Global Trade and
Customs Journal
Contents
Articles
319
A Survey of the EU Tariff Classification Case Law in Year 2010
Davide Rovetta & Patricio Díaz Gavier
325
The Review of the WTO Dispute Settlement Process
Marco Tulio Molina Tejeda & Fernando Piérola
339
Customs Audits, Verifications and Voluntary Disclosures in Canada
Daniel L. Kiselbach & Dalton Albrecht
343
Trade Remedies: China and the WTO Dispute Settlement Resolution
Yanning Yu
351
Investment Regulation and Intellectual Property
Katarzyna Jozwik
361
Development and Innovation: The Role of State Enterprises
Marcia Carla Pereira Ribeiro & Eduardo Oliveira Agustinho
377
WCO Framework of Standards: Authorized Economic Operator (AEO) in the World
Carsten Weerth
Interview
381
Nasim Deylami
Dj Wolff
Column
385
Final Nail in the Zeroing Coffin?
Laura Fraedrich
Volume 6, Issue 7/8, 2011
ARTICLE
Development and Innovation: The Role of State Enterprises
Marcia Carla Pereira Ribeiro & Eduardo Oliveira Agustinho*
While society is changing at speeds never seen before, some questions arise about the impact that new technology causes and
will cause in the lives of citizens. Unfortunately, not all innovation leads to development, and not all development is of a global
nature. In this context, the law presents interesting alternatives. The state can play an important role in regional economic
development through state enterprises. State enterprises ally with private and public investment, which assures that the interest of the collective prevails. However, the performance of state enterprises is very limited by the Agreement on Subsidies and
Countervailing Measures (hereinafter ‘SCM Agreement’). To a certain extent, the restrictions therein contradict the sole aim
of the agreement, which clearly expresses the importance of subsidies in economic development. This paper analyzes the legal
system of state enterprises within Brazil and their recent successes, as a basis to rethink the limitations imposed by the SCM
Agreement.
the current social and economic organizations, which
caused the financial crisis that spread from North
America throughout the global economy. To remedy
the flaws of liberalism, the state has had to invest billions to ensure that normality once again runs the
market, which has brought the state and the market
into a closeness not previously imagined by liberalism.
Even the most solid, non-interventionist nations are
discussing mixed public-private entrepreneurships.
SCEs, which were either established as such or have
become public because the state is the major shareholder, offer their structure of private law to the interest of the collectivity, which is considered relevant or
essential not only to social well-being but also, most of
all, to development. As access to goods and information became global, it became more difficult to accept
the exclusion of some or sometimes of many. As was
so vividly shown in marketing campaigns, goods and
services that were perfected by science and technology came in the thousands, a miracle that, at least
on the surface, seemed like a passport to happiness.
However, the term ‘development’ carries many connotations; real development depends on state entrepreneurships to widen the access to information and
new technology that improves the living conditions
of a society.
This paper first approaches the definition of state
enterprises, which is included in clause 173 of the
1. INTRODUCTION
Constant changes in society bring to mind questions
about the impact that new technology causes and
will cause on the quality of life of citizens. Unfortunately, not all innovation leads to development, and
not all development is of a global nature. In this context, the law presents interesting alternatives. The
state, through state enterprises and in special statecontrolled enterprises (SCEs), plays an important role
in regional development so that citizens can enjoy
fairer and more comfortable lives.
SCEs integrate private and public investment and
emphasize the interests of the collectivity in justifying
their creation and profit. This symbiosis of public and
private has been reinforced since the 1990s. Developing countries face the need to reformulate their
policies of public investment because of the gradual
withdrawal of the public agent, which promotes a
more decentralized economy.
High production costs, scarce public resources, the
need to adequately adapt to the rules of the multilateral system of international trade, and the intentional detachment of the state have caused many
state enterprises to go private. Monopolies have been
replaced by a competitive market economy system.
However, there is increasing recognition that we
must avoid the excesses of freedom that are typical of
Note
*
For Marcia Carla Pereira Ribeiro: Professor of Commercial Law at Universidade Federal do Paraná (UFPR) and Pontifícia Universidade
Católica do Paraná (PUC/PR). Doctor of Law. Attorney. E-mail: [email protected]. Eduardo Oliveira Agustinho: Professor of Commercial Law at Pontifícia Universidade Católica do Paraná (PUC/PR). Master of Law. Attorney. E-mail: [email protected].
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Development and Innovation: The Role of State Enterprises
AQ1
AQ2
Brazilian Constitution, SCEs, state-owned enterprises
(SOEs), and third parties. The second part focuses
on corporate law by approaching the managerial
structure of state enterprises and includes some
observations to evaluate the performance of state
entrepreneurships using the Copel case study as an
example of the Brazilian experience. The third part
deals with the limits that are imposed by the Agreement on Subsidies and Countervailing Measures
(hereinafter ‘SCM Agreements’), which establishes
policies for state enterprises in the pursuit of development, and this contradicts the aim of the document. The final part approaches the meaning of the
word ‘development’ according to the economist and
Nobel prize winner Amarthya Sen in ‘Development
as Freedom’;1 innovation is the basis that is needed to
overcome the current financial crisis. Therefore, the
importance of SCEs is in this way demonstrated, and
the stage is set for the need to reopen the discussion of
the restrictions on subsidies in the Multilateral Trading System (MTS).
Direct actions are not common because of the principles of free will and private property that are established in the Constitution,6 and therefore, goods and
services should be provided mainly by private entities
that are organized as companies. The state is in the
market through state enterprises and is restricted to the
needs of the relevant collective interest and national
safety.7
The boundaries for both direct interventions of the
state in the economy are, as a matter of fact, in the definition of the legal situations that fit the constitutional
presuppositions above, but both have undetermined
contents. Therefore, it is not possible to establish, a
priori, all cases that are a matter of national safety
or of a relevant collective interest, as these pretenses
find borderlines in the language.
According to the Constitution in clause 173, the
law defines the premises mentioned above. Because
it is clearly impossible to exhaust hypotheses where
a direct intervention of the state would be needed,
the Constitution can only establish general criteria to
identify these possible situations.8
However, the infra-constitutional legislator is not
totally free to define the contents of the above-mentioned
concepts.9 To be legitimate and to act in the defense of
the relevant interests of the collectivity, the entrepreneurial state must be directly associated with the need
to intervene to correct flaws in the market.10 Sporadic
international crises, such as the current financial crisis that started in the stock market in North America,
are a risk to the economic development of the nation,
and thus, a justification to call the state to intervene in
the economy based on the relevant interest of the collectivity is required. This current crisis presents a special opportunity for economic and social development,
for example, an opportunity to find a more efficient
use of natural resources, which is discussed later.
Regarding the national safety issue mentioned
in the clause 173, even if part of the doctrine gives
this clause a wider meaning,11 in general, it has been
2. THE SYMBIOSIS OF PUBLIC AND PRIVATE
INTERESTS: CONSTITUTIONAL PATHS
AQ3
In a democratic system, the state should provide for
the basic rights (as it is understood in clauses 1º, 3º,
5º, 6º, and 170º of the Brazilian Constitution) that
act directly in the economy through state enterprises
under the regime of a legal monopoly2 or indirectly as
a regulating agent3 through mandatory or inductive
norms and regulations.4
Indirectly, regulations come as norms through due
legal procedures within the Constitution following the
principles of administrative law, and they can occur
through control (e.g., the state as the police, Conselho
Administrativo de Defesa Econômica – CADE), stimuli
(e.g., investment banks), and the planning of the state
as part of the economy.5
Notes
1
2
3
4
5
6
7
8
9
10
11
Amarthya Sen, Desenvolvimento como liberdade (Development as Freedom), trans. Laura Teixeira Motta (São Paulo: Editora Schwarcz,
2007).
