Strategic change through sensible projects

World Development, Vol. 24, No. 9, pp. 1539-1550, 1996 Copyright 0 19% Elsevier Science Ltd Printed in Great Britain. All rights reserved 0305-750x196 $15.00 + 0.00

Pergamon

Strategic Change Through Sensible Projects CORALIE

BRYANT*

World Bank, Washington, DC, U.S.A. Summary. - While economists in donor agencies and within developing countries otten define the strategic agenda, when getting results on the ground matters and implementation is valued, professional development managers are needed. Institutional analysis should be done during project or program preparation with attention to what is needed for implementation - this results in a more sensible design. Using land reform in Northeast Brazil - a strategic issue - this article looks at the institutional requisites for market-based approaches to land reform to illustrate the importanceof the role of the develop-

ment manager/institutionalspecialist.Copyright0 1996Elsevier Science Ltd

1. INTRODUCTION This article explores the relationships between institutional development conceived as rules (policies, norms), roles (learned behaviors) and structures (formal and informal organizations) and strategic change conceived as asking fundamental questions and charting long-term goals (in light of external and internal data).’ In development practice and theory, given the hegemony of economic approaches, and, more specifically, economists in donor agencies, macroeconomic variables (exchange rates, intemational trade and capital flows) usually define the strategic agenda for decision makers, both in the developing countries and within the donor agencies financing development. All too often there is not much institutional analysis undertaken to address the actual implementation and operationalization of strategic change. “Sensible” project means what it connotes: sturdy, straightforward projects that are not overly ambitious, or comprehensive and complex with multiple aspects and activities which confound implementation. The size of a project may reflect its complexity. Mega projects, costing over US$2CKl million, for example, invariably involve building capacities in several ministries and agencies simultaneously while also linking them to local-level governments and/or municipalities. The complexity of such operations can mean that there will be neither the time nor the attention committed to achieving actual operationalization of the changes written into the project documentation. The end result may then be that only those policy changes that can be mandated by edict are implemented. Development management, a field of inquiry and experience, has much to offer to improve country and

donor performance in the actualization of change. Yet often the borrowers and the donor agencies draw upon development management professionals only after the program or project has been initiated and capacity problems are hampering implementation.* Throughout the development process several interrelated issues limit achieving results on the ground: (a) a shortage of professional development management specialists, (b) too few professional development management specialists working on the design of strategic change, and (c) too little timely attention to that which is needed in order to secure implementation. For development management specialists, there are additional questions, for example, how to position institutional work in dialogue with macroeconomic work early in the process of designing strategic reform, how to draw attention to implementation in the absence of organizational incentives, and how to position institutional issues on the development agenda. In international development, economists hold hegemony and economic analysis determines the subject of strategic policy reform. In most countries the core questions will center on trade, exchange rates, stabilization and adjustment. Within borrowing countries, the Ministry of Finance and the Central Bank are in charge of macroeconomic policy and determine a major part of the allocation of resources. Yet actual implementation of policy change requires attention to a wider range of variables beyond the core economic variables of exchange rates, prices, and trade and

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*None of the opinions expressed in this article should be attributed to the World Bank. They reflect only the personal views of the author.

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capital flows. For example, organizational capacity within sector ministries, the legal framework for private sector development, and the ownership by stakeholders of the changes proposed are also key to achieving sustainable strategic change. Implementation is a task for the decision makers within the borrowing country. Donor agencies financing change assume, rightly, that implementation is the responsibility of the borrowing country. For the borrower, however, the fact that the design and preparation of the project paid little attention to institutional and organizational incapacity results in several quandaries. It complicates positioning decision makers in order to bring about the policy reforms sometimes conditioned by external financing. Similarly, those decision makers’ lack of influence can impede the policy reform process. Meanwhile institutional specialists in the donor agencies are often not able to flag for the macroeconomist the institutional impediments that the recommended changes will encounter. The choice of modalities, often decided before the institutional specialist is asked to join the team, precludes the array of approaches available to improve implementation. This issue lies at the center of the implementation problem - achieving results -in development work more generally. Macroeconomic policies establish the context within which the economy functions - or misfunctions - and create the incentives around which sectoral projects operate. While some policy changes can be done with “a stroke of the pen,” most are not selfimplementing. On the contrary, there is much to be done into order to carry forward the multiple and iterative tasks that cumulate and result in implementation. It is here that the development manager or institutional specialist is most needed in the development process. This article explores the roles and needs for the professional development manager in both designing and implementing strategic change, arguing that the inclusion of this perspective often leads to more sensible projects. Involving development management specialists after the design work has been done is less likely to achieve the same results as engaging them in the design in the first place.3 This often so despite the fact that implementation is not the highest priority for donor organizations, and that there are too few incentives within these organizations to change staffing patterns, incentives, and their own long-term goals4 The case material will draw on recent experience in undertaking sector work on land reform in Brazil in order to prepare for project lending. Since the author was working in the World Bank, the material reflects primarily Bank experience. The central argument is that institutional development is central to the effective implementation of strategic change and hence that professional development managers are needed -

both within the organizations and agencies in the developing country and in the donor agency that finances the components of strategic change.

