JOHN WILKINSON (Coord.)
PIERINA GERMAN CASTELLI

Rio de Janeiro, 2000

Research co-operation agreement: CPDA/UFRRJ and ActionAid
Collaborating researcher: Ana Célia Castro

Alogamous plants -- Plants that reproduce by random crossed pollination (crossed fertilisation), through the uniting of gametes (reproductive cells, an egg cell and a spermatozoid) from different individuals.

Autogamous plants -- Plants that most often reproduce by self-fertilisation, using their own pollen, fusing the gametes of a single individual.

Biodiversity -- (biological diversity) The wealth/diversity of species existing in a given biological system or ecosystem. The largest centres of origin of biological diversity are located in the tropical and subtropical regions. Brazil and Colombia are considered to be the countries with the world's greatest biological diversity.

Biopiracy -- Activity aimed at extracting, expropriating and privatising genetic resources and traditional knowledge without the consent, participation and control by the country of origin and local communities. Countries and/or local communities are not benefited by the gains accrued from the commercial use of these genetic resources.

Biotechnology -- Any technology using living organisms or their components to produce, transform, improve or break down products. The production of bread or wine and the classical methods of plant breeding may be considered as traditional biotechnology. Tissue culture, biological pest control and the biological fixing of nitrogen are intermediary biotechnologies. New biotechnology is that which uses the possibilities of genetic recombination, either through genetic engineering techniques or through knowledge of molecular biology.

Cultivar -- A plant variety used in agriculture, that is, a cultivated variety which has been bred and made more homogeneous by human selection than the wild variety(ies) from which it originated.

DNA -- Deoxyribonucleic acid, a polymer of deoxyribo-nucleotides. These are complex chemical units grouped into specific sequences making up a chain that is different and unique for each species. DNA is mainly responsible for the genetic information of living organisms. All living organisms contain sets of genes (DNA sequences). The varying makeup of these sequences determines the characteristics of each organism.

Ex situ conservation -- Components of biological diversity conserved outside their natural habitats. Examples include national and international germplasm banks, seed banks, botanical gardens, zoos, etc.

Genes -- The biological units responsible for transmitting hereditary characteristics. Genes are segments on the DNA chain that define specific characteristics of each individual, such as size, form, colour, flavour, smell, etc.

Genetic engineering -- A novel technology (1970) used to modify the genetic material responsible for transmitting the hereditary features of biological systems (living organisms), in order to make them able to produce new compounds, perform new functions or improve their original performance. Genetic engineering breaks the sexual barriers that normally forbid genetic cross-overs between different species.

Genetic resources -- All living matter containing information that allows inheritable characteristics to be transmitted over generations. The term refers specifically to the economic potential contained in the genetic reservoir of plants, animals or other organisms due to their current or potential uses. The sum total of genetic resources in a region, country, etc. are called genetic heritage.

Genetically modified organism (GMO / Transgenic) -- An organism whose genetic material (DNA or RNA) has been modified by any technique involving genetic engineering, generally by receiving genes from another organism (exogenous genes) of a different species.

Genome -- All the genetic material contained in the chromosomes (linear structures containing the genes of a given organism). Current research is aimed at mapping and sequencing the genome of many organisms, including humans.

Genotype -- The genetic constitution of an organism.

Germplasm -- All the genes found in a population or, more broadly, in a given set of populations. For example, different varieties of beans found in a given region (conserved in the field, research centres, botanical gardens or seed banks) make up a germplasm collection. The more variety in the germplasm, the greater the genetic diversity.

Hybridisation -- The process of producing hybrids.

Hybrids -- Plants or animals resulting from the interbreeding of different varieties or breeds, as long as they are sexually compatible. Such crossing is done in order to achieve hybrid vigour, a function of the phenomenon of heterosis (a state in which the first generation of a hybrid is stronger than any of the varieties from which it arose). The first-generation population of a hybrid is uniform in its expression of physical features, but it is not genetically stable, since the seeds of succeeding generations of the same population will gradually lose their initial characteristics. This is why farmers do not save hybrid seeds and must buy new seeds for each planting season.

Improved variety -- In the broad sense it is any cultivar obtained by conscious human activity. The term is generally used, however, to refer only to those cultivars obtained by private companies or public institutions dedicated to plant breeding.

In situ conservation -- The conservation of biodiversity and the genetic resources it contains in their original ecosystems, thus maintaining the evolutionary dynamic of the habitat and the natural environment. Examples can range from the permanent preservation of certain areas to the conservation activities and the local reproduction of native species of farm crops and livestock.

Landrace (or native variety) -- A variety (or animal breed) that has been selected, cultivated, conserved and in some cases improved by farming communities, but without institutionalised breeding practices. A landrace is often the raw material used in breeding programs by public or private institutions.

Patents -- A means of protecting industrial property. It is the privilege granted by a government to the owner of an invention, which gives said owner exclusive (monopoly) marketing rights over the patented product or the process for a period of 20 years.

Phenotype -- Visible features of an organism, arising from the interaction of the genotype with the environment.

Species -- A group of individuals that interbreed and reproduce amongst themselves spontaneously in nature, producing fertile descendants. There are cases in which breeding may take place between individuals of one species with those of a related species. One species may be subdivided into differentiated populations, such as varieties, breeds or strains.

Royalties -- A payment stipulated in a contract between the owner and the user of an industrial patent, to grant the owner a share of the income from the sales of a product. The share of royalties in the final price often varies between 3 to 5%.

RNA -- A ribonucleotide polymer, directly related to DNA, with various functions in a cell.

Transgenic plants -- Plants whose genetic make-up has been modified in laboratories using genetic-engineering techniques, such as recombinant DNA. This technique involves extracting one or more genes from (an)other species (these donor organisms may be plants, animals or micro-organisms) and inserting them into the genome of a plant variety (the receiver organism). This change in a DNA sequence can modify the characteristics of a plant. The insertion of a foreign gene breaks a sequence in the receiver organism's DNA and reprograms it to produce new compounds, to carry out new functions or present new characteristics, such as (typically) resistance to herbicides, pests or microbial disease; changes in chemical composition (e.g. the quantity or quality of starches, proteins, oils, etc.); and changes in physiological features, such as resistance to adverse environmental conditions (draught, salty soil, etc.) or longer life cycles.

Variety -- Generally described as a sub-division of a species, comprising a homogenous group of plants identified by similar morphological or agronomic features (form, colour, size, flavour, environmental behaviour, etc.) which, because of their uniformity, distinguish that group or population from other varieties. These distinguishing features may have been acquired naturally or by means of selection by humans, and they remain stable over many generations. For animals, we use the term breeds to characterise the distinct groups belonging to a single species. A variety may be: a landrace, improved or hybrid.

During the 20^th Century the seed -- a key means of production for agriculture -- became one more commodity in the division of labour between family farmers and industry. As the carrier of genetic information embedded in its genetic heritage, whether acquired over the ages by natural processes of breeding or redesigned through the labour of humans, the seed still plays a central role in farming systems, as a vector for technical progress that conditions the way we produce and consume plant and animal species.

Plant breeding began to grow as a formal activity in the 19th Century with the advance of fundamental breakthroughs in knowledge (Mendel's laws) and the organisation of the principles of selection (Vilmorim). It was only at the end of that century that seeds and plants became the object of exchange and trade, particularly in Europe (and primarily for grains and sugar beets). The beginning of a true seed industry came when US researchers concluded their research on hybrid corn (Allard, 1960 and Berlan, 1963 quoted by Bertrand, Ducos and Joly, 1991).

Berlan (1989) thus explains that the private seed sector appeared at the turn of the century and progressively grew into a heterogeneous grouping of markets, largely influenced by the impact of natural factors as key variables in their process of competition: the appropriability and the cumulativity of research efforts. Until the hybrid path was finally taken, private companies depended on the public breeding sector, which was responsible both for reproducing the genetic base and for developing, adapting and disseminating new varieties.

While seed production is based on relatively simple and empirical routines, the industry's technical basis, once hybridisation strategies were adopted, allowed it to be classified as a "science-based" sector, using Pavitt's (1984) typology. The use of hybridisation, an intra-specific breeding technique that enables the private appropriation of new varieties planted on a large scale such as corn, helped to consolidate specialised companies like Pioneer in the US, Limagrain in France and Agroceres in Brazil. Meanwhile, the limitation of hybrid techniques to certain (autogamous) species assured the public sector an on-going strategic position. Major crops not suitable for hybridisation were targeted by ambitious international breeding programs to develop varieties adapted to the use of technical "packages" dependent on chemical inputs and irrigation. In both cases, the breeding history for major crops has favoured the development of varieties that demand increasingly modern production systems.

With the appearance of the "new biotechnology" in the 1970s, the seed industry reorganised into a new scientific paradigm, now generically applicable to all kinds of seeds. This change redefined the previous division of labour between the public and private sectors based on the use of hybridisation techniques, while it also attracted investments into the sector from other industries, in particular chemical and pharmaceutical companies.

The seed industry's scientific ground lies in the knowledge of genetics, mainly in the development of forecasting techniques based on experimental statistics and on specific screening¹ methods. Other scientific disciplines, such as plant physiology, edaphology² and, more recently, molecular biology, complement the genetic core of research activities.

Seed production has two basic functions, often confused a posteriori: (a) plant "creation" and (b) the dissemination and maintenance of the quality of reproductive material to be used by farmers.

The function of plant "creation" is basically the innovation process carried out by industry for agriculture. The latter function refers to reproducing the seed and maintaining certain quality standards, and involves on-going monitoring. Companies and research centres create research routines aimed at promoting scientific advances that lead to new products (cultivars) the companies can then commercially "brand."

Under the umbrella of "conventional" plant breeding, the industry can be divided into two major segments based on the plant species' natural features (alogamous or autogamous) most directly responsible for the appropriability of the fruits of innovation. On the one hand, we have (A) hybrid seed production, in which self-pollinating plants allow for "natural" protection (a "natural patent", according to Berlan, 1983) of the improved seeds, since the companies block access to the parent varieties or "lines"; while on the other hand the public sector tends to focus on (B) production of seeds for open-pollinating species, for which the establishment of property rights over new varieties can only be assured -- and even so, only partially -- by legal mechanisms, which vary from one country to another, when they exist at all.

The hybrid seed segment, in which there is a "natural" right of property over one's innovations, generally focuses on crops with a high rate of multiplication³ and gives rise to oligopolistic market structures with a high degree of concentration, whose competition patterns are based on product differentiation, rather than on price. In variety seed production, however, where patent protection for innovation is either limited or not available, and in which the focus is on species with lower rates of multiplication, it is much more frequent to see the presence of a large number of companies competing mainly on the basis of price.

Traditional genetic breeding methods predominated through the 1970s, and the market leaders were usually national or multinational companies dedicated exclusively to seed production, sale and/or processing.

The international seed industry has gone through different phases. It was first dominated by companies active only in their home-country markets, and only in the seed industry. This phase lasted from 1930, when the industry began to emerge as such in the central economies, until the late 1970s, when it began attracting companies from other fields, seeking to diversify and/or to gain greater access to information on the farming market. This was also when the industry began to internationalise.

The 1970s also brought genetic engineering onto the scene, creating a new technological paradigm for plant breeding and raising revolutionary perspectives for various industrial sectors. Interest in the seed industry grew on the part of chemical, pharmaceutical, petrochemical and food industries. For these groups the ability to use biotechnology essentially meant expansion into new markets, in which the seed industry could be a strategic vehicle.

Beginning in the 1970s, the seed industry went into two successive periods of restructuring and acquisitions on an international scale. The first phase grew out of the expansion of traditional seed markets during the commodities boom in the early 1970s, which attracted companies closely related to seed distribution (pesticides, for example). The second phase, also involving major agrochemical firms, focused on synergies arising from the potential application of "new biotechnologies" and combined a defensive strategic position vis-à-vis the greater dynamism of chemical specialities with the chance to integrate more fully with pharmaceuticals (OCDE, 1993). Mergers and acquisitions involving various industrial sectors with the seed industry picked up in the 1980s and then accelerated even more in the 90s.

Silveira (1987) outlines three major motivations beginning in the 1970s for the intensification of acquisitions of small and medium-sized, local or regionally-based companies in several countries, by companies from the pharmaceutical, chemical, petrochemical and food sectors:

1. Pharmaceutical sector were looking for business diversification, whether into biotechnology (which would only come later) or not: Sandoz and Upjohn.
2. Trading companies such as Cargill and Continental Grains used seed markets as an information source for their main activity, commodity trade. Here the seed industry was a natural area into which they could diversify their activities.
3. Pesticide companies sought to implement a two-fold strategic movement: first, an offensive into a new market and a new field of knowledge about to be modified by the introduction of biotechnology; and also a defensive move in response to the impending exhaustion of agrochemical technologies, examples being ICI, Rhône Poulenc and Sanofi.

In Chart 1, below, we present the main acquisitions of new-comers to the seed industry through the late 1980s.

SOURCE: Joly (1989) and Jullien (1989) quoted in Silveira et al., 1990.

At the end of the decade, there was also a group of potential new-comers spending large amounts on research and development (R&D) in plant biotechnology, but with no significant participation yet in the seed market. DuPont, Ferruzi and Monsanto were the three most important of these companies, investing much more in R&D than companies in other sectors, with the exception of chemical and pharmaceutical companies also active in the sector, such as ICI (soon to become Zeneca), Sandoz and Ciba-Geigy (both of which later merged into Novartis).

Several authors -- Hayenga, 1998, Joly and Lemarié, 1998, Lesser, 1998 (quoted by German, 1999) -- agree that 1994 was a turning point for the changes undergone by the seed industry since the 1980s. It was the year when the largest wave ever of mergers and acquisitions by major agrochemical and biotechnology companies began.

Klaizzandonakes, 1998 (quoted by German, 1999) shows how, over the past 15 years, agrobiotechnology has shown that it really can generate the markets projected earlier, with structural impacts throughout the agro-food production line. He offers several possible explanations for the growth in demand within the seed industry:

1. Seeds proved to be the mechanism for projecting the option for agrobiotechnology and, given the scarcity of high-quality germplasm, the strategic value of existing seed companies grew rapidly. Biotechnology companies were thus forced to rush into mergers and acquisitions.
2. Once the "Life Science" idea took hold, based on complementary technological capacities covering biotechnology, chemicals and pharmaceuticals, companies in these sectors felt obliged to undertake mergers and acquisitions of seed companies in order to fit a missing piece into the "Life Science" puzzle.
3. Recent commitments by agrobiotechnology companies to research in genomics entail huge R&D budgets that can only be justified with a major expansion of sales. Given the size of global farm-chemical markets, both presence and growing shares in these markets have been highly sought-after objectives for these companies.
4. Patents have not made agrobiotechnology companies feel as safe as they wish. They are thus moving into vertical (downstream) mergers and acquisitions, to add more value to their technology.

Shimoda (quoted by German, 1990) emphasises that the corporate mosaic centred on agricultural biotechnology is being shaped by the growing recognition of multi-dimensional relationships between conventional farming and its related markets. In addition, it combines with the prospect of using agricultural technologies to catalyse a strategic integration of agriculture with a group of industries hitherto unrelated to farming.

The convergence of four key orientations highlights some of biotechnology's potential impacts. First, the agrobiotechnology companies involved in seeds and pesticides are undergoing a process of mergers based on the recognition that these technologies are complementary. Second, those companies are building ties with downstream industrial sectors in order to add value in processed-food markets. Third, agrobiotechnology is becoming a critical component in the evolution and activities of "Life-Science" company strategies. Fourth, the creation of products with special characteristics for non-conventional farm markets will enable the establishment of strategic relations with a broad range of companies in new industrial sectors.

Joly and Lemarié (1998, quoted by German, 1999) observe that after the launching of the first transgenic plants in the United States, the seed industry has experienced structural changes (mergers, take overs and acquisitions) which, while not new, have finally culminated a process begun early in the 1970s. A few "mega-companies" have emerged, combining skills in biotechnology, pesticides and seeds, to dispute a new field (plant genomics, which gives them quick access to genetic information on the qualitative or agronomic features of crops) and to assure their R&D investments through patents.

The following chart summarises the restructuring of the global seed industry in the late 1990s.

(1) Monsanto is the world's second largest seed company, with seed income estimated at US$ 1.8 billion.

(2) The merger with Delta & Pine Land announced in 1998 was questioned by the US Department of Justice, and Monsanto halted negotiations in December 1999 after being acquired itself by Pharmacia & Upjohn Inc.

(3) World leader in molecular genetics and bio-computing.

(4) Biotech "start-up" companies specialised in research on plant genetic engineering.

(5) DuPont is the world's largest seed company, with seed income of more than US$ 1.8 billion.

(6) Pioneer Hi-Bred Int. operates in several continents with various crops; it sell hybrid corn in approximately 100 countries, as well as sorghum, sunflowers, soybeans, alfalfa, canola and wheat.

(7) Novartis was created in 1996 from the merger of Swiss giants Sandoz and Ciba-Geigy; it is the world's third largest seed company, with 1997 sales of US$ 998 million.

(8) Aventis was created in 1999, with the merger of Hoechst (Germany) and Rhône Poulenc (France), and is in fourth place amongst the world's largest seed companies.

(9) AgrEvo was created in 1998 out of the merger between Hoechst and Shering; its 1998 income from seed sales was US$ 134 million.

(10) Created by the merger of Dow Chemical Company and Eli Lilly.

(11) Sales by Mycogen and its subsidiaries in 1997 totalled US$162 million.

