Violence and smuggling markets Exploring the governance of illicit trade in Brazil

PhD Prospectus

Norman Paterson School of International Affairs, Carleton University

Philip Jones

PhD Supervisor: Dr. Jean Daudelin

“…men do not take risks except in the proportion to the profit they expect from a successful venture.”

- Cesare Beccaria (1738-1794) on smuggling

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Executive Summary

Brazil shares a largely porous border with 10 different countries stretching nearly 17,000

kilometers. For comparison the US-Mexico border is roughly one fifth of the length, at just under

3,200 kilometers. Brazil’s border has been a hotbed of smuggling activity since at least the

1970s, with goods moving illegally into Brazil via its neighbors (Manos and Dias: 2018). On

average, border violence in Brazil from 2000 to the present has been higher than in the rest of the

country and concentrated in municipalities with smuggling markets. However, in these markets

there have been large changes in the levels of violence over time and across municipalities

without obvious reasons for such variation. Using this region as a social laboratory, and Brazilian

municipalities where smuggling is prevalent as cases, the primary objective of this project is to

discern under what conditions and why smuggling markets become violent.

This research project contributes to the understanding of the mechanics of how illegal

markets function and the relationship between their governance and violence. Evidence on the

causal relationship between market illegality and violence remains limited, though quantitative

as well as qualitative studies exist (Beckert and Dewey 2017; Daudelin and Ratton 2018;

Garfinkel and Skaperdas 2007; Calderón et al. 2015). Although theories about the relationship

abound, there is an emerging consensus that much of the violence stems from a lack of formal

alternatives to peacefully resolve disputes and establish claims over resources (Goldstein 1985;

Reuter 2009; Skarbek 2014). Until now work on smuggling remains under-theorised and under-

studied apart from a few recent exceptions (Ahmad 2017; Rabossi 2018; Andreas 2014; Meagher

2015; Manso and Dias 2018; Chimeli and Soares 2017), without any study systematically

analysing the relationship between the governance of smuggling markets and violence.

The answers to my questions lie in the types of informal, and hybrid governance

arrangements established in border regions, involving both state and non-state actors –

introduced as a “smuggling regime”. My research project involves both quantitative and

qualitative methodologies. Quantitatively, I am using municipal-level geographic and social

development indicators to identify the main structural factors associated with violence. I will use

qualitative approaches to examine specific smuggling markets at the micro level. I intend to

analyse smuggling markets involving both illegal (e.g. drugs) and legal (e.g. electronics) to

determine how different markets operate and are governed. In order to carry out this analysis I

will conduct semi-structured interviews in different Brazilian border municipalities.

A detailed examination of the governance mechanisms used by groups to facilitate the very

large amount of illicit trade between Brazil and its neighbouring countries will help us

understand how and why smuggling markets experience different patterns of violence.

Improving our understanding of illicit economies and the factors that make some of them,

sometimes, violent can also help develop good public policy to reduce the negative economic

and social consequences of illicit markets. Considering estimates that over 60 percent of the

world’s workers, or 2 billion people, participate in the informal economy and that 90 percent of

these jobs are in emerging and developing countries (ILO 2018), this research has wide ranging

implications beyond Brazil and neighbouring countries.

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Table of Contents

A. Introductory Material ............................................................................................................. 3

1) Problem or Puzzle ......................................................................................................... 3

2) Motivation .................................................................................................................... 3

3) Research Question(s) .................................................................................................... 3

4) The Answer................................................................................................................... 4

5) Key Terms .................................................................................................................... 4

B. Identifying What We Know ................................................................................................... 4

6) Literature Review ......................................................................................................... 4

C. How I Will Make My Contribution........................................................................................ 8

7) Theoretical Framework ................................................................................................. 8

8) Hypotheses.................................................................................................................. 10

9) Methodology ............................................................................................................... 10

10) Outline of the Dissertation .......................................................................................... 15

11) Ethics Implications ..................................................................................................... 16

12) Feasibility and Timeline ............................................................................................. 16

Annex I: Maps........................................................................................................................... 20

Map of South America .......................................................................................................... 20

Homicide Rate Map of Brazil ............................................................................................... 21

Map of Brazil and Case Study States .................................................................................... 21

Homicide Rate Map of Case Study Municipalities............................................................... 22

Annex II: Preliminary Illustration of Foz do Iguaçu’s Smuggling Market .............................. 23

Annex III: Preliminary Bibliography ........................................................................................ 25

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A. Introductory Material

1) Problem or Puzzle

Different states' laws and law enforcement capacities meet in border areas. The legal and

regulatory differences, the distinct police and administrative capabilities involved, as well as the

degree of commitment of state authorities, create rent potentials that are central to border

dynamics and the frequent instability that prevails in border regions. Latin America's border

regions have long experienced high rates of violence, which has been traced to the smuggling of

legal and illegal goods and to the peculiarities of military and police enforcement of the

movement of people and goods (Chinchilla 2011). However, violence in border areas is neither

uniform over space nor stable over time. In Brazil, border violence from 2000 to the present is

concentrated in municipalities with smuggling markets, but those markets see substantial

variation in their levels of violence, both over time and across municipalities, without evident

reasons. This is the puzzle my research addresses.