Constitution, clause 177.
Ibid., clause 173 §§ 1º and 2.
João Bosco Leopoldino da. Fonseca, Direito Econômico (Rio de Janeiro: Forense, 2005), 272; Eros Roberto Grau, A ordem econômica na constituição de 1988, 6.ed. rev. e atual (São Paulo: Malheiros, 2001), 163.
Constitution, clauses 165 c/c 84, XI; 61, §1º, ‘b’; 63, I; 166, caput and §§3º, 4º, 5º, 6º; 165, §9º; 59, only paragraph; 174.
Ibid., clause 170 caput and para. II of the Federal Constitution of 1988.
Ibid., clause 173.
Marcos Juruena Villela Souto, Direito administrativo da economia (Rio de Janeiro: Lumen Juris, 2003), 86; Lúcia Vale Figueiredo, Curso de
direito administrativo, 6.ed. rev. atual. e ampl (São Paulo: Malheiros, 2003), 112.
Figueiredo, 112.
Eduardo J. Rodríguez Chirillo, Privatizacion de la empresa publica y post privatizacion: analisis juridico (Buenos Aires: Abeledo-Perrot, 1995),
75–76.
Álvaro Lazzarini, Temas de direito administrativo, 2.ed. rev. e ampl (São Paulo: Revista dos Tribunais, 2003), 140.
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Marcia Carla Pereira Ribeiro & Eduardo Oliveira Agustinho
attributed a stricter meaning, which included the production of weapons to keep the army well-equipped.12
It is important to say that the state is to be in the
market in a competitive regime with private companies13 as foreseen in the Constitution.14 Nevertheless,
it is evident that there is the possibility that the state
might have no competition, for example, in the supply of a certain kind of goods or services that the private sector is not providing. What cannot be admitted
is that a state keeps the right to explore to itself and
exploits a certain area that hinders the onset of competition in that sector.15
Similarly, the link that is established between the
Public Power and the principle of free competition
must be examined under three different angles: (1) the
state, through legislative mechanisms,16 intervenes to
correct competition deviations in the market; (2) the
state reaches the same goal through enterprises; and
(3) the state respects the principle of free competition
in the market. In the first and the second cases, the
state acts to assure that constitutional norms are followed, and in the third case, the state follows the Constitution. Consequently, it can be said that the principle of free competition is also presented as a condition
for state entrepreneurships, which leads to the impossible condition that what is imperative to national
safety and relevant to the interest of the collectivity
requires state companies in a regime of monopoly.
is ensured, and (5) to follow the private company’s
regime.
Decree-law 200/67, mainly in clause 5o, III, establishes an SCE as an entity under private law, created
by law to be in the market as a limited liability company in which the major shareholder with rights
to vote is the union or the state entity that directly
administers it.17
Law 6.404/76, LSA, rules that limited liability
companies do not have as a concept the definition of
SCEs but delineates the basics for the structure and
management of companies where the state holds the
majority of shares.18 In fact, the law only authorizes
these entities to be created19 when, in addition to following private law, SCEs are formed by due constitutional acts.20 The object of an SCE must express a
greater need and a general interest that will prevail
in the case of a potential conflict between the general interest and the private interest of shareholders
(which is consistent with having a profit).
3.1. State-Owned Enterprises
Like SCEs, SOEs are entities of indirect public management that, through previous legal authorization,
are in the market as established in clause 173 of the
Constitution and are subject to the private rights
regime, which follows the same rules described previously. However, in this case, only the state or public
bodies can be partners. Moreover, they can follow any
kind of corporate organization and can even be different from the pre-existing legal models,21 including the
detached assets of the state and the company.22
Other political entities and respective indirect management are allowed as long as public rights hold
the majority of votes, including a unilateral entrepreneurship when the resources come from only
one public entity, a situation that is ordinarily not
accepted by the legal Brazilian order.23 Besides SCEs
3. STATE ENTERPRISES
As previously mentioned, to perform in the economy,
the state can make use of SOEs, SCEs, and third parties according to clause 173, section 1o of the Constitution. SCEs are created when the state wants to join
both private and public assets. Legally, however, the
following conditions are imperative: (1) previous legal
authorization, (2) a main public or collective interest,
(3) to be a limited liability company, (4) state control
Notes
12
13
14
15
16
17
18
19
20
21
22
23
Celso Ribeiro Bastos, Comentários à constituição do Brasil: promulgada em 5 de outubro de 1988 (São Paulo: Saraiva, 1988), v.7, 73; Tadeu
Pereira, Regime(s) jurídico(s) das empresas estatais que exploram atividade econômica (Porto Alegre: Síntese, 2001), 53–54.
Free competition (clause 170, IV of the FC/88) in a free economy is assured to private entities (clause 170, only paragraph of FC/88).
Fábio Konder Comparato, Direito público: estudos e pareceres (São Paulo: Saraiva, 1996), 146; Celso Antônio Bandeira de Mello, Curso de
direito administrativo, 16.ed. rev. atual. e ampliada (São Paulo: Malheiros, 2003), 639.
It is also possible to have a state monopoly instated by law (Grau, 308).
Law 8.884/94, Antitrust Law.
Clause 37, XIX – Constitution.
Maria Sylvia Zanella Di Pietro, Direito administrativo, 16.ed. (São Paulo: Atlas, 2003), 387.
Ibid., at 370.
Constitution, Arts 45 and 985 of the New Civil Code.
Sérgio Andrea Ferreira, ‘O direito administrativo das empresas governamentais brasileiras’, Revista de Direito Administrativo, Rio de
Janeiro, n. 136, 1–33, Abr./Jun. 1979, 51.
Alvaro A. Caminha Muniz, A empresa pública no direito brasileiro (Rio de Janeiro: Edições Trabalhistas, 1972), 51.
Clause 251 of LSA regulates the ‘whole subsidiary’, a singular hypothesis of unilateral personality.
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Development and Innovation: The Role of State Enterprises
and SOEs, the state can also control using concessionbased systems.24
are also delegated to private companies in a regime
of competition, the state must relinquish the inherent prerogatives and, by being in the same position
of private agents in the sector, subject itself to ‘the
legal regime of private agents, even when it comes
to rights, civil duties and commercial, labour and tax
commitments’.28
Although the above-mentioned sends us back to
the elaboration of a legal statute, the submission of
state companies that are in the market to the norms
of private law is needed and immediate because it is
not being conditioned by any legislation to come.29
Taking into consideration that the state should be
admitted in this sector only exceptionally and in a
competitive regime with the private sector, it is valid
to assume that the Constitution only states the aim
of the constitutional order and withdraws from the
legislator any possibility to state in an ordinary law
the benefits or advantages that set the state entrepreneur in a privileged situation. Therefore, the link to
the private legal regime is concerned with the minimum content to be foreseen in the legal statutes of
state enterprises and cannot be created exactly from
its writing.
In the public and private sectors, the scope of the
protection of private entities against unfair competition would broaden if the state could use its prerogatives and immunity as a corporation. Moreover, the
private system is generally the main reason for the
existence of SCEs, SOEs, and concessions. The state
chooses entrepreneurships to have a freer public sector with the agility and flexibility that is inherent to
good performance in the market.30
However, it has to be considered that the link
between state enterprises and the private regime does
not make them equal to corporations31 because of the
constitutional regime, that is, in the applicability of
the public administration principles, as there is a link
between the entity and the political agent that created and controls it. In other words, because of public
investment, the state enterprises that are in the market should settle on the principles of corporate law
that rule the matter in general but also fit the specific
norms of administrative law.
3.2. State Enterprises that Provide Public
Services: Submission to Clause 173
The previous considerations lead to the conclusion
that if the presupposed interest of the collectivity and
national safety are present under a market economy
system, the state will be allowed to develop entrepreneurships that are typical of the private sector.