(12) A corn seed and germplasm company.

(13) In 1999 the Zeneca Group, British leader in the "Life Science" sector, merged with the pharmaceutical group Astra, creating the AstraZeneca Corporation.

(14) Advanta is the world's sixth largest seed company, with 1998 sales of US$ 412 million.

(15) Sakata Seed Corp. is the world's eighth largest seed company, with 1996-97 annual sales of US$ 349 million.

(16) In March 1999, the Empresas La Moderna group merged with Seguros Comercial América, and the new company is called Savia. Empresas La Moderna sales in 1998 were US$ 28 million. Savia is the world's fifth largest seed company.

(17) Seminis Vegetable Seed Inc. is the biggest fruit and vegetable seed company, with 25% of the world market in this sector.

SOURCE: Rafi, 1999; German, 1999; Campo&Lavoura, Zero Hora, 09/07/99; Embrapa, March or June 1999.

Brazil's seed and seedling market is regulated by the following legal instruments:

• The Seed Law (Lei de sementes - Law n� 6.507/77) implemented by Decree n� 8.771/78, which sets standards for the production of certified and inspected seeds;
• Ministry of Agriculture Directive (Portaria n� 527/97) setting norms for the National Cultivars Registry;
• Cultivars Protection Act (Lei de Proteção de Cultivares/LPC -- Law n� 9.456, dated 25/April/97), implemented by Decree n� 2.366, dated 05/Nov./97;
• Ministry of Agriculture Directive (Portaria n� 199, dated 15/May/98), approving the bylaws of the National Cultivar Protection Service (Serviço Nacional de Proteção deCultivares/SNPC).

There are two bills in Congress (Senate Bill n� 12 and Chamber of Deputies Bill n� 4.828/98) aimed at updating laws on Brazil's seed system, which would replace Law 6.507/77.

Ever since colonial times, the Ministry of Agriculture and several State Departments of Agriculture (except for São Paulo) had been responsible for producing seeds. This period ended in the 1950s, when private farmers equipped with technology and capital began taking on this activity and expanding the seed market, which at the time was restricted to hybrid corn, marketed by multinationals and by Brazilian-owned Agoceres, and to some green-vegetable seeds, all of them imported. The Brazilian seed industry actually took off in 1960 with the Wheat Seed Plant-Health Campaign, led by the Southern Agricultural Research Institute, Ipeas/RS, headquartered in Pelotas, Rio Grande do Sul. The campaign involved large-scale production of wheat by the Rio Grande do Sul wheat co-operatives, and soon expanded throughout the south, to the south-east and central-west.

Until the mid-1960s, laws to control seed production, marketing and distribution were mostly written by States, and focused on local issues and problems (Albuquerque, 1983; Silveira et al., 1990; Castro & Fonseca, 1991 quoted by Carvalho, 1996). Afterwards, Brazil's seed sector began to centralise policy decision-making in the federal government.

The first national law for the seed industry, published in 1965, created rules aimed exclusively at regulating seed trade, with no provisions for organising the production of seeds and seedlings. The standards it set were based on the experience of States that already had their own seed inspection laws, such as Rio Grande do Sul and Paraná. The directives published to implement the law in 1967 included the creation of a co-ordinated seed production policy which would come to be known as the National Seed Plan - Planasem.

That guidelines and responsibilities for public agencies over seed production set out by that plan can be seen as the first full-blown attempt to create an organised seed production system in Brazil. The main official measures were to: (a) establish the supporting role for public agencies in producing basic and commercial seeds; (b) organise training programs for seed and seedling producers; and (c) require the registration of all persons or companies involved in producing seeds and seedlings.

Responsibilities were also given to the State Departments of Agriculture in Rio Grande do Sul, Santa Catarina, Paraná, São Paulo and Minas Gerais, as "Certifying Organisations." They had the power to approve the analytical reports produced by official laboratories. Following the initial regulation of the Seed Law, from 1965-68, no fundamental change took place until 1977. The early 1970s brought an organised seed production system into being, but federal legislation did not keep up with the laws and regulations implemented in those States.

1977 brought the publication of Federal Law 6.507/77 and the creation of a legal framework for the Brazilian seed market, comparable to those in developed countries. The law was regulated the following year, and dealt with the inspection and control over seed production and trade. It has been considered "the main landmark in regulation of (seed) activities in Brazil." (Silveira et al., 1990:40, quoted by Carvalho, 1996).

The main novelties in the regulatory decree issued in 1978 were: (a) compulsory inspection and control of production and trade in seeds and seedlings; (b) allocation of funds to pay for inspection and control services, with a system to pay for services provided by the Ministry of Agriculture through public prices; (c) the creation of sanctions for offenders; (d) the establishment, separate from the certification system, of seed and seedling production in two different and independent systems: The Inspection System and the Non-Improved Seed and Seedling System (the categories of seeds and their differences are set out in Chart 3); and (e) the official sanctioning of an inter-related organisational system at the core of the Brazilian seeds and seedlings system, under the co-ordination of the Ministry of Agriculture. It also created the National Seeds and Seedlings Commission (Conasem) as a board and a forum for discussion on seed policy (Silveira et al.,1990).

The federal system was to reach out through the involvement of States, by means of their Departments of Agriculture, the offices of the Ministry of Agriculture in each State, the Federal Agriculture Offices (DFAs), the National Agricultural Production Secretariat (SNAP), the National Agricultural Defence Secretariat (SNAD) and the Brazilian Technical Assistance and Rural Extension Company (Embrater).

Technical and scientific support was to be provided by the Co-operative System for Agricultural Research, made up of Embrapa, State agricultural research companies and institutes and the Brazilian Technical Assistance and Rural Extension System (Sibrater), made up in turn by Embrater and the State-run Ematers.

Funding and investments, in turn, were the responsibility of the Central Bank, the Production Finance Company (CFP) and the Ministry of the Treasury (Carvalho, 1996).

This division of seeds and seedlings into three categories -- unimproved, inspected and certified -- allows the system to take into account regional and socio-economic disparities between different regions and kinds of farmers. The goal was basically to integrate seed and seedling producers into an organised system and to quickly upgrade them to certified producers.

Carvalho (1996) explains that the certification system used here and in developed countries involves strict control over the basic material, monitoring in the multiplication fields and also laboratory-supported quality control by the certification agency. The system establishes a classification for seeds and seedlings (genetic, basic or registered), while it is up to the certification agency -- once norms and standards have been set -- to define the number of generations of each that can be multiplied.

The States that have been duly accredited to produce certified seeds and seedlings are Rio Grande do Sul, Santa Catarina, Paraná, São Paulo, Espírito Santo, Minas Gerais, Goiás, Federal District, Mato Grosso and Mato Grosso do Sul. While all States in central and southern Brazil are capable of structuring their production into a certified seed and seedling production system, only São Paulo has made a major effort in this direction. Even so, despite the existence of federal legislation since 1977, seed production in that State continued to be controlled by a State law until 1982. Since then, with the accreditation of the State DFA to supervise the production of seeds and seedlings, an inspection system was created on the basis of federal legislation. That initiative had a negative impact on the State of São Paulo's own certification structure (Silveira et al., 1990).

Under the inspection system, the multiplication fields are monitored by sampling, with no requirements for laboratory controls and no one technically responsible for the product.

Being more flexible, the inspection system was preferred by seed companies because it facilitates the introduction of new cultivars (Silveira et al., 1990, quoted by Carvalho, 1996). In a competitive environment where the continuous release of new products is vital, institutions that promote this aspect will be more attractive, especially for innovative companies.

To exemplify this preference, in the 1996-97 season, of the 1,645,011 tons of seeds produced, 1.85% were basic seeds, 2.23% registered; 7.37% certified; and 88.85% inspected (Chart 4) (Embrapa, March or June 1999).

The dynamics of the seed market are intensely interlinked with Brazilian agriculture's process of modernisation. This process produced the concentration, specialisation and regionalization of production, leading to a differentiation in the dynamism of different crops, and even within given crops (Kageyama et al., 1987 quoted by Carvalho, 1996). There is a notable disparity, for example, in rates of use of improved seeds from one State or crop to another.

The Brazilian seed market has therefore developed and consolidated into a differentiated and segmented structure. We can identify three characteristic structures in the seed market: the markets for hybrids, for varieties and for green vegetables (to which we shall return below).

Current estimates are that domestic sales of seeds and seedlings in Brazil are around US$1.2 million per year, accounting for 2.3% of the US$30-billion world seed market. Brazil exports US$192,000 in grain-crop seeds and about US$1 million in green-vegetable seeds (World Seed Statistics, set. 1999).

Other estimates place national seed production, including both publicly- and privately-produced seeds, at around R$ 1.5 billion, broken down into the following segments, with often quite significant yearly variations for percentages of sales of "officially" controlled seeds: (a).30 grain-producing and cotton seeds, about 65-70%; (b) forage plants 17-22%; (c) potatoes, 8-10%; and (d) green vegetables 3-5% (Embrapa, March or June 1999).

The infrastructure for seed production in Brazil is made up of 1,045 processing units with an operational production capacity of 97,400 tons/day, 1,215 storage units that hold 5,072,060 tons of seeds and 208 quality-control laboratories. The seed-production units had a total idle capacity of 67% in the 1996-97 season. The system operates with over 38,000 co-operating farmers to whom seed production is outsourced (Abrasem, 1999; Embrapa, March or June 1999).

In 1997, there were 579 companies dependent on the System's basic seeds for their activities with public cultivars. Based on the estimates of several authors, the 579 companies can be divided into five hypothetical categories: (a) very small, about a quarter of the total, with total fixed investments of around R$100 million; (b) small, 40%, accounting for R$400 in investments; (c) medium, 20%, with R$450 million; (d) medium-large, 10%, with R$350 million; and (e) large, 5%, with R$500 million, giving us a total of R$1,8 billion. This estimate does not include the largest companies: Agroceres, Pioneer, Cargill, FT Pesquisa e Sementes, Braskalb, Agroflora, etc. Other estimates identify total fixed investments by the private sector at US$3 billion in the seed sector, and others yet believe the total may reach over US$5 billion. (Embrapa, March or June 1999).

Seed production grew in Brazil from the 1960s through the record 1988-89 harvest, after which it had fallen by 43% in the 1996-97 season and 32% the year after, in a long-term downward trend, as we see in Graph 1.

This drop in the supply of improved seeds is clear in the comparison between the record 1989 harvest with the average of the following eight years (1990-97) for the major grain crops and cotton. The fall-off is mostly due to the drop in seed production for all major crops except for rice (which increased although not significantly) in the 1996-98 period, as we see in Chart 5.

Comparing the 1989 record crop to the average for the following decade, the fall in overall supplies for the seed market is evident for cotton (38.5%), rice (34.2%), corn (14.8%), soybeans (14.5%) and wheat (53.6%). Only the bean seed supply grew by 30%. On the (weighted) average, the average decline was 28.3%.

It should be emphasised that the declining supply of seeds was a response to the growing number of farmers using their own seeds (saved from the previous harvest).

We also observe a relative change in the share of each crop in seed production, as seen in Graphs 2 and 3 below. The crops whose shares changed most from 1988-98 were wheat (from 33% to 15%), soybeans (from 48% up to 64%) and corn (from 6% to 10%). Shares for other species remained roughly constant.

Nation-wide, the number of seed producers grew by 40% during the 1980s, but over the following eight years (1990-97) it fell by 31%. The rates varied from one region to another, falling by 30% in the south, 24% in the southeast and 21% in the central-west. All 46 producers active in the Northeast in 1990 had abandoned this activity in 1997 (Chart 6). (Embrapa, March or June 1999)

Although the figures vary somewhat from one State to another, seed producers concentrate on soybeans (Chart 7). 67% of them produce soybean seeds, 38% produce wheat seeds, 28% corn, 23% rice, 22% forage, 21% beans, 5% cotton and 4% green-vegetable seeds.

There are also striking regional differences in Brazil's seed sector. In the south, south-east and central-west we see a relatively mature sector with a fair amount of idle capacity, while in the north and north-east the industry lags behind both technically (development of more appropriate cultivars) and in terms of the number of processing units and accredited laboratories.

Following the approval of the Cultivars Act in 1997, however, we observe a growth in investments by large companies in those regions. Chart 8 shows that in the 1996-97 harvest the regional ranking in seed production remains constant: 58.07% in the south; 25.85% in the central-west; 14.83% in the south-east; 1.1% in the north-east and 0.14% in the north. We can thus discuss the segmentation of seed production based on regions and technology, crop by crop.

For rice seeds, we have both regional and technological segmentation, depending on whether this sub-market is irrigated or not. In Rio Grande do Sul (RS), the largest rice seed producer, irrigated rice farms are technologically advanced and the State is more than able to supply the demand of neighbouring States. The top performance by rice crops in these States is largely due to the cultivars released by the Rio Grande do Sul Rice Institute (IRGA) and to the quality of the seeds themselves. Seed production there is done mostly by co-operatives and by the Rio Grande do Sul Rice Producers' Association (Apassul). Following the new Cultivars Act (1997), some major companies have shown interest in rice, as is seen in the contract signed between AgrEvo (now Aventis) and the IRGA in November 1998, to research transgenic rice. Most cultivars used in dryland rice production come from the Campinas Agronomic Institute (IAC). Since the late 1980s there has been a geographical shift in dryland rice production, with less now coming from São Paulo (SP), Mato Grosso do Sul (MS) and Mato Grosso (MT), constant levels of production in Minas Gerais (MG) and a growth in Bahia (BA) and the central-west, where the state of Goiás (GO) has become a major producer.

According to data published by the industrial association Abrasem em 1999, the main rice-producing States are Rio Grande do Sul, Santa Catarina, Paraná, São Paulo, Minas Gerais, Mato Grosso do Sul, Mato Grosso and Goiás. Chart 9 provides data for each of them on seed production, the area cultivated, demand for seeds and the rate of use of commercially-available improved cultivars.

The chart shows that 86.5% of rice seeds were produced in the south (Rio Grande do Sul, Santa Catarina and Paraná) in 1997-98. The central-west (Mato Grosso do Sul, Mato Grosso and Goiás) came in with 11.8%, while the south-east produced 1.7% of rice seeds. The largest commercial seed use rates were in the south and the central-west, all 50% or above.

Bean seed production figures are analogous to those for dryland rice, with a preponderance of small and medium-sized companies and a few regional co-operatives, in addition to supplies from the public system which, as a complementary supplier, actually provides almost the totality of improved seeds. The main producer of been seeds is the State of São Paulo.

While this is a major economic crop for the entire country, beans are not much integrated into the agribusiness assembly line. Seed production takes place mainly in the States of São Paulo, Minas Gerais, Santa Catarina, Paraná and Goiás. The following chart provides data on the distribution of production, from the Abrasem's 1999 Annual Report.

The south as a whole produced 29.5% of bean seeds, the south-east 36.4% and the central-west another 34.2%. In all States the rate of purchase of improved seeds is low, with the highest figures at only 30% in São Paulo and Mato Grosso do Sul.

Corn seed production is dominated by the hybrid segment, with its great dynamism both in generating technology and in the companies' strategic market planning. Today the market is controlled by large transnational companies. While corn seed production is concentrated in the States of São Paulo, Minas Gerais and Paraná, which account for 72.5% of the total, the major companies also have production fields and seed-processing units in other major consuming regions, as well as an extensive network of retailers.

The hybrid corn seed industry has an adequate storage and transportation system, providing regular delivery of supplies to the entire country. Chart 11 describes the nation-wide distribution of corn seeds.

Regionally, the south accounts for 33% of seed production, the south-east for 49.1% and the central west for 17.9%. All regions have a high rate -- over 60% -- of farmers who purchase corn seeds every year.

Soybean seed production is very sensitive to high temperatures, meaning that it is concentrated farther from the equator, in the south, from where it is exported to the south-east. The States of Rio Grande do Sul, followed by Santa Catarina, have traditionally supplied seeds for States in the south-east, since the latter are more subject, for example, to late summers and variable temperatures that are a threat to seed production and supplies. With the more recent growth of soybean production in the central west, north and north-east, the States of São Paulo and Mato Grosso do Sul are producing medium-cycle and late-harvest varieties to supply those regions, since the varieties from the south come on precociously when planted farther north. Thus, the expansion of soybeans into new regions has also caused a re-organisation of seed production, with a new regional specialisation for these varieties.

Embrapa was the country's leading soybean plant breeder until the approval of the Cultivars Act in 1997, accompanied by a few Brazilian-owned co-operatives and private plant breeders. The Cultivars Act, by allowing for a kind of patent on new plant varieties, has stimulated transnational corporations to join this sector as well. Seed production had mostly been carried out by co-operatives and regionally-based Brazilian private companies, but transnationals have also now entered heavily into this aspect of the soybean industry as well.

Chart 12 provides data on soybean production, areas, demand and purchase rates.

These figures reveal a clear regional specialisation in soybean seed production. The south leads with 60% of the supply, most of it from Rio Grande do Sul and Paraná, followed by the central west with 30.8% (mostly from Mato Grosso) and only 8.2% from the south-east, where Minas Gerais is ahead of São Paulo. The seed-purchase rates are high -- 60% and upwards -- for all States.

Wheat seed production is organised similarly to that of soybeans, mostly carried out by private co-operatives. In contrast, however, this market's lower demand pressure means that supply is more stable than for soybeans. Once again, Embrapa has done most of the plant breeding for the country, although breeding is also done to some extent by the co-operatives' network of producers.