2) Motivation

While illegal and a source of lost revenue for the state and legal firms alike, it is possible that

smuggling contributes to local economies by employing individuals in areas where formal

employment is either hard to come by or insufficient to provide an adequate standard of living. A

problem, however, is that when market activity is relegated to private actors outside the rule of

law, rights and the security of individuals are subject to little if any regulation or minimum

standard. As with so many other types other types of illicit activity, smuggling attracts the

presence of organised criminal groups. These groups have a rich history of using violence as a

means to an end. Thus, smuggling represents a public and human security issue, as well as an

economic challenge for states.

Examining the governance mechanisms used by organised criminal groups to facilitate the

very large amount of illicit trade between Brazil and neighbouring countries will help us

comprehend the relationship between smuggling markets and violence. This research can be used

to gain insights into the functioning of informality in areas traditionally located at the periphery

of states, helping policymakers understand local dynamics that as of yet, have not been explored.

The information derived from this project should help inform public policy towards illegal trade,

local economic development, and public security. Ultimately, the proposed research has the

potential to support efforts to identify the conditions that lead smuggling markets to become

violent and efficiently allocate resources to combat their negative externalities.

3) Research Question(s)

The primary objective of my research is to discern under what conditions and why smuggling

markets become violent?

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In addition to my primary questions, my research will address secondary questions including:

• What are the characteristics of the governance regimes of illicit international trade

(smuggling)?

• How do structural characteristics of municipalities affect violence in Brazilian smuggling

markets?

• Is there a gender-specificity to violence on smuggling markets?

4) The Answer

I propose that there is more violence when informal, hybrid governance arrangements in border

regions are unable to manage competing claims and resolve disputes amongst market

stakeholders through the provision of governance.

5) Key Terms

Smuggling and Smuggling Market:

The act of smuggling is “bringing in or taking out [a product] from one jurisdiction to

another without authorization” (Andreas 2013: x). Smuggling is deemed by states to be illegal,

because of the "good" traded, or because taxes or duties over it have not been paid. The exchange

of smuggled goods takes place in a smuggling market.

Smuggling Regime:

A smuggling regime designates the system of rules and institutional arrangements and

mechanisms that govern – more or less effectively – a particular smuggling market and deters –

more or less effectively – the use of violence among its participants. The regime can be

monopolistic – controlled by one gang – or not, and it can be hybrid – i.e. involve both state and

criminal agents

B. Identifying What We Know

6) Literature Review

Governance is a two-part process. First, governance involves the definition and enforcement

of property rights and contracts between parties. Second, governance is the provision of dispute

resolution mechanisms to resolve conflict between opposing parties. Property rights and

contracts are socially validated claims over a thing, "against the whole world"--i.e. for property

rights, and against a particular party, for a contract (Clarke and Koeler 2005). Claimants can

have the right to use the thing (usus), appropriate returns from said thing (usus fructus), and the

right to change its form, substance, location or other characteristics (Libecap 2003). Ownership

involves a single actor claiming the whole "bundle" of these rights (Ostrom 1990). Enforcement

of a claim is crucial to holding a property right. Enforcement refers to the way in which the claim

will be defended, generally through the use or threat of sanctions. Importantly, enforcement can

be undertaken by both formal and informal actors and can be carried out by three types of agents:

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first party (claimant - me --"us"-- defending my--our-- rights), second party coalitions of

claimants (such as several Indigenous tribes or gangs involved in smuggling), or third party, i.e.

outside authorities that are not directly involved in the market but can intervene in it (state or

organised crime group not directly involved in the trade) (Libecap 2003; Daudelin 2010).

In many of the works on violence in illegal markets (Chimeli and Soares 2017, Goldstein

1985, Reuter 2009, to name but a few), problems of violence and conflict are couched within a

property rights structure, with conflict emerging when property rights are poorly defined, poorly

enforced, or both (Garfinkel and Skaperdas 2007). However, these are necessary but not

sufficient conditions for conflict. Many claims can be poorly defined, poorly enforced, or both,

and still not result in conflict if the thing at stake is not highly valued. Instead, conflict occurs

when competing claims are made over things that are poorly defined, poorly enforced, or both,

and those claims cannot be settled (Daudelin 2010).

The evolutionary theory of property rights holds that as the value of things increase, property

rights definition and enforcement evolve in order to ensure conflict is prevented (Demsetz 1967).

Fitzpatrick (2006), however, shows that when the value of a good is high, a party will not

necessarily define or enforce property rights. This problem occurs when no party has the

capacity, or the incentives needed to undertake such roles (Alston et al. 1999). Understanding

the incidence of property rights conflict thus implies, first, identifying the determinants of the

changing value of a thing over which agents compete, and the conditions under which agents will

define and enforce property rights.