Consequently, the state enterprises that provide the
public services stated in the Constitution are not to
be included, a priori, in these dispositions directly or
through concessions, which make the aforementioned
constitutional ruling inapplicable.25 What remains,
however, is only the applicability of the public rights
norms, which does not fit in with the discussion of a
legal statute that establishes its submission to the legal
regime of private companies. However, we must not
lose sight of the fact that the Brazilian state has chosen to delegate the public services to the private sector,
which brings in a new element, competition,26 and
demonstrates a tendency that has been seen in other
countries, a service of general economic interest.27
This evident change in paradigm leads to a careful
consideration of the applicability of the general legal
statute to the state enterprises that provide public
services that have been delegated to private companies, which, in addition to SOEs, SCEs, and concessions, should submit to the norms stated in the clause
173, section 1º of the Constitution. In addition to
ensuring that state enterprises have the needed flexibility to compete with private companies, adherence
to Constitutional norms is the only way to assure fair
competition.
3.3. Results, Responsibility, and Control
in a State-Controlled Enterprise
Positioned in the market as an agent that performs
the typical role of the private sector (in economic
endeavours only) or provides public services that
Notes
24
25
26
27
28
29
30
31
José Edwaldo Tavares Borba, Direito Societário, 8ª ed. (Rio de Janeiro: Renovar, 2003), 497.
Grau, 135–140.
Carlos Ari Sundfeld & Oscar VilhenaVeira (Coords.), Direito global (São Paulo: Max Limonad, 1999), 161.
Vital Moreira, ‘Os serviços públicos tradicionais sob o impacto da União Européia’, Revista de Direito Público da Economia, Belo Horizonte,
ano 1, n. 1, 227–228, Abr./Jun. 2003, 239–241.
Constitution, clause173, §1º, II. The legal statute cannot give state enterprises ‘tax privileges that do not extend’ to the private companies
(clause 173, §2o).
Borba, 500.
Di Pietro, 385.
Celso Antônio Bandeira de Mello, ‘Sociedades de economia mista, empresas públicas e o regime de direito público’, Revista Diálogo Jurídico,
Salvador, n. 13. abr./maio 2002, <www.direitopublico.com.br>, viewed on 13 maio 2004.
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Marcia Carla Pereira Ribeiro & Eduardo Oliveira Agustinho
Paragraph IV of section 1º of clause 173 refers to
private partners of the board in management, and it
refers specifically to state enterprises that split the control with other public and private investors. Because
this paper aims to set forth new concepts in the context of SCEs, the approach will now be directed to this
kind of entrepreneurship.
A system that assures absolute power to the controlling shareholder does not, in principle, attract
private investment. Therefore, the structure and the
political decision to have more or less control will be
reflected in effective private investment. Moreover,
society is already at a level of organization that does
not expect illicit benefits or advantages by the joining
of state organizations and its natural power.
In countries with a traditional interventionist policy like Brazil, the trust and assurance of the simple
participation of the state and the presupposed unconditional solvency should be added to the interest of
the common investor.
3.4. State-Controlled Enterprises:
Control and Management
In the SCE, private shareholders are associated to a
state that holds the majority of the company shares
and, therefore, control. A controlling shareholder, as
defined in clause 116 of the Brazilian limited liability
company law (LSA), is the main shareholder with the
power to elect the majority of the board and to lead
the company due to the effective power. A controlling
shareholder has the duty to maximize the interests
of the corporation, the shareholders, the workers,
and the local community. According to clause 238 of
LSA, this controlling shareholder shall lead the company and make decisions to favour the public interest
that is directly linked to its own existence.
There is an evident contradiction between the
two positions above: one of a general nature that
establishes the duties of the controlling shareholder
according to different interests and another that is
centralized in the management of the relevant public
interest or national safety that defines the nature of
the organization. This limited orientation for the controlling shareholder to run a company is suggested
by law and is expressed in the decision-making of the
controlling shareholder and managers that necessarily will take into consideration political matters and
the macro-economy, which could go against the interest of a minority of shareholders. In addition to direct
power and control, the flow of business in a company
surfaces when nominees are called to be a part of the
board of directors.
The development of an entrepreneurship is directly
related to investment policies. If private investment is
to be privileged, the company must be led to favour
the investment that will not occur unless there is a
forecasted profit that is associated to the public investment, which is not necessarily directed to profit but is
relevant to the interest of the collectivity or a matter
of national safety that justifies the state enterprise.
3.5. The Political Condition: Minor and
Major Representation in the Board
The administrative structure presented by law can
be either with one (diretoria) or two boards (diretoria and conselho de administração). In the second, two
boards are to lead the company. The diretoria includes
shareholders and non-shareholders with technical backgrounds, and conselho de administração, just
shareholders. The law demands that SOEs and SCEs
are necessarily formed by two boards to assure the
state representative in charge in the case of SCEs
even with private shareholders that state interest can
prevail. This structure obviously has the merit of trying to conciliate professional management through
the allocation of specialized staff with the interests
of shareholders that are represented in the elected
administrative councilors.
Officers (called directors) are to be elected in a
general assembly or by the administrative council,
if there is one, and will consist of at least two people. In the administrative council, which is composed
of at least three people who are elected in a general
assembly, there can also be a shareholders’ representative, which assures the condition that the controlling shareholder has more representatives.32 In state
enterprises, the mandatory representation of workers
remains.33
In state enterprises, management is usually nominated by the Executive Office, and shareholders
agreements, which organize the division of control
in the company, have been questioned in court34 once
the control of the state enterprise has been necessarily preserved in the hands of a public entity. In the
Notes
32
33
34
Clause 141, §4º of LSA.
Law 12.353/10.
Brasília, Superior Tribunal de Justiça, Complaint 3016, Dominó Holdings S/A x Estado do Paraná, Redator: Min. Eliana Calmon. Brasília,
21 Oct. 2008. Available at <www.stj.pr.gov.br>, viewed on 24 Oct. 2000. Also Minas Gerais, Tribunal de Justiça do Estado de Minas
Gerais, Civil Appeal 000.199.781-6/00, Southern Electric Brasil Participações x Estado de Minas Gerais. Redator: Des. Garcia Leão. Belo
Horizonte, 07 Aug. 2001. Available at <www.tj.mg.gov.br>, viewed on 21 Oct. 2008.
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Development and Innovation: The Role of State Enterprises
administrative structure of state enterprises, especially in an SCE, the representation of different interests that coexist takes on a special connotation.
Primarily because the criteria to create the boards
are sometimes far from the theory, neither officers nor
the administrative council are required to have the
needed expertise to represent shareholders. Therefore, the controlling shareholder is the state and the
interest of the state is close to the political nature of
the groups in power, which makes it difficult to evaluate the different interests that coexist in the organization. For example, in a state enterprise, management
positions are given to political parties or benefited
parties because of the financial profit the position
grants. Evidently, the expert management of a state
enterprise is an important element to gather private
investment.
There are systems that work differently, legally
speaking, within an SCE. In France, for example, up
to eighteen places are given to shareholders who
represent the local community. The same number of
places is granted to private shareholders.35 French law
allows representatives who are elected by the community to be a part of the management independently of
assembly elections and, consequently, independent of
their mandate.
Would a prevision law be a challenge to the general corporate principles that assure the election of
management whether by votes of an assembly or by
the deliberation of a council? It is understood that the
answer is no; once corporate law allows, for example, the establishment of norms to indicate managers based on agreements, the assembly nominations
become a mere formality.
Brazilian law requires that the administrative councilor should be a shareholder, but this order can be
mediated with the temporary attribution of shares to
the person chosen to be in the office. In addition, the
principles of corporate management show the convenience of the nomination of a certain number of
independent councilors, who are independent from
the groups of interest that are created within the
corporation, with no need to be a partner or the free
choice of an assembly.
