo Poder Judiciário (Rio de Janeiro: Livraria Editora Freitas Bastos, 1941) – in fact, Tácito singles out the second edition of Fagundes’ work, published in 1950 – as the main contributions to the full growth and propagation of that doctrine among Brazilian jurists.

See Ha-Joon Chang, Kicking Away the Ladder (London: Anthem Press, 2002), pp. 82–83.

“[T]he power of those who govern is imposed legitimately if it is exercised in conformity to the jural principle (la règle de droit), the basis of which must necessarily be determined. Obedience is due to every act of the ruler which conforms to law (au droit); such obedience is due not because it is an act of one in authority, but because such act is in accordance with law (au droit); it is due only when and to the extent that such act conforms to law (au droit). Léon Duguit, The Law and the State, 31 Harvard Law Review, no. 1 (1917–1918), 1–185, at 163.

See Duguit (ibidem, pp. 33–72).

Cf. Burdeau (1995, pp. 331–332, 341–350).

The comparison between Duguit’s general outlook and von Stein’s arguments is derived from the fact that they were both intent on completely rejecting metaphysical abstractions. Marcuse describes this general stance derived from positivist philosophy as one of “refutation of all transcendental ideas”. See Marcuse (1954, pp. 374–388, 376).

In the case of Duguit, the rejection of metaphysical ideas meant the repudiation of both abstract conceptions about natural rights and also mystifying idealizations about the state. The latter were more congenial to German political philosophy, but Duguit saw them present in the thought of Rousseau as well. See Duguit (1917–1918).

See remark taken from Hollanda (1982), supra note 47.

Mello (1967, pp. 70–71). O. A. Bandeira de Mello takes this view from the Lorenz von Stein. In summarizing Stein’s argument, O. A. Bandeira de Mello stresses that “[a]longside the negative action of the [administrative] police”, which has to do with “limitations imposed on the liberty and property of private persons”, the state must develop a “social action, positive and direct, of interference in the personal lives of citizens”. Such interference concerns not only aspects of “social” life, such as education, public health and so on, but also aspects related to “economic” life, including requirements for “better production, distribution and consumption of wealth.”

Mello (2009).

Mello (ibidem, p. 46). C. A. Bandeira de Mello goes as far as stating that administrative law is at bottom “the Law defensive of the citizen”. Idem, p. 47.

See, for example, Mello (2009-a).

Mello (2009, p. 55).

Di Pietro (2007, p. 55).

As recognized in 2011 by the vice president of the Conseil d’État, Jean-Marc Sauvé, with respect to the droit administratif in France, since the 19th century a “close link” has connected the growth of administrative law and economic development. “The affirmation and continued exercise of the role of the Council of State along the 19th century”, remarked Sauvé, “are closely linked to its capacity and its will to accompany the development and implementation of public policies pertaining to economic matters” Jean-Marc Sauvé, Le Conseil d’État et le développement économique de la France au XIXe siècle. Intervention de Jean-Marc Sauvé du 20 mai 2011, lors de la Journée d’étude organisée par le Comité d’histoire du Conseil d’État et de la juridiction administrative ayant pour thème ‘Le Conseil d’État et le développement économique de la France au XIXe siècle’, available at: http://www.conseil-etat.fr/node.php?articleid=2340, accessed 7 March 2012 (2011).

Tácito (2007, p. 28).

Tácito (ibidem, p. 29).

On French economic planning from 1946 to 1983, see Peter Hall, Governing the Economy (Oxford: Oxford University Press, 1986), pp. 137–226).

See, for example, Eros Roberto Grau, Planejamento Econômico e Regra Jurídica (São Paulo: Editora Revista dos Tribunais, 1978), Anchises Bretas et al., Direito Econômico do Planejamento (Belo Horizonte: Editora UFMG, 1980) and João Bosco Leopoldino da Fonseca, Direito Econômico (2nd ed., Rio de Janeiro: Forense, 1997), p. 205 et seq.

On French “indicative planning” and mechanisms of policy coordination, cf. Hall (1986, pp. 141–155).

