potential for rent seeking. The complexity of Brazilian coffee policies during this period,
involving administrative prices, subsidies and the simultaneous use of export taxes and rebates,
doubtlessly obscured the effects of the rebates and made it easier for observers to accept official
arguments that the rebates had a neutral welfare effect.28 Further research on the political and
institutional situation in Brazil may shed additional light on how and why these events occurred.
Although less developed countries are increasingly adopting market oriented policies and
eschewing distortions that lead to rent seeking, it is worth noting that the ICA was a commodity
agreement created jointly by less developed and more developed countries to increase and
stabilize coffee prices. The price increase was expected to benefit coffee producing countries
and, particularly, the coffee producers therein. Instead, it appears that Brazil and most other
producing countries suffered large net social welfare losses as a result of the rent seeking that the
export quotas created (e.g., Bohman, et al.). Within the producing countries, there is reason to
believe that coffee farmers lost proportionately most heavily (Bohman and Jarvis, 1996).
Developed country importers gained greatly and such gains may have contributed to their longer
term political support for maintenance of the ICA (Bates, Jarvis, 2001), as well as their pursuit of
export rebates within Brazil. Thus, rent seeking in this case had international as well as national
characteristics.
28 Although foreign roasters appear to have received most of the export tax rebates, domestic roasters, domestic
soluble producers, and domestic exporters also received sizeable amounts of export tax rebates, especially during the
1980s. Since the avisos were negotiable, they provided a convenient instrument for subsidizing the development of
the domestic coffee industry.
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