Reelection incentives and political budget cycle: evidence from Brazil

This article tests the presence of political budget cycle (PBC) in municipal elections in Brazil and checks whether mayors who adopt such policy have greater probability of reelection. Based on fiscal and electoral data of 5,406 Brazilian municipalities and applying the difference-in-differences econometric method as well as logistic regressions, the results provide some evidence of PBC in Brazil, although its magnitude and consistency varies depending on the years used as electoral and non-electoral years. On average, reelectable mayors spend close to 3% more in election years than nonreelectables. Moreover, reelectables who do run for reelection present a variation in spending which is close to 5% superior to that of non-reelectables and non-runners. Additionally, the results suggest that mayors who increase public spending during electoral periods have greater chances of being reelected, as long as such spending is done within deficit limits acceptable by voters.

O efeito da intenção de reeleição sobre gastos em saúde: uma análise com base no modelo de reputação política

The effect of reelection intention on public health expenditures: An analysis based on reputation models. The political model of reputational-building argues that if the incumbent politician aspires to be reassigned, he/she must act in the voters' interest to obtain their approval and consequently their votes. Considering that voters are sensitive to public health expenditures, we check how reputational incentives shift municipal spending patterns in electoral years. The empirical tests for 3.004 Brazilian municipalities show an increase of health expenditures in those cities in which incumbents are trying to maintain their jobs. In addition, we find an increment in health expenditures where mayors forfeit their chance of being reelected to the benefit of a party mate.

Why budget accountability fails? The elusive links between parliaments and audit agencies in the oversight of the budget

ABSTRACTParliaments and audit agencies have critical and complementary roles in the oversight of the budget and the enforcement of government accountability. Yet, the nexus between parliaments and audit agencies is one of the weakest links in the accountability chain, generating an accountability gap in the budget process. This articles analyses the interactions between parliaments and audit agencies in the oversight of government finances during the latter stages of the budget process. Using proxies to evaluate the quality of those linkages, such as the follow-up to audit findings and the discharge of government, it shows important dysfunctions in the interactions between parliaments and audit agencies due to a combination of technical capacity constraints and political economy disincentives. It suggests that the effective functioning of the system of checks and balances in public budgeting critically hinges on the agility of the linkages between accountability institutions. As such, the failure of budget accountability is due to systemic dysfunctions in the systems of accountability, rather than the failure of an individual accountability institution acting in isolation. In addition, the effectiveness of the horizontal accountability architecture depends on the political economy incentives shaping the budget process, which are generated by the interactions between the choice of institutional design and budget rules, with the degree of political competition and electoral rules.

Muddle or march: China and the 21st century Concert of Powers

Concert of Powers has emerged as an attractive modality in global governance. As an emerging power, China must seriously take this template into account. This article seeks to analyze the incentives, possibilities, and uncertainties for China to participate in Concert with reference to China's history memory on Concert, China's intellectual endeavors, as well as China's evolving foreign preferences. It concludes that China is generally qualified and capable of being a key participant in Concert of Powers with increasing willingness. Yet, China's involvement depends on 1) if Concert template can overcome its own deficiencies; 2) if Concert have competitive advantages compared with other governance alternatives for China; and 3) if China can keep its momentum on both willingness and capacity in power transition.

International transfer pricing restrictions: impact on corporate financial policy

Transfer pricing is a pervasive issue that presents significant tax savings potential concerning international enterprises. The authors discuss company incentives to manage transfer prices in an article appearing in the preceding issue of this journal. In response to these incentives, governments have increasingly enacted and enforced domestic restrictions on transfer prices. In this article, contemporary norms restricting transfer pricing are analyzed. The OEGO and US pricing standards are assessed and Brazil's recent application of these standards is considered. Transfer pricing methods are described and evidence of their use is presented. We conclude by describing an intercompany transfer pricing policy intended to facilitate internaI financiaI management and minimize externaI tax threats.

Designing competitive international compensation programs

Over the past 25 years, expatriate managers have voiced increased disenchantment with their compensation packages whíle abroad. This paper takes a prescriptive approach, outlíning severa I elements of a successful human resources strategy and stressing key ingredients of effective international compensation programs. Particular ettention is given to the adherence of cultural values and distrlbutive justice when working across nations and cultures.

Observations on the Brazilian presidency, democracy, and governance

This article presents the first results of research on the organization and administration of the Brazilian presidency and problems of democratic governance in Brazil. Biases of Euro-centrism in current views of presidentialism, democracy, governance, and representation are criticized and new comparative analysis of political experiences in the Americas called for. Initial analysis of the Brazilian presidency reveals a unique combination of executive-led electoral representation and muddling through governance since the transition from military rule.

Budgeting and resource allocation in universities: a public choice approach

The calls for colleges and universities to improve their productivity are coming thick and fast in Brazil. Many studies are suggesting evaluation systems and external criteria to control the quality of teaching and research in universities. Since universities and colleges are not profit-oriented organizations (considering only the legitimate and serious research and teaching organizations, of course), the traditional microeconomics and administrative variables used to measure efficiency do not have any direct function. An alternative would be to create an "as if" market control system to evaluate performance in universities and colleges. Internal budget and resources allocation mechanism can be used as incentive instruments to improve quality and productivity. It will be the main issue of this article.