2. DEVELOPMENT

MANAGEMENT

Development management, in contrast to economics, is largely an inductive field. There are differences of approach, methodology, and even epistemology among social sciences generally, and between management and economics particularly. Management focuses on “how” questions, on the modalities needed to solve problems and implement change. Economics comes at a problem with a focus on the logic of choice and the metric of money, and an assumption that sound analysis will result in policy choices. Little attention to process is required. In development management, that which is known has often been learned experientially, and usually from the bottom up, with a focus on a project or a program - and on the interdependence of product with process (Korten, 1980,1983; Bryant and White, 1982; Hyden, 1983; Brinkerhoff and Klauss, 1985; White, 1987, 1990). Development management theory, as a result, is less elegant than economic theory, especially as it carries assumptions of contingency -that which is to be done is contingent upon context and opportunity. The cases written over the years have analysed how various parts of programs or projects could be made to work more effectively (Ingle, 1985; Honadle and VanSant, 1985). Particular specializations stakeholder analysis, institutional assessments, conflict resolution - moved the field’s cutting edge forward (Brinkerhoff and Goldsmith, 1990). More was learned about how to strengthen core management functions such as personnel management, financial management, and budget systems. In practice, institutional specialists have worked on smaller canvases, building the knowledge base experientially and incrementally - drawing eclectically from other disciplines. In order for institutional development to have a role in strategic change, institutions through which policies are made, must be as central to the economist as they are for the institutional specialist. The dramatic changes following the end of the Cold War have brought to the fore a series of new questions about institutional requisites for countries in transition to market economies. The relationship between the public and private sectors is being reexamined, along with their respective roles in reducing poverty. Legal and regulatory frameworks have to be constructed and put in place to enable markets to function. The new focus on private sector development has been accompanied by sharp reductions in the public sector. Yet poor people suffer from both bad govemments and distorted markets; attention therefore must

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go to both sectors, with special attention to their interaction. Conceiving of public sector management as wholly distinct from private sector development neglects the enabling role that public sector institutions (rule of law, judicial administration, contract enforcement, private property rights) play in private sector development.5 Robust markets require effective public institutions. A poverty-reduction strategy needs both feet in order to stand, in large part because poor people also need secure private property rights. Within many sectors, institutional choices also determine strategies. For example, the decentralization of the early 1990s in several South American countries has required the strengthening of state-level institutions. In the land reform case which follows, it becomes apparent that future choices for strategic land policies are often determined by the impact of statelevel institutions.

3. CLARIFYING INSTITUTIONAL DEVELOPMENT During the 1980s the field of development management readily incorporated the concepts put forward by institutional economics (Ostrom, 1990; Bryant, 1986; Brinkerhoff, 1989). A critical distinction was made between organizations and institutions. Donor organizations, however, did not make this distinction and continued to fund projects as though adding equipment, expatriate “technical assistance,” and training to an organization constituted capacitybuilding. While institutional economists such as Oliver Williamson and Douglass North differ, they both point to the saliency of institutions as central to the development process, and they both draw a distinction between organizations and institutions, seeing institutions as larger rules of the game within which organizations operate (North, 1990; Williamson, 1985). Those scholar/practitioners working in management or teaching in business schools focused on major components in the managerial process: organizational analysis, financial management, persoMe management, and the intersection between public and private sectors. The work of the development manager broadens and deepens when the concept of institution is regarded as including policies as rules of the game, learned behaviors, authority roles, and formal and informal organizations. The concept of institutional development similarly changes. The work goes well beyond building or strengthening agencies and organizations and turns to the implementation of policy change through the legal framework, and to constituency-building for policy change - the demand for change in the first instance. It can also be about