Therefore, board positions, especially chairs in the
council, are dissociated from the traditional democratic model of the free choice of an assembly, which
allows for the coexistence of different interests and different sources of power in the centre of the corporation. This reality demands caution in the establishing
of rules for the occupation of the management positions in a company and must be based on existing
interests. A conflict must not contradict the greater
premises that are allocated in a corporation, such as
the responsibility of fulfi lling the interests of the company, shareholders, workers, and the community in
which it is inserted.
If the workers and the community have interests,
which are not to be neglected, and are linked to the
entrepreneurship that is organized as a corporation,
its representation will be more effective through the
assurance of the right to vote and elect representatives. In an SCE, there are public interests in addition
to the interests of shareholders, investors, workers,
and the community. How the management of an SCE
bears these interests in mind is a matter to be faced
by a special law that rules on state enterprises. The
assurance of different representation can change the
administrative profi le because of the effective attention given to private shareholders and minorities and
the general interests that motivated the partnership.
However, the management of the company should
stick to the nomination of strictly technical staff using
any criteria. Regarding competitive state enterprises
in the market, this is not only a matter of survival but
also a stimulus for private investment.
Political influence and the assurance of harmony
in leading the entrepreneurship in a macro-economy
should be limited to the indication of chairs in the
administrative council (i.e., the board’s first (supervisory) tier) and to the management plan to be followed,
which is always a direct duty of the controlling shareholder, in this case, the state that is directly linked to
the market in question.
In France, the local authority can veto businesses
that can compromise the public budget.36 This prerogative is seen as a way to ensure the balance between
the interests to dispose of more public assets and what
the company can invest. However, private shareholders can use the veto power, which is established in the
company’s statutes, to determine certain matters.37
This confrontation of veto powers can aid the desired
balance in the management of an SCE without giving up the right to nominate executive positions,
which allows the company to be managed by experts.
An adequate number of chairs in the administrative
council, in addition to the veto power that is given in
specific matters that can reasonably coexist with the
freedom of managers, can help the search for the ideal
management model of a state enterprise.
Notes
35
36
37
Corinne Regnaut-Moutier, ‘L’administration de la SEM: propos de privatiste’, in Regards croisé sur l’économie mixte, Guérard, Stéphane,
coord. (Paris: L’Harmattan, 2006), 290.
André Delion, Le droit des entreprises et participations publiques (Paris: LGDJ, 2003), 227.
Regnaut-Moutier, 294.
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the constitutional clause that foresees its inclusion in
the legal statute of SOCs and SCEs.
Therefore, taking into consideration that legal
norms are to be interpreted so that the maximum
effectiveness can be extracted from them,40 it is understood that the social role in clause 173, section 1,
I of the Constitution reports a duty that is conceived
to be imposed on corporations and state enterprises.41
However, this should not be misunderstood with the
wider public interest that justifies the existence of the
state enterprise.
Consequently, it is not enough for the state entrepreneur to pursue the relevant collective interest or
the needed national security that gave it the authority to intervene directly in the economy. Like private
entrepreneurships, state enterprises must fulfi l the
immediate interests of the employees, private shareholders, suppliers, consumers, and the community in
general, and it is up to the legal statute to draw the
lines for these interests.42
3.6. Evaluating Performance
Due to the specific role attributed to an SCE, there is
a close link with the SOE, governmental investments,
and the financing of the entrepreneurship. There are
situations when the public capital increases because
of an increase in capital and the subsidy of a future
increase, the selling of shares and similar options,
financial restructuring programs, and the financial
compensations due to measures taken to preserve the
public interest.
All differentiated increases of public resources,
which will unavoidably influence the balance of the
company and the profit of the period, will demand
specific control to ensure the transparency between
the partnership and public resources and assure that
disciplinary measures are followed to ensure the workers’ participation in the company profit. This policy
prevents distortions in the profit of the period (extraordinary increases of capital to finance re-organization
due to compensations for decisions based in the public
interest must be due in special accounts).
The legal statute of SCEs38 must necessarily have
criteria to measure non-financial results that are valued according to the collective interest that motivated
the existence of the company, even through quantifiable indexes that would be a parameter for the evaluation of published reports.39
Clause 173, section 1o of the Constitution determines the need of a legal statute on the social role of
a state enterprise. However, is accomplishing a social
role, either as a national security matter or as a matter that is relevant to the collective interest, the reason
that the state is an entrepreneur? The legal literature
is not clear when it comes to this matter. However, to
think that the state enterprise was created to fulfi l a
goal is enough to make viable the principle that the
social role would be the same as to reduce to useless
3.7. The Copel Case
An example of the strength of the partnership of
public and private investment, which promotes
development, is the Copel case. In Brazil, the electric
energy power sector was developed by private and foreign companies. At first, the cities made concessions.
Fragmented, the system was a problem to the sector.
It changed in 1934 when the Waters National Code
put control under the wing of the Federal State.43 In
the 1950s, ‘the electric power was the pillar of the
national industrialization process’44 and was considered basic to development45 when the gathering of
investments was also basic. Companies were shown
to be the most adequate way to gather substantial
investment, and in Parana, in 1948, the first state
Notes
38
39
40
41
42
43
44
45
Constitution, clause 173.
Delion, 229.
José Joaquim Gomes Canotilho Canotilho, Direito constitucional e teoria da constituição, 5.ed. (Coimbra: Livraria Almedina, 2002), 1.208.
To Eros Grau, social role is an active command that imposes to the controller of a company the duty to direct the business deals ‘in the
benefit of others and not to over-perform in detriment of others’ (supra, 269).
It is odd that state enterprises favor the interest of the collective afar from the accomplishment of duties that are the sole reason for its
existence. Besides private companies, many state companies develop projects that are inserted in what is known today as ‘social responsibility’. As examples, we have (1) Project ‘Luz das Letras’, developed by Copel – Cia. Paranaense de Energia Elétrica, concentrating on
‘litteracy of the young and adults’; (2) Project Sorrir, implemented by Sanepar – Cia. de Saneamento do Paraná, a ‘tripod of Education,
Citizenship and the Hygiene of the Mouth’ for ‘children ages 6 to 14 in the low-income community’ (Pedro Washington de Almeida &
Eduardo Almeida, 1.o Anuário de responsabilidade social – Paraná: solutions for the future (Curitiba: Paranapress, 2003), 68–69 e 102–
103).
Clause 150. BRASIL. Decree 24.643, 10 Jul. 1934. Decreta o Código de Águas, <www.planalto.gov.br/ccivil_03/decreto/D24643.htm>,
viewed on 20 Mar. 2009.
História Da Copel, <www.Copel.com>, viewed on 20 Mar. 2009.
A Evolução Do Planejamento No Governo Federal. Marcos do Planejamento Público no Brasil 1947 a 2000, <www.planejamento.gov.br/
arquivos_down/spi/publicacoes/evolucao_1.pdf>, viewed on 20 Mar. 2009.
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electric power generation plan46 joined an important
binary of economic development: assets and electric
power. For the state, the company came as a product
and as a tool to facilitate the economy.
The rules foreseen for Copel as object are only
found in paragraph of clause 9º, which now reads as
follows:
great deal of service was provided to rural areas and
to low-income families. Segredo Power Station was
also built, and the Salto Caxias Power Station opened
in 1999. Because it needed resources, in 1994, Copel
went public by selling shares in the stock market. The
goal was to reach the international market, which
actually happened in 1998. Going public meant a
leap for investment and results and, at the time, was
interpreted as a kind of privatization.