The data in Chart 13 on the 1997-98 growing season highlights the concentration of production in the south, which accounts for 97.1% of the country's wheat seeds. Paraná alone harvests 67% of that total. Commercial seed-use rates are very high for all States, above 80%.

Cotton seed production declined significantly (by 38.5%) in the 1990s, since smaller cotton harvests have demanded fewer seeds. Both plant breeding and cotton-seed production have been the monopoly of State governments, which supply the main cotton-planting states. Chart 14 reveals a clear predominance of improved seed production in the central-west, which accounts for 51.8%, followed by the south-east (30.8%) and the south (17.4%).

The commercial-seed purchase rates are inversely proportional to production levels in the States of Minas Gerais, Mato Grosso do Sul and Mato Grosso, probably indicating a predominance of interstate commerce of seeds sold to other cotton-producing States, such as Rio Grande do Norte, Paraíba, Pernambuco and Ceará.

We can draw two major conclusions from this picture of seed production in Brazil:

1. Brazil's seed industry is segmented as a result of the country's regional and technological disparities in agricultural production.
2. During the period we have observed, there has been a redistribution of the relative shares of different species in seed production, as a result of different dynamics in the expansion of agricultural production.

There is a large number of seed-producing companies in Brazil, but just a few large companies dominate technological research and some entire segments of the industry, with a major role in technological development reserved for the federal government's agricultural research centre, Embrapa.

The main factor in competition is product differentiation, based on higher yields (pest resistance, shorter cycles, physical productivity) and specific product qualities (uniformity, adaptation to the mechanised and chemical farming, etc.). This strategy requires major investments in research and development (R&D) and must consider: (a) the structure of the sector in which few companies can afford to do plant breeding (separating the innovators from all the other companies, which at best can do some variety adaptations); and (b) the appropriability of the results of innovation (the existence of "natural" or legal barriers). The differentiation caused by these two factors explains why the hybrid seed market has more private companies and is more concentrated, while in the varietal market there is more public-private co-operation and lower levels of concentration. Competition in the hybrid markets is based on product differentiation, while there is more room for price competition for varietal seeds. Market access is another key factor, since access to an extensive distribution network makes it much easier to control major segments of any market (BNDES, 1988, quoted by Scarlato and Rubio, 1994).

Within the seed industry we can identify three market structures differentiated by their technological bases and institutional conditions: (1) the hybrid market, focused on producing hybrid seeds for "extensively-grown" crops (corn, sorghum and sunflowers); (2) the varietal market, focused on producing varieties for other "extensive" crops (wheat, soybeans, cotton, rice, beans, etc.); and (3) the green-vegetable market, focused on producing seeds for green vegetables.

Economically, these sectors make different kinds of contributions to the seed industry. Varietal seeds, for example, can only be protected by legal means, such as UPOV-styled plant breeders' rights provided by the Cultivars Act. So varieties are the hardest commodity for the seed industry to appropriate. For both hybrids and transgenic varieties, however, appropriability is much easier for the seed industry to guarantee. Hybrid seeds enjoy a "natural" protection (a "natural patent" according to Berlan, 1983, quoted by Rubio, 1992) as long as access to the parental lines is blocked. Depending on the technology involved, this kind of protection could also be extended to transgenic seeds, but the most common mechanism for appropriation used so far by the biotechnology industry has been the patenting of genes or of the biological processes used to obtain these varieties, as allowed by the new TRIPs regime.

Hybrid seed markets are structured around the ongoing launching of new products as a key to maintaining competitivity. The prices allowed by sales efforts, financing of distribution and -- above all -- product research and development (R&D) make for hefty profit margins. Innovation aimed at cost reduction is of secondary importance, since quality is of more concern than lowering production costs. Some analysts believes this explains why seed multiplication itself is not verticalized but contracted out to farmers or "co-operators" (Furtado et al. 1992). Even for non-hybrid species, however, this stage is generally subcontracted due to the limited specialisation in farming by agribusiness companies.

Except for this on-farm seed production stage, the rest of the process is highly verticalized all the way to seed distribution and sale. The sector is also very internationalised, particularly through the transnationals' international R&D centres and contracts with other companies. To plant the crops that will produce the commercial seeds, companies outsource to "elite" farmers. In addition to technology, advertising has also gained ground as a competitive factor, along with credit for sales (Gutierrez, 1988 quoted by Scarlato and Rubio, 1994).

Corn is the most important hybrid crop, both world-wide and domestically. The leading hybrid corn company also leads the hybrid segment as a whole. It tends to be an oligopolised sector, with prices set by market leaders. In the corn seed market as a whole, yearly seed-purchase rates run at 80% in the central west, while it averages 72% for the heavily modernised farmers in Brazil's southern States.

Oligopolistic hybrid markets are run by a few large companies, while smaller seed producers operate in locally- or regionally-viable niche markets of little interest to industry leaders. Competition is based on advertising (branding and product features), sales efforts (including pre- and post-sale technical assistance) and the continual release of new products. This kind of competition raises major entry barriers against new companies and highlights the importance of complementary efforts (Berlan, 1983, Silveira et al., 1990 quoted by Carvalho, 1996).

As in the US, public research into hybrids dates back to the 1930s. Public research later lost its leadership in terms of innovation, which came to be appropriated by the private sector. The technology-based, high degree of appropriability of hybrid-seed innovation by the private sector (which could accumulate the technology and seize market opportunities) allowed the public sector to withdraw with no prejudice to the sector's dynamism. (Scarlato and Rubio, 1994). Even so, about 20 public institutions are still part of the nation-wide corn research program (Embrapa , IAC, Fealq, Ipagro, Iapar, and others).

The Agroceres company 10 was founded in 1945 by two geneticists who in 1937 had launched one of the first hybrid corn research programs, at the Viçosa Federal University (UFV). Their initiative had also been preceded by earlier experiments at the University of Campinas (1932). Once the first commercial corn hybrids were produced in 1948, an agreement was signed with the Ibec company (part of the Rockefeller Group), and then in 1951 Agroceres was incorporated under the control of its majority shareholder, the Rockefeller Foundation. The merger with Ibec meant the incorporation of modern seed-processing equipment, more financial resources and access to national and international banks, all of them key to the expansion of Agroceres' activities.

Training of the company's research team, in Brazil and abroad, was also crucial in creating a stable critical mass of researchers to guide research towards the needs of a diversified range of regions and farmers. It was Agroceres' technological capability that allowed it to negotiate on more equal footing with the transnationals.

Agroceres' first phase of development, through the mid-1960s, centred on creating and expanding markets for its own hybrid seeds, as well as strengthening its R&D department and broadening its operations to the scale of major international seed companies. Expansion was made easier by the fact that Agroceres could set hybrid corn prices, in the absence of competition at the time.

Later in the 1960s, foreign companies also gained their own footholds in the market. In 1964, Pioneer arrived, followed by Cargill in 1965, Limagrain and Asgrow in 1971, DeKalb in 1978 and Ciba-Geigy in 1979.

In their first attempts to penetrate this market, despite using hybrids from the Campinas Agronomic Institute (IAC), Cargill and DeKalb (PIONEER????) only cornered real markets in Brazil after they released the first hybrids adapted to conditions in the far south, later in the decade.

It was also during that first phase that Agroceres released two major genetic innovations: (1) the discovery in the early 1950s of male-sterility in a local corn variety (charrua) which cut hybrid production costs, and (2) the discovery of high-protein mutants of a Brazilian corn variety.

The early consolidation of Agroceres' extensive marketing network, along with the high quality of its technical staff, made it successful in competing with the transnationals during the second phase, when it still controlled 40-50% of the market. As it continued to incorporate charrua-based male-sterility into its lines (which had the additional advantage of being resistant to a fungus that wiped out seed production in Brazil and the US in 1969 and 1970), Agroceres began to develop and release hybrids adapted to mechanical harvesters and intensified its research with precocious hybrids that reduce crops' exposure to weather hazards.

The introduction of mechanical seed harvesters at that time, adapted to large-scale seed farms, was a major improvement over manual picking, still predominant both in Brazil and the US. That innovation in turn brought changes in industrial seed-processing that exceeded even North American standards at the time and greatly expanded the scale of production in Brazil. Those changes were developed through trial-and-error studies, systematised by the Piracicaba Seed Technology Department, in São Paulo.

Based on its hybrid corn experience, Agroceres began applying the conceptual features of its existing techniques to creating new technologies for an expanding range of products. This included the creation of the Horticeres company, to produce green-vegetable seeds, and an association with Embrapa to produce sorghum and forage seeds for the Cerrado region, in the country's central highland savannahs. Agroceres also moved into pesticides, as well as high-yield breeds of pigs (1977) and poultry, through joint ventures. In 1980, Agroceres was bought out by Brazilian capital and launched new projects in plant biotechnology, after its acquisition of the Biomatrix company. In 1998, that unprecedented and innovative experience was abruptly interrupted by the purchase of Agroceres by Monsanto.

In 1988, Embrapa organised a network of seed producers to jointly produce this public company's hybrid corn seeds, on the basis of mutual co-operation to get the seeds to market. Without that co-operation, Embrapa could hardly expect to market its products in competition with the leading multinationals, who have their own hybrids and therefore little interest in pushing Embrapa's "BR" brand¹¹.

Along with 30 producers in the States of Minas Gerais, São Paulo and Goiás, Embrapa created the Union of National-Research Corn Seed Producers (Unimilho), whose seeds were well received by farmers in the savannah regions. A first result of the presence of Unimilho seeds was a decline in the price of the multinationals' hybrid seeds, even in the south where Unimilho was still not active. Since Embrapa's hybrid corn seeds were (and still are) adapted to the savannah's poor and acid soil, it rapidly took over 15% of the market.

By 1999, however, Embrapa only held 5% of this market (Embrapa, March or June 1999). In May 1999, Unimilho lost its main associate, Sementes Ribeiral, located in Minas Gerais, through a buy-out to AgrEvo (formerly Hoechst, now Aventis -- Gazeta Mercantil, 16/06/99). This seems to signal further losses in market share for Unimilho in the future. Fifty years after the creation of the hybrid seed market, the private sector is now dominant.

In the 1980s, the hybrid seed industry displayed a small increase in concentration, as we observe in Chart 15.

From 1981 to 1989, the four leading companies moved from 65% to 83% of market control, due to the growth of Cargill, Braskalb and Pioneer. By the end of the 1980s, two companies alone controlled 65% of the market: Agroceres (still Brazilian-owned) and Cargill (US-owned).

The rest of the market is made up of a heterogeneous group of companies with minor market shares in this segment: (a) branches of agrochemical transnationals (Germinal, owned by Funk/Ciba-Geigy, Contibrasil by ICI, Dinamilho by Limagrain, Asgrow by Upjohn)¹²; (b) small Brazilian-owned companies linked to farm-based economic groups (such as sugar-cane mills or cattle growers who diversify into seeds) or co-operatives (Sementes Mogiana, Sementes Colorado, Sementes Reis de Ouro, Sementes dos Marcos, and a few others)¹³ (Scarlato and Rubio, 1994).

Concentration has continued to intensify over the past decade in the hybrid seed market, with a reshuffling of market shares held by different companies. Most of this movement occurred immediately after approval of the Cultivars Protection Act in 1997, when small and large Brazilian-owned seed companies began to be purchased or taken over by multinationals, particularly by those on the cutting edge of biotechnology, which now call themselves "life-science" companies because of their huge investments in genetically modified organisms (GMOs), also known as transgenic or genetically-engineered organisms.

Transnationals have been buying up local seed companies around the world because innovations in plants (cultivars) -- as opposed to industrial innovations that can simply be transferred by sales from one country to another -- must be adapted to the soil, climatic and ecological conditions of the places where they will be introduced in the rest of the world. The transnationals own the know-how and the genes to be introduced into transgenic cultivars, but they did not have the local cultivars already adapted to the specific agricultural environments in each country.

To come up with their "novel plants," transnationals must purchase or create joint ventures with seed companies, in order to have access to locally-adapted germplasm. Another option is to enter into agreements with public plant breeders, such as in the contracts signed in Brazil between Monsanto and Embrapa and between AgrEvo and the IRGA (German, 1999).

The 1997 Cultivars Act has made this process easier since companies can now appropriate (assure their property rights over) market releases through the legal guarantee of IPRs over their cultivars, the use of which can generate royalties if and when cultivar owners decide to license seed production to Brazilian-owned seed companies.

Thus, by 1999, there had been a major shift in the companies dominating the corn seed market, and in their market shares, as we observe in Graphs 4 and 5.

Until 1997, there were more companies in the corn seed sector and the four leaders accounted for 77% of sales, with the market divided between Agroceres and Cargill (26% each), Pioneer (14%), Novartis (11%), Braskalb (8%) and others with smaller shares.

By 1999, there had been even more concentration and further changes in market positions, to the point that today four transnational companies account for 90% of Brazilian seed sales. Monsanto, through its Brazilian branch Monsoy, took over Agroceres', Cargill's and Braskalb's market shares and is now the absolute leader, with 60% of this market. In second place comes Pioneer (now owned by DuPont) with 14%, followed by Novartis with 11% and Dow (which bought Dinamilho Carol) with 5%. The rest is divided between Zeneca (formerly ICI) with 3%, AgrEvo with 2% and Unimilho (the only Brazilian-owned company, and composed of 17 Embrapa franchise operations) with another 5% of the market.

Embrapa is now producing triple-hybrid corn seeds (BRS 3060, very efficient in absorbing phosphorous, and BRS 310, with superior physical quality in the grain) and double-hybrid tropical corn seeds (BRS 2114 and BRS 2110, both with very healthy ears). It also produces hybrid sorghum seeds, such as BRS 306, adapted to the second harvest (Embrapa, 1999).

Brazilian corn-seed producers bought out by so-called "Life-Science" transnationals are listed in Chart 16. We can see that all the transnationals with major investments in transgenic crops in the US, Canada, Argentina, Uruguay and Australia have invested in Brazil through the acquisition of national seed companies. Most of these transnationals have also been active themselves for a long time in Brazil.

Monsoy, one of Monsanto's divisions in Brazil, has already invested US$100 million in the corn seed market. Monsanto works with its seed farmers like meatpackers work with their poultry and pig raisers. It supplies the seeds that the farmer plants, harvests and returns to the company, which does the processing, packaging and sales. Farmers franchised to produce these seeds are paid between 30-70% above the market price for corn grain (Campo&Lavoura, Zero Hora, July 9, 1999).

AgrEvo (now Aventis) has been field testing its transgenic "Liberty Link" corn resistant to the company's own glufosinate herbicide. According to the vice-president of AgrEvo Sementes do Brasil, with the acquisition of Brazilian-owned Riveiral, Mitla and Fartura seed companies, AgrEvo now owns Brazil's largest seed bank for tropical corn. For the time being, these companies are marketing conventional corn hybrids in Brazil, but also intend to release transgenic corn in the future (Campo&Lavoura, Zero Hora, July 9, 1999).

Competition is price-based in the market structures that have arisen for varietal seeds, where profit margins are tighter due to the presence of the public sector and co-operatives. While there is a degree of product differentiation in this segment, the most important factors are seed production techniques in the field, as well as the processing and storage of seeds (Furtado et al., 1992).

The market is dominated by co-operatives and regionally-based companies, mostly of rural origin -- wealthy farmers or middlemen in the agribusiness sector. Activity is concentrated in a few crops, wheat and soybeans in the first place, followed by rice and cotton.

Co-operatives are responsible for most of this market segment, accounting for between 40-60% of wheat seed sales, over 60% of soybeans and a little over 35% for rice, or as much as 40% for irrigated rice seeds. The public sector and a few smaller private companies are responsible for the rest. Competitive patterns relate to the co-operatives', companies' and public agencies' ability to penetrate into the various productive regions (Carvalho, 1996).

In the private sector, the four largest firms rarely account for more than 20% of total sales in any of these three sub-markets, with irrigated rice seed sales (geographically restricted to southern Rio Grande do Sul) standing out as the most concentrated of all (Silveira et al., 1990).

The key factor distinguishing varietals from the hybrid seed market has been the low appropriability of research results due to the absence of "natural" or legal protection for new plant varieties. This has meant greater dependency on public plant breeders, which until the early 1980s were responsible for nearly all varieties released on the Brazilian market.

Three of the major public plant-breeding agencies are federally-owned: Embrapa and the State institutes Ipagro, in Rio Grande do Sul, and the IAC in São Paulo. A generalised crisis in public research in the late 1980s had already led to the emergence of new institutional arrangements in the private sector, with a greater role for co-operatives, since they can guarantee more rapid dissemination of new genetic material.

Back in the 1970s, illegal imports of seeds often exceeded purchases of recommended varietal seeds, thus questioning the relevance of public research and highlighting its inability to keep up with the dynamism of modern agriculture for crops like soybeans, wheat and cotton. The result was the rise of private research and testing stations centred above all on plant breeding.

In 1973, the Fecotrigo Research and Experimental Centre was created in Rio Grande do Sul, to generate and disseminate locally-adapted cultivars of wheat and soybeans, under the auspices of the State-wide co-operative association, Centralsul. Fecotrigo varieties sold reasonably well in the State, but not in the rest of the country, and its organisation and research funding were modelled on the IARC system (Silveira, et al., 1990). The plant-breeding program has been successful and by the late 1990s Fecotrigo had developed eleven varieties of wheat, seven varieties of soybeans, three of tritical and one corn variety, all of them recommended for use in Rio Grande do Sul. The Centre's work was crucial in the expansion of the farming frontier into Mato Grosso do Sul (Wilkinson et al., 1992).

The Francisco Teresawa/FT company, headquartered in Ponta Grossa, Paraná, was founded in the 1960s, initially to produce soybean seeds, but it soon expanded into other species as well. The company employed 19 researchers in a network of experimental stations, most of them set up with support from the Cotia Agricultural Co-operative. FT seed production began with the multiplication of basic seeds by co-operatives which, in turn, distributed the commercial seeds to members based on the commitment of payment of 2.5% of sales as royalties. The company's first soybean releases, the Cristalina and FT varieties, had a major impact in Paraná and the central west.

Also in the State of Paraná, the Paraná Co-operatives Organisation (Ocepar) created its own private research centre modelled on the CIMMYT to carry out plant breeding of varieties for its member co-operatives. As an autonomous agency, the broad dissemination of the results of its research over the past 16 years has had significant results. It runs a test plot network in conjunction with the official Paraná Agronomic Institute (Iapar) and is an active member of the Southern Brazilian Cultivars Recommendation Commission. Its ongoing relationship with the CIMMYT's plant-breeding work is aimed at better disseminating wheat varieties in Latin America's warmer regions. As a result, it has widely disseminated the use of adapted Mexican varieties, as well as its own.

The Ocepar varieties obtained in Cascavel were adapted to acid soils to which Mexican varieties were not adapted. Wheat breeding paid special attention to yields and pest problems, more than to qualities adapted for bread or pasta making, due to the origin of the germplasm used, which demanded particular efforts to adapt to tropical conditions. In the early 1990s, 45% of the area planted in the State of Paraná used Ocepar varieties. Only in the late 1980s did Fecotrigo and Ocepar turn their breeding work to the quest for varieties with bread and pasta qualities.

Ocepar also bred soybean cultivars adapted to the State of Paraná, since varieties from Rio Grande do Sul had problems adapted to the photoperiod. It was more successful with soybeans than with wheat cultivars. Ocepar's plant breeding sought to differentiate its cultivars to provide greater diversity for soybean and wheat farmers (Silveira et al., 1990).

In the late 1980s, when Ocepar was responsible for 98% of seed production, its Research and Experimental Centre began obtaining bush cotton cultivars as well.

According to Silveira et al., 1990, the experience of Ocepar, Fecotrigo and FT consolidated a specific breeding approach based on strong ties between the co-operatives and the research centre, in which the contact established by co-operatives gives them an advantage over public research. It downplays the unimportance of scientific knowledge (new breeding methods) in the routine process of obtaining new cultivars from selected basic material. The close ties maintained by these research centres and companies with international organisations facilitates the achievement of variability. There is some doubt, however, as to the danger of narrowing cultivar traits as the result of an excessive concern with farmers' short-term needs. The co-operatives' good relations with Embrapa and the State research institutes, as well as their network of international contacts, should tend to ease this risk. This may not hold for private companies like FT and Indusem, though, due to their history of dependence on public germplasm for their commercial releases.

These private research and experimental centres have mostly used conventional breeding practices to obtain new cultivars. The dependence of their breeding on material already adapted to local climatic conditions is a major limitation.

Embrapa was founded in 1973 as part of a strategic initiative aimed at creating a modern agricultural system based on a domestic industrial structure capable furnishing inputs and machinery, using a subsidised national credit system (instead of a capital market) to stimulate the incorporation of the modern technological packages (Wilkinson et al., 1992). Embrapa has long been a major plant breeder and producer of basic varietal seeds for several species. It runs the Basic Seed Production Service (SPSB) to disseminate the cultivars it has bred. This public organisation is self-financing and market oriented, through the creation of mechanisms that allow it to appropriate some of the results of its research. The SPSB and the National Genetic Resource Centre (Cenargen) are responsible for maintaining Embrapa's germplasm collections. The SPSB is also one of Embrapa's major divisions, in that it produces a broad and generic range of varieties that are very valuable to breeders (Silveira, et al., 1990). Embrapa is only active in the basic seed sub-segment, providing the raw material for the production of the private sector's certified and inspected seed. In the 1996-97 planting season it produced 28% of all the country's basic seeds (Chart 17).

In 1997, Embrapa produced seeds and seedlings for 43 cultivars of 36 different species. It produces basic seed in this market for cotton, rice, soybeans, wheat, oats, beans and forage. Chart 18 presents a breakdown of basic seed production.

Seed production in 1997 surpassed the 1996 supply, which had also grown over the 1995 figure. Sales also grew during the same period. As a result, cultivars released by the National Agricultural Research System are gradually occupying more land and market share, thus raising the productivity and quality of the Brazilian seed supply. In the 1996-97 season, Embrapa and its partners supplied 88% of the seeds for dryland rice, 68% for irrigated rice, 55% for wheat, 48% for soybeans, 47% for beans, 21% for corn and 8% for cotton. These cultivars were planted on a total of 14.4 million hectares in that same season, or 40% of the country's total planted farmland (Embrapa, 1998).

Through partnerships with public institutions (UnB, IAC, Cati, Emparn and Empaer/MS) and with private nurseries, Embrapa is also organising seedling production in the Northeast, including training for personnel and a supply of germplasm available to research centres. In 1998, the Northeast absorbed 90% of all the material provided by Embrapa. The program is funded by the CNPq and by the Ministry of Agriculture (Embrapa, 1999).

Embrapa's Plant Breeding Programs are also aimed at reducing pollution and health-related risks, as well as at achieving greater yields. These programs are integrated with others, such as soil management, chemical and biological pest control, farming practices and farm systems.

Embrapa's Soybean Research Program has made major contributions to expanding the agricultural frontier into Brazil's savannah (cerrado) regions. This work involved developing new varieties with the "long childhood" trait, the first of which (IAC2) was adapted to low latitudes. Other varieties were obtained for the cerrados by Embrapa and by the privately-owned FT. Their research on soil management and production techniques also contributed to the crop's rapid expansion into new regions, as well as promoting tests with new varieties and the adaptation of farming techniques to conditions in the north and north-east, meaning that soybeans are now planted in the entire country (Wilkinson et al., 1992). In mid 2000, there are 24 soybean cultivars on the Brazilian market adapted to a diversity of farming regions, with the leaders being: Embrapa 155, resistant to the stem canker, with yields over 3,000 k/ha and beans that can be eaten raw, as well as low-cost processing; MA/BRS 165 ("Seridó RCH"), resistant to the stem canker and recommended for the States of Maranhão, Piauí, Tocantins and Pará, in poor soils; MG/BR 68 ("Vencedora") resistant to the stem canker, with yields over 3,400 kg/ha; MT/BRS-63 (Pintado) with yields equal to the best cultivars and resistant to strains 1 and 3 of the stem canker; BR 153 and BR 154 for southern Brazil, with resistance to mildew, grey rot and frogeye leaf spot; as well as the Uiarapuru and Curió cultivars to be planted on the agricultural frontier (Embrapa, 1999).

Embrapa has also invested in genetic engineering for plant breeding, in the belief that this will cause no harm to farming systems. Yet the Brazilian Consumer Defence Institute (Idec), several other NGOs and the government of Rio Grande do Sul disagree with Embrapa.

The press recently reported that Embrapa is beginning field tests that, in two years, should lead to a new variety of transgenic soybeans whose commercial release is scheduled for the year 2004. There are also reports of a partnership between Embrapa and American Cyanamid (which now belongs to the German BASF) to obtain soybeans that tolerate herbicides from the imidazoline chemical group (Agroanalysis, 15/August/99).

Further press reports reveal that Embrapa will spend between US$4 to US$6 million to research the safety of transgenic food, in order to comply with regulations for approval of commercial release. According to the head of Embrapa's Intellectual Property Department (at the time, he is now the head of Embrapa/Cenargen), Luiz Antônio Barreto de Castro, this investment is meant to improve biosafety mechanisms for genetically modified products. He sees the investment in specific laboratories as necessary because transgenic products have already been produced with Brazilian technology, to be tested in all phases of production. The polemics around the use of transgenic plants has centred on Roundup Ready soybeans produced by Monsanto, since there are denunciations that this products is being smuggled in from Argentina (Jornal da Ciência n�. 1398, 14/10/99).

Priority for breeding efforts in Embrapa's Wheat Research Program has been disease resistance and efficiency traits. In 1990, Embrapa's National Wheat Centre had released 54 varieties. Varieties are only released once they have demonstrated yields at least 5% greater than existing varieties, as well as the expression of a new trait. New varieties have incorporated traits such as adaptation to different soil types, disease resistance and adaptation to irrigation (Wilkinson, et al., 1992). In 1999 the Embrapa wheat varieties registered for use were BRS 27 and BR 18-Terena, along with the tritical varieties BRS 148 and Embrapa 53, all resistant to leaf diseases and to the wheat mosaic virus (Embrapa, 1999).

As we have already mentioned, in the market for varietal seeds of various species, public research has long had a major presence in the creation of new varieties, which are marketed through a system of partnerships with the co-operative system and a few private Brazilian companies. Soon after the approval of the Cultivars Protection Act in 1997, some transnationals also entered this market, focused on a few species such as soybeans and rice.

Graphs 6 and 7 portray the reorganisation of companies in the soybean seed market, in terms of the change of market shares in each.

The graphs show that the soybean seed market is still dominated by publicly-owned Embrapa, but its share has diminished. Its 70% of the market in 1998 was expected to fall to 65% in 1999. Monsanto advanced the fastest, after its purchase of FT-Pesquisas e Sementes de Soja, from 12% to 18% in two years. Monsoy, the soybean division of US-owned Monsanto, plans to invest US$35 million by 2004 in soybean seeds, and to expand its market share to 35% at the same time (Campo&Lavoura, Zero Hora, 09/07/99). DuPont, following its acquisition of Pioneer, is on the charts for the first time, with 2% of the market.

Brazilian-owned companies involved in the production of varietal seeds for various species are presented in Chart 19.

We see in the chart that transnationals have invested in the sub-markets of soybeans, rice and cotton, which implies prospects for even greater rearrangements in market shares for these companies in the future.

The entry of transnationals into varietal seed markets is partly due to the generation of "new biotechnologies," with seeds as the main vector for their application. These technologies, being generic, can be applied to either hybrids or varieties, no matter how the plant material is generated. In addition, the approval of the Cultivars Protection Act makes possible the appropriation of breeding innovations through property rights over cultivars, through the levying of royalties on seed use and through technology fees which must be paid by national seed producers. As the main agent of biological transformation, seeds have thus become the most important input in the transnationals' strategies for market expansion.

In response, co-operatives and small Brazilian-owned corn and soybean seed companies have reacted by searching out market niches and forging associations, as a survival strategy in a market where multinationals are advancing and turning over around US$350 million a year. One example is the acquisition of the Pindorama Co-operative, in Xanxerê, by the Alfa Regional Co-operative (Cooperalfa), in Chapecó. Cooperalfa is also proposing a partnership with another organisation in Paraná, the Three Frontiers Agricultural Co-operative (Cotrefal), headquartered in Medianeira. Another example is the entry of Semel Sementes (which had belonged to Brasmilho) into the Unimilho association of 15 of Embrapa's franchisers. To attenuate the impact of the entry of transnationals, researchers, producers and leaders of several co-operatives in 1999 created the Pró-Sementes Group/RS, aimed above all at using seeds to increase grain harvest yields. Chart 20 gives us its composition.

The green-vegetable seed market is radically different from the hybrid or variety markets, mainly since it is much smaller, with an annual turnover of only US$35 million. Much of the genetic material is imported, for US$7 million per year, or 20% of the final sales total (Carvalho, 1996, Furtado et al., 1992, Silveira et al., 1990).

According to Silveira et al., 1990 and Furtado et al., 1992, this market is extremely segmented into three major sub-markets, all dynamically interrelated, in which the dominant market cannot ignore the presence of the other two. These sub-markets, in turn, are also segmented by the companies into niches. The three sub-markets are:

1. The professional market, essentially for large-scale horticulture. Co-operatives and retail stores make final sales of cases of seeds with a fixed number of cans in each. Farmers are quite demanding in terms of brands and characteristics of the hybrids and varieties. Of all the seed market's sub-segments, this one is the most demanding, and direct contact between the company and the buyer is the key competitive factor, in addition to taking advantage of the "synchronic variability"¹⁴ identified by the French authors Joly and Ducos (1989, quoted by Silveira et al, 1990). This sub-segment accounts for 30% of the total green-vegetable seed market and is dominated by Asgrow (which originally belonged to the Upjohn group, whose Horticulture division was sold to Mexican-owned Seminis Vegetable Seeds) and by Agroflora (sold to Japanese-owned Sakata Seeds), each of which accounts for 30-40% of the sub-segment.
2. The semi-professional segment, made up of farmers who sell to local or regional markets, is where price competition is more important than product differentiation. It accounts for 45% of the total green-vegetable market and is led by three companies: (a) Agroceres, whose Horticeres affiliate (also recently sold to Seminis Vegetable Seeds) had an exclusive license from the Japanese Sakata Seeds group for distribution in Brazil, (b) Isal, and (c) Top-seeds.
3. The envelope segment, represented by occasional vegetable gardeners and farmers selling essentially to local markets. The main leadership factors are low prices and decentralised distribution. It accounts for 25% of the green-vegetable market and is made up of a large number of companies, many of whom do not produce their own seeds.

In addition to those companies, others with commercial representatives but no production structure in Brazil also have share in Brazil's horticultural seed market, and nearly all of these belong to world industry giants such as NK/Sandoz, Ferry-Morse, Takii, Clause, Olsen, Reles Moran, PetoSeed, Royal Sluis, etc.

In addition to the horticulture market's clear segmentation, Carvalho (1996) also points out several other traits: (1) its smaller size, compared to the other two, as we have already mentioned, (ii) a clear segmentation based on the kind of producer, which restricts seed production to levels that hardly justify the establishment of productive units in Brazil, (iii) as a result of the previous point market supply has a major component (US$7 million, or 20% of sales) of imports, (iv) the role of R&D carried out in Brazil is limited and complementary, mostly by state-owned institutions, since there is no stimulus for private investments and the most dynamic sector of demand (professionals) is small enough to be adequately handled by imports, (v) a strong interdependence between overseas suppliers, Brazilian sellers and the vegetable farmers, and (vi) a slight specialisation of seed suppliers who depend on the companies' home countries.

Embrapa and other public agencies like IAC and Esalq have their own green-vegetable breeding programs both to adapt various species to different regions of Brazil and to regionalise the cultivars indicated for each species in the different States. They also have programs to generate cultivars for various specialities, and varieties currently on the market include Embrapa's industrial tomato Viradoro, the TX 401-08 tomato line and the Beta Cristal white onion.

The private companies Agroceres and Asgrow also have their own, rather limited, research structure, with which they do experiments to climatise imported germplasm.

Silveira et al. (1990) reported that domestic green-vegetable seed production is very limited, accounting for only 30% of onions and of non-hybrid varieties of beans, string beans, carrots (here including hybrids) and cabbage. One feature of green-vegetable seed production is the localised specialisation in the regions of Bagé (for carrots, squash and parsley), the north of Minas Gerais and Brasília and the San Francisco River Valley (which, despite its climatic advantage has the disadvantage of scarcity of skilled labour for seed production).

As in the hybrid and varietal markets discussed above, and despite this sub-sector's minor relative importance for the Brazilian seed industry, the approval of the Cultivars Protection Act in 1997 was soon followed by the purchase of Brazilian green-vegetable seed companies by large corporate seed companies, as we see in Chart 21.

Both Empresas La Moderna S.A. (ELM, which owns Seminis Vegetable Seeds) and Sakata Seeds Corp. have invested in R&D to develop new transgenic plants.

These plants include transgenic mini-carrots, and the United States has already approved the commercial release of their genetically-modified squash (resistant to disease) and tomatoes (longer shelf life). Other results achieved in this area include sweeter peas, insect-resistant cucumbers and Roundup Ready lettuce, the latter produced under a profit-sharing contract with Monsanto. ELM also plans to use Monsanto-controlled technology to breed other insect-resistant plants (Jornal do Brasil, Feb. 1, 1999).

As we have seen, the new biotechnologies are generic and polyvalent and can be applied to seeds of any species, including green vegetables as well as hybrids and varieties for major crops (Wilkinson, 1998, quoted by German, 1999). But the new plants must also be adapted to soil and climatic conditions of each region, meaning that even the companies holding the technology are investing directly in Brazil in order to obtain the genetic material already adapted to the Brazilian environment through the acquisition of local companies. This process has accelerated since the approval of the Cultivars Protection Act, which created the legal means for those investors to appropriate the results of their innovations.

This analysis, combined with Embrapa's conclusions, allows us to identify several key trends in the Brazilian seed industry:

• The transnationals' strategy of absorbing local companies is bringing much more concentration in seed production.
• This trend is not yet evident among Brazilian-owned companies, which have not created their own joint ventures, co-operatives, acquisitions, conglomerates or strategic alliances as a strategy to survive the avalanche of transnationals.
• The release of new Brazilian-owned cultivars obtained from public breeding material is declining to the point of stagnation.
• Although the majority of Brazilian seed companies have structured their work around publicly-obtained cultivars (mainly those released by Embrapa), public breeders are now losing many traditional partners in the dissemination of new varieties, as they become franchises working under exclusive contracts with transnationals.
• Nearly all seed companies directly involved in plant breeding to sell their own cultivars have now been bought up by transnationals, thus significantly reducing the range of choices available to farmers. More and more, farmers will have to sign exclusive contracts and pay higher prices to be able to use the protected cultivars.
• Meanwhile, public breeders now tend to prefer co-operation contracts with transnationals to fund their plant breeding work, thus cutting back on the release of new public varieties to be sold as basic seeds for seed producing companies.
• Many Brazilian seed producers have shut down as the sector becomes congested, as financing and/or affordable credit dries up and/or as their managerial skills fall short of the ability to compete under these new conditions.
• Growing indebtedness among farmers has also contributed to the decapitalisation of seed-producing companies, along with the growing number of farmers who prefer to save and replant seeds from their own harvest, thus cutting back on the companies' sales.
• The Brazilian companies' short-sightedness vis-à-vis investments and marketing aimed at sales and services for their farmer clients puts them at a disadvantage compared to the transnationals, who spend large sums on their corporate images and to advertise their seeds.
• Since most seed producers are typically small to medium sized family-owned businesses with no professional management, their competitive potential is reduced even further.
• Observers expect a major reduction in national seed production with the decline of this sector.
• Some better-off Brazilian companies may shift their operations to neighbouring countries in the Mercosur, which offer more advantageous credit, more incentives and a lower tax load.
• Budget restrictions for public institutions are also likely to slow down the transfer of public cultivars and basic seeds from public research agencies to the seed industry.

Among the most notable features of the world economy in the last 15 years are the emergence of new technological paradigms and the globalisation of finance. The world economy has become much more tightly integrated, while the technological revolution has spread rapidly -- although unequally -- even in the most advanced economies. The competitivity of firms and nations has thus come to depend increasingly on their capacity for innovation, while the ongoing acceleration of technological change makes this movement increasingly complex. One of the key features of this scenario in the 1990s has been the intensification of investments in knowledge.

Information and communication technologies, along with the "new biotechnologies" have evolved into a new technological paradigm, which is gradually replacing capital- and energy-intensive technologies. Knowledge has thus become a key asset for competition, in the context of new forms of competition and interaction among firms and between firms and other institutions (such as educational and research institutions), thus promoting rapid changes in research, production and marketing structures.

As each technological paradigm has its own modes of appropriating innovations, the development of software and of "new biotechnologies" has required the emergence of new sets of rules. In this case, Intellectual Property Rights (IPRs) have come to play a key role in assuring this appropriation.

Throughout the history of industrialisation, a combination of different forms of appropriation -- including patents -- has been used to assure control over innovations. Patents have expanded from a relatively minor tool into one of the leading forms of exercising this "protection" amongst the overall arsenal of forms of appropriation (alongside, for example, copyrights and industrial secrets). Patents have recently become a leading mechanism amongst other IPRs to assure this appropriation, as evidenced by the priority given by the major capitalist nations to the creation of new rules for this area during the Uruguay Round of the General Agreement on Trade and Tariffs (GATT).

The negotiations in the 1980s and 1990s to achieve a new General Agreement on Trade and Tariffs can be divided into three phases. The first involved the pre-Uruguay-Round negotiations during which the US and other developed members of the GATT moved to put "new issues" on the agenda, including IPRs. The second phase began in 1986, with the compromise solution to include issues related to industrial property, particularly clauses on counterfeit goods. During the third phase, following 1989, IPRs in general came onto the working agenda. The final draft of this agreement, issued in 1991, included items such as the broadening of patent coverage "with no discrimination as to the place of invention or whether the use of the right is exercised through local production or importation," the patentability of biological processes and micro-organisms, the extension of the term of the patent to 20 years and greater restrictions on provisions such as compulsory licenses, which had often been used as tools for industrial development.

The compromise draft presented in 1991 by GATT president Arthur Dunkel on Trade-Related Aspects of Intellectual Property Rights (known as the "TRIPs Agreement") was later incorporated into the final act of the GATT's Uruguay Round, which gave rise to the new World Trade Organisation (WTO) in December 1994. It provides¹⁵ that member countries may consider "plants and animals other than micro-organisms," as well as "essentially-biological processes" as non-patentable. Even so, they must provide protection for plant varieties, through patents and/or through an effective sui generis system. This TRIPs provision (article 27.3(b)) thus requires all members to adopt some kind of system to "protect" plant varieties (Bifani, 1992).

In short, the TRIPs Agreement obliges countries to allow patents on products and processes in any field of technology, as long as they are novel, non-obvious and useful in some industrial application. There are only a few exceptions to this general rule. States may limit the granting of patents on inventions whose commercial use might offend morals or "ordre public" (TRIPs, Art. 27.2). States may also exclude plants and animals from any kind of IPR protection, except for new plant varieties (Art. 27.3(b)16).

The World Intellectual Property Organisation (WIPO) was not considered to have the teeth to force countries to accept the new Uruguay Round rules, meaning that substantive IPR-related matters are now the turf of the WTO, which can monitor their implementation by national governments and even authorise economic retaliations against offending countries.

Thus the 135 countries that joined the World Trade Organisation upon completion of the Uruguay Round have been obliged to privatise part of their genetic resources and biodiversity through IPRs over new plant varieties. The TRIPs Agreement stipulates that developing countries must create IPR laws to provide patent rights or some form of effective sui generis protection¹⁷ for new plant varieties before the year 2000, and least-developed countries to do the same by 2005.

One of the possible formulas for creating sui generis rights over plant varieties -- and the one most often suggested as appropriate -- is a form of Plant Variety Protection (PVP, or Plant Breeders' Rights - PBR) developed in Europe in the 1950s to provide pseudo-patent rights for plant breeders. The objective was to create an effective system for protecting plant varieties that would be different from the industrial patent system, since plants differ from industrial products in that plants can easily be copied by other scientist or competitors.

The International Union for the Protection of New Plant Varieties (known by its French acronym UPOV) is a multilateral convention adopted by several countries to set common rules for the recognition and protection of intellectual property over new varieties obtained by plant breeders. Established in 1961, UPOV grew from its original six members to around 20 in the early 1990s. Currently, it has 37 members, including several Latin American countries who have joined recently. UPOV's headquarters are located in the same building as the World Intellectual Property Organisation (WIPO), in Geneva (Grain, 28/2/99).

The original UPOV Convention signed in 1961 was revised in 1972, 1978 and 1991¹⁸. Most member states have ratified either the 1978 or the 1991 version (which came into effect in April 1997). The possibility of joining under the 1978 version ended in April 1999, meaning that any country joining UPOV after that date must subscribe to the terms of the 1991 revision.

In its successive revisions, the protection offered to plant breeders under the UPOV Convention has moved progressively closer to patents. Many authors maintain that the 1991 revision was aimed precisely at making the UPOV system equal to the patent system.

Patents provide exclusive monopoly rights to make, use or sell a new invention for 20 years. To be eligible for patent protection, an innovation must be novel (that is, an invention rather than a discovery) and inventive (presenting an inventive step that is not obvious to an expert in the pertinent field of technology). It must also be useful in some commercial or industrial application.

The concession of PVP under the UPOV Convention, on the other hand, requires that the plant variety be distinct, homogeneous (or uniform) and genetically stable.

The notion of distinctness means that a soybean variety, for example, whether it was bred conventionally or with genetic engineering, must have one or more important traits that make it clearly distinguishable from any other variety of soybeans known to exist at the moment when the breeder applies for protection (Upov, 1978, Art.6). In practical terms, the new soybean variety would have to be different from any other variety already on the market.

To fulfil the homogeneity requirement, the variety most be sufficiently homogeneous with regards to the particular traits of its sexual reproduction or vegetative propagation (Upov, 1978, Art.6). In short, this criteria means that all plants in this variety must share the same set of characteristics.

A variety's stability, the third requirement for protection, means that its essential traits must remain faithful to the variety's original description after repeating its reproduction or propagation or, when the breeder has defined a particular cycle for reproduction or multiplication, upon completion of each cycle (Upov, 1978, Art.6). To be stable, in other words, the successive generations of a protected variety (for example the MA/BRS 165 soybean variety) must all display the same distinctive characteristics.

In addition to meeting these three requirements, the 1991 version of the UPOV Convention also explicitly raises a criteria for novelty or innovation, by which a variety can only be considered new if, on the date when the breeder files for protection, the propagating material has not been sold or made available by others, with or without the breeder's consent, for the purposes of using the variety: (i) in the territory of member countries where the application was filed more than one year before that date and (ii) in any other territory other than a member country where the application was filed more than four (or, in the case of trees and vines, six) years before the filing date (Art.6).

Breeders are thus recognised as the creators of plant varieties just as authors are recognised by copyrights and inventors by patents. In countries with laws adapted to this Convention, plant breeders acquire exclusive property rights over the varieties they obtain.

The 1978 and 1991 versions of the UPOV convention can be distinguished by several features that indicate a progression towards greater rights for breeders in UPOV-91.

In all the revisions of the Convention up to the 1978 version (which actually remained in force through most of the 1990s), breeders' rights were different from patents in that -- under the so-called "breeder's exemption" -- other breeders could freely use any protected varieties as a starting point to be modified into new varieties (Upov, 1978, Art.5(3)).

Until UPOV-91, the Convention also contained a provision known as the "farmer's privilege," under which farmers could save seeds from their harvest to plant again the next spring. In addition, UPOV members whose national laws allowed for both plant breeders' rights and patenting, the practice of "double protection" of any species by both PBRs and patents was prohibited (Upov, 1978, Art.2(1)).

As we look closer at UPOV protection requirements, we see that a variety which is different from others, homogeneous and stable over several generations is not necessarily a new invention. Therefore a variety simply discovered in nature that had never before been commercially used in agriculture could be appropriated, as long as it met the limited UPOV criteria (Upov, 1978, Art.6).

At the same time, it allowed member countries to exclude certain species from any form of protection, in accordance with their specific national interests (Upov, 1978, Art.2(2)). The Convention has never required that a protected variety actually offer new qualities or usefulness, nor does it define any "minimum distance" between one protected variety and another.

March 1991 brought the signing of the latest version of the UPOV convention, although it only entered into effect in April 1997. This version significantly expands breeders' rights. The main reason for this move was that companies active in genetic engineering were obtaining very broad rights through patents on genes and even transgenic species. Such patents were an economic threat to the survival of conventional breeders who depended on PVP. It had become very easy for the holder of a patent on some gene to insert it into a plant variety and claim ownership -- under patent rules -- of a "new variety" (Grain, Feb. 28, 1998).

While plant breeders' rights had, in previous versions, been limited essentially to control over the multiplication and sale of seeds and seedlings (Art.5[1]), under UPOV-91 they were significantly expanded to include exclusive (monopoly) rights over:

1. Activities such as (i) production and reproduction (multiplication); (ii) packaging for the purpose of propagation; (iii) offering for sale; (iv) selling or other kinds of marketing; (v) exports; (vi) imports; and (vii) storage for purposes other than those stipulated in items (i)-(vi) (Upov, 1991, Art.14[1]).
2. Harvested material, including the whole plant and its parts (Upov, 1991, Art. 14[2]).
3. Products made directly from the harvested material of crops planted with protected varieties, covering for example soy or corn oil, soybean flour, etc. (Upov, 1991, Art.14[3]).
4. Other rights in addition to those mentioned above, to be defined by the Contracting Parties (Upov, 1991, Art.14[4]).
5. New varieties which are "essentially derived" from others that are protected or not clearly distinguishable from protected varieties, as well as new varieties whose production requires the repeated use of seeds from a protected variety. A variety is considered to have been essentially derived from another (the "initial variety") when: (i) it is predominantly derived from the initial variety or from a variety which is itself predominantly derived from an initial variety when it retains the expression of some of the initial variety's essential characteristics as a result of the genotype or a combination of genotypes of the initial variety; (ii) it is clearly distinguishable from the initial variety; and (iii) except for differences that arise from the express derivation from the characteristics of the initial variety. Varieties are also considered to have been "essentially derived" when they can be obtained by the selection of natural or induced mutants, somaclonal variations; variant individuals produced by the initial variety, back-crossing or transformation through genetic engineering (Upov, 1991, Art.14[5]).

UPOV-91 also eliminates previously allowed exceptions by which countries could except certain crops from protection, and now protection must be available for all species of all botanical genders (Upov, 1991, Art.3). Countries now have less leeway to adapt breeders' rights to their own interests and needs.

The term of protection is also extended under the new version, to 20 years for annual crop varieties (under UPOV-78 it was 15 years) and to 25 years for perennials such as trees and vines (Upov, 1991, Art.19).

UPOV no longer requires respect for the farmer's right to save part of the harvest as seeds for the next planting season, although it does allow countries to allow such an exception, as long as the country does so "within reasonable limits and subject to the safeguarding of the legitimate interests of the breeder." (Upov, 1991, Art.15)

Double protection (patents and PVP) is now allowed, following the elimination of the article in UPOV-78 (Art. 2[1]) that expressly prohibited this practice for any particular plant genus or species. PVP is thus no longer the exclusive form of protection, and countries may permit "double protection" if they wish.

The expanded rights now allowed under UPOV-91 imply total market control for breeders over their varieties' reproductive material. Farmers using protected varieties cannot sell their harvest as seed and, in a growing number of UPOV member countries, they can not even save their own seeds or exchange them on a non-commercial basis. Farmers must now pay royalties every year when they buy seeds, and they may only plant the protected variety to produce seeds if the breeder grants them a specific license to do so (GRAIN, Feb. 28, 1999).

The Convention on Biological Diversity (CBD)¹⁹, signed in 1992 and in force since 29 December 1993 for its 177 member countries (as of August 2000), is to a large extent a countervailing force to the TRIPs Agreement. The CBD is a basic pillar in international efforts to promote the conservation and sustainable use of biodiversity, as well as the sharing of benefits derived from the use of its components. It binds the member countries to respect its basic principles with regards to how biodiversity is to be conserved, by whom and to whose benefit. These principles are summarised in Chart 4.

The Convention on Biological Diversity (CBD), signed in 1992 and in force since 1994 for its 170 member countries, to a large extent is a countervailing force to the TRIPs Agreement. The CBD is essentially a basic pillar in international efforts to promote the conservation and sustainable use of biodiversity, as well as the sharing of benefits derived from its use. It binds the member countries to respect its basic principles with regards to how biodiversity is to be conserved, by whom and to whose benefit. These principles are summarised in Chart 4.

SOURCE: Grain, Feb. 23, 1999

One of the most important specificities of this Convention is that it grants official international recognition to the core role of indigenous and local communities in the conservation of biodiversity, through their traditional practices and their cultural knowledge systems. The CBD thus explicitly recognises the intrinsic value of community knowledge systems and places greater importance on their use and conservation than on the knowledge used or the products marketed by companies (Grain, 23/02/99).

The CBD's objectives are clear and simple: to conserve and make sustainable use of biological resources and assure the fair and equitable sharing of benefits derived therefrom. To achieve these objectives, it sets out obligations that member states must apply and respect. The CBD does not, however, stipulate specific measures by which the countries should implement the goals, meaning that they are free to choose the best way to carry out their obligations, as long as it fits the Convention's spirit and text. The obligations created by this Convention are summarised in Chart 26.

SOURCE: "TRIPS versus CBD - Conflicts between the WTO regime of intellectual property rights and sustainable biodiversity management," Global Trade and Biodiversity in Conflict, Issue n� 1, April 1998, GAIA/GRAIN. http://www.grain.org/publications/gtbc/issue1.htm

Compliance with the CBD member countries' obligations means full recognition of and respect for the rights of indigenous peoples and local communities. The CBD also recognises the conflict between the recognition and protection of these community rights, versus that of private monopoly rights, by drawing a clear dividing line to keep IPRs from progressively invading the collective space of biodiversity and biodiversity-related knowledge.

The clear conflict between TRIPs and the CBD with regards to rights over biodiversity arises from the very nature of the two agreements and appears in three major aspects of each of them -- their objectives, the rights system created and the legal obligations imposed -- which can be summarised as follows:

The CBD's objective is to strengthen the capacities of developing countries' (those richest in biodiversity) to conserve and use biological diversity over the long run, considering the rights related to those resources and including the right to share in the benefits they produce. TRIPs, on the contrary, assures that IPRs must be applied universally to all technologies, particularly those that had previously been excluded from this kind of control by national laws, where the granting of such rights in these sectors had not been considered appropriate, for example in the case of pharmaceuticals, food and biological material (including plants and micro-organisms), as well as biotechnological processes, all of them now subject to the application of IPRs in WTO member countries.

After 1990, as a result of international pressures and agreements, several new laws were introduced in Brazil, with major impacts on agricultural biodiversity for farmers, as well as for other local communities and indigenous peoples, whose farming systems are based on that biodiversity and on the freedom to manage genetic resources.

A new patent law, a plant variety protection law and a biosafety law for GMOs all became law between 1995-1997, while a countervailing bill, to regulate access to genetic resources, has been moving slowly through the National Congress since 1995.

On May 14, 1996, Law Number 9.279/96²⁰ was published to regulate industrial property rights in Brazil. It came into force one year later, on May 15, 1997.

The new law reproduces international trends on intellectual property rights. Intellectual property is a broad concept related to ownership rights over works of knowledge, guaranteeing authors or inventors exclusive rights to use and exploit their creations for a certain period of time. It includes rights pertaining to inventions in all fields of human activity, industrial designs, trademarks, trade secrets, unfair competition, artistic compositions and interpretations, phonograms and broadcasts and all other rights inherent to intellectual activity in the fields of industry, science, literature and the arts. Intellectual property rights can thus be seen as a broad umbrella covering industrial property rights, on the one hand, and copyrights on the other. Copyrights refer exclusively to the protection of works of art, music, books, articles, motion pictures, videos, etc.

Brazil's new Industrial Property Rights Law, as is the case internationally, expresses the strength of technology through the granting of a monopoly over the use of patents on inventions for 20 years, or over the use of a utility model (an improvement on an existing tool, part or product) for 15 years.

One justification for patent legislation is to stimulate competition: the more competition there is in a given economic sector, the greater the chances for technological advance, since competition stimulates the generation of inventions as a condition for a company's survival. All intellectual property laws (covering industrial property and trademarks, as well as literary, artistic and scientific works) provide both rights and obligations for the owners and for society, so that society can gain access to the fruits of innovation, while avoiding abuse. In Brazil, however, the new law gives greater protection to the patent holder than to society (Rumos, July 1999).

Changes introduced by the new patent law make both medicines and foodstuff patentable, as well as biotechnological processes and transgenic micro-organisms (Art.18). The law defines these "transgenic micro-organisms" as those which meet the three requirements of patentability - novelty, inventive step and industrial application - and which are not mere discoveries. Transgenic micro-organisms are defined in the law as any organism, except for plants or animals, in whole or in part, that due to direct human intervention in their genetic composition, express a characteristic that cannot be normally achieved by the species under natural conditions (Art.18/III). Chapter II of the law also limits the granting of patents to what it defines as inventions and utility models. In this context, Article 10 provides that several kinds of activities not considered to be "inventions" are thus not eligible for patents, including (item IX): "all or part of natural living beings and biological materials found in nature, or isolated therefrom, including the genome or germplasm of any natural living being and natural biological processes."

Articles 10 and 18 thus provide that, in Brazil, patents shall not be available for any natural living being or its components, for any natural biological process, or even for any plant or animal -- in whole or part -- that might be considered an invention (such as transgenic plants or animals). The country's biodiversity is thus apparently left out of this private property system.

Yet the law sets no clear limits between what is natural and what is an invention for living beings and their components or for the biological processes they may be part of. In addition, since no exception is mentioned among the non-patentable inventions listed in Article 18, biotechnological processes are in fact patentable. This situation contradicts the Convention on Biological Diversity (of which Brazil is a member) in its assurance of the transfer of such technologies in exchange for access to the country's genetic resources.

Meanwhile, according to Soares and Hathaway (1998), the patent law also opens the way to what are called "virtual patents," imposed indirectly on plants and animals, since the law only bars the direct exercise of patents in this area. Article 42/II, for example, grants a patent holder "the right to prevent others from manufacturing, using, offering for sale, selling or importing for such purposes, without his consent," not only a patented product but also any "process or product directly obtained by the patented process." This means that a patent on a biotechnological process to create a transgenic plant or animal extends the process-patent holder's patent rights to the "unpatentable" plant or animal created by that process. The same two authors also identify another form of "virtual patenting" since the law sets no limits to the rights granted by a patent on the genes of transgenic micro-organisms such as bacteria, when those genes are subsequently transferred into a transgenic plant or animal. When a farmer reproduces such an "unpatentable" plant, the patented genes inside it will therefore also be (illegally) reproduced. Plants and animals may thus be "virtually" or indirectly subjected to other patents, either on biotechnological processes or on the patented components of transgenic micro-organisms used as vectors in these processes.

The Plant Variety Protection Act (Law Number 9.456/97)²¹ was published on April 25, 1997 and was subsequently regulated by Decree Number 2.366²², on November 5, 1997.

Brazil had to adopt this law in order to join the International Union for the Protection of New Plant Varieties (UPOV), which it did, under the terms of the 1978 version. The Final Act of the GATT's Uruguay Round, ratified by the National Congress, provides in the TRIPs agreement (Agreement on Trade-Related Aspects of Intellectual Property Rights) that countries must provide either patents or a sui generis system for the protection of plant varieties (Article 27.3.b). The TRIPs provision did not in fact oblige Brazil to join UPOV, since a sui generis system does not necessarily have to comply with that organisation's requirements. At the time, some nationalistic sectors of the scientific community recommended the franchise system as the most appropriate way for Brazil's law to meet the sui generis requirement. But the government's position, which prevailed, was based on concerns that Brazil might be diplomatically isolated if it did not join UPOV.

What are the implications of the new Plant Variety Protection (or Cultivars) Act? The products that now make up the world population's food diet were once wild plants, before the beginning of agriculture some 12,000 years ago. Since the beginning of agriculture, today's cultivated plants have gone through genetic and phenotipical alterations, as the result of human activities in the processes of selection and domestication, combined with the impact of weather factors and environmental changes. A long and slow process of plant domestication and breeding carried out by both man and nature gave rise to the food and plant raw materials available to us today. As agriculture developed, seeds have always been a resource with which farmers can freely plant, produce their own seeds and exchange them with each other, through the broadest possible freedom of access to this basic farming input.

Following the appearance of Mendel's laws in 1865 and their implementation in the 20^th Century, biologists moved from a state of observing living beings into a phase of understanding the basic laws of inheritance and the construction of its architecture, in the bio-sciences. This has brought major scientific progress to plant breeding, and in particular for commercial exploitation of seeds. As seeds were transformed into commodities, the new industrial segment created to produce them began to worry about the need to impose intellectual property rights on the its products.

The first plant-protection law in the world was approved in the United States, in 1930. In Europe, the growth of the seed market also strengthened the idea of plant breeders' rights and led to the creation of UPOV in 1961, along with the passage of national laws on the subject. All those laws granted plant breeders rights over the marketing of seeds from the protected varieties, but with caveats different from the patent system (although the US law was called the "Plant Patent Act"), such as the legal use of protected varieties by other breeders to develop new and different cultivars. Farmers, under these early UPOV-compliant laws, were also allowed to save and reproduce seeds from protected varieties in their own fields.

The appearance of "new biotechnologies" including genetic engineering in the 1970s expanded the genetic frontiers of plant breeding to realms until then beyond the reach of traditional technology. The seed industry worked mainly with hybrids due to their "natural patent" over the resulting cultivars. Genetic engineering raised their interest in the varietal seed market, and in assuring greater "protection" for these cultivars as well. This explains the current trend towards laws that allow corporate plant breeders to own their cultivars, with the simultaneous loss by farmers of free access to these resources.

Brazil's Cultivars Act in many key points coincides with the structure created by UPOV-78, while it also contains provisions consonant with UPOV-91. In others it is even more rigid than either of these two versions, as we can see in the following comparison of its most controversial points with UPOV-78 and UPOV-91 provisions.

1. Article 2 of Brazil's 1997 Cultivars Act provides that the only legal form of protection of cultivars in the country is through the granting of the Cultivar Protection Certificate. The law thus precludes the so-called "double protection" of plants by both plant-breeders' rights and patents, as required by the terms of the 1978 UPOV Convention's Article 2(1). Yet we cannot forget the possibility of "virtual patents" (as coined by authors Adriano Soares and David Hathaway) under Brazil's Industrial Property Law, whereby plants may be subjected to patent rights granted over the use of biotechnological processes used to obtain them or over the genes transferred into their genomes from patented micro-organisms. So, at least for transgenic cultivars, there is still the possibility of double protection.
2. Articles 4 and 14 (items VII and X) require that, to qualify for protection, a cultivar must be: new, distinct, homogeneous and stable, thus coinciding with the terms of UPOV-91, as opposed to the UPOV-78 requirement that it simply be distinct, homogeneous and stable, with no reference to novelty or innovation.
3. Article 3/IX introduces the concept of an "essentially-derived cultivar," a notion introduced by UPOV-91 (Art. 14/V) and totally absent from the 1978 version. Brazil's law even goes beyond UPOV-91 in this case, by providing for the protection of cultivars that are "derived from the derived" cultivar (UPOV-91 stops at the first derivation). This expands the law's scope of protection and therefore the restrictions and costs imposed on farmers wishing to use these cultivars.
4. Article 4 says that protection will be available for cultivars of any plant genus or species, as soon as the law is published. This implies a potential for the immediate protection of all kinds of plants. This provision goes beyond UPOV-78 requirements, which sets out the largest possible number of botanical genus and species, but also allows for the possibility of excluding some species from protection. What is more, the law goes beyond UPOV-91 by setting a 10-year deadline for protection to be applied to all plant genes or species. Nonetheless, paragraph 3 in the same article does set out a timetable for the progressive inclusion of minimum numbers of species eligible for protection in accordance with the UPOV-78 deadlines.
5. Article 4 allows for the protection of any cultivar that has not been on the market for more than 12 months before the application. It also provides that, for cultivars used to obtain other "essentially-derived" cultivars, this period goes back to ten years before the filing date. This amounts to a retro-active "pipeline" provision²³, with restrictive repercussions on access to such material, particularly for other breeders, which goes far beyond the requirements of either UPOV-78 or UPOV-91.
6. Article 8 defines the rights granted to plant breeders over the material used to reproduce or multiply whole plants. Article 9 then guarantees the breeder the right to commercial reproduction in all of Brazil and bans anyone else from carrying out the commercial production, provision for sale or marketing of the cultivar's reproductive material until the protection expires, unless authorised by the original breeder. This provision fits into UPOV-78 requirements.
7. Article 10 provides for the so-called "farmer's privilege." Item I in this article states that property rights over the protected cultivar are not infringed by anyone who saves and plants seeds for their own use, on their own establishment (generally a farm) or on the establishment of third parties which they control. This point is in accordance with UPOV-78, and would be precluded by UPOV-91. Item IV in this article is even more generous to farmers than required by UPOV-78, since it allows small farmers to multiply seeds for donations or in-kind exchange with other small farmers, as part of financial or support programs for small farms sponsored by public agencies or non-governmental organisations, as authorised by the government.

The small farmers eligible for this "privilege" are defined by the law as those who: I) farm a plot of land as an owner, squatter, renter or sharecropper; II) employ on a permanent basis no more than two hired persons, except for occasional hired help as demanded by the seasonal nature of this activity; III) do not hold under any conditions an area greater than four "fiscal modules", as set out by existing legislation; IV) earn at least 80% of their gross annual income from farming, cattle-raising or extractive activities; and V) live on the farm or in a nearby urban or rural settlement (paragraph 3).

Article 10's "privileges" do not apply to sugar cane, for which additional provisions are included.

8. According to Article 10/II, ownership rights over cultivars are not infringed by anyone using or selling their harvest as food or raw material, unless this is for purposes of reproducing the plant. This point fits with UPOV-78 and falls short of UPOV-91 requirements, which extend protection rights even to products derived from the material harvested from protected varieties.
9. Article 10/III provides the same "breeders' exemption" allowed under UPOV-78, by stating that ownership rights over protected cultivars are not infringed by anyone using them as the source of variation for genetic breeding or for research purposes. The right-holder's authorisation must be obtained, however, when a protected variety must be used repeatedly for the commercial production of seeds for the new cultivar or hybrid (paragraph 2/I). It once again goes beyond UPOV-78 in paragraph 2/II, however, by requiring the authorisation of the original cultivar's rights holder for another breeder to market a new cultivar which is essentially derived from the first one. This repeats the same UPOV-91 provision mentioned above.
10. The terms of protection for cultivars by Article 11 coincide with those set by UPOV-78, namely 15 years for annual crops and 18 years for vines, trees and their mother grafts.

The Biosafety Law was published on January 5, 1995 and regulated by Decrees 1.752 (Dec. 20, 1995) and 2.577 (April 30, 1998)²⁴, which created the National Technical Commission on Biosafety (CTNBio) and defined its powers and composition.

This law creates safety standards and control mechanisms for the use of genetic engineering in the construction, cultivation, manipulation, transportation, marketing, consumption, release and disposal of genetically modified organisms (GMOs), in order to protect human, animal and plant health as well as the environment. It also provides for the creation of the CTNBio by the President.

Some of this law's key points:

• Activities and projects involving GMOs in Brazil, such as teaching, scientific research, technological development and industrial production, can only be carried out by public and private companies or institutions (not by individuals), which are responsible for obeying the legislation and for any effects or consequences caused by its violation. Any national or international institution wishing to finance, sponsor or contract such activities must require the presentation of a Biosafety Quality Certificate provided by the CTNBio to certify the research institution's technical and scientific competence (Article 2).
• The law defines a genetically modified organism (GMO) as an organism whose genetic material (DNA/RNA) has been modified by any technique of genetic engineering. (Article 3/IV)
• The law excludes from this definition (and therefore from its scope) "organisms arising from techniques that imply the direct introduction, into an organism, of hereditary material, when this does not involve the use of recombinant DNA/RNA molecules or GMOs, such as: in vitro insemination, conjugation, transduction, transformation polyploid induction and any other natural process." (Article 3, single paragraph) Nor does this law cover organisms modified by the following techniques: mutagenesis; the formation and use of somatic cells from an animal hybridome; cell fusion, including that of protoplasm, of plant cells, which can be produced by means of traditional culture techniques; or the self-cloning of non-pathogenic organisms when processed in a natural fashion. (Article 4)
• The Ministries of Health, Agriculture and the Environment have the following responsibilities (along with the observation of technical opinions issued by the CTNBio): (i) the control and inspection of all activities and projects related to Group II GMOs; (ii) the issuance of registrations for products containing GMOs or derived from GMOs which are to be marketed for the human, animal or plant use or for release into the environment; (iii) the granting of authorisation for the operation of laboratories, institutions or companies carrying out activities related to GMOs; (iv) the issuance of authorisation for the entry into the country of any product containing GMOs or derived from GMOs; (v) maintenance of a register of all institutions and professionals carrying out activities and projects related to GMOs in the national territory; (vi) submission to the CTNBio, for the issuance of its technical opinion, of all procedures related to projects and activities involving GMOs; (vii) submission for publication in the Diário Oficial da União [Official Daily Federal Register] of the results of procedures judged by the agency, as well the conclusions of the technical opinion; and (viii) application of penalties provided for by this Law.
• The Biosafety Law forbids the following activities with GMOs: (i) genetic manipulation of human germ cells; (ii) in vivo intervention in human germ cells, except for the treatment of genetic defects, obeying ethical principles such as the principle of autonomy and the principle of beneficence, and with the previous approval of the CTNBio; (iii) the production, storage or manipulation of human embryos to be used as available biological material; and (iv) in vivo intervention in the genetic material of animals, except for cases in which such intervention constitutes a significant advance in scientific research and in technological development, obeying ethical principles such as the principle of responsibility and the principle of prudence, and with the previous approval of the CTNBio (Article 8/II-V).
• Products containing GMOs and intended to be marketed or processed in Brazil, if imported from other countries, may only be introduced into Brazil following the previous final conclusion of the CTNBio and authorisation by the pertinent control agency, with consideration to be given to technical opinions issued in other countries, when available. (Article 8, paragraph 1)
• Any organisation using genetic engineering techniques and methods shall create an Internal Biosafety Commission/CIBio, in addition to naming an individual who will be technically responsible for each specific project. (Article 9)
• The National Technical Commission on Biosafety/CTNBio, is part of the Executive Secretariat of the Ministry of Science and Technology and is made up of full members and alternates designated by the Minister of Science and Technology, as follows: (i) eight renowned scientific and technical specialists active in the field of biotechnology, two of whom from human sciences, two from animal sciences, two from the sciences and two from environmental sciences; (ii) one representative from each of the following Ministries, named by the respective Ministers: Science and Technology, Health, the Environment, Education and Sports and Foreign Relations; (iii) two representatives from the Ministry of Agriculture, including one from agriculture and one from livestock, named by the respective Minister; (iv) one representative from a legally established consumer defence agency; (v) one representative from legally established associations representing the biotechnology business sector, to be named by the Minister of Science and Technology based on a list of three names submitted by the above-mentioned associations; and (vi) one representative from a legally established agency for protection of workers' health. (Article 3, Decree No. 1.752)
• The substantive functions assigned to the CTNBio by the Law's regulatory decree (Article 2) include: (i) to propose a National Biosafety Policy; (ii) to monitor the development and technical and scientific progress of biosafety and related areas, aimed at the safety of consumers and the general population, with constant surveillance to protect the environment; (iii) to deal with institutions devoted to genetic engineering and biosafety at the national and international levels; (iv) to propose a Code of Ethics for Genetic Manipulation; (v) to establish standards and regulations for activities and projects involving the making, culture, handling, use, transportation, storage, marketing, consumption, release and disposal of genetically modified organisms (GMOs); (vi) to classify GMOs according to their degree of risk, defining biosafety levels assigned to them and to what are considered unhealthy and dangerous activities; (vii) to establish mechanisms for operations of the Internal Biosafety Committees -- CIBio's -- within each institution and which are devoted to research on and teaching, development, and utilisation of genetic engineering techniques; (viii) to issue expert technical opinions on proposed activities related to or involving the release of GMOs; (ix) to publish in the Diário Oficial da União [Official Daily Federal Register], prior to the process of analysis, the list of petitions submitted for approval and referring to the release of GMOs into the environment, excluding confidential information of commercial interest which is the object of intellectual property, identified as such by the applicant and thus considered by the Commission; (x) to issue a conclusive prior expert technical opinion on the registration, use, transportation, storage, marketing, consumption, release, and disposal of any product containing GMO or derivative, referring it to the competent inspection agency; (xi) to demand as additional documentation, whenever it deems necessary, an Environmental Impact Assessment (EIA) and the respective Environmental Impact Report (EIR) for projects and applications involving the release of GMOs into the environment, in addition to specific requirements for the applicable risk level; (xii) to issue, at the request of the applicant, a Biosafety Quality Certificate (BQC), referring to installations devoted to any activity or project involving GMOs or derivatives; and (xiii) to propose changes in the enforcement of Law No. 8,974 of 1995.

From 1997 to April 2000, the CTNBio authorised nearly 800 releases of transgenic plants, on a total area of approximately 800 hectares. Monsanto and its other Brazilian branches accounted for 90% of this area. The transgenic species released for field trials until April 2000 were: cotton, rice, potatoes, sugar cane, eucalyptus, tobacco, papaya, corn and soybeans. Corn stands out as the species with the largest number of authorisations and covered the largest cultivated area (approximately 400 ha.), followed by soybeans (280 ha.) and cotton (nearly 80 ha.). All other crops were planted on less than 10 ha. each. As for the traits incorporated into these crops, over 50% of the trials were done with herbicide-resistant plants.

37% of the trials were carried out in the Southern Region, 34% in the Southeast and 27% in the Central West. The Northern and North-eastern regions of Brazil accounted for less than 2% of all trials done with transgenic crops.

During the Rio de Janeiro UNCED Summit in 1992, Brazil signed the Convention on Biological Diversity (CBD), whose entry into force in 1993 gave biodiversity a new international status. A national law on Access to Genetic Resources would create a legal framework for compliance with one of the CBD's basic objectives, namely the fair and equitable sharing of benefits arising from the use of genetic resources, including monetary compensation, transfer of relevant technologies and satisfaction of both national and local-community rights over these resources.

A total of four bills (two of which are of major importance) were presented in the National Congress between 1995 and 1998, aimed at creating a law to govern access to genetic resources, as well as to the products thereof.

The first of these (Bill Number 306/95) was presented in the Senate in November 1995, by Senator Marina Silva, from the State of Acre, in Brazil's Amazon region. The Senate's standing committee on Social Affairs (the CAS), responsible for its discussion and revision, held a series of public hearings in the cities of São Paulo, Manaus and Brasília in 1996 to gather opinions and suggestions from as many sectors as possible that would be affected by its approval. These sectors included agriculture, industry, universities, research centres, local and indigenous communities and non-governmental organisations. Late in 1996, the CAS, the Ministry of the Environment and several NGOs also held a major workshop in Brasília specifically to discuss this legislative proposal. One executive-branch agency, its official health research institute (Fundação Oswaldo Cruz), also organised discussions to reflect on how the law should deal with access to human genetic resources.

Yet the government as a whole preferred to develop its own counter-proposal to Senator Silva's bill, which was finally presented to the lower house of Congress, the Chamber of Deputies, in mid-1998, shortly before the Senate approved its own final version of the original 1995 bill.

The Executive's bill (Number 4751/98), rather than regulating "genetic resources," proposed to legislate on access to the country's "genetic assets,"²⁵ which are not defined as genetic or molecular material but rather as genetic "information". Both the Senate's and the Executive's version of this bill have been under examination in the Chamber of Deputies by a temporary Special Commission created in the beginning of the year 2000.

Both bills highlight the principles of national sovereignty and the inalienability of rights over the country's biodiversity and genetic resources; the rights of local and indigenous communities regarding access in their areas; national participation in economic and social benefits arising from access, particularly the remuneration of local and indigenous communities; and the protection and stimulation of cultural diversity. Both bills also exclude the free exchange of seeds and other genetic resources among local communities from the formality of access procedures, and provide that separate legislation should, at some future date, deal with access to human genetic resources.

On June 30, 2000, however, this five-year legislative process was interrupted when the government issued an executive "Provisional Measure" (Number 2.052), largely based on the executive's own 1998 bill. As Brazil's modern-day equivalent to a decree, this Provisional Measure is in fact now in force, although it can still be modified by Congress. The government withdrew its 1998 bill from Congress and a new Joint Special Commission of both houses was created to deliberate only on the new Provisional Measure, although in September 2000 it had not yet held its first meeting.

Why is it important to legislate on Access to Genetic Resources?

Genetic resources were traditionally considered to be the "common heritage of mankind" and anyone could make free use of the material and information generated and used in in situ conservation, since they were in the public domain. No authorisation was required, and no economic compensation due. With the appearance of the "new biotechnologies," they became a strategic resource for the development of new products by private companies, offering tremendous prospects for benefits and profits. The technologies, however, are highly appropriable through intellectual property rights (IPRs), using either patents or plant-breeders' rights.

In this context, the purpose of a Law on Access to Genetic Resources is to regulate access to these resources without contradicting the principle of IPRs, recognising the state's sovereign rights over its natural resources. The law also proposes a recognition of local and indigenous communities' intellectual rights based on their contribution to the preservation of biodiversity. As a result, the benefits obtained from its commercial exploitation should be shared by states and/or private companies with the communities that contribute their knowledge. This issue is particularly important for a country like Brazil, which is the privileged holder of mega-biodiversity.

The term biodiversity can be used in several senses, the most broad of which refers to all biological life on the planet, all of its diversity of kingdoms, species and other taxonomic classifications, and the high degree of interdependence amongst the many species, either as components of food chains or in complementary functions provided to each other. The breadth and the complex interdependence amongst the different forms of life implies that biodiversity must not be taken as a huge pool of living beings, but as a system in which a threat against any one of its components can have multiple repercussions on others. Both in situ and ex situ conservation play strategic roles in the preservation of biodiversity.

Conservation (whether in situ, on farm or ex situ), research and development and the use of genetic resources are parts of a complex, dynamically interactive system. That interaction is based on both market and non-market relationships amongst several kinds of agents who carry out specific functions within a system that can be called the "plant genetic-resource system", or PGRS (Correa, 1999). According to this author, the reason for this name relates to the fact that plant genetic resources are the system's main components. They are used to cultivate traditional varieties, for research and development, for the production and reproduction of genetic material and for the growing of commercial varieties.

Different subsystems can be identified within the PGRS, with the participation of different agents:

• Conservation subsystem, made up of (i) indigenous populations and traditional farmers (sectors of family and/or peasant farmers) who conserve and use plant genetic resources (PGRs). The value of PGRs is preserved and enhanced through their use in cultivation, in the production of genetic material and in the on-going selection of the best-adapted local varieties. They habitually interact through trade and exchanges amongst communities or farmers; (ii) gatherers and curators who harvest and/or conserve plant genetic resources, a task which includes their characterisation, cataloguing, assessment and pre-breeding. They interact with traditional farmers, with research institutions, with plant breeders and seed companies. Most of this interaction takes place outside the market. No price is paid to traditional farmers for the value they produce, nor are breeders or seed companies charged for the samples they obtain.
• Research and development subsystem: made up of (i) research and development institutions, which use PGRs to carry out basic and applied research, including agro-biotechnology, to improve existing varieties and to increase the availability of "gene pools" (Although their interaction with other agents in the system -- traditional farmers, curators, breeders -- is mostly outside the market, there is now a strong trend towards the protection of research products and the creation of closer links with private companies, introducing market-based modes of interaction.); and (ii) plant breeders, who use PGRs in their breeding programs. These breeders obtain material and scientific information from the groups in the preceding item, generally outside the market, and produce new, improved varieties to sell on the market. IPRs, where they exist, strengthen their market position and their capacity to recover investments in development. They are generally integrated by companies into commercial plant-breeding activities and multiplication of genetic material.
• Commercial reproduction/production subsystem: seed companies use the results of plant breeding to disseminate this material. They operate entirely within the market. PGRs are one of the (intangible) inputs into their production, but they attribute no value to these resources.
• Agricultural use subsystem: At the end of the research/production chain come the farmers who use improved varieties. They are benefited by the paid and/or unpaid labour carried out within the other subsystems. Their relationship with seed suppliers is ruled by the market. Farmers use and produce seeds that can be re-used base on the "farmer's privilege," when applicable.

Thus it is the local farmers' and peasant community, along with indigenous populations, that are the foundation for the in situ conservation of biodiversity. The fact that their local PGRs remain in the public domain does not mean that their efforts do not demand intellectual effort or lack any value. Their knowledge is in fact the result of a cognitive system and has economic value, although this is not necessarily reflected in the market.

The knowledge of local and indigenous communities includes several components that are part of a "traditional" knowledge system with its own epistemological bases (Shiva, 1996:21, quoted by Correa, 1999), making up a "dynamic and organised research and development system, whose value is critical to the long-term conservation of the Earth's diversity" (Nijar, 1996b:13, quoted by Correa, 1999). One of the main characteristics of this system is the collective production of knowledge. Innovation is "cumulative" and "informal," carried out over time: "knowledge changes, adapts and develops on the basis of existing knowledge" (Shiva, 1996:23 cit., quoted by Correa, 1999).

There are thus major differences separating local communities' "indigenous" and/or "traditional" knowledge systems from "scientific" and "technological" systems. These differences involve the nature of the process of generating knowledge, the types of knowledge creators, the methods they use, their systems for compensation and validation, the level of codification (formalisation) of their knowledge, the existence of property rights and the methods of dissemination.

Both systems are extremely important for the preservation, whether through in situ or ex situ conservation. For the in situ conservation subsystem, however, there are no legal safeguards, until Access legislation approved. This means that anyone can come into the country and map out, export and patent freely-collected resources. The lack of a legal framework to control the private appropriation of genetic resources amounts to "foregone earnings" for the country. In this sense, "The Federal Government itself recognises the irreparable damage the country has suffered. Even with no precise data, we know we have lost hundreds of millions of dollars through the registration abroad of plant species native to the Amazon" (Senate Bill 306/95, Reporter's 1997 Opinion). This situation is a threat to community livelihoods and thus to their food security. Another aggravating factor is the tendency to replace "traditional varieties" with "improved varieties" sold on the formal market, even though the latter varieties are not necessarily adapted to local farming conditions and may also lead to the expansion of farmland into new areas.

In this chapter we discuss the impact of the restructuring of the seed industry and of the new regulatory framework on family farming. The crucial variables here are the transnationalisation of the sector, the release of transgenic plants and the impact of patent and plant-breeders' rights. All these factors, as we shall see, create a competitive environment hostile to the survival of family farmers.

In Brazil, we cannot speak about the impacts of all of these variables because the lawsuits filed by Greenpeace and IDEC have suspended the market release of transgenic plants in Brazil. As we have shown in the preceding chapters, however, Brazil has followed global tendencies in terms of the new legal framework and business restructuring. What follows, therefore, are scenarios aimed at portraying the implications of these new trends for family farmers, using information both from Brazil and from other countries where transgenic crops are already on the market.

In the preceding chapters we profiled the seed industry as it consolidated in the wake of the creation of the national research system centred on Embrapa in the mid 1970s. We identified three different divisions during that pre-biotechnology period: (i) between hybrids and varieties, (ii) between grains and green vegetables and (iii) between public and private. Industry has revolved basically around the major grain and oilseed crops, with private companies restricted almost exclusively to the hybrid segment. The public system and co-operatives, in close co-operation, dominated the seed market's varietal segments for major crops both for export (soybeans) and domestic sale (wheat). The green-vegetable sector was also divided between hybrids and varieties, but its more pulverised markets were less attractive to major private-sector investments.

In most of the seed markets, therefore, the public sector and co-operatives were either dominant or were at least an option, even in segments with strong private-company presence. Late in that decade, a 1977 federal law unified the regulatory framework for seeds and ratified three seed production and marketing regimes: certified, inspected and unimproved seeds and seedlings. The law mandated inspection and control over seed production and marketing, as well as penalties for violations, and held up certification as the industry's ultimate objective. Nonetheless, private companies opted for the less demanding system of inspected seeds, and the existence of penalties did not preclude the survival of a vigorous informal sector, particularly where the public sector or co-operatives supplied the seeds.

To multiply the original genetic material into marketable volumes of seeds, both hybrids and the "synthetic varieties" require co-operating producers to take on the actual commercial-scale seed production.

In the case of hybrids, Brazilian producers generally are given two simple hybrids to be planted in alternating rows, following specific technical norms. One of them normally has a male-sterility trait, meaning that the other one will pollinate it. This guarantees the production of the double hybrid intended for commercial-scale sale, under contracts between one of the big seed companies and a host of co-operating producers. The secret embedded in the pure lines as the fruit of the company's systematic genetic research and breeding activities, does not reach the hands of the co-operating producer. The hybrids thus hide their genetic secret in the very methodology of creation of the hybrids, in a process well-known around the world and in Brazil for over 70 years (which at the very least indicates, in the face of competition with transgenic plants, a contradictory process of diminishing importance of known hybrids and particularly of the "secret" they contain).

In the United States, particularly in the past two decades, the drive for increasing yields from hybrids -- dependent on the hybrid vigour of the seeds -- has led companies to supply the co-operating producers with "half-brother" lines to obtain simple hybrids. In all cases, the final corn farmers, who buys the seeds from the companies, should not re-plant the grain they harvest, due to the phenomenon of segregation, which tends to reproduce the "ancestors" that went into the make-up of the commercial hybrids. The companies argue that the alternative labour cost of separating seeds for the next crop, treating them, storing them, etc. is unlikely to be less than the relatively low cost of buying hybrid seeds.

To sell its corn hybrids, in 1987 Embrapa set up a licensing program with small seed companies to market a number of varieties: BR201, BR205 and BR296. The royalties charged were calculated based on a combination of the price of the seed and on the company's productivity and efficiency. Using this strategy, Embrapa managed to expand its market share to over 15% of the national corn-seed market, until then mostly dominated by private companies and multinationals.

In the case of the "synthetic varieties" whose genetic material is provided by Embrapa and the co-operatives, there is also a need for the fields of co-operating producers for commercial-scale seed reproduction. This relationship also uses a co-operation contract, with the difference that this producer is allowed to re-plant three crops of the seeds he harvests, as is the final consumer (the farmer) who purchases the synthetic seeds on the market. In this case, farmers are more free in relation to their seed supply, since they are not locked into the supplier, as we shall see. Here, the argument regarding the alternative labour cost of separating, treating and storing the seeds is the same as for hybrids. It is not common for large-scale grain farmers to save part of their harvest for the following season, although this recourse may be vital for a small farmer.

There were several possible forms of entering the seed production and marketing market. The simplest case was where a producer would buy seeds marketed by a private company. Non-hybrid seeds normally maintain their yields for three successive crops. Depending on the seed-to-grain price ratio, therefore, as well as on the cost of cleaning seeds for re-planting, a farmer could guarantee his own supply for two more crops, with no new seed purchases. The ratio between grain and seeds prices might also make it sensible for a farmer to sell some of the seeds to his neighbours.

In that situation, a farmer buying seeds directly from a seed company could maintain a significant degree of autonomy, and the system allowed for continuation of the ancient tradition of local seed markets based on buying and selling amongst neighbours. Today, however, these local markets depend more and more on the seed industry for the fundamental work of genetic breeding, and their very existence has come to depend on the characteristics of commercial seeds and on the regulatory regime.

When a co-operative bought basic seeds to be multiplied, there was also considerable flexibility in its relations to the supplier. There were no royalty payments for the right to use the seed to be multiplied. After receiving the seed back from the multipliers, the co-operative could either sell the product as grain or as seeds over two or three seasons, and the co-operative's members had access to seeds at different prices, based on their purchasing power or needs.

The 1970s regulatory framework consolidated a modern seed industry in Brazil rooted technologically and economically in the application of Mendellian genetics, both for hybrids and for varieties with high response to modern inputs. In major crops, genetic conservation and breeding were shifted from the field to the laboratory, replacing collective responsibilities with regimes for individual legal appropriation. Even so, three major factors distinguished that period: (i) the seed industry as a whole was dominated by the public sector and the co-operative system, (ii) farmers maintained a high relative degree of autonomy in their relations with the seed industry and its regulatory standards, and (iii) the seed industry was only indirectly inter-related with other input sectors.

We can conclude that, although the modern seed industry accelerated the segmentation of agriculture by helping consolidate economies of scale and the concentration of production, it still played only a modest role in the new model of modernised agriculture. The freedom to replant seeds reduced the importance of seeds in price formation, particularly for family farmers. Small farmers also had the recourse of buying seeds on the informal market.

Twenty years after the federal Seed Law, international pressures combined with favourable domestic conditions and a weak opposition to drastically modify Brazil's regulatory framework through the adoption of the UPOV-aligned Cultivars Act and the Patent Law. These changes, made to bring Brazil closer to the competitive conditions of developed countries, brought a wave of investments in the country by transnationals, mostly through acquisitions.

In the first chapter, we analysed the impact of these investments on the restructuring of the seed industry. Here we will simply stress that the upshot has been the absolute domination of transnationals in the private sector, as well as their hegemony in the industry as a whole, at the expense of both the co-operatives and the public sector. It has also meant the absorption of the seed industry into the agrochemical industry, based on the new biotechnologies rather than on Mendellian genetics, with impacts both on breeding techniques and on the new cultivars themselves. In this new technological context, the public sector may aspire at most to a position as a minority partner, unless it decides to invest heavily and competitively in the transgenic plant market, which has not been the case for Embrapa.

What does this new regulatory framework mean for co-operatives, farmers and -- most particularly -- family farmers?

First of all, with the new Cultivars Act royalties began to be charged, and co-operatives were thus no longer a low-cost source of seeds, since they have to pass the cost on to farmers. As mentioned in the previous chapter, however, these charges do not apply when purchased seeds are re-used under the so-called "farmer's privilege." Transgenic seeds, however, cannot be replanted under the terms of the contract farmers must sign to buy them.

Second, farmers in principle could be punished if they sold part of their patented or cultivar-protected harvest as seeds to their neighbours. Here once again, as we saw in the previous chapter, the new Cultivars Act does provide an exception for those who fit in the "small-farmer" category under official criteria, since they could multiply seeds they have purchased and then donate them to or exchange them with other small farmers.

In the private sector, on the other hand, as it comes to dominate the seed industry, there is much interest in implementing and enforcing the new regulatory framework. The informal market, therefore, may suffer a major blow. Either small farmers become more directly dependent on the seed industry (ever-more interlinked with all the agrochemical input suppliers), or they limit themselves to an older genetic base not affected by the Cultivars Act but, for that very reason, subject to increasing disadvantages in terms of yield and adaptability. Ironically, as far as transgenic plants go, the transnationals have responded to the embargo against the commercial release in Brazil (achieved in court by Greenpeace and IDEC) by stimulating -- or at least "overlooking" -- the smuggling of transgenic seeds into southern Brazil from Uruguay and Argentina, where they are legally on the market. Transgenic seeds have thus become another component of the informal market. In the first harvest, in 1996, the rigorous contracts imposed on sales of transgenic seeds in the US were not introduced into the Mercosur countries, where the priority was on a strategy of dissemination at any cost.

During the next growing season, however, the Argentine company Nidera, a major seed producer licensed to sell Monsanto's transgenic varieties, charged US$13 for 50 kilos of Roundup-Ready soybean seeds and required a contract under which the farmer promised not to save seeds from his harvest. The Argentine Farmers' Federation managed to have that condition suspended on the basis of their country's Cultivars Act, and this created an important precedent for Brazil. In 1998, Monsanto once again took the offensive by requiring that transgenic seeds could only be sold as property of Monsanto and subject to the industrial property (patent) law, thus eliminating the farmer's "privilege." This was actually a case of "double protection," analysed in the previous chapter's discussion of UPOV.

For transgenic seeds, therefore, things are complicated. Monsanto's approach in the US and Canada confirms that its position in Argentina is part of a global strategy in which the dissemination of transgenic seeds imposes a contractual obligation that puts grain and oilseed farmers into the position of "integrated" producers, similar to poultry or pig growers contracted by meatpackers. Typical contracts include clauses that prohibit the replanting or resale of purchased seeds. Under typical integration contracts, the penalty for violations are exclusion from future production. Infringement of transgenic seed contracts, on the other hand, may also lead to court suits. In addition, transgenic seeds are developed from elite varieties that require a range of inputs and technical aptitudes that end up either restricting contracts to "modernised" farmers or imposing the adoption of techniques and inputs whose viability tends to require large-scale production.

In the United States, for example, to protect their genetic secrets (since the new seeds are varieties rather than hybrids), the transnationals will in no case allow farmers to replant transgenic seeds from their own harvest. Yet farmers who buy those seeds argue that, since pollen spreads to neighbouring fields, it is impossible to determine whether there has been a breach of contract -- in Monsanto's case, the contract is called a Technology Use Agreement -- or simply an occurrence of seeds being spread by nature.

This situation has arisen in US-based Monsanto's lawsuit against a 68-year-old Canadian farmer it accuses of planting one of Monsanto's varieties of canola without its consent. The farmer, Percy Schmeiser, claims the seeds were blown by the wind into his fields planted with conventional canola. Since it is hard to tell the difference between transgenic and conventional plants, he did not realise that genetically modified canola was growing on his farm. The incident occurred in 1997 and, like many farmers, Schmeiser saved part of the seeds for his 1998 crop, when he unknowingly grew both kinds of plants. The Financial Times reported that Schmeiser "sees no reason to be penalised for an accident of Mother Nature." Monsanto, on the other hand, claims that this is a case of patent infringement and that it will defend the use of its technology, in order to recover the billions of dollars it spent on research and development. The Canadian press, as it follows the story, has used it as an example of the degree of control that biotechnology companies can exert over their own clients and others.²⁶

In the absence of a natural mechanism such as hybridisation to protect genetic secrets better than patents (since it is nearly impossible to keep most farmers from saving part of their harvest for replanting), the industry has tried to incorporate another form of biological protection into seeds through the so-called "Terminator" gene. This "intelligent" gene is able to sterilise cultivated grains to keep them from turning into fertile seeds when they mature. "The process of creating the Terminator gene is based on the transfer of the gene for an 'assassin' toxin from one plant to another. The toxin 'kills' the seeds. Since a certain number of seeds must be produced by the seed company, the scientists also insert a DNA blocker that can suppress production of the toxin. Before they are sold, the seeds are bathed in a solution to induce production of an enzyme able to remove the blocker. After the seeds are planted and the crop matures, the plants produce the toxin to kill the new seeds. Farmers interested in raising a similar crop the next year must by seeds again."²⁷

Open-pollinating species of Terminator plants may or may not sterilise neighbouring fields as well, but the main objection to use of the Terminator has come from farmers who refuse to be held hostage to those companies' price policies. In October 1999, Monsanto announced that it was closing down its research on the Terminator gene, in response to the feedback that it not only would be rejected by farmers but that it was also largely responsible for the company's negative image in the view of consumers in general.²⁸

If transgenic plants are released, we will see a growing duality between "integrated" and excluded farmers. The combination of new laws with more severe control over the use of seeds will make elite varieties less available to small farmers either through the informal sector or through the traditional co-operative retail outlets. Meanwhile, the public sector and co-operatives are no longer independent plant breeders, but junior partners to the transnationals in the development of transgenic varieties. With the release of transgenic seeds, small family farmers may be restricted to the use of ever less productive and less adapted genetic material, thus hastening their expulsion from major grain-crop production. We should recognise, however, that in Brazil this process of exclusion of small farmers from major commodity crops is already well underway, even before the introduction of transgenics.

Opposition to transgenic food has had an unexpected impact on the organisation of the production chain of grain and oilseed commodities. As far back as the 1980s there was already talk of "identify-preserved" (or "IP") products, vis-à-vis transgenics. If the introduction of genes into a variety meant adding special qualities, the market would need to preserve its identity in order to charge a higher price. In a commodity segment, this would require the segregation of planting, harvesting, storage and transportation activities, all the way to the final consumer.

The first generation of transgenic crops, though, only offers agronomic traits. In response to the growing opposition of actors on the demand side, the seed companies' strategy has actually been to avoid separating transgenic from conventional grain. Ironically, it is the technology's opponents rather its proponents who have now taken on the burden of preserving the identity and certifying conventional crops, in order to sell them at a higher price than transgenics.

We cannot analyse this strategy simplistically, thinking for example how it might strengthen "conventional" farmers by creating a polarisation between transgenic and organic products, conceivably more favourable to family farmers. Adoption of a "premium-price" market strategy for non-transgenic crops in fact demands the creation of reverse identity preservation, which -- for farmers -- means obligatory purchase and use of certified or fiscalised seeds. This prospect is a threat to the informal seed sector and to the community sharing of seeds among neighbours, with the negative impacts to be born above all by small farmers, unless they can organise to supply these new "IP" markets. In any case, the informal seed market which has been so important for many cultivars in several Brazilian States, will be seriously set back or even put out of business.

Another issue to be faced is the matter of lower production costs, which has been the basis for US, Canadian and Argentine farmers preferring transgenic seeds. If that cost reduction (particularly in terms of spending on insecticides and herbicides) does not bear out and/or does not hold up over time, then the superiority of transgenic crops cannot be sustained. This suspicion -- that production-cost savings are not significant or cannot be sustained -- may partially explain why transgenic seed sales in the United States (except for Bt cotton) have levelled off or declined in 2000, after years of spectacular growth.

Finally, all the arguments in favour of exploiting a market reserve for non-transgenic products -- in which Brazil is the world's only major grain exporter yet to authorise their marketing and thus still a viable alternative for "rebel" markets like Europe -- have not convinced public or private research institutions to redirect their priorities.

Having adopted the conditions of UPOV-78 with regards to the long-standing "farmers' privilege," including specific provisions for small farmers' associations that donate and exchange seeds in their communities, Brazil's Cultivars Act at least formally holds out certain aspects that can protect small farmers against the rigours of this global plant-breeders' rights system.

In practice, however, the weight of a strengthened seed industry speaks louder than such an exception. Reality is that: (i) the public sector has shifted its priorities, (ii) the co-operative system has been weakened, (iii) seed production has become a subsector of the farm chemicals industry, and (iv) seed companies are imposing a much more direct, contractual relationship with farmers as they release their transgenic seeds. All of these latter factors promise even greater intensification of the processes that have been excluding family farmers from major commodity markets.

Meanwhile, Brazilian experience shows that, in some categories of irrigated fruit and vegetable production, family farmers are more competitive because of the importance of manual labour (in sowing, weeding, harvesting, etc.), and that the agglomeration of small farms is the best option for achieving economies of scale. Several export companies in north-eastern Brazil prefer to contract with small, irrigated farms, including many who have been settled by the Agrarian Reform program. In this case, a change to transgenic plants would not necessarily affect their preference for contracts with small farmers. These segments are supplying some of the most dynamic areas of the food industry, and enjoy quite optimistic outlooks for exports, as well as for the expansion of domestic markets. Tropical fruit production, in this context, highlights the competitivity of regions like northern and north-eastern Brazil, where most of the country's small farmers live.

Growing consumer interest in the environment and health has brought new regulations and markets that offer optimistic prospects for the competitive participation of family farmers. New and dynamic markets are emerging, for example, around "geographical indications" (appellations d�origine) which provide a strong identification with traditional forms of production. In many cases, this involves the defence of labour-intensive forms of processing farm produce, without questioning the origins of the raw material. Their association with organic farming, nonetheless, is on the rise and will make it very hard for transgenic inputs to be accepted in these markets.

There are also important examples of new niche markets already built around "exotic" crops such as wild rice and Aztec cornflakes, or "Inca" branded food from Bolivia and Peru. There is a clear marketing association here with pre-Green-Revolution genetic bases and peasant production models. These are market trends that work in favour of small farmers, enhancing esteem for traditional knowledge and genetic bases.

In cases where value focuses on a plant's health or functional qualities (such as secondary metabolites), however, the implications may be more dubious. The discovery of such properties, valuable independent of their form of production, can have negative impacts on the plants' original producers. New markets may shift these crops' out of their original settings, modernising their production à la Green Revolution, and subjecting such species to corporate plant-breeding. In extreme cases, perhaps suggestive of future trends, the value placed on exotic germplasm may give rise to biopiracy (for example, the emblematic case of Basmati rice from India), based on a genetic make-over allowing them to be patented. In this case, access to export markets by the original producers might even require the payment of royalties to usurpers and, ultimately, new production bases could also be developed to replace centres of origin.

We have seen how emerging markets may offer favourable prospects for adding value to traditional genetic material, although this process may end up creating new threats. Two factors in the global regulatory framework, highlighted in the previous chapter, deserve attention in this context.

First of all, there is a recognition that the in situ conservation of genetic resources is at the very least an essential complement to the international network of seed banks. Second, there is a growing recognition of the fact that conservation is an active process of long-term, collective innovation carried out by local communities. The interaction between the work of local communities and the seed industry and/or the public system for plant breeding and seed marketing varies from one country to another.

In India, for example, as well as indigenous regions of Latin America, local communities have a great degree of autonomy in organising their own seed markets. The strategy to be developed there is to recognise collective rights over the intellectual production of local communities.

The principles behind such rights are well illustrated in the Community Intellectual Rights Bill drafted in 1994 for the Karnataka region of India, directly derived from provisions of the Convention on Biological Diversity. The Bill's notion of innovation -- radically different from concepts underlying the UPOV system or patent law -- is a collective and cumulative process in which the innovator is the local community. Innovation here refers to all the knowledge and technologies accumulated in the community, whether documented or not, as well as any improvement in a species or the components of a plant, domesticated or not, whose use is based on such knowledge. The community, or an organisation registered to represent it, owns the innovation, although other communities may be co-owners and the state is also a co-owner for purposes of negotiating rights with others. Access for non-commercial use is free, but communities may charge royalties (20% on gross sales) for commercial use, through non-exclusive contracts. No individual patent or other form of IPR protection granted for a community-held innovation may be recognised. Even if an innovation is not registered, the community can claim retroactive rights over its use.

This kind of legislation could be directly applied in Brazil's indigenous communities. The concept of collective rights is more difficult to apply to family-farming communities, however, where the formal seed market already permeates all cash crops. Yet the CBD's notion of in situ conservation opens the way to the recognition of this activity in areas where traditional varieties are still grown.

Communities served by NGOs such as the AS-PTA²⁹, whose priority is on developing a regionally-adapted traditional genetic base, are good examples. Communities or groups of farmers in these areas could be registered by public authorities as farmers committed to farming with traditional cultivars. Access to their genetic resources would be free to plant breeders, and the public system and seed industry would be responsible for remunerating their conservationist work to the extent that it implies financial sacrifice for the farmers. They would thus be making a two-fold contribution quite in line with the concept of multifunctionality now being negotiated internationally by the European Union. From another outlook, these farmers could be seen as complementary multipliers of a Genetic Resource System encompassing in situ conservation and plant breeding.

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1 | Selection/separation, using sieves.

2 | The science which studies soil.

3 | The seed multiplication rate is a measurement of the volume of seeds needed to plant one hectare. For some species, 20 kg are enough, and there is a high multiplication rate, such as with corn, sorghum and sunflowers. For others, as much as 100 kg of seeds may be needed, such as for wheat, barley, etc. Although plant breeding can improve this rate, species differences are significant and will never be overcome as long as seeds are used as a vehicle for propagation.

4 | Explain the calculation of the seed-use rate.

5 | Explain the calculation of the seed-use rate.

6 | Explain the calculation of the seed-use rate.

7 | Explain the calculation of the seed-use rate.

8 | Explain the calculation of the seed-use rate.

9 | Explain the calculation of the seed-use rate.

10 | The information on Agroceres is from a 1990 report by the UN Economic Commission for Latin America, ECLA.

11 | Embrapa's hybrid and variety seeds are registered under the BR trademark, followed by a number, for example BR 201.

12 | In this group, only Asgrow is diversified, as it also produces green-vegetable seeds.

13 | These companies do not have germplasm and do no plant breeding of their own, but rather depend on publicly-bred material.

14 | Explain the concept.

15 | Full TRIPs text available from the WTO at: http://www.wto.org/english/docs_e/legal_e/27-trips.wpf (WordPerfect) or http://www.wto.org/english/docs_e/legal_e/27-trips.pdf (PDF).

16 | TRIPs Article 27: Patentable Subject Matter. 3. Members may also exclude from patentability: (b) (article 27.3 (b)): plants and animals other than micro-organisms, and essentially biological processes for the production of plants or animals other than non-biological and microbiological processes. However, Members shall provide for the protection of plant varieties either by patents or by an effective sui generis system or by any combination thereof. The provisions of this subparagraph shall be reviewed four years after the date of entry into force of the WTO Agreement.

17 | "Sui generis" means unique or of its own gender, in Latin. Sui generis rights are legally-recognised rights adapted to specific subject matter which by its own nature does not fit the general rules for classic intellectual property (patents, copyrights, trademarks, etc.). A few examples of this kind of special rights include integrated circuits in computers, electronic data bases and new plant varieties. In this sense, sui generis rights are simply variations on conventional intellectual property rights (IPRs). The WTO agreement on IPRs (TRIPs) obliges member countries to establish monopoly rights over new plant varieties, through patents or some effective sui generis system. Thus, if a national system is not recognised as being "effective," the country may be subjected to sanctions, as part of the WTO's dispute-settlement system. This means that countries must design their own national laws or adhere to an existing convention, such as UPOV. Therefore, some form of IPRs must be adopted by countries which did not previously allow for monopolies over plant varieties.

18 | Texts of the UPOV Convention (Acts of 1961, 1978, 1991) available from UPOV at: http://www.upov.org/eng/convntns/index.htm.

19 | Full text available from the Convention's site at: http://www.biodiv.org/chm/conv/default.htm.

20 | English version available at: http://www.inpi.gov.br/indice_9279.htm.

21 | English version available at: http://www.agricultura.gov.br/snpc/eng2000.htm.

22 | English version available at: http://www.agricultura.gov.br/snpc/eng4000.htm.

23 | An exceptional recognition of rights to protection over cultivars already on the market at the time the new law comes into force.

24 | The law and the two decrees are available for download at http://www.mct.gov.br/ctnbiotec/law8974.htm.

25 | [The term used by the government's bill is actually patrimônio genético. In Portuguese, the term patrimônio has two meanings: heritage or assets. Since the government's defence of its bill has placed a clear priority on the market value of genetic resources (as opposed to some historical, collective, or intrinsic value), the more precise translation in this case is "assets."]

26 | As reported in "Panorama Setorial", Gazeta Mercantil, Biotecnologia, Alimentos Transgênicos, (Volume I), pg.156, October 1999.

27 | Idem, pg. 157.

28 | In England, the company was actually nicknamed MonSatan, and a major anti-GE food campaign was built around the company's image. The key point was that consumers gained a more extensive grasp on the agro-food chain as they identified its links and began to follow the trail of transgenic seeds through the entire food chain that uses them.

29 | AS-PTA, Consultants in Alternative Agriculture Projects, Rua da Candelária 9, 6� andar -- Centro, 20091-020 Rio de Janeiro, RJ, Brasil; e-mail [email protected].