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replacing, countering, or undermining dysfunctional institutions (e.g., privatizing government-owned facilities, reforming parastatals). Some also argue, quite persuasively, for more attention to indigenous institutions, not just conceived as local organizations, but also as local value systems (Putnam, 1993; World Bank, 1992a; Dia, 1991,199s; Olson, 1995). Analysis of the rules of the game (the formal and informal political and policy rules goveming behavior) of the functions performed well, and of institutions becomes essential. dysfunctional Dysfunctional institutions are to management analysts what policy distortions are to economists, that is, institutions with perverse incentives undermining more optimal outcomes. Every policy, economy, and society has at least a few (corruption, subsidy policies with perverse incentives, or customs policies that cripple trade are a few examples). Leaders and citizens create institutions and are the central stakeholders for strengthening or replacing them. The process of changing institutions, especially since they are usually valued or useful to stakeholders (even when dysfunctional - e.g., corruption - in terms of broader social impact) is necessarily sensitive. Who decides on the direction of change and its trajectory is a critical issue. The more sensitive the changes required, the more wary external financing organizations are of funding work in institutional change, and all the more so if the change is strategic institutional change, such as the land reform policies as discussed below. Institutional change that is sensitive and long term requires a labor-intensive approach with time allocated for building coalitions in support - exactly requirements that complicate the role of an external financing organization. Donor agencies prefer interventions on safer terrain with readier performance indicators of success. Most institutional change necessarily involves participatory processes. Because they are socially generated, institutions are reinvented, restructured, or replaced altogether through social processes. If institutional change is not wanted either by several different interests in a society, or by at least some well-positioned interests, it is not likely to happen. The exceptions are scientific inventions or high technological change. (No one “voted,” held a plebiscite, or developed consensus on, for example, the introduction of the combustion engine, the microchip, hybrid seeds, or the birth control pill.) But in institutional and organizational change, key stakeholders need to “own the logic” for the organizational change initially - not just after it is introduced - if it is to be implemented and sustainable. This is more challenging since the full stream of benefits from a change may not be apparent at the initial stages. One of the leading intellectuals at the World Bank, Ismail Serageldin, argues that it is unfortunate that there is no integrated social theory for the other social

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sciences that tells as complete a story as economic theory provides for economists in regard to development (Serageldin, 1995). There are instead bits and pieces of theory - on civil society; on participation; on decentralization; on fiscal federalism; a growing bit on governance -but these are pieces and do not yet amount to a unified powerful theory of the social and political requisites for development. While economists do disagree, there is greater convergence among them on, for example, the benefits of liberalizing economies, then there is among tbe disparate fields in the other social sciences. Nonetheless, as noted above, there has been a great deal of theory-building derived from experience in regard to institutional development, capacity-building, and organizational change - all central topics in the field of development management - and to the management of strategic policy reform (White, 1991; Brinkerhoff, 1994; Crosby, 1991). To illustrate the operational implications of this argument, this article turns now to a project and some sector research to explore tbe relationships between strategic change and institutional development by looking at the research on land markets as a more effective approach to land reform.

4. MARKET-ASSISTED

LAND REFORM

Land policies evoke strategic issues as they raise fundamental questions with long-run implications for the distribution of rural assets and for agricultural productivity (Lipton, 1993; de Soto, 1989; Economist, 1995). In Brazil, as in many other countries, land policies have been tbe subject of nearly endless debate and the cause of serious rural violence. Land policies have clear implications for reducing poverty since they can address the major structural cause of rural poverty. Interestingly for the hypothesis of this article, the institutional issues are as central as the economic ones, thus provide a good case in which to look at the respective roles for the institutional specialist and the economist in strategic management, inside the borrowing country, and inside the external organizations financing change. Extreme inequalities in land ownership, and limited access to land by smallholders, are known to be central factors contributing to rural poverty in Brazil (Kutcher and Scandizo, 1981; Hall, 1990). Efforts to redress these factors have demonstrated little success, especially when they were sweeping state-driven initiatives. Yet it is known that extreme concentration of land ownership impedes efficient economic agricultural performance and productivity. There are also social and political consequences of extreme inequality in land ownership since it reinforces the power of large latifundia to maintain economic rents and distortions in public policies in their favor (Howe and Goodman, 1992). In an increasingly competitive

international marketplace, approaches that create incentives for competitiveness and more robust markets are essential. As Brazil is undergoing market liberalization and serious economic reform, the land policy questions have renewed relevance. In the past, bureaucratically heavy, state-driven approaches to land distribution were found to be ineffective, cumbersome, and all too often relatively easy to circumvent or corrupt. Recent work on other countries, however, now points to the possibility of working through markets rather than bureaucracies to secure more efficient land allocation (Van Zyl, Kirsten and Binswanger, 1995). A willing buyer-willing seller approach to land distribution is significantly less bureaucratic and can improve the distribution of land. A market-assisted land distribution system requires, however, some special institutional components. A discussion of land markets cannot neglect these institutional requisites without seriously jeopardizing the implementation of land reform. Pointing out that most economic analyses do not include institutional analyses, Gershon Feder notes that property rights are an important class of institutional arrangement and institutions cannot be omitted without seriously distorting the analysis (Feder and Feeny, 1991). Thus here we have a case where the economist needs the institutional specialist, and the institutional specialist’s focus on strategic management requires that certain issues be considered during a project design phase. Brazil has one of the most unequal land distribution systems in the world. The majority of the land, 88%, is in the hands of the wealthiest 20% of the rural population; the bottom 40% of the population share only 1% of the land (IFAD, 1993). Brazil’s highly unequal land distribution is one of the country’s most serious problems, especially in the Northeast (Andrade, 1980), because it exacerbates rural poverty and limits the potential for more robust agricultural growth. About 54% of all tbe country’s poor live in the Northeast; the region has the highest level of absolute poverty in Brazil. The Northeast of Brazil also accounts for the largest concentration of rural poverty in Latin America (Howe and Goodman, 1992). Life expectancy, infant mortality rates, and literacy levels in the Northeast are similar to those of Haiti, Zaire, and Honduras, even though Brazil is a middle-income country with sophisticated and wealthy urban centers comparable to any in Europe or North America. UNICEF cites a UNDP estimate that Brazil has tbe second lowest human development index and the greatest disparity in wealth distribution among middle-income countries (UNICEF, 1993). While it is known that land ownership is highly unequal, precise data on land ownership are unreliable and the absence of recent census data that were to have