The open capital structure of the SCE corresponded
to the need for voluptuous resources to finance further electric power transmission, gas distribution,
and power generation. In 1993, the stock market was
favourable, especially to the electric power sector due
to fees established for the public service, the extinction
of the assured-remuneration regime, and the restructuring of the electric power sector.48 After Copel went
public because of the need for investments in maintaining the required service, especially electric power
to support economic growth, State Law 10.702, 30
December 1993,49 was written to authorize the government to sell a major part of its shares.
The law established that the resources gathered
were to be invested in the following manner: (1) 10%
in popular houses; (2) 25% in local railways; and (3)
65% in Copel for power generation systems, transmission, and distribution of power. The law established
the flow of sales. The re-investment in Copel was an
important factor in the rising of share prices. In the
late 1990s, the company was in the North American stock market, and it is currently in the European
stock market.
In 2001,50 after attempts in the United States, there
was an unsuccessful privatization, a process made
not because of deficit but by the federal government’s
choice. Recently, to allow the company to keep the
state enterprise status, the law was revoked.51
Copel, as a state enterprise, must necessarily invest in
research and development and efficient electric power
in the percentages that were established in Law 9.991,
24 July 2000, and regulated by Decree 3.867, 16 July
2001. According to clause 2º, caput, the authorized
The company, according to the present clause,
itself or through services granted to third parties
it is a shareholder, or through a company it will
be a shareholder, provided Public Power holds the
majority of shares, can:
(a) research and study, technical and economic
angles of any source of energy;
(b) research, study, plan, build and explore production, transformation, transportation, storage,
distribution and commerce of any kind of energy,
in special electric power, petrol and raw energy
sources;
(c) study, plan, project, build and operate dams
and reservoirs, and other entrepreneurships that
have the multiple use of water;
(d) provide information service and technical
assistance to the rational use of energy to private
companies that are to implement and develop
activities relevant to the development of the State;
(e) perform in electronic information transmission, communication and electronic control, cellular phones, and other activities of interest to Copel
and to the state of Parana, being it authorized for
these purposes and the ones on items ‘b’ and ‘c’, to
participate, as a major shareholder, in leasing or in
private companies.47
The company built power stations that minimized
the need to import electric power. In the 1960s, it
provided energy to the pioneers in the North and the
South and, in the 1970s, to the West and the East.
In 1980, Foz do Areia Power Station opened, and a
Notes
46
47
48
49
50
51
A História Da Energia No Paraná, available at <www.Copel.com>, viewed on 20 Mar. 2009.
Paraná. Law 1.384, 10 Nov. 1953. Institui o Fundo de Eletrificação e dá outras providências. Diário Oficial [do Estado do Paraná], Curitiba, Paraná, n. 199, 11 Nov. 1953. 1.
Copel [Diretoria] Curitiba. Minutes of the meeting of 08 Nov. 1993.
Paraná. Law 10.702, of 30 Dec. 1993. Specific authorization to sell shares. Diário Oficial [do Estado do Paraná], Curitiba, Paraná, n.
4.171, 31 Dec. 1993, 3 and 4.
Paraná. Law 12.355, 12/08/1998 Authorizes the Executive Office to re-structure shares, negotiating shares the state has, as well as to
get credit, finance, or other negotiations on its own or through Paraná Investimentos S/A and other measures. Diário Oficial [do Estado
do Paraná], Curitiba, 12/09/1998, <http://celepar7cta.pr.gov.br/SEEG/sumulas.nsf/319b106715f69a4b03256efc00601826/e74a14
ee0c8520b203256e99006892b1?OpenDocument>, viewed on 20 Mar 2009.
Paraná. Law 14.608, 01/10/2005. Revokes law 12.355, of 12/08/1998, that authorized the Executive Office to re-structure Copel shares.
Diário Oficial [do Estado do Paraná], Curitiba, 01/28, <http://celepar7cta.pr.gov.br/SEEG/sumulas.nsf/319b106715f69a4b03256efc00601
826/392478666bf 9543783256f9d0060828a?OpenDocument>, viewed on 20 Mar. 2009.
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companies must apply, every year, the minimum
amount of 1% of revenues in research and development of the electric power sector, excluding, because
of exemption, companies that generate energy exclusively from wind, solar, biomass, small hydroelectric
power plants and qualified co-generation.
Clause 4º of the same law foresees that:
must be national and recognized by the Ministry of
Science and Technology – MCT; IV – the high-end
teaching institutions must be registered with the
Ministry of Education – MEC.
The above-mentioned statutes show the clear sustainable nature of the investment in research and
development of the electric power sector, with the
exemption seen as a stimulus to the use of ‘clean
energy’ and to the association of companies and
teaching institutions for the development of new
technologies. Social responsibility is currently considered basic, nationally and worldwide, and instates
the consciousness that companies cannot be limited
to commerce, industry, or services.
In this context, Copel has been developing some
innovating projects. One project, which was presented in September 2008, is a car that runs on electric energy at a speed of 110 km/h and reaches 110
km/h in 28 seconds, a project that was coordinated
by Itaipu Binacional. In 2006, a deal was closed with
the Swiss Power Station KWO and Lactec – Instituto
de Tecnologia para o Desenvolvimento. Eletrobrás
and other Brazilian companies in the sector are also
investing. The goal is to reach INR 1.4 million.
Another project is the Power Line Communication (PLC), which uses the electric power network to
access the Internet in 10 megabits extra-broadband
and52 is currently being tested in Santo Antonio da
Platina, north of Parana.
There is also the VoIP system, which is about
76% cheaper than conventional landlines and
mobile phones in the state of Parana. If the providers migrate to the optic fibre network that Copel has
already installed, the savings are expected to amount
to INR 86 million per year, and it will be available to
the teaching institutes in the state of Parana.
resources are to follow: I – 40% to Fundo Nacional de
Desenvolvimento Científico e Tecnológico – FNDCT,
created by the decree-law 719, in July 31, 1969, reestablished by the law 8.172, in January 18, 1991;
(Writing follows law 10.848, 2004); II – 40% for
research and development projects, according to
the regulation established by Agência Nacional
de Energia Elétrica - ANEEL; (Writing follows law
10.848, 2004); III – 20% to MME, a subsidy for
studies and research on planning the expansion
of the power system, inventory and viable use of
hydroelectric power (law 10.848, 2004).
Regarding resources, in paragraph I of clause 4º in
Law 9.991/2000, Decree 3.687/2001 says in clause
1º that they will be deposited in FNDCT ‘in a specific
category called CT-ENERG, to be used in the research
and technological development of the sector and in
projects of efficient use of power by the end user’. In
the only paragraph of the same document, it says:
As to the herein, it is understood as scientific
research and technological development: I –
projects of scientific and technological research;
II – experimental technical development; III – development of the basic technology; IV – infrastructure
for research; V – training; VI – diffusion of scientific
and technological knowledge.
As to the use of resources, it says in clause 5º of
Law 9.991/2000 that:
I – investment in efficient use of power foreseen in
clause 1º, will be according to regulations established by ANEEL; II – a minimum of 30% is to
projects developed by research institutions in the
North, Northeast and Centre-West of the country
and where the respective regional superintendence
is; II – at least 30% of the resources in paragraphs
I, II and III in clause 4 of this law will be to projects
developed by research institutions in the North,
Northeast and Centre-West of the country, including where the regional superintendence is; (writing given by law 10.848 of 2004); III – research
and development institutes that receive resources
4. SCES, DEVELOPMENT, AND
THE SCM AGREEMENT
Despite the above facts, which show a positive example of state participation in the economy through
state enterprises, it is important to note that this path
is currently quite restricted. This restriction is due
to economic and legal reasons. The first restriction
is the result of the obvious lack of resources, which
is present in all developing countries without exception. The second restriction, however, is the consequence of the limits to be observed by these countries,
Note
52
Marco Martins, Copel testa internet ‘elétrica’ no Norte Pioneiro. Gazeta do Povo, Tecnologia, 23 Feb. 2009, <portal.rpc.com.br/gazetadop
ovo/tecnologia/conteudo.phtml ?tl=1&id=860583&tit=Copel-testa-internet-eletrica-no-Norte-Pioneiro>, viewed on 10 Mar. 2009.