Fertilizer policy in the developing countries: the case of Brazil

This paper deals initially with the role of mineral fertilizers in increasing agricultural production: the relationship between the two variables is illustrated within global, regional national and local contexts. The pattern and trends in fertilizer usage in Brazil are presented next, namely: increase in consumption in the period 1950/72; regional distribution; consumption as related to crops and cultivated land. It is shown that in less than a quarter or century fertilizer use has increased in the country nearly 12 fold, whereas world consumption was raised 7 fold, thus exceeding estimates based in several criteria. Steps taken to secure the raise in fertilizer consumption above the historical trend are discussed: research experience for outlining fertilization recomendations; the transfer of the knowledge to the farmer by the extension work both official and private; the credit policy and special incentives for the purchase of fertilizer; the national policy for minumum proces of agricultural products; the implantation of a national fertilizer industry. It is considered that the Brazilian experience adapted to similar local conditions in other developing countries, presents a possibility for achieving beneficial results without inflationary reflexes in the economy.

Networks in Argentine agriculture: a multiple-case study approach

Argentina is among the four largest producers of soybeans, sunflower, corn, and wheat, among other agricultural products. Institutional and policy changes during the 1990s fostered the development of Argentine agriculture and the introduction of innovative process and product technologies (no-till, agrochemicals, GMO, GPS) and new investments in modern, large-scale sunflower and soybean processing plants. In addition to technological changes, a "quiet revolution" occurred in the way agricultural production was carried out and organized: from self-production or ownership agriculture to a contract-based agriculture. The objective of this paper is to explore and describe the emergence of networks in the Argentine crop production sector. The paper presents and describes four cases that currently represent about 50% of total grain and oilseed production in Argentina: "informal hybrid form", "agricultural trust fund", "investor-oriented corporate structure", and "network of networks". In all cases, hybrid forms involve a group of actors linked by common objectives, mainly to gain scale, share resources, and improve the profitability of the business. Informal contracts seem to be the most common way of organizing the agriculture process, but using short-term contracts and sequential interfirm collaboration. Networks of networks involve long-term relationships and social development, and reciprocal interfirm collaboration. Agricultural trust fund and investor-oriented corporate structures have combined interfirm collaboration and medium-term relationships. These organizational forms are highly flexible and show a great capacity to adapt to challenges; they are competitive because they enjoy aligned incentives, flexibility, and adaptability.

Sharing competences in strategic alliances: a case study of the Cosan and Shell biofuel venture

In a competitive world, the way a firm establishes its organizational arrangements may determine the enhancement of its core competences and the possibility of reaching new markets. Firms that find their skills to be applicable in just one type of market encounter constraints in expanding their markets, and through alliances may find a competitive form of value capture. Hybrid forms of organization appear primarily as an alternative to capturing value and managing joint assets when the market and hierarchy modes do not present any yields for the firm's competitiveness. As a result, this form may present other challenging issues, such as the allocation of rights and principal-agent problems. The biofuel market has presented a strong pattern of changes over the last 10 years. New intra-firm arrangements have appeared as a path to participate or survive among global competition. Given the need for capital to achieve better results, there has been a consistent movement of mergers and acquisitions in the Biofuel sector, especially since the 2008 financial crisis. In 2011 there were five major groups in Brazil with a grinding capacity of more than 15 million tons per year: Raízen (joint venture formed by Cosan and Shell), Louis Dreyfus, Tereos Petrobras, ETH, and Bunge. Major oil companies have implemented the strategy of diversification as a hedge against the rising cost of oil. Using the alliance of Cosan and Shell in the Brazilian biofuel market as a case study, this paper analyses the governance mode and challenging issues raised by strategic alliances when firms aim to reach new markets through the sharing of core competences with local firms. The article is based on documentary research and interviews with Cosan's Investor Relations staff, and examines the main questions involving hybrid forms through the lens of the Transaction Cost Economics (TCE), Agency Theory, Resource Based View (RBV), and dynamic capabilities theoretical approaches. One focal point is knowledge "appropriability" and the specific assets originated by the joint venture. Once the alliance is formed, it is expected that competences will be shared and new capabilities will expand the limits of the firm. In the case studied, Cosan and Shell shared a number of strategic assets related to their competences. Raízen was formed with economizing incentives, as well to continue marshalling internal resources to enhance the company's presence in the world energy sector. Therefore, some challenges might be related to the control and monitoring agents' behavior, considering the two-part organism formed by distinctive organizational culture, tacit knowledge, and long-term incentives. The case study analyzed illustrates the hybrid arrangement as a middle form for organizing the transaction: neither in the market nor in the hierarchy mode, but rather a more flexible commitment agreement with a strategic central authority. The corporate governance devices are also a challenge, since the alignment between the parent companies in the joint ventures is far more complex. These characteristics have led to an organism with bilateral dependence, offering favorable conditions for developing dynamic capabilities. However, these conditions might rely on the partners' long-term interest in the joint venture.