Plano Trienal de Desenvolvimento Econômico e Social (1961); Plano de Ação Econômica do Governo (1964); Plano Decenal (1967); Programa Estratégico de Desenvolvimento (1968); Programa de Metas e Bases para a Ação do Governo (1970); Primeiro Plano Nacional de Desenvolvimento (1972); Segundo Plano Nacional de Desenvolvimento (1974); Terceiro Plano Nacional de Desenvolvimento (1979).

Cf. Celso Furtado, Political Obstacles to Economic Growth in Brazil, 41 International Affairs (Royal Institute of International Affairs), no. 2 (1965), 252–266.

Brazil was ruled by an autocratic military regime from 1964 to 1985.

On the technocratic mode of decision-making in Brazil, which became acute in the 1970s, see Adriano Nervo Codato, Sistema Estatal e Política Econômica no Brasil Pós-1964 (São Paulo: Editora Hucitec, 1997).

Cf. Codato (ibidem, pp. 284–303) and Albert O. Hirschman, The Political Economy of Latin American Development: Seven Exercises in Retrospection, 22 Latin American Research Review, no. 3 (1987), 7–36, at 19–22.

Eric Helleiner, “From Bretton Woods to Global Finance”, in R. Stubbs and G. R. D. Underhill (eds.), Political Economy and the Changing Global Order (New York: St. Martin’s Press, 1994), 163–175.

See Robert Gilpin, Global Political Economy (Princeton: Princeton University Press, 2001), pp. 238–242.

See Robert O. Keohane, “The International Politics of Inflation”, in L. N. Lindberg and Charles S. Maier (eds.), The Politics of Inflation and Economic Stagnation (Washington, DC: The Bookings Institution, 1985), 78–104, at pp. 98–104.

Useful insights into international realignment moves can be found in Keohane (1984, pp. 135 et seq.).

See Y. Dezalay and B. G. Garth, The Internationalization of Palace Wars: Lawyers, Economists, and the Contest to Transform Latin American States (Chicago: University of Chicago Press, 2002).

For a more detailed description, see Castro and Carvalho (2003, pp. 478–482).

See Gilberto Bercovici, “O Planejamento e a Constituição de 1988”, in Fernando F. Scaff (ed.), Constitucionalizando Direitos: 15 Anos da Constituição Brasileira de 1988 (Rio de Janeiro: Renovar, 2003), 305–328.

This required approval by parliament of several amendments to the constitution: Constitutional Amendment no. 5 of 1995 (natural gas distribution); Constitutional Amendment no. 6 of 1995 (general protectionist measures); Constitutional Amendment no. 7 of 1995 (transportation and civil aviation); Constitutional Amendment no. 8 of 1995 (telecommunications); Constitutional Amendment no. 9 of 1995 (petroleum exploration, production, refinement and transportation, also applicable to hydrocarbons generally).

Among large state-owned enterprises privatized at the federal (central government) level since 1990 were included: Telecomunicações Brasileiras S.A. – TELEBRÁS (telecommunications); Empresa Brasileira de Aeronáutica – EMBRAER (aeronautics); Companhia Vale do Rio Doce (mining); Companhia Siderúrgica Nacional (steel); Aço Minas Gerais S.A. (steel); Companhia Siderúrgica Paulista – COSIPA (steel); Companhia Siderúrgica do Nordeste – COSINOR (steel); Companhia de Aços Especiais Itabira – ACESITA (specialty steels); Centrais Geradoras do Sul S.A. – GERASUL (electricity generation); Light Serviços de Eletricidade S.A. (electricity distribution); Espírito Santo Centrais Elétricas S.A. – ESCELSA (electricity distribution); Fertilizantes Fostatados S.A. – FOSFÉRTIL (fertilizers); Material Ferroviário S.A. – MAFERSA (rolling stock and passenger cars); Companhia Petroquímica do Sul – COPESUL (petrochemicals); Banco do Estado do Amazonas S. A. – BEM (banking industry); Banco do Estado do Maranhão S.A. (banking industry); etc.