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regarding how to behave as an economic agent due to
the restrictions imposed by the MTS. Therefore, SCM
must be the focus of attention. This agreement is part
of the MTS, which is managed by the World Trade
Organization (WTO).53
According to this system, a subsidy is usually seen
as an undeserved benefit that can generate distortions in competitions in the free international market.54 The use of subsidies, however, is not understood
absolutely as something negative. In fact, the goal of
the agreement is ‘to strengthen and improve GATT
disciplines related to the use of SCM, while, at the
same time, recognizing the right of members to use
such measures under certain conditions’.55 Therefore,
the importance of state intervention in the economy
through subsidies as a tool to reach development is
recognized. What is searched, on that account, is the
conciliation of these two antagonistic points of view
on subsidies, either as a factor of distortion in international trade or as a valid tool to promote economic
development. Through the SCM Agreement, the legal
concept of subsidy is established. For a certain measure to be characterized as subsidy, there must be (1) a
financial contribution by the government or any public body, (2) a benefit, and (3) specificity.
The last requirement establishes the need of the
state subvention to be submitted to specific access,
de jure or de facto, (1) to an enterprise or industry, (2)
to a group of enterprises or industries, or (3) to certain
enterprises located within a designated geographical region. With these criteria being established, the
subsidies are divided into two kinds: prohibited and
actionable. Among the prohibited subsidies are any
measures that link financial contributions from the
government to export performance conditions or to
the use of domestic over imported goods.
Aside from the above, subsidies can be considered actionable if they generate adverse effects to
international trade when (1) subsidies may lead to
displacement of imports in the subsiding country,
(2) subsidized products may displace otherwise competitive domestic products in the importing country, or
(3) subsidies may cause displacement of otherwise
competitive exports from third countries.
The SCM Agreement still foresaw, during a transition period that ended in 31 December 1999, a list
of non-actionable subsidies that involved financial
contributions from the government under certain
conditions to (1) assist research, (2) assist a general
framework of regional development, or (3) promote
the adaptation of existing facilities to new environmental requirements. However, it also established
that in a transition period that ended in 2003, developing countries could have subsidies in export, which
is now prohibited under the Agreement. Currently,
this special treatment is only applied to least developed countries and developing countries with less
than GDP 1,000 per capita.
With the strict exception of the least developed
countries, the same legal regime is applied indistinctly
to all WTO members, which severely limits the use of
subsidies in developing countries. Therefore, it has
become evident that there is a certain imbalance in
the closeness of subsidies as displacement factors in
international trade and as valid tools for the promotion of economic development, which promotes concerns, in the case of the WTO, about the preservation
of the first factor. This imbalance, in turn, affects how
state enterprises might perform among the different
kinds of financial contributions, which are exemplified in the SCM Agreement as subsidies, that is, to
increase the working capital in a company.
This does not mean that the state cannot be an
entrepreneur through SOCs and SCEs, but the investments that are made must be compatible with common market procedures. Actually, in the MTS, there
is no concern with the public or private nature of the
partners in an enterprise. In short, it is understood that
the World Trade System has an ownership-neutral
position. Some reasons for this attitude can be perceived. At first, it is a question of a ‘position legally
consistent with the requirements of international
law’, which preserves state autonomy in the definition of its social, political, and economic systems. In
addition, after the Great Depression in the 1930s,
developing countries ‘also established SOEs as tools
for achieving objectives of government policies’.56
With that being said, that the possibility of state
interference in the economy through state enterprises
is, until today, compatible with international trade
can be noted. However, the allowance of subsidies to
these corporations as a means of implementing public
policies is strictly forbidden. In the context of the current legal Brazilian setting, the possibility of an SCE to
benefit through subsidies due to an increase in capital is very unlikely. The certainty of this statement is
based in two elements of the current legislation. First,
it is important to note that SCEs, as seen above and as
Notes
53
54
55
56
Rabih Ali Nasser, A OMC e os países em desenvolvimento (São Paulo: Aduaneiras, 2002), 133–232.
Mitsuo Matsushita, Thomas Schoenbaum & Petros C. Mavroidis, The World Trade Organization: Law, Practice and Policy (New York: Oxford
University Press, 2003), 260.
Appellate Body Report, United States – Final Countervailing Duty Determination with respect to Certain Softwood Lumber from Canada (hereinafter ‘US – Lumber CVD Final’), WT/DS257/AB/R, adopted 17 Feb. 2004, para. 64.
Julia Ya Qin, ‘WTO Regulation of Subsidies to State-Owned Enterprises (SOEs) – A Critical Appraisal of the China’, Journal of International
Economic Law 7 no. 4 (2004): 899–900.
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constitutionally determined,57 develop an activity in
competition and under the same legal regime as corporations, which are inadequate at adopting any kind
of privileged treatment that is restricted only to state
enterprises.
In addition, these enterprises have their share
capital that is composed of private resources as well.
Therefore, the utter economic logic of the market
disposes of the hypothesis that their management is
not concerned with future revenues because, even
if the state is not worried about collecting dividends,
the same cannot be said about the other partners.
In short, the balance that comes from the conflict of
interests between the state and private partners adds
to the fact that this kind of state enterprise is not benefited by subsidies as a means to increase capital.
The same cannot be said about SOEs because the
investment is solely from the state in this case. Subsidies in this sphere are one of the most complex
possibilities of improper incentives. However, it is a
plausible situation in some economic sectors for infrastructure. In this case, if a state enterprise develops
its end activity in a situation where the working costs
are higher than the expected future results, this is a
situation that can be understood as subsidy because
the state, by taking over the financial losses, makes a
contribution that benefits this company, which makes
it more competitive in international trade.
Despite this fact, there is no rule in MTS forbidding its use in SOEs. What we have is an incentive
measure for developing countries to privatize these
enterprises.58 Based on this premise, Brazil launched
a National Program in the 1990s to end public ownership when several state enterprises went private.
However, the possibility of state participation in these
corporations with the veto power remained in an
attempt to protect the interest of the collectivity that,
at some point, justified them.59
A renowned example of this process is Embraer
S/A, the Brazilian aircraft manufacturer that was
made private and became known in the international
trade of aircrafts when it became involved in a disputed competition with the Canadian Bombardier.
In this case, the dispute ended in a panel in the WTO
in which the program installed in Brazil to equalize
the credit offer in the international stock exchange
market companies in developed countries had to be
equal to the credit offered to Brazilian companies.
The program was considered a specific benefit and,
therefore, inappropriate.60
The case above shows two pertinent considerations
to the subject of state enterprises and their performance. First, the possibility of a Brazilian company
participating in a high-end market, such as aviation,
in equal competitive conditions with companies from
developed countries is, no doubt, the result of the
state having allowed this enterprise to exist. In addition, the showing of the need of financial equalization
measures to allow a higher competitive level in these
markets shows that there still is a lack of equality
between developed countries and developing countries in the international context that justifies different agreements in subsidy policies.
Therefore, the transition period in the SCM Agreement must be reviewed to even up the balance in the
World Trade System. As one observer of the challenges of Chinese access to MTS, ‘Chinese SOEs have
helped to demonstrate the necessity of rethinking the
role of subsidies and WTO subsidy rules in general …
For example, should WTO subsidy disciplines regulate
different types of subsidies according to their purposes
as well as their trade effects?’.61
5. SOES:TOOLS FOR ECONOMIC AND
SOCIAL DEVELOPMENT
The lack of balance in the definition of subsidies limits
can be understood as a consequence of the fact that
it is marked by elements that originate from a neoclassical understanding of development. Therefore, a
possible path to rethinking the system can come from
re-reading these premises. The never-ending search
for industrialization and economic development has
led most countries around the world to concentrate
efforts in the promotion of growth of the GDP, which
relegated quality of life to a second level. Economic
growth is seen as the means and end of development.