As mentioned, the second component of governance is the resolution of disputes. For

markets – illegal or otherwise – to operate efficiently, there must be an arena where actors can

peacefully resolve and adjudicate disputes (Skarbek 2014). Dispute resolution mechanisms are

critical to illegal markets as they have the potential to keep conflict to a minimum, which in turn

allows markets to operate smoothly. Disputes can arise for any number of reasons, such as non-

payments, late payments, late delivery of an item, disagreements or renegotiations of prices,

disputes over territory in which an actor can conduct business. Without adequate dispute

resolution mechanisms in place, conflict prevails, destabilising markets.

As pointed out by Daudelin and Ratton (2018) the undersupply of governance leads to

conflict but not necessarily to violent conflict. Instead, violent conflict is a product of inadequate

deterrence – a “deterrence gap” – towards the use of violence to resolve conflicts in a given

arena. Deterrence “is an attempt to influence another actor’s assessment of its interests”, with

one party seeking to convince the another that the cost of an action will exceed any possible gain

(Lebow 2016: 3). For deterrence to be effective, an actor must issue credible threats of

punishments that are swift, certain and, severe enough to dissuade an action (Kennedy 2012;

Kleiman 2009; Beccaria 1963). Effective deterrence results in a lesser need to apply the

punishment due to fewer transgressions (Kleiman and Kilmer 2009). When deterrence is applied

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appropriately– whether by first, second or third party, and either informally or formally – conflict

may still exist, but violence will be prevented or at least considerably reduced.

Institutions are “humanly devised constraints that structure political, economic and social

interaction” (North 1991: 97). Importantly, not all markets are governed by the same form of

institution. On one hand, legal markets are governed by formal institutions, structured and

formed by the official channels of states (e.g. laws, constitutions) and enforced by state entities

(i.e. police). On the other hand, illegal markets are governed by and large by informal institutions

operating outside of official channels and rely on private regulators (Ostrom 2009; North 1991).

While scholars such as De Soto (1990) have argued all markets need to be incorporated into

formal institutions in order to function properly, others (Beckert and Dewey 2017; Dewey 2014)

have shown that informal institutions, while sub-optimal, are capable of regulating informal

economies. Exploring the ability of societies to privately govern themselves, Peter Leeson makes

the case that self-governance “works better than you think” (2014: 5). Leeson shows that

governance can be provided by private parties, and on occasion be a strong alternative to formal

government structures. Observing that “numerous societies were stateless for most of their

histories,” Leeson argues that iterative interaction prompts good faith and trust between parties

when executing contractual agreements (2014: 155). While this mechanism sets the stage for

functional self-governance to be orchestrated by non-state actors, it does not consider that much

informal governance is in fact hybrid.

Despite being conceptualized as separate, informal institutions can, and have been, shown to

interact with formal ones regularly (Helmke and Levitsky 2004; Gallen 2019; Meagher 2014;

Galemba 2017). The interaction of informal actors with state institutions in the governance of

smuggling markets creates hybrid arrangements, composed of a mixture of formal state and

informal non-state actors. Jaffe (2013) considers hybridity as the entanglement of multiple

actors, both formal and informal, cutting across public-private boundaries to provide a system of

governance for those who under its sphere of influence. The scope of the hybridity can range

from the state having high to little involvement in smuggling markets, alongside illegal firms,

and everything in between. This research will seek to map out the entanglement of formal and

informal institutions in the governance of smuggling markets to understand the capacity of the

resulting regime to avoid or manage conflict, and when the latter happens, to prevent them from

turning violent.

Paul Goldstein (1985) mainstreamed the debate as to the causes of violence in illegal markets

when he introduced his tripartite “drugs/violence nexus” framework. In the framework, violence

in illegal markets tends to come down to three factors associated with drugs and violence that

can, or often do intertwine: psychopharmacological, the economically compulsive, and the

systemic, or market related problems (1985: 143). Studies have shown that violence in illegal

markets on the scale seen in Brazil and other South American countries tend not to be compatible

with the former two factors and are instead well-suited to the latter (Calderón et al. 2015; Idler

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2019; Felbab-Brown 2011; Arias 2009). However, causal evidence on the relation between

market illegality and violence remains rather limited. For instance, despite extremely violent

contexts, case studies have shown that illegal markets can function without much violence

(Daudelin and Ratton 2018; Owens 2014; Duran-Martinez 2017). Despite a relative scarcity of

research on the subject, theories about that relationship – largely stemming from Goldstein’s

(1985) tripartite framework – are in comprehensive agreement on the fact that illegality does not

cause violence in illegal markets, although an absence of formal institutions is a contributing

cause (Reuter 2009; Garfinkel and Skaperdas 2007; Skarbek 2014; Snyder and Duran-Martinez

2009).