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been updated in the agricultural census preclude the use of precise figures. (INCRA and IBGE, the two major federal agencies with land data responsibilities, use different definitions for categories of landowning, the near landless, and the landless. They report different totals for occupied farm area.) There is agreement, however, that the Gini coefficient of land distribution was 0.865 in 1985. Of the landowners classified as small farmers, 53% own 2.7% of the land while 0.8% of the landowners own 43% of the land (Colchester and Lohmann, 1987). In 1985, of Brazil’s total estimated 3,085,841 farms smaller than 10 hectares, approximately 64% were in the Northeast. A frequently cited figure is that over 20 million people (4.8 million families) are landless in Brazil (Colchester and Lohmann, 1993). In addition to unequal land ownership are the serious problems that complicate the process for registering ownership and establishing clear title to land, especially if one is poor. Data from INCRA’s preliminary 1992 cadastral survey reveal that the area in farms under 10 hectares (27.3% of all farms) account for less than 1% of the registered farm area. If one looks at the land held in farms that are less than 10 hectares and are owner occupied, even in these cases, only 8.7% of their area is registered. As the size of the farm increases, so too does the likelihood that an increasing portion of that land has a legal registered title. One of the major problems caused by this situation is that it constrains the investments that owners can make in land since they have little access to credit when they do not have legal title. Unequal land ownership is interdependent with limited access to credit. Without title to land, farmers most often must resort to informal (and expensive) sources for credit. Meanwhile formal rural credit policies and production incentives encourage mechanization and large-scale agricultural production. Little help was available for small family farms - even though it is also known that these account for the largest share of food production and that they also generate more rural employment. Unable to get credit, often unable to find work, the rural poor are displaced and migrate to the sprawling slums of the large cities (Kutcher and Scandizo, 1981; Binswanger and Landell-Mills, 1995). There are transactions that function as “sales” of land in the Northeast, in many instances without regular titles. People buy land in the informal market, often in order to occupy it. The land is not readily alienable, however, and ways are found to strengthen one’s claim to that land. Since the sale is in the informal market, it is also likely that the precise boundaries of the land are not legally determined. If the sale is informally undertaken there is little to prevent other claimants from appearing. Unregistered sales can also mean that an individual can “sell” land to different buyers and leave them all with competing claims. In

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those cases, the first one through the gate to registration is the winner. Yet this impedes a market since it is widely known that multiple sales to multiple purchasers can take place. Furthermore, prices of unregistered land are lower than for registered land.

5. LAND REFORM AS PROPERTY RIGHTS FOR THE RURAL POOR Markets have clear advantages for land distribution: greater efficiency in allocation, and lower transaction costs. A more open, competitive, and efficient land distribution system would require institutional changes that allow the rural poor to have property rights. Exclusive, transparent, alienable, and enforceable private property rights in land are not in place, and the current system only works for those who are not poor (Feder and Feeny, 1991). Below we turn to the specific kinds of institutional changes needed to move toward a more open, competitive market in land and one that ensures that the rural poor have property rights. It also needs to be underscored that too few professional development managers have been or are currently engaged in working on the design and implementation of land reform programs. Long the purview of agricultural economists, this particular strategic issue has not been one in which the development management field has made its contribution. Yet here is an instance in which the institutional issues are key; the implementation of the reform requires close attention to a series of simultaneous structural, rule and role changes. Specifically, for a market-based approach to land distribution there must be: attention to titling and registration processes; open price competition; credit, collateral, and debt collection institutions; freedom to contract and contract enforcement; financial assistance for low-income purchasers; and dispute adjudication or conflict resolution institutions.

