Land Rights Protection in the Pulp and Paper Production System

Abstract

This article explores how the quality of institutions influences the strategic choice of agents in the pulp and paper production system based on the forest plantation sector. In order to proceed with the study, we employ the Economic Analysis of Property Rights (Barzel, 1982, 1989, 2002) as foundation, and test the proposition: in federative states where the institutional environment is fragile and therefore the State has a high cost to enforce property rights, private mechanisms stand out in the protection of property rights. According to Dixit (2009, p. 8), “if the government does not pro tect property rights, at least not as well as owners require, many private arrangements arise to satisfy the owners' needs”. The analysis of three business cases of companies with plantations in more than one federative unit revealed the broad range of private mechanisms in place to cope with insecure land rights. In addition to countrywide strategies, in the federative units where government fails to be a good property rights steward, we found geographically specific initiatives being used. Another finding was the identification of variables that are able to evaluate the quality of institutions and employed in the companies´ decision-making process for the selection of land rights protection strategies. Findings altogether are empirical evidence of how the quality of institutions influences the strategic choice of land rights protection in the forest plantation sector in Brazil.