Illegal markets have been characterised as inherently violent as illegal actors stem from the

“social strata in which violent self-help is relatively common” (Andreas and Wallman 2009,

226). However, Reuter (2009) points out that most illegal markets are generally peaceful despite

the absence of formal institutions to enforce contracts and facilitate transactions and only

occasionally exhibit high levels of violence. Illegality itself is insufficient to generate high levels

of violence in the market. Instead, violence is tied to a lack of institutions – informal and formal

– to deter actors from engaging in violent actions that result from competition and information

asymmetries within and between groups (Skarbek 2014). Overall, a lack of institutions to

dissuade violence are why some illegal markets may be predisposed to violence, yet are not

always violent and at times relatively peaceful.

Changes in the governance structure of illegal markets impacts violence levels (Owens 2011,

Snyder and Duran-Martinez 2009). Calderón et al. (2015) show that violence levels increase

following the neutralisation of a drug trafficking leader in Mexico by state authorities.1 The

study employs a combination of difference-in-differences and synthetic control groups and

operationalises municipal homicide rates as the dependent variable. Whether a drug cartel leader

and whether a subordinate ranking cartel member is apprehended or killed are operationalised as

main explanatory variables. The study finds that while “king-pin” capture or arrest play an

important role in the disruption of criminal organisations; it also leads to both inter- and intra-

cartel violence as organisations fragment. The neutralization of drug cartel leaders – actors who

tend to have a pivotal role in how illegal markets are governed – leads to short- and medium-

term increases in the level of homicides inflicted on both cartel members and the general

population. The study’s results estimate that the elimination or seizure of cartel leader results in a

165 percent increase in violence in the first six months following, and 126 percent for the

following 6 months (2015: 1480). The study helps identify under some of the conditions under

which illegal markets may become violence. However, as the study focuses on structural changes

to the governance of cartels there is little indication as to what channel(s) generates the violence.

Furthermore, little indication is made as to whether the governance structure of the drug markets

studied played a role in the variation observed in the level of violence.

1 Neutralization refers to both the killing and apprehension of drug trafficking leaders.

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Reuter (2009) argues that intensified enforcement and disruption may impact levels of

violence through two different channels stemming from the absence of formal institutions and a

reliance on personal ties. First, he proposes that when a leader is eliminated, working

relationships between gangs and corrupt officials break down, leading to violence. Second, he

suggests that the removal of corrupt officials from posts again disrupts the governing

arrangement, leading to uncertainty for criminal organisations who now require a new source of

protection and use violence to intimidate officials to do so. It is almost certain that other channels

exist such as; inter- and intra-criminal group agreements, or contracts, breaking down if a group

leader is neutralized, and ceteris paribus, given weak deterrence, governance breakdowns will

lead to violent conflict. However as of now these, and other channels are yet to be theoretically

and empirically tested leaving plenty of space to explore the relationship between market

governance and violence.

Studies specifically focusing on violence in smuggling markets are particularly sparse, with

Chimeli and Soares (2017) a notable exception. Investigating the prohibition of a formerly legal

practice (the cutting down and selling of mahogany trees), the authors look at municipal levels of

violence in the Brazilian state of Pará where the trade of mahogany was concentrated before

prohibition and is thought to be concentrated after. The authors show that an increase in violence

is associated with the emergence and presence of an illegal mahogany market, while violence

decreased in areas where authorities managed to prevent or shut down the functioning of the

illegal markets (2017: 31). However, the study assumes that the state can fully enforce

prohibition on a product, resulting in a decline in violence. While it may have worked in the case

of Pará and the illegal mahogany market, prohibition has a patchy record as a tool of peaceful

governance (see Owens 2014). The problem is, as in the case of other illegal markets, some

smuggling markets are well governed – rarely through state-enforced prohibition – and others are

not, with conflict and violence prevailing in the latter.

C. How I Will Make My Contribution

7) Theoretical Framework

As smuggling markets are by definition illegal, state authorities will not formally intervene to

provide property rights and will in fact, much of the time, work to disrupt such markets. In turn,

the definition and enforcement of property rights in smuggling markets is placed into the hands

of private actors and/or state actors acting informally, without access to formal dispute resolution

mechanisms, raising the costs of governance. If these informal actors can't define and enforce

property rights and contracts and can't resolve the disputes that emerge on smuggling markets,

conflict will result.

For conflict to become violent, however, there must also be a lack of effective deterrence

mechanisms – or a deterrence deficit – to keep individuals from using violence to accomplish a

goal. Therefore, given a deterrence deficit, violent conflict in smuggling markets should be

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influenced by a combination of 1) the intensity of competition over a given market, which should

influence the level of governance demanded, 2) the incentives and capacity of groups (informal

second or third parties) to supply governance – property rights, contract enforcement and dispute

resolution – in said smuggling markets, and 3) the interaction of informal parties with the state as

the latter disrupts criminal self-governance (Daudelin 2010) or as state agents acting illegally

engage in it, conforming hybrid arrangements.