(a) Titling, tenure security, and registration rights A “willing buyers-willing sellers” formal land market requires that the sellers can certify that boundaries have been demarcated and that the land in question is legally owned by the seller. Buyers are not as willing to buy land unless those characteristics pertain. In general, formal ownership of land is recognized through registering a land purchase and obtaining a title. Since in the Northeast none of the steps in this process are straightforward they must be put in place. In theory all land belongs to the national patrimony unless it has been deeded to a local government or to landowners through one of the many successive land

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grants or deeds since the 1500s. Land records are notoriously unreliable, difficult to retrieve, and not readily accessible to the public. There are no private sector firms which, for a fee, will undertake a title search in order to provide formal proof that the title is clear. The fundamental institution in the Northeast for registering a land purchase and obtaining title is the Cartorio. Located in almost every municipio, the Cartorio is the land registry. There are in fact three different types of Cartorios yet the first type is the authoritative registry. The position of Cartorio (or Cartoria) is, in some instances, passed from father to son or daughter, and in some municipios it is elective. It is here that, if possible, the purchaser goes in the first instance and, for a fee, has his information about the purchase transcribed by hand in the large bound books kept by Cartorios. At intervals, Cartorios then report the numbers and sizes of their registrants to relevant state and federal agencies, such as IBGE. The Cartorio is usually also an Escrivao - a kind of notary. In more remote areas, the first point in the registering process may take place through the Escrivao. Cartorios keep their records chronologically, and by hand. In the Cartorios visited, there was no indication of an information retrieval system. In short, if one wanted to do a title search, one would need to know in which municipio the title was registered and the month and year in which it was inscribed in the big bound book. While Cartorios have a table of costs which are intended as the legally constituted fee for registering land, there is no regular supervision and no recourse for the small land purchaser who, at the whim of the Cartorio, may be told that the requisite fee is substantially above his means. The system is so old, and entrenched, that when during interviews one questions this monopoly power, the response is a resigned acknowledgement that this is just how it has always been. The Cartorio system is, however, not the only reason why there are so many farms without registered titles. Boundaries may in earlier times have been demarcated by site specifications not recorded on cadastral maps. Even the extent of registered public land held either by the federal government or the state or municipio governments is not known. It is often argued that public lands are concentrated in parts of the Northeast, especially in Maranhao, but data depicting relative shares held by different levels of government are unavailable. Different organizations are responsible for different levels of public ownership. INCRA is responsible for federally owned land; state and municipio owned land is managed by state and municipio agencies. The relationships between the INCRA State Superintendencies and the state’s land agency are complicated by the often overlapping or concurrent

authority given under different laws. The precise procedures for demarcating and discriminating land (dividing off parcels of publicly owned land) vary by state and locality, but they are often not clear, especially in frontier states or in the Northeast. The legislative history of land ownership in Brazil is dense, layered as it is with different legislative initiatives under the mantle of agrarian reform over the past three and a half decades. Land invasions - collections of squatters who move onto land which they occupy with, or without, an intention to later lay claim to it - are an important informal institution. There are several different kinds of invasions: ones that squatters undertake themselves, ones that are invited by a larger landowner as part of that owners strategy for clearing parts of land he hopes later to claim, and ones undertaken by a landowner to move in settlers to clear land he already owns. Land possession in Brazil is rooted in the political economy of its frontier regions. Three patterns exist with different aspects of the problem. First, there are the state-encouraged colonizing efforts in which colonists are induced to migrate and settle in the frontier regions with promises of access to land. The second pattern is one in which farmers demonstrate that they have cleared land in order to put it into production - thus they can claim ownership rights. The third pattern is one of land speculation - large tracts are “bought” for small amounts because the title is unclear; squatter invasions are encouraged; the “owner” then asks the state to expropriate the land to clear the title; the squatters are then asked to pay the owner since he now has title. As noted, land registries at the local level vary in their capacities to track and record titles and to retrieve the information as needed to resolve competing claims. At their worst, these incapacities stop the market from functioning at all - informally or formally. Furthermore, there are divided responsibilities between INCRA and the management responsibilities of state land institutes along with a three-tiered channel for funds of projects dealing with a land component - Federal treasury, Ministry of Interior, INCRA, and their state-level superintendencies - cramps effective land registration and titling.

(b) Transparency andprices In general, investors and lendors need markets with enough transparency so that their information costs are not prohibitive; purchasers need competitiveness in order to have a chance at fair prices. In the instance of land markets, for example, public access to registries assists land markets since they establish titles. When searches for title information are not possible, markets become distorted; informal markets flourish given the ambiguity. As pointed out in a

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recent note, “A registry system that is open to the public and inexpensive to search makes it easier to determine the priority of security interests and thus the riskiness of a loan” (Fleisig, 1995a, p. 2). In the Northeast, registries can be searched only with official permission that is difficult to obtain. The data within them are not organized for ease of retrieval. Often the registries themselves do not detail the formal legal standing of the titles they have within their data banks. The result is that credit prices interest rates are affected. Furthermore, land parcels that can demonstrate clear title command higher prices. In this manner, prices do not reflect competitive interaction between demand and supply, but rather the selective access to scarce information about what is being sold, by whom, and with what competing claims.

(c) Credit, collateral, and debt collection Land titling and registration is directly related to the availability of credit because of the role of land ownership to act as collateral. But land to which one does not have title, even though the producer has been farming it and his use of it is informally accepted, cannot be used as collateral. This is why access to land is correlated with the access to credit. Banking regulations in civil code countries are very specific about what can be treated as collateral in bank lending. Banking regulations vary by type of bank, and by state and federal laws. In some instances state bank regulations governing collateral are affected by state laws aimed at encouraging small farmer access to credit. Problems with debt collection determine the availability of credit. Willing lenders become less willing if there are high transaction costs associated with debt collection. If courts are the only recourse for lenders, the queue for courts is long, and prospects for collection slim, lenders cease to lend. Needed are small claims courts, private organizations that assist with debt collection, and a legal framework that reinforces clear, enforceable debt collection. The current high rates of farm debt in Brazil underscore the salience of this issue; current research underscores the problems that flow from rural indebtedness (World Bank, 1994a). This rural indebtedness crisis reached new heights in 1994-95 and led to a Commission of Inquiry appointed by the First Secretary of the Brazilian Senate. The Report of the Commission of Inquiry (authored by representatives of large landowning interests) argued that the problems of rural debt are very serious and that previous efforts by farmers to renegotiate their debt only led to a steady worsening of their problems. The report of the Commission of Inquiry concluded with several recommendations, most of which were directed toward further extensions of guaranteed

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minimum prices for farm products, more credit, extending sufficient financial resources to transform the debts of smaller producers as a responsibility of the national treasury, and reformulation of the norms for the constitutional funds supporting farmers with a sliding scale for monetary correction. As several members of the Commission of Inquiry were wellestablished leaders of large farmer associations and their interests, the recommendations for dealing with this debt by extending and renegotiating were to be expected. The direct confrontation that followed between the Congress and the newly elected President illustrated the influence of rural interests and large landowners. The Congress passed a law revoking the reformed interest rates on rural debt and pegged them instead to a much lower rate determined in part by the price of farm products. The President vetoed it; Congress overruled the veto. Canceling use of the indexation for inflation on agricultural loans will cost the Bank of Brazil R$ 1.8-2.5 billion to be absorbed by the Bank of Brazil, and ultimately by the Federal Treasury. In effect this decision demonstrates the capacities of the largest landowners not to repay loans from the Bank of Brazil. While the majority of smaller farmers lack access to credit, the Bank of Brazil by the spring of 1995 had lent R$ 15 billion to a total of 331,000 farmers of which 313,000 paid, or are still paying their debts on time. But 18,000 large farmers (5% of the borrowers) were in default, owing the Bank of Brazil R$3.3 billion in April 1995. The greatest share of this debt, approximately R$ 2.3 billion, is in the hands of 1,276 large farmers. As one goes up the scale, an ever smaller number of farmers control a larger share of the unpaid debt. The top 100 rural merchants represent 25% of the total debt in default; the largest merchant alone owes R$67 million.

(d) Freedom to contract and contract enforceability The rural credit crisis leads one directly to the issue of the enforceability of contracts. An atmosphere of acknowledged noncompliance or nonenforceability of contracts undermines markets. When contracts cannot be enforced, exchanges are greatly impeded. The lack of enforceability of contracts, or the capacity to circumvent a contract through the use of political influence, increases the use of alternative informal methods to secure compliance, such as special deals or special arrangements. As the Bank’s Private Sector Assessment for Brazil points out In its everyday application, this capacity is known in Brazil as the j&o; the nearest translation is “wangel,” and its diminutive, jeirinho, expresses the Brazilian affection for this institution. The jeito incorporates the Brazilian ingenuity in circumventing, within or without the law, the maze of rules and laws that may obstruct the

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timely solution of a particular problem (World Bank, 19!34b,p. 84). In a civil law context, contracts as instrumentalities are restricted to that which the law allows. If the law does not provide for a class or category of contractual rights, they cannot be presumed to be contracted, nor will a court enforce the contract. (In contrast, in a common law context, any contract is presumed enforceable; only that which is legal can be the subject of a contract.) Civil law contracts are only available for adjudication when the law governing that class of activities has been specified, often through implementing regulations. Contract enforcement institutions are currently very weak. Most people find use of the courts so difficult and costly, that all alternatives are pursued. The result is overreliance on family and social networks, creating yet another barrier for the small farmer to increase his productivity through credit and marketing.

