Building Regulatory Bodies in the Brazilian States by Adam Joseph

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Building Regulatory Bodies in the Brazilian States by Adam Joseph Building Regulatory Bodies in the Brazilian States By Adam Joseph Cohon A dissertation submitted in partial satisfaction of the requirements for the degree of Doctor of Philosophy in Political Science in the Graduate Division of the University of California, Berkeley Committee in charge: Professor David Collier, Co-Chair Professor Alison Post, Co-Chair Professor Steven Vogel Professor Christopher Ansell Professor Anne Joseph O’Connell Fall 2013 Building Regulatory Bodies in the Brazilian States © 2013 By Adam Joseph Cohon Abstract Building Regulatory Bodies in the Brazilian States by Adam Joseph Cohon Doctor of Philosophy in Political Science University of California, Berkeley Professors David Collier and Alison Post, Co-Chairs Why do some bureaucratic bodies become robust after they are created, with adequate resources and authority to perform their tasks, while others remain underfunded and limited in scope? My dissertation explores this question using multisector regulatory agencies in Brazil. Before, during, and after the development of concessions and transfer of essential services to private control in Brazil, state governments created regulatory agencies to maintain an active state role overseeing of service delivery. Though regulatory agencies followed very similar formal outlines, their post-creation development varied widely. I explain this variation. My arguments are based in political principals’ electoral incentives. I begin with an instrumental explanation of agency creation. Governors created regulatory agencies to address a combination of consumer and concessionaire anxiety where they were unable to otherwise make long-term commitments to prevent abusive price increases or expropriation. I then argue that post-creation development was most pronounced where multisector bodies focused most heavily on work in electrical energy, sanitation, and piped natural gas distribution. Mayors and city councilmembers can claim credit for service improvements in these policy areas because these services are geographically bounded. By contrast, work in intercity highways and transportation provides few opportunities for improvement for which local officials can claim credit. Agencies focused on these second set of issues do not develop a positive reputation with mayors. Governors in turn care about mayors’ opinions, and receive credible information about bureaucratic work from them, because mayors’ support is key in future statewide elections. Agency leaders who employ their positive reputation to successfully lobby for more resources and authority produce robust agencies. I explore this argument in multiple areas. First, I explain the workings of the proposed causal mechanism through a comparison between the agency Agergs in moderately well-developed state of Rio Grande do Sul and the agency Arce in the less-developed state of Ceará. Agergs’s early focus on highway and transportation regulation meant that it grew far less robust by 2010 than did Arce, which focused on electricity and sanitation. I then test hypotheses across the case universe using descriptive statistics and causal process-tracing. I expand the argument slightly to examine sectoral agencies in São Paulo and Rio de Janeiro, and hypothesize how different political institutions might affect subnational regulatory body development in Argentina and Mexico, the next-largest Latin American federations. 1 My work contributes to our understanding of the functioning of the regulatory state in the global South. I raise new important questions about local state capacity in developing countries, and propose an explanation that can be transferred to multiple cases. 2 Acknowledgements I am unable to sufficiently thank and acknowledge the help I have received in bringing this project together. Below is my brief attempt to demonstrate my oversized gratitude. I am glad I came to Berkeley to take this journey. In Berkeley were colleagues whose guidance, friendship, criticisms, and perspective made starting, revising, refining, and finishing this project possible. Moreover, they taught me to be a colleague, to offer help and hope no one noticed how disproportionately one received help in turn. I am grateful for the friendship and assistance in multiple ways of Miguel de Figueiredo, Danny Hidalgo, Lindsay Mayka, Neal Richardson, Veronica Herrera, Maiah Jaskoski, Taylor Boas, Jay Seawright, Diana Kapiszewski, Jessica Rich, Ben Lessing, Sam Handlin, Olivia Miljanic, Jody LaPorte, Margaret Boittin, John Hanley, Mekoce Walker, Kristi Govella, Lucas Novaes, Ben Allen, Brian Palmer-Rubin, Chris Chambers- Ju, Rodrigo Zarazaga, and others. Time spent with them was invaluable. I am glad I came to Berkeley to work as part of a community. I owe special thanks to advisors who helped start, inspire, and guide the project, and to those who provided the later fine-tuning that helped me keep the project on track and address flaws. David Collier, Chris Ansell, and Anne Joseph O’Connell have been there from the beginning, watching it the sausage take