Violent conflict is associated with an under-supply of governance relative to demand, which

may occur as a result of a governance breakdown (reduction in capacity or incentive relative to

demand), or during the establishment of a governance regime (before capacity or incentive to

establish governance reaches the demand). Conversely, if governance regimes are established

successfully, there will be fewer disputes, fewer conflict over property rights, and a reduction in

the need to define and enforce contracts, or manage competition, using violence.

The demand for and supply of governance are both tied to the value of a territory, or a good.

The demand for governance is a function of the net present value of the smuggled goods. When a

market’s net present value is high with a guarantee of high future rents and relatively low

opportunity costs, the demand for market governance will be high due to competition amongst

claimants to capture the economic rents generated by smuggling. Competition over border

municipalities in smuggling markets is expected to be intense, as the different regulatory regimes

created by international borders generate high rents. Higher competition is more challenging to

manage. Competition over border municipalities that act as gateways from one administrative

area to another should be highest, particularly for markets for high rent goods, as organised firms

will look to stem new competition that will decrease the rents yielded (Alston et al. 2009).

The supply of governance is indicated by the ability of informal and hybrid institutional

arrangements to define and enforce contracts and resolve disputes must be evaluated separately

from the dependent variable’s outcome. The governance supplied by informal and hybrid

institutional governance arrangements is tied to the stability and consistency of the rules applied,

their institutionalisation - i.e. the extent to which the rules are known and internalized (Berger

and Luckmann 1991) – the consistency of their application and the credibility of the enforcement

that accompanies them. The comprehensiveness of the governance regime - whether rules apply

to the enforcement and definition of contracts, or dispute resolution, or both – and the

mechanisms used to govern further impact the governance supply. Like governance, level of

deterrence supplied is tied to the stability, consistency, and institutionalisation of measures to

limit the use of violence. When supplied comprehensively, these factors help governance

regimes manage competition and mitigate violence in smuggling markets.

Logically, when a smuggling regime enforces claims over a market and manages the

intensity of competition over the claim, the supply of governance – property rights, contract

enforcement and dispute resolution – will adequately meet demand, ceteris paribus, resulting in

a more peaceful market. Therefore, if the capacity and incentive to provide governance in a

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certain smuggling market meets or exceeds demand, then a reduction in the frequency of

violence should follow.

8) Hypotheses

Given the theoretical framework and logic presented, I hypothesise that:2

H1: if expected returns from smuggling in a market are large, ceteris paribus, then there will be

competition between groups to claim control over a territory

H2: if a smuggling regime is unable to enforce its claim over a territory and a deterrence gap

exists, then high levels of competition will lead to violent conflict until a group possesses the

capacity and incentive to govern

H3: if a smuggling regime successfully enforces their claim over a market and manages the

competition over the claim through governance, then conflict decreases.

9) Methodology

My study falls between a plausibility probe and a theory testing exercise. A plausibility

probe helps determine whether a relatively interesting theory and accompanying hypotheses

developed for the study warrant further rigorous testing. While plausibility probes do not provide

rigorous tests of theories, they are not intended to “lower the standards of evidence and

inference” used when conducting formal theory testing (George and Bennett 2005: 75).

By using this study to assess “the validity and scope conditions” of my framework, I will

engage in theory testing (George and Bennett 2005: 75). Good theory testing includes testing as

many of the theory’s hypotheses and subsequent predictions as possible (Van Evera 1997). The

cases selected allow for multiple observations, and subsequent opportunities to test hypotheses

due to within- and across-case variation on the dependent and independent variables. Assessing

multiple hypotheses is in accordance with the objective of the study, which is to draw both

descriptive and causal inferences that set the initial building blocks for a more thorough research

agenda on the governance of illicit markets and its relationship with violent conflict.

My research project involves both quantitative and qualitative methodologies. For the

quantitative component, I am using municipal-level geographic and social development

indicators to identify the main structural factors associated with violence at the municipal level.

In an initial phase of this research project I have analysed a series of problems using a dataset

that includes information about homicide rates at the municipal level for the total, male, and

female populations. I use a cross-sectional analysis of Brazilian municipalities (N=5,550) to

2 The hypotheses are general, by necessity. They are "model hypotheses", not specific. I will have to

identify the characteristics of the regimes that makes them robust (i.e. able to deal with increased

competition) or weak.