(e) Financing for purchasers of small land parcels Financing land purchases for modest to smallholders requires special attention to their needs. The capacity to repay financing varies; in the case of very low-income farmers, if they are to participate in a land market, some portion of the financing may have to be a grant in order that they not have too high a debt/asset ratio. Targeting a grant component through selective criteria based on the farmer’s past productivity is one way, another is using a matching grant approach that forces participants to use some of their own resources to gain access to land. There have been other cases in which a sliding scale was developed based on criteria, and the beneliciary made a co-payment. The relative shares of matching grant and co-payment varied depending upon the capacities for co-payment, value of the land, and the project budget. Encouraging groups of small farmers to form an association is another possible approach to financing; the association can determine its rules about subdividing, use and repayment. The association members, however, need to be clear about the financial debt incurred by the association and the terms for repayment. A land fund, for example, working on the model of the social funds or rural minicipio funds in current Bank projects would be the appropriate level through which to work. The advantage of a municipio land fund is that it is by definition decentralized, and most likely to have knowledge about the past farming experience of those applying for funds. The current rural credit crisis in Brazil may present the opportunity to address the need for a more efficient land policy. There may be some downward pres-

sures on land prices, though, of course, not nearly as many nor as severe had there been no roll back of the indexation. But many things determine the price of land: titling and registration, credit, market reforms, prices of products being harvested, capital costs, proximity to water, technology, and infrastructure. Nonetheless, the impact of the competition coming from the Mercosul agreement, the management of debt, and the sluggishness of the reform program may well mean that the Northeast will experience the low land prices which could facilitate movement in the land market.

(f) Dispute resolution or adjudication institutions Disputes over land rights and competing land claims have historically been severe in Brazil, especially in the North and Northeast. The current institutions for dispute resolution are limited and very bureaucratic. Needed are private entities which can undertake a variety of dispute resolution tasks, for example troubleshooting, or negotiation. In many developed countries there is a large variety of these organizations and entities listed in the yellow pages of any telephone book. Overreliance on state-staffed and supported entities results in lengthy waits and high fees.

6. DONOR ROLES IN SECURING RURAL PROPERTY RIGHTS Donors have, unfortunately, been reluctant to become involved in financing land reform. In the 197Os, the US Agency for International Development did some work in this area, most notably in Central America. This changed in the more conservative 1980s. There are limits, however, on what bilateral agencies can do; the leverage needed is generally not available when loans are relatively small. Multilateral banks, on the other hand, have become accustomed to large-scale policy and program reform lending via adjustment lending since the 1980s. Hence the possibilities of work in securing rural property rights are there, if latent. Yet, to date, the World Bank has not been very active in lending for land reform, or for inclusion of land reform components in rural development projects. On the other hand, the Bank has been active in land management projects or including improvements in land titling within either land reform projects or natural resources management projects. Among the reasons frequently given for this reluctance is the interpretation given to that part of the Articles of Agreement which proscribes against lending for the transfer of assets. This policy is, however, currently being reviewed given the scale of the land problem in several key borrowing countries. To date,

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in projects that include land reform components, the land transfers have been financed by counterpart funds. In the McNamara years, however, the Bank had a published “Land Reform Sector Policy Paper” (1975) which concluded that land reform is consistent with the development objectives of increasing output, improving income distribution and expanding employment, and that the World Bank should support reforms that are consistent with these goals. It went on to point out that land reform should be discussed in the context of rural development, and that land reform was consistent with the Bank’s objectives of increasing output, improving income distribution, and expanding employment. Sensible land reform projects - modest in size, carefully targeted, and with clear performance indicators - prepared with development management specialists working with agricultural economists are very clearly needed. The list above identifying the kinds of institutional changes required draws attention to that which could, and should, be done. Moreover, as mentioned earlier, too few institutional specialists have worked on the issue of land reform. The kinds of institutional development called for here draw the field into relatively new areas. Nonetheless, there are opportunities here for development management specialists to demonstrate the “value added” that they can bring to project preparation and to underscore their long-term and established strength in improving the chances for effective project implementation.

7. CONCLUSIONS This article explores some issues of the relative roles of the institutional specialist and the macroeconomist in the strategic management of policy reform looking in particular at land reform - and argues that sensible projects can be used effectively as the vehicle for that reform. The argument is that if one wants to achieve results on the ground, there should be a focus on that which is essential in order to implement the project. Further, designing and preparing a project with implementation in mind is best done with the assistance of someone with training and experience in development management since institutional issues invariably determine implementation. Management and organizational change often lie at the center of program and project effectiveness. To break through to results on the ground, the management sciences and institutional analysis are needed in the analysis and in the design of the interventions. While macroeconomic policies should be appropriate, development management gives the guidance on how to deliver changes in core sectors in the economy. While this case maybe self-evident to some readers, few borrowers and even fewer donor agencies are