shape. Alison Post and Steve Vogel stepped in at critical moments with sharp on-point suggestions. Before them, Sean Gailmard and Ruth Collier were right to be critical on important sticking points, and I thank them for their helpful feedback and support. I would be amiss to rank or differentiate all the extremely generous assistance I have received. I owe these advisors debts that I am not capable of repaying. I cannot thank all of my interviewees by name, for their protection. I enjoyed every moment I spent in conversation with them, and I thank them for their time and generosity. I am grateful to Renato Boschi, Alketa Peci, and Élvia Cavalcanti Fadul for their generosity in hosting me in Brazil and for incredibly productive and interesting discussions. I owe special thanks to my wife Bethany Lacina, whose patience and support helped me along. I work hard because I am inspired by her, and want to be worthy of the support and love she provides. I dedicate this project to my parents and grandparents. In writing this project far from its intellectual home in the Bay Area, I needed a source of finance. I turned to a collection of old savings bonds, deposited for me in my childhood. I was taken aback that every adult who contributed gave so selflessly that I might have a chance to learn and go farther. My grandparents believed so strongly in the value of education as a road forward, despite having limited formal education themselves. My parents instilled the idea that there was nothing more important than to keep learning and to teach others. I am only where I am, and this project is complete, because of their love. i Table of Contents Chapter 1: Introduction 1 Chapter 2: A Theory of Robust Agency Development 2 Chapter 3: Essential Public Services Reforms in the Brazilian States 23 Chapter 4: Delegation to Independent Regulatory Agencies 43 Chapter 5: Paired Case Studies of Agergs in Rio Grande do Sul and Arce in Ceará 75 Chapter 6: Medium-N Analysis Across the Brazilian States 113 Chapter 7: Applications of the Theory 153 Chapter 8: Conclusion 168 Bibliography 171 ii Chapter 1: Introduction In this project, I explain why regulatory organizations diverge after they are created. Some bodies become robust, with adequate resources and authority to handle the tasks assigned to them by law and delegation. Other bodies are staffed, but are underfunded and inactive in enforcing the institutions for which they are created. Scholars lack an explanation of this divergence. Two examples drawn from the case universe of Brazilian state regulatory agencies illustrate this post-creation variation. Governors in the Brazilian states of Mato Grosso and Bahia both created regulatory institutions to oversee newly created concessions after neoliberal reforms in the 1990s. Mato Grosso Governor Dante Martins de Oliveira created the multisector regulatory agency Ager-MT in January 1999 to oversee the privatized energy company Cemat, the state water and sanitation company Sanemat whose physical plant had been returned to municipalities, and other public services. Bahia Governor Paulo Souto created the multisector agency Agerba in May 1998 to oversee similar companies and services in Bahia. By the end of the period under study, Ager-MT was active and well-funded while Agerba was less than fully active and under-funded. By 2010, Ager-MT in Mato Grosso was more active and better funded than its counterpart in Agerba in Bahia was. Ager-MT had successfully overseen the re-concessioning of bus lines in Mato Grosso over the opposition of bus companies, in accordance with a 1995 federal law.1 Two-thirds of its staff had entered via a competitive public service examination and thus had stability in their position. The agency scheduled another public examination for 2010.2 Its work in energy distribution regulation had won it expanded authority over isolated and generation energy systems in the state.3 By contrast, Agerba in 2010 had lost its cooperation agreement with the federal energy regulator Aneel for its lack of independence, and thus played no role in energy regulation. It had no permanent staff, and had never conducted a competitive public examination for staffers. The position of Executive Director at Agerba saw high turnover, with multiple directors resigning in disgrace.4 This divergence in outcomes affected public services. First, both agencies had delegation agreements with the federal energy regulator Aneel to oversee energy distributors. In 2000, energy supply in Mato Grosso, provided by the privatized Cemat, was interrupted on average 39.8 times per year, for an average outage of 29.22 hours. By 2010, these averages dropped: energy is still interrupted 21.9 times each year for an average outage of 28.7 hours. By contrast, in Bahia from 2000 to 2010 the privatized energy distributor Coelba went from 10.7 to 11.2 1 Interview MT4; Simone Alves, “Governo extinge concessões a 129 empresas de transporte,” RD News (Cuiabá), 25 March 2010, http://www.rdnews.com.br/noticia/governo-extingue-concessoes-a-129-empresas-de-transporte. 2 Public service examination data are from Ager-MT staff responses to a mail survey I conducted in December 2011.
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