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determine whether borders areas are significantly more violent than other interior municipalities,

operationalizing homicide rates at the municipal level over a five-year average from 2010-2014

inclusive as the dependent variable.3

The explanatory variables I used in the study are all geographic dummy variables

allowing me to identify and conduct a crude mapping exercise of the geographic determinants of

violence in Brazil. To resolve the issue of heteroskedasticity, I employ a multiplicative

heteroskedastic linear regression model using a two-step generalised least squares (GLS)

estimator that fits a multiplicative heteroskedastic linear regression by modelling the variance as

an exponential function of specified variables.4

A two-step GLS estimator is used rather than a maximum likelihood (ML) estimator

which more efficient because the two-step is more robust than the ML estimator if the variance

function is possibly incorrect or if the errors are non-normal. The estimating equation for a

multiplicative heteroskedastic linear regression model using a two-step GLS estimator’s

functional form is:

Yi = xiβ + єi ; σ 2i = exp(ziα), where i = municipality

Through a preliminary analysis, I can determine that violence affects municipalities

located on the Brazil’s border. Further analysis points specifically to violence affecting men in

border municipalities in the States of Paraná and Mato Grosso do Sul – a stretch of border from

the tip of Argentina to Bolivia encompassing the entirety of Brazil’s border with Paraguay. The

results indicate a statistically significant and robust relationship between violence and

municipalities that border Paraguay, and an even greater effect for urban areas that are

contiguously connected to another municipality (twin cities) in Paraguay. When controlling for

all other variables, the coefficient estimation for the dummy variable of twin cities results in

these municipalities experiencing homicide rates more than double the national average. These

municipalities are where several smuggling markets in Brazil are concentrated. Male and female

rates are introduced to better understand the extent to which determinants of violence may be

gender specific. Through an initial regression, I can determine that violence in suspected

smuggling markets on Brazil’s border disproportionally effects men.

The OLS regression’s adjusted R-squared indicates that nearly 12.5 percent of the

variance of the dependent variable is now explained when analysing total homicide rates, 8

3 A cross sectional analysis is employed because the independent variables to be analyzed are all

structural, and I am investigating phenomenon that focus on variance across units (municipalities).

Homicide rates are a useful proxy for violence as they tend to be recorded unlike assaults or other forms

of violence. The dependent variable is averaged in order to make sure that the homicide rate used reflects

the municipality’s violence levels over several years, thus reducing chance of using a single year that

might be unusually high or low. 4 Heteroskedasticity exists due to several municipalities with an average DV value of 0

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percent when simply analysing males, and 0 when analysing females alone.5 While at first glance

a R-squared of 12.5 may seem negligible, it offers extremely important insight for my research.

The low R-squared indicates that while being located on the border affects violence, and even

more so if the municipality is a twin city, it further points to dynamic changes – for instance,

changes in the governance of smuggling markets – being largely responsible for the variation in

the dependent variable, violence.

To delve into the factors that the quantitative analysis can't identify, much of the

dissertation will use qualitative methods. I use qualitative approaches to examine specific

smuggling markets at the micro level. I will construct a basic typology that differentiates

smuggling markets according to whether the good is illegal (e.g. drugs) or legal (e.g. electronics)

to determine how different markets operate and are governed. As noted by George and Bennet

(2005), typological theorising relies on both within- and across-case comparison. In order to

carry out this analysis I will conduct fieldwork in different Brazilian municipalities using semi-

structured interviews to collect primary qualitative data. I will ask questions including: what are

the characteristics of the governance regimes of illicit international trade (smuggling); how do

structural characteristics of municipalities affect violence in Brazilian smuggling markets; what

role does the state play in the dynamics of smuggling market governance; what are the main

products in each smuggling market, and; who are the main market stakeholders? I will employ

process tracing in order to control for equifinality, and false positives. When process tracing, I

will adhere to the best practice guidelines laid out by Bennet and Checkel (2015), including:

keeping an open eye for alternative explanations and being equally tough on their explanatory

power; considering the potential biases of sources; gathering diverse and relevant evidence; and

utilising both inductive and deductive reasoning.

It will be necessary for me to utilise multiple “snowballs” to gain as many independent

insertion points as possible to conduct my interviews and conduct rigorous process tracing. To

this end, I have already established contacts with several smuggling market stakeholders

including smugglers themselves, consumers of smuggled goods, members of the Federal Police

(investigative police force), civilian and uniformed military personnel, and civil servants. In

addition, I have also been in touch with lawyers, judges, and members of Brazil’s ‘elite’ society

with knowledge of smuggling markets and their governance.6

Through these connections, I will create further snowballs with smuggling market

stakeholders. I also have contacts with civilians living in my prospective case studies with first-

5 While the adjusted R-squared for the male only estimation is lower than for total averaged homicide

rates, the variance for the homicide rate increases from 246 for the average homicide rates overall to 1312

for male homicide rates indicating that the model may be explaining the same or more of the variation in

male violence than in the combined, averaged homicide rate, albeit only for one year, not five. 6 One of my informants is a Sertanejo singer (Brazilian country music) with access to elite members of

society in the region I intend to study.