In ‘Development for Freedom’, Amarthya Sen sets
forth the difficulty of not only understanding development but also limiting the concept of evaluating the
growth of a country through relative criterion such
as income growth (i.e., the population purchasing
power). This economist evaluates development differently, especially the substantive freedom that includes,
for example, political freedom, economic facilities,
Notes
57
58
59
60
61
Constitution, clause 173, §1º, II.
SCM Agreement, Art. 27.14.
LSA, Art. 17, §7º.
Appellate Body Report, Brazil – Export Financing Program for Aircraft, Report of Panel, WT/DS46/R, adopted 14 Apr. 1999, para. 8.1.
Qin, 919.
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social opportunities, transparency, and the protective
safety. When freedom is expanded, the main means of
development consists of the removal of many kinds of
restrictions that leave people with few, if any, choices
and opportunities. Certain kinds of freedom have an
instrumental role in the promotion of freedoms of
other natures, such as education and health, which
complement individual opportunities to participate
in economic and political endeavours in addition to
being a stimulus to overcome poverty.
Due to the issues discussed above, an approach
based on the identification of freedom as the main
object of development according to the principles of
Sen will follow.
conditions to live a life that is viable and chosen, if
needed, through the aid of public policies or by having an influence in these policies, which fall under
political freedom. Therefore, if there is freedom and
the individuals are ready to earn their living through
work, it is crucial that the economic condition in
the country gives them access to work. Otherwise, the
decision to work lacks effectiveness. This is where the
access to knowledge and technology is pertinent. Consequently, if development is associated with a level of
freedom in addition to the psychological aspect and
if this freedom is viable, the more generalized the
access to information, the bigger the perspective of
development.
5.1. Political Freedom
5.3. Destitution of Freedom
According to Sen, ‘in general, we have excellent reasons to want more income or wealth, though not
because we want them for their own sake, but because
they are the means to have more freedom to live the
kind of life we have reasons to value, as wealth is the
means to reach the desired life’.62 It is undeniable that
economic development plays an important role to this
end; however, growth is not the end itself.
Development linked to economic growth does not
lead automatically to a decrease in social discrepancies because the growth alone with no concern of the
distribution can worsen the lack of equality. Development, in addition to economics, can be valued by the
oportunity given to an individual to exert freedom.
As a matter of fact, development presupposes, on the
one hand, a better organization of the market and, on
the other, the implementation of public policies that,
according to Sen, are not enough to ensure a lasting
improvement in living conditions. Stable markets,
according to studies, are efficient tools for growth.
Still, when the question is analysed under the prism
of freedom, especially political freedom, according to
Sen, there are few signs that authoritarian politicies
aid social improvement because, in theory, democratic regimes that reach for votes induce governors
to avoid social comotions, especially when they come
with hunger.63
Sen shows that there is no freedom when there are no
opportunities and when hunger and malnutrition are
the reasons that part of the society does not have full
access to the basic freedom of survival. In other cases,
there is a barrier to freedom: authoritarianism that
deprives citizens of their political freedom and basic
civil rights. Some economists even understand that
an authoritarian regime is desirable under the eyes of
the economy because it means stability to allow for
the optimum use and allocation of resources. However, the author says that in the history of mankind,
hunger in society as a whole only took place under
authoritarian regimes, which questions the quoted
efficiency and favours freedom.
Economically speaking, in Brazil, the dictatorship
of Ernesto Geisel from 1974 to 1978 is an example of such growth policies; however, the economic
growth was not sustainable due to the concentration
of income and social differences. This is why, as Sen
said, economic improvement does not mean development when matters related to freedom and quality
of life are not considered. In other words, development must be the result of economic growth and an
improvement in the quality of life. It must include
‘changes in the composition of the product and allocated resources in different sectors of the economy
so as to improve the social and economic wellbeing
indicators (poverty, unemployment, lack of equality,
health, nourishment, education, and housing)’.64
Freedom as development is seen not only as a
result of the process but also as the means chosen to
reach growth. It must be seen as a part of the process to ensure development through freedom. Sen has
5.2. Levels of Freedom
Economically speaking, freedom is linked to actions
and decision-making as long as they are followed
by freedom of opportunities. Freedom presupposes
Notes
62
63
64
Sen, 28.
Ibid., at 30.
Marco Antonio Vasconcelos & Manuel Enriquez Garcia, Fundamentos de economia (São Paulo: Saraiva, 1998), 05.
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Marcia Carla Pereira Ribeiro & Eduardo Oliveira Agustinho
freedom as a tool and as an end for directing public
policies and private initiatives toward development.
Lack of freedom antagonizes the priority of growth.
Under this point of view, the poverty criterion should
be replaced by the lack of capability that hinders the
use of freedoms as a parameter to evaluate the level of
development in a country.
the denial of a free market would mean the destitution of freedom. The problem is not the idea of market
but its general meaning that is associated with utilitarianism as a mere mechanism to increase wealth.
5.6. Individual and Social Freedom
Sen argues that individual freedom is a social product because there are social dispositions that can
enhance individual freedom. However, individual
freedom has to be used not only to improve the life of
each person but also to make social dispositions more
adequate and efficient. Regarding tradition, culture,
and democracy, the people who are involved must
have the opportunity to choose the measures to be
taken when tradition leads to poverty and death.65
5.4. Expanding Freedom
Development as freedom is a set of substantive
freedoms that represent the basic elements that are
given to an individual so that, according to individual capabilities, one can exercise these freedoms. The
increment of capability and the speed at which it is
processed cannot be dissociated from public policies
that are directed by the influence of individuals that
make effective use of their capabilities in a cycle. In a
democratically mature society, a cycle is established
in which the widening of access to the benefits of
growth leads to an improved education of the holder
of the democratic power that will make choices based
on the knowledge that was acquired, and they will
elect agents that will multiply positive social policies.
The facilitators, information, and technology are
needed to reach the purpose of providing the individual freedom that can only be built on knowledge. In the
sphere of the private world, the concept given by the
author to an individual attitude is based on one being
a member of the public and part of economic, social,
and political transactions. The concern is to make the
people more rational with a view that is more complex than materialistic attitudes based on personal
satisfaction. The aim of Sen’s work is to present a new
proposition for the development of an evaluation
system based in substantive freedom. According to
this approach, poverty stops being equivalent to low
income and becomes the destitution of capacity.
5.7. Innovation and Technology
as Sources of Development
It was inferred previously, under the scope of development, that the expansion of freedom is a primary
end and is, therefore, not only an element but also
the main means of its instrumental role. Instrumental freedoms include political freedom (suffrage),
economic (credit), social opportunities (education
and health), assurance of transparency (licit relationships), and protective security (social safety).
These freedoms tend to contribute to the general possibility that an individual can live more freely. They
also complement one another. In a system of interrelationships that complement one another, development is the consequence of economic growth that
allows private income to grow and a growing active
intervention of the government to expand social
services.
According to Sen:
According to multiple inter-related freedoms,
there is the need to develop a sustainable plurality
of institutions such as democratic systems, legal
mechanisms, market, education and health, media
and other kinds of communication etc. These institutions can incorporate private initiatives besides
the public ones, as well as mixed structures such as
non-governmental institutions and coops.66
5.5. Market and Freedom
Based on all of the above ideas, the author tried to
understand the meaning of a free market outside the
context of usefulness and looked at it through the
eyes of freedom, which, according to Sen, is the original reading that was later restricted by post-Smithian
classic liberalism. It is valid to say that the freedom of
a system can incrementally develop and accept certain restrictions, usually in the form of regulations.