Brazilian antitrust law, which became more effective since the adoption of Law no. 8884 of 1994, has been enormously influenced by American antitrust law. Cf. Luis Fernando Schuartz, A Desconstitucionalização do Direito de Defesa da Concorrência, 1 Revista do IBRAC, no. 1 (2009), 325–351. As indicated by Schuartz (idem, p. 335), “[t]he intensive use, in a direct or indirect manner (by means of the incorporation of propositions taken from manuals or from official documents of foreign authorities, especially North-American), of antitrust economics in the treatment of legal problems revolutionized competition law in [Brazil]. (…) This discreet and silent revolution was operated in many levels, but it was undoubtedly at the level of [legal] methodology that it had the most radical impacts and most theoretical implications.”

At the federal level, the following independent agencies were created from 1996 to 2005: Agência Nacional de Energia Elétrica – ANEEL (electricity); Agência Nacional de Telecomunicações (telecommunications); Agência Nacional do Petróleo (petroleum, natural gas and biofuels); Agência Nacional de Vigilância Sanitária – ANVISA (healthcare products and services); Agência Nacional de Saúde Suplementar – ANS (health insurance); Agência Nacional de Águas – ANA (water treatment and supply); Agência Nacional de Transportes Terrestres – ANTT (terrestrial transportation); Agência Nacional de Transportes Aquaviários – ANTAQ (water transport); Agência Nacional de Cinema – ANCINE (film industry); Agência Nacional de Aviação Civil – ANAC (civil aviation). A comprehensive description of pro-market reforms adopted in Brazil since the 1990s can be found in Organisation for Economic Co-Operation and Development (OECD), Brazil: Strengthening Governance for Growth. OECD Reviews of Regulatory Reform, available at: http://www.oecd-ilibrary.org/governance/oecd-reviews-of-regulatory-reform-brazil-2008_9789264042940-en, accessed 5 February 2012 (2008).

See Ha-Joon Chang, Globalization, Economic Development and the Role of the State (London: Zed Books, 2003), pp. 45–52.

George J. Stigler, The Theory of Economic Regulation, 2 The Bell Journal of Economics and Management Science, no. 1 (1971), 3–21.

Ronald Coase, The Problem of Social Cost, 3 Journal of Law and Economics, (1960), 1–44 and Richard Posner, Economic Analysis of Law (Boston: Little Brown, 1973) and their progeny. For a description of the formation of the “law and economics” movement as a reaction against “public interest advocacy” and general conceptions about the law prevalent in the United States under the New Deal, see Steven M. Teles, The Rise of the Conservative Legal Movement (Princeton: Princeton University Press, 2008).

See Alvaro Santos, “The World Bank’s Uses of the ‘Rule of Law’ Promise in Economic Development”, in D. M. Trubek and A. Santos (eds.), The New Law and Economic Development (Cambridge: Cambridge University Press, 2006), 253–300, at 280. For criticisms of the “legal origins” argument and its reform implications, see Mark J. Roe, Legal Origins, Politics and Modern Stock Markets, 120 Harvard Law Review (2006), 460–627, Meredith Jung-En Woo, “The Rule of Law, Legal Traditions, and Economic Growth: The East Asian Example”, in Ha-Joon Chang (ed.), Institutional Change and Economic Development (Tokyo/London: United Nations University Press/Anthem Press, 2007), 157–174 and Alvaro Santos, Labor Flexibility, Legal Reform, and Economic Development, 50 Virginia Journal of International Law, no. 1 (2009), 43–106.

See, for example, Carlos Ari Sundfeld, “Introdução às Agências Reguladoras”, in Carlos Ari Sundfeld (ed.), Direito Administrativo Econômico (São Paulo: Malheiros Editores, 2000), 17–38, Dinorá Adelaide Musetti Grotti, “Teoria dos Serviços Públicos e sua Transformação”, in Carlos Ari Sundfeld (ed.), Direito Administrativo Econômico (São Paulo: Malheiros Editores, 2000), 39–71, Alexandre Santos de Aragão, O Conceito de Serviços Públicos no Direito Constitucional Brasileiro. Revista Eletrônica de Direito Administrativo Econômico, Salvador, Instituto Brasileiro de Direito Público, no. 17, February–April, available at: http://www.direitodoestado.com.br/artigo/alexandre-aragao/o-conceito-de-servicos-publicos-no-direito-constitucional-brasileiro, accessed 10 March 2012 (2004), Floriano P. de A. Marques Neto, Regulação Estatal e Interesses Públicos (São Paulo: Malheiros Editores, 2002), Floriano P. de A. Marques Neto, A Nova Regulamentação dos Serviços Públicos, Revista Eletrônica de Direito Administrativo Econômico, no. 1 (2005 February), 1–18, Alexandre Santos de Aragão, Agências Reguladoras e a Evolução do Direito Administrativo Econômico (Rio de Janeiro: Editora Forense, 2006).

A remarkable example of this line of argument can be found in Carlos Ari Sundfeld, an influential jurist and advocate of pro-market reforms. Sundfeld stresses that “economists have a fascinating quality: they know how to evaluate problems by means of measurable, objective equations and unities”. See Sundfeld (2000, p. 17). He adds that lawyers, in contrast, are used to approaching issues by means of vague notions. In Sundfeld’s view, given the “eccentric way of being” of lawyers, they are kept marginalized from confronting important facts of modern life. The consequence drawn by Sundfeld from these considerations is that, instead of legal analysis, it is rather “economic reasoning that exerts the most influence in the choice of new policies (…)”. Idem, ibidem.

See Carlos Ari Sundfeld, “A Administração Pública na Era do Direito Global”, in C. A. Sundfeld and O. V. Vieira (eds.), Direito Global (São Paulo: School of Global Law SBDP/Editora Max Limonad, 1999), pp. 157–168, at 157. According to Sundfeld, in the presence of global law, the state must “conceive and apply its legal norms as a response to global needs (necessidades mundiais) of the organization of economic, social and political life” (Idem, p. 160). Morever, in Sundfeld’s view, “such impositions [of global law] determine the very dimension of the state, the extent of its interventions, the limit of its powers” (Idem, pp. 160–161).

See, for example, the works of several American authors (including the famous 1971 article by George J. Stigler on the theory of regulation) translated for Brazilian readers in Paulo Todescan Lessa Mattos et al. (eds.), Regulação Econômica e Democracia: O Debate Norte-Americano (São Paulo: Editora 34, 2004). The texts were selected by lawyers and intended to serve as “a theoretical basis for the Brazilian discussion” on economic regulation, as indicated in the back cover of the book. See also Mariana Mota Prado, “Análise de Custo-Benefício e o Direito”, in E. C. B. Bittar and F. de M. Soares (eds.), Temas de Filosofia do Direito: Novos Cenários, Velhas Questões (São Paulo: Editora Manole, 2004), 33–82 (on cost-benefit analysis); Bruno M. Salama, Direito e Economia: Textos Escolhidos (Saraiva: São Paulo, 2010) (a collection of articles translated from American authors of the law and economics literature); Luciano Benetti Timm, Direito e Economia no Brasil (São Paulo: Editora Atlas, 2012) (several articles describing different aspects of legal institutions in the perspective of the law and economics literature); Sundfeld (2000) (on regulatory agencies, their legal status, powers, etc.); Aragão (2006) (on regulatory agencies, their legal status, powers, etc.); Nusdeo (2000) (competition law spillovers, linkages between competition law and regulation); Bruno M. Salama, O que é pesquisa em direito e economia? 5 Cadernos de Direito GV, Caderno 22, no. 2 (2008), 5–58 (on the economic analysis of law); J. I. F. de A. Prado Filho, Defesa da Concorrência no Cenário Internacional: O Caso das Negociações Multilaterais no GATT/OMC, 6 Revista de Direito Público da Economia, no. 22 (2008), 97–113 (on the relations between competition policy and international trade law); Daniel Goldberg, “Controle de Políticas Públicas pelo Judiciário: Welfarismo em um Mundo Imperfeito”, in L. H. Salgado and R. S. da Motta (eds.), Regulação e Concorrência no Brasil (Rio de Janeiro: Ipea, 2007), pp. 43–82 (on microeconomic concepts and their application in legal reasoning); A. S. Badin and G. V. C. de Araujo, “Conflito entre Normas do CADE e da ANATEL”, in J. C. Guedes and J. S. M. Neiva (eds.), Publicações da Escola da AGU: Debates em Direito da Concorrência (Brasília: Advocacia-Geral da União, 2011), 41–60 (competition law spillovers, linkages between competition law and regulation) R. Sztajn and E. Gorga, “Tradições do Direito”, in D. Zylbersztajn and R. Sztajn (eds.), Direito e Economia (Rio de Janeiro: Elsevier, 2005), pp. 137–196 (on the “legal origins” argument).

See P. Arida, E. L. Bacha, and A. Lara-Resende, “Credit, Interest, and Jurisdictional Uncertainty: Conjectures on the Case of Brazil”, in F. Giavazzi, I. Goldfajn, and S. Herrera (eds.), Inflation Targeting, Debt, and the Brazilian Experience, 1999 to 2003 (Cambridge: The MIT Press, 2005), pp. 265–293.

Idem. This macroeconomic argument was rebuked both by jurists and other economists. See, respectively, J. Falcão Filho, L. F. Schuartz, and D. W. Arguelhes, Jurisdição, Incerteza e Estado de Direito, 1 Revista de Direito Administrativo (2006), 79–112; and F. Gonçalves, M. Holland, and A. Spacov, “Can Jurisdictional Uncertainty and Capital Controls Explain the High Level of Real Interest Rates in Brazil?” 61 Revista Brasileira de Economia, no.1 Rio de Janeiro (January/March 2007), 49–75.

See, for example, C. Viegas and B. Macedo, “Falhas de Mercado: Causas, Efeitos e Controles”, in Mario Gomes Schapiro (ed.), Direito Econômico Regulatório (São Paulo: Editora Saraiva, 2010), pp. 81–109.

As indicated by Jessica Leight, “Public Choice: A Critical Reassessment”, in E. Balleisen and D. Moss (eds.), Government and Markets: Toward a New Theory of Regulation (Cambridge: Cambridge University Press, 2010), pp. 213–255, at 214–216, the theory of market failure originally evolved from Ugo Mazzola, Knut Wicksell and Eric Lindahl to Paul Samuleson’s famous 1954 article on public goods and combined with Pigovian arguments about externalities and other ideas, all converging to sustain the view that “the government could effectively play a role in correcting [perceived] failures”.

See Viegas and Macedo (2010).

Mello (2009, pp. 50–52).

Di Pietro (2007, pp. 31–33).

Di Pietro (2007, p. 33).

See, for example, Sundfeld (1999, 2000); Floriano P. de A. Marques Neto, “A Nova Regulação Estatal e as Agências Independentes”, in Carlos Ari Sundfeld (ed.), Direito Administrativo Econômico (São Paulo: Malheiros Editores, 2000), 72–98; Marques Neto (2005); Aragão (2006); Paulo Todescan Lessa Mattos, O Marco Regulatório do Setor de Telecomunicações, 6 Revista de Direito Público da Economia, no. 22 (abril/junho 2008), 197–222.

A major example of “tinkering” is the proposed notion of “public service governed by private law principles”, about which see below.

This is the case of Gustavo Binembojm, Uma Teoria do Direito Administrativo (2nd ed., Rio de Janeiro: Editora Renovar, 2008); Diogo de Figueiredo Moreira Neto, Quatro Paradigmas do Direito Administrativo Pós-Moderno (Belo Horizonte: Editora Fórum, 2008); Marçal Justen Filho, Curso de Direito Administrativo (Belo Horizonte: Editora Fórum, 2011) and others.

For accounts of proportionality balancing in the context of global trends or globalization of law, see Duncan Kennedy, “Three Globalizations of Law and Legal Thought: 1850–2000”, in D. M. Trubek and A. Santos (eds.), The New Law and Economic Development (Cambridge: Cambridge University Press, 2006), 19–73, at 63–73; and A. S. Sweet and J. Mathews, Proportionality Balancing and Global Constitutionalism, 47 Columbia Journal of Transnational Law (2008), 73–165.

Law no. 9472/97.

In 1998, several portions of the “General Law of Telecommunications” were challenged before the Supreme Court of Brazil by political parties opposed to pro-market reforms. These parties argued that several innovations brought by the new law were unconstitutional. See ADIN no. 1668–5/DF of 1998.

See Mattos (2008).

This argument can be found, for example, in C. A. Bandeira de Mello (2009, p. 1059). He remarks that, since the 1995, adopted reforms were “conceived as mimetic copies of alien institutions, without any relation with the spirit of local law (…)”. And he added: “Needless to say, in the implementation of such ‘novelties’, national Constitutional Law was trampled without hesitation.” Idem, ibidem.

See, for example, Conrado H. Mendes, “Reforma do Estado e Agências Reguladoras: Estabelecendo os Parâmetros da Discussão”, in Carlos Ari Sundfeld (ed.), Direito Administrativo Econômico (São Paulo: Malheiros Editores, 2000), 99–139, at 128–130; Sérgio Guerra, “Normatização por Entidades Reguladoras Independentes: Uma Contribuição para o Desafio da Tecnicidade”, in Sérgio Guerra (ed.), Temas de Direito Regulatório (Rio de Janeiro: Freitas Bastos Editora, 2004), 1–48; Aragão (2006, pp. 369–430); Del Pichia (2010).

The so-called constitutional “principle of efficiency” of public administration was added to the text of the constitution by means of Constitutional Amendment no. 19 of 1998. The approval of this amendment prompted jurists to engage in efforts to specify the scope of that principle in the context of Brazilian law.

See, for example, Lucas Rocha Furtado, Curso de Direito Administrativo (Belo Horizonte: Editora Fórum, 2007), p. 112: “Efficiency requires, from the administration official responsible for the application of public funds, an examination of the cost/benefit relation of the action to be undertaken.”

See Daniel Sarmento, Interesses Públicos versus Interesses Privados: Desconstruindo o Princípio da Supremacia do Interesse Público (Rio de Janeiro: Lumen Juris, 2005); and A. S. Aragão and F. de A. Marques Neto (eds.), Direito Administrativo e seus Novos Paradigmas (Belo Horizonte: Editora Fórum, 2008). Vigorous rebuttals offered by jurist still attached to categories of “developmentalist” administrative law can be found in M. S. Z. Di Pietro and C. V. A. Ribeiro, Supremacia do Interesse Público e Outros Relevantes do Direito Administrativo (São Paulo: Editora Atlas, 2010).

The article by C. A. Sundfeld and J. A. Câmara, O Sistema de Regulação de Preços de Medicamentos, 6 Revista de Direito Público da Economia, no. 22 (April/June 2008), 31–44 is taken as the example here.

See Section 3, supra.

The withdrawal from the “functional view” of the law is also apparent in the attack against the conventional notion of “public service”. In attempting to revise and adapt that concept, Aragão, for instance, insists that, “the determination of the concept and of the classification of state activities, including that of public service, must follow the legal technique used by them, not by their respective ends or socio-political foundations”. See Aragão (2009, p. 6).

See, for example, Dani Rodrik, One Economics, Many Recipes (Princeton: Princeton University Press, 2007), pp. 16–21 and passim.

See David Kennedy, “The ‘Rule of Law’, Political Choices and Development Common Sense”, in D. M. Trubek and A. Santos (eds.), The New Law and Economic Development (Cambridge: Cambridge University Press, 2006), 95–173, at 172.

An earlier and longer version of the present article was presented in the 4th Biennial ECPR Standing Group for Regulatory Governance Conference on ‘New Perspectives on Regulation, Governance and Learning’ held in Exeter, UK, from 27 to 29 June 2012.