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hand knowledge of smuggling market governance. The smuggling market municipalities on the

Brazil border chosen as potential cases are: Foz do Iguaçu in the state of Paraná, Ponta Porã in

the state of Mato Grosso do Sul, Guajará-Mirim in the state of Rondônia, and Tabatinga in the

state of Amazonas.7 The cases are widely acknowledged as lucrative smuggling markets, and fit

the criteria outlined by Van Evera (1997) of good cases to study due to multiple observations and

within- and between-case variation on the dependent variables. Moreover, the cases are a good

laboratory to explore the relationship between violence, types of good, and the governance of

smuggling markets due the different products traded in each market.

Figure 1. Homicide rates of proposed case studies 2004 – 2017*

7 Four cases are discussed. However, much relies on my insertion points and ability to gather informants.

Two cases are most likely to be chosen, three at most.

0

20

40

60

80

100

120

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Homicide Rate of Case Municipalities

Ponta Porã Foz do Iguaçu Guajará-Mirim Tabatinga

*Homicide rates from author’s personal data set, created using publicly available data from DATASUS and IBGE

14

Additional similarities and differences between the cases allow me to observe possible

intervening factors that may influence violence levels in each market. All municipalities selected

are municipalities with neighbouring cities on the other side of the border. Each case study is in a

different Brazilian state, introducing variation in structural factors between states such as

transportation infrastructure and state enforcement capacities. Further variation is introduced

through the examination of cases bordering different neighbouring countries.

Foz do Iguaçu is part of a “triple frontier”, possessing a water border with both Argentina

and Paraguay. Foz do Iguaçu is by far the largest municipality selected, both in terms of

population and size of the smuggling market (value and volume of goods). The municipality

itself is home to a “Free Commerce Zone” established in 2002 with Paraguay and Argentina. The

municipality’s smuggling markets include tobacco, electronics, drugs, weapons, agricultural

products, and household goods.8

Compared to Paraná, the modern and well-organized state where Foz do Iguaçu is

located, the state of Mato Grosso do Sul is more recently established, less wealthy and has a

much less well-developed administrative capability. Located on Mato Grosso do Sul’s frontier,

Ponta Porã’s has a land border with Paraguay and the market of goods moving through the

municipality is dominated by cocaine from Bolivia and Peru entering Brazil through Paraguay.

The municipality’s smuggling market recently experienced a change in governance in 2016 when

the then “King of the Frontier” Jorge Rafaat Toumani was killed by a rival faction – a Sao Paulo

based organization considered to be, by far, Brazil's largest and most powerful, the Primeiro

Comando da Capital (PCC).9

Moving away from the Paraguayan border, the remaining cases are in the remote North-

West of Brazil. Guajará-Mirim is another frontier municipality sharing a water border with

Bolivia and is in the frontier region of Brazil, roughly 350 kilometres from the state capital of

Rondônia, Porto Velho. The municipality’s smuggling market is largely made up of common

goods, drugs, and possibly oil. The municipality is another “Free Commerce Zone” with Bolivia,

established in 1993.

The final case of Tabatinga is another “triple frontier” bordering Peru and Colombia with

the municipality being a key transhipment point for goods (mostly narcotics) moving from the

neighbouring countries down the Amazon river to the state – and regional – capital, Manaus.

There is also likely a local drugs market and due Tabatinga’s Colombian neighbour, Leticia,

being a tourist, and backpacker destination. The municipality has recently experienced an

increase in Brazilian military presence but as to what extent this has impacted smuggling

operations through the municipality is yet unknown.

8 Goods listed in each case’s smuggling market are known but not definitive nor exclusive. 9 An initial plausibility probe applying the proposed theory and using Ponta Porã as a case study indicates

congruence between the breakdown and construction of governance regimes over smuggling markets, and

violence.

15

10) Outline of the Dissertation

The prospective outline of the proposed dissertation is as follows:

1) Introduction

2) Theory and methods (including typology)

3) Contextual information and overview

I. Smuggling markets and their products

II. Brazil's smuggling markets and violence in general

III. Brief overview of smuggling markets, domestic institutions and interest groups or

relevant actors in other countries included in study

i. For example: Argentina, Paraguay, Bolívia, Peru, Colombia

IV. Quantitative analysis including analysis of

i. Brazil

ii. Brazil’s Borders (in general)

4) Cases conducted as follows (largely qualitative with quantitative indicators)

I. Border with Argentina and Paraguay

i. Paraná

1. Foz do Iguaçu

a. Market

b. Governance

c. Violence

ii. Mato Grosso do Sul

1. Ponta Porã

a. Market

b. Governance

c. Violence

Possible jump to 5) here, see footnote 6

II. Additional Case: Border with Bolivia

i. Rondônia

1. Guajará-Mirim

a. Market

b. Governance

c. Violence

III. Additional Case: Border with Colombia and Peru

i. Amazonas

1. Tabatinga

a. Market

b. Governance

c. Violence

5) Conclusions and policy recommendations

16

11) Ethics Implications

While some of the groups involved in this research are not considered vulnerable (e.g. police,

military, civil servants that do not participate in smuggling markets), individuals directly

involved in smuggling are, especially considering they are acting outside the law, involved in

illegal activities. Therefore, every effort must be made to abide by the ‘do no harm’ principle,

whereby researchers must minimize the harm they may inadvertently cause through their actions

(Wood 2006). Given that the proposed research involves vulnerable groups, my project will

undergo ethics reviews by Carleton University’s Ethics Board before I conduct fieldwork.