From this point of view, under the eyes of freedom,
the precept of a free market is set forth by the fact that
Therefore, development is freedom. Freedom cannot be dissociated from the use of capabilities. Capabilities build on the preservation of life, including the
right to health and education. The access to knowledge is basic in the search for development.
Notes
65
66
Sen, 47.
Ibid., 71.
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© 2011 Kluwer Law International.
Development and Innovation: The Role of State Enterprises
In the current macro-economy, in the face of the
international financial crisis that assumes the structural contours that bring change to the system,
changes and innovation are the proper tools to overcome the capital reproduction system that collapsed
in the beginning of the twenty-first century. The idea
of a self-regulating market was shown to be ineffective
mainly because of two reasons. First, because the market economy can only be successful in a society of markets, this logic subverts the premise that economic relationships should be based in social relationships as one
is subordinated to the other.67 Second, because when
market mechanisms and the elements of the industry
(e.g., nature and work force) are inserted, the need to
submit social interests to market laws becomes clear.68
Once we have identified the flaw in the self-regulating market theory, the idea that society is not limited
to market relationships becomes evident. These relationships cannot aim for profit only because of the
growth of worldwide recognition (1) of the need to
change the current production-purchase model, (2)
of the need to innovate and use technology that has a
smaller impact on the environment, and (3) that sustainable development cannot be spoken of without
being linked to the tripod ‘economy – environment –
society’ as basic to political and social endeavours.
The Australian business consultant Brian Bacon
says that:
refers to a natural path of capitalism: search for new
technology and create new production models. However, it is not simple. Some sectors are to be replaced
by others, what means to alternate from power to
opportunity and the natural barrier is to stop, to make
it more difficult to change. The ones who lose always
try to prolong the old ways of making money and
establishing power. OPEC last year had its turn trying
to lower the price of petrol to suppress the search for
renewable sources of energy. Nevertheless, the more
the old system persists, the more we should prolong
the crisis.71
When it comes to values, consumers with a materialist profi le inflict a rhythm to production that involves
long working hours. It is up to each person to determine what constitutes development. Nevertheless,
companies play the main role in the creation of a new
system that integrates economy, ecology, and society
because companies have never developed a sense of
total responsibility. Now companies are recognizing
their responsibility. People are worried about global
warming, the environment, and what is going on in
their cities. People are very conscious of the products
they choose within their sense of what is good for the
community and ecology. At the moment, this is why
the companies have a more conscious behaviour.72
It is under this point of view that SCEs, who play
the main role in the integration of private and public
investment in innovation and technology, ensure the
interest of the collectivity that is responsible for their
existence. The real development depends on SCEs widening the access to information and new technology
that will effectively improve the well-being of society.
The examples of Copel and Embraer discussed above
are great examples of state enterprises that invested
in innovation and technology and were competitive
without losing sight of the aimed development that
provides a better quality of life in a fairer and more
comfortable society. These cases show why there
should be a redefinition of the subsidies policies for
state enterprises as a tool for the promotion of development in harmony with the international trade.
to some leaders and some companies, this crisis
is an opportunity to innovate in a way never seen
before and being closer to the client to understand
deeply what is needed and create closer relationships with the employees.69
To support his line of thought, the consultant
affirms that:
nobody likes changes. It is more comfortable to do
what one always did. People have the capability of
changing, but they carry on doing the same thing.
What crisis do is take away all options and alternatives and force one to see more clearly what is the
real meaning of a business, what is truthful in a
relationship with clients and employees and what
really has to be kept and what is not needed.70
6. CONCLUSION
The way out of this crisis and towards development
lies in innovation, which includes a better use of
resources, and the re-evaluation of values. The first
Over the last several years, a deep change in the economic paradigms has occurred. Gradually, the search
Notes
67
68
69
70
71
72
Karl Polanyi, The Great Transformation: The Political & Economic Origins of Our Time, 2nd edn (Boston: Beacon Press, 2001), 60.
Ibid., at 74–75.
Felipe Laufer, ‘Não se pode jogar uma crise no lixo’, Gazeta do Povo, Conjuntura, 08 Mar. 2009, <http://portal.rpc.com.br/gazetadopovo/
economia/conteudo. phtml?tl=1&id=864723&tit=Nao-se-pode-jogar-uma-crise-no-lixo>, viewed on 20 Mar. 2009.
Ibid.
Christian Luiz da Silva, ‘2009: da crise ao desenvolvimento’, Gazeta do Povo, Opinião, 09 Mar. 2009, 2.
See Laufer.
Global Trade and Customs Journal, Volume 6, Issue 7/8
© 2011 Kluwer Law International.
374
Marcia Carla Pereira Ribeiro & Eduardo Oliveira Agustinho
development that cannot be dissociated from current
societies.
Because a model of development based on the systematic exclusion of a large part of the population is
no longer acceptable, the SCE catches the eye of private investment, and at the same time, it is a great tool
for the promotion of social fairness because the company’s inherent social responsibility is a certification
of quality and, therefore, shares a profit. Currently,
to keep the company competitively in the market, the
social commitment that justifies this entrepreneurship is an asset to the investment in innovation and
new technology.
Therefore, there can be no doubt of the need to
rethink the SCM Agreement in the Multilateral Trade
System to allow subsidies to be considered not only
because of its adverse effects but also because of
the virtue of its purposes, which includes an understanding of the current social and economic role of
SCEs in the face of the new ideology of sustainable
development.
for efficiency at any cost is being left behind, and the
dichotomy of capital and work is being overcome.
Currently, it is accepted that only the existence in an
environment that is truly cooperative reaches higher
levels of well-being. On this account, the state and the
market are intimate in a way never imagined by classic liberalism and the self-regulating criterion.
The financial crisis that settled in North America
under the premise of a global economy now has its
hands in developed and developing countries, and
the state is being called upon to intervene and bring
the market back to normality. One way that the state
can intervene is through SCEs that play an important
role in the increment of new technology and social
inclusion. When public and private investments ally,
these enterprises propel economic and social development while having in mind, at all times, the interest of the collectivity that justifies their existence.
In other words, the SCEs offer its entrepreneurship
to the interest of the collectivity that values as relevant or essential the search for social well-being and
375
Global Trade and Customs Journal, Volume 6, Issue 7/8
© 2011 Kluwer Law International.
KLUWER LAW INTERNATIONAL
QUERY LOG
File Name
GTCJ_0607
Authors
Marcia Carla
Pereira Ribeiro &
Eduardo Oliveira
Agustinho
Query No.
Query
1
Please provide the complete title of cases at first citation,
if any.
2
Please check if changes made to ‘The third part deals
with the limits that are imposed by the Agreement on
Subsidies and Countervailing Measures (hereinafter
‘SCM Agreements’), which establishes policies for
state enterprises in the pursuit of development, and
this contradicts the aim of the document’ retained the
intended meaning of the sentence.
3
Please check if references provided in foreign language
were captured correctly.
4
This sentence seems vague: ‘If private investment is
to be privileged, the company must be led to favour
the investment that will not occur unless there is
a forecasted profit that is associated to the public
investment, which is not necessarily directed to profit
but is relevant to the interest of the collectivity or
a matter of national safety that justifies the state
enterprise.’ Please make necessary changes, if any.
5
Please check if ‘According to clause 2º, caput, the
authorized companies must apply, every year, the
minimum amount of 1% of revenues in research and
development of the electric power sector, excluding,
because of exemption, companies that generate
energy exclusively from wind, solar, biomass, small
hydroelectric power plants and qualified co-generation’
is correct.
Author Remarks