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in fact staffed and positioned to undertake more of this kind of work. The second half of the 1990s has seen a general withdrawal of public commitment to development work in general, and to development assistance in particular. The years ahead will be very lean in terms of funding and popular support. The irony is that while the standard criticism of development assistance is that it is insufficiently effective, the very staff likely to increase its effectiveness, are the ones most likely to be cut. Assuming, wrongly, that institutional specialists are more public sector than private sector in orientation, and that private sector development is the important lead sector for the future, development management specialists are being replaced by economists. Changes in governance and the role of the state in developing and transitional economies in the past six years mean that there is a need to reassess and freshly conceptualize what must be done to improve the management of development. Private sector development and public sector restructuring constantly interact with one another, and most of the important issues are within that interaction. As we have seen in the case of land reform, ensuring that not just the rich, but also the rural poor have private property rights in land requires policy reform. Needed are open competitive land markets, with the right to land titles, enforceable contracts, and predictable processes for land claim dispute resolution. These are institutional reforms that will enable robust markets. In the case of land reform, the saliency of institutions is vital if the economic benefits from open competitive markets are to be realized. Creating an open, transparent land market requires initial investment in institutional changes with basic pieces of institutional infrastructure: land registries that function and are open to public inspection, the development of title insurance as a local business, and small claims courts for the collection of debts are essential. The core elements of the institutional development strategy in this area include the following: (a) Identify interventions at two levels: the policy rules of the game, and the roles and organizations that affect both the supply and the demand for those policies. Most attention must go to the level most likely to change either attitudes or behavior. If different levels of governance are involved, attention must be paid to that which needs to be done at each level. There may be a need to review the legal framework. (b) Work on both the supply of policy (provision of goods, services), and on the demand for policy change. Consider that which must be done in order to have the change implemented - results put in place. The demand may exist either within citizen groups, local nongovernmental organizations. and/or the private sector. (c) Decide on interventions working at the inter-

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section between public and private sectors, combining elements from both. For example, there usually are some commercial groups interested in more professional (and less political) public organizations. Potential investors may be identified who are interested in (and are a constituency for) competitive, predictable and enforceable public sector decisions. (d) Build coalitions and networks so that internal changes and external changes are communicated with lower transaction costs. When working at the field level, meet with the local nongovernment organizations as part of the strategy of underlining their importance in any network committed to change. Consider financing a regional technical network to meet at regular intervals to discuss what is working and lessons learned. (e) Building upon the most positive forces within locally valued institutions while facilitating their abilities to readapt or incorporate change is more likely to work than a “transplant and pray” approach which puts in place a foreign institution, supports it with technical assistance, and prays it will spring roots.

There is real “value added” when institutional specialists are positioned to bring to bear the strengths of the development management field. Their contributions and roles (those development specialists within the borrowing country and within the donor agency) should not be thought of as narrowly circumscribed. It is central to achieving breakthrough results that they work in tandem with the economist in the design of the project if implementation is to be considered from the start. Development management is the key to facilitating implementation and moving forward the process of actualizing the substance of the project; in short, determining long-term effectiveness. In conclusion, it can be seen that robust markets are public goods. There are roles here for those with skills in the field of development management that go beyond the earlier and older assumptions of technical assistance as a few expatriates, training, and equipment. Here development management becomes a wider and more far-reaching professional field of inquiry and practice in which the contribution by the practitioner is not only better designed and more sensible projects, but ones that are more likely to achieve lasting and sustainable results.

NOTES This definition reflects the literature on institutional 1. development, especially Williamson (1985); Israel (1987); North (1990); and Eggertsson (1990). This definition, accepted by some donor organizations, was most notably accepted by the World Bank and disseminated through its official Technical Assistance Handbook to operational staff. The core article on institutional development and institutional assessment in this handbook was written by this author. The definition of “strategic change” draws on the work of the Strategic Planning Department of the World Bank as well as the growing literature in business management on this topic. See most particularly White (1990). White’s book on implementing policy reform provided the conceptual framework for the successful project financed by the US Agency for International Development, Implementing Policy Change. In part this is, for donors, a staffing problem. The 2. World Bank, for example, has only three professionaIs in a central vice-presidency and they are dedicated to work on public sector management, a narrower and more circum-

scribed field of inquiry. Private sector development is treated, by the World Bank, as a wholly separate sector. This artificial distinction draws attention away from the intersection between public and private sector development which is at the core of development management. For another detailed example of this point in the envi3. ronmental sector see Bryant (1995a). 4. One of the more widely cited and useful accounts of these problems within the World Bank is to be found in World Bank (1992a), best known as the Wapenhans Report. For an earlier account of the organizational disincentives affecting effectiveness in the US Agency for International Development see Tendler (1975). 5. These issues were discussed in some length in the World Bank Board policy paper on governance approved in July 1991 (World Bank, 1992b). Goldsmith (1995) also points out that Adam Smith made several arguments about the role of government in the development of capitalism.

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