Every precaution will be undertaken not to increase the vulnerability of research participants,

including the use of anonymous coding of names and locations with the key to the code located

in a different DataVerse account than the recorded research; only conducting audio recording of

interviewees after respondents formally agree to take part, and; erasing all recordings from

storage device once uploaded and encrypted in a secured location. Once uploaded, interviews

will be transcribed and then deleted permanently. All interviews will take place in locations

agreed upon with respondents and where they will be confident that their safety and privacy is

protected. Due to family members of smuggling market stakeholders and other and individuals

not directly connected to illegal markets possibly being impacted by the research, the same

precautions will be undertaken with these individuals as the interviewees.

12) Feasibility and Timeline

Feasibility

As previously stated, I established personal and professional working relationships with

smuggling market stakeholders in the course of a scoping field trip to Brazil in 2018, during

which I visited all four of my potential case study sites. Furthermore, I speak, read and write

Portuguese, and I intend to become fluent in the “slang” that is commonly used on the local

smuggling markets.

In Rio I will partner with the Pontifical Catholic University of Rio de Janeiro (PUC-Rio). At

the PUC-Rio, I will work closely with Dr. Celina D'Araujo whom I met in February 2019 and

use the PUC-Rio’s campus as an initial base of operations. My research project research

coincides with Dr. D'Araujo’s research project "Interfaces of the police and the Armed Forces in

the defense and security of Latin America" and I will be able to accompany her on visits to

security and defence institutions in Brazil, as well as technical visits with institutions and

organisations dealing with national and international drug policies.

In addition to the partnership with the PUC-Rio, I will visit and spend time at the Igarape

Institute based in Rio de Janeiro, a think tank that working on Latin American drug policy and

violence reduction. I have already met and discussed my research with the Director of the

Institute, Dr. Robert Muggah, to assess the plausibility of my project and future collaboration,

receiving positive feedback. Further I intend to collaborate with researchers and disseminate my

17

research at the renowned Center for the Study of Violence (NEV) at the University of São Paulo

(USP). At the NEV I will work with Dr. Bruno Paes Manso and Dr. Camila Caldeira Nunes

Dias, two researchers that have written a book on the expansion and entrenchment of Brazilian

organised criminal groups on the Paraguayan border. Finally, I will also spend time in Dourados,

200 kilometres east of Ponta Porã, where both the Brazilian Military’s Integrated Border

Monitoring System (SISFRON), and the Federal University of Grande Dourados are located.

While the PUC-Rio will serve as my base of operation in Rio, I will spend most of my time in

my potential case study locations (Foz do Iguazu, Ponta Porã, Guajará-Mirim, and Tabatinga). I

will spend upwards of two-plus months at a time in municipalities in order to conduct interviews

and establish relations with stakeholders in smuggling markets. I will split my time between the

municipalities on the Brazilian side of the border while visiting their sister cities in their

opposing countries (Ciudad del Este, Pedro Juan Caballero, Guayaramerín, and Leticia

respectively) to better understand the dynamics of smuggling markets from both sides of the

border. In Foz do Iguaçu I have met with the director of the Instituto de Desenvolvimento

Econômico e Social de Fronteiras (IDESF), and academics at the Universidade Federal da

Integração Latino-Americana (UNILA) – both based in the border municipality of Foz do

Iguaçu, Brazil – being invited to join a research group on informal markets between Brazil and

Paraguay.10

I believe, considering my already established insertion points and preliminary understanding

of local smuggling dynamics, coupled with my knowledge of Portuguese, I will be able to

conduct upwards of 80 semi-structured interviews in the 12 months I intend to spend in the

region. These interviews will provide me with the necessary primary source material to complete

the first ever comprehensive study on the governance of smuggling markets and violence

Once I have defended my prospectus, I will move forward with gaining ethics approval and

securing a Visa from the Brazilian authorities. I will be using a Type I Research Visa,11

permitting me to stay for a minimum of 12 months in Brazil before renewing my stay.

Timeline

My tentative timeline is as follows:

Phase I: (Late) January 2019 – March 2020

In the initial phase, I will establish my base of operation at the Pontifical Catholic University of

Rio de Janeiro (PUC-Rio). I will use this phase to conduct interviews with legal experts, NGOs,

politicians, and academics in Rio de Janeiro, São Paulo, and Brasilia before departing to my case

study locales.

Phase II: March 2020 – April 2020

10 Institute for Economic and Social Development of Borders and the Federal University of Latin

American Integration 11 Visto Temporário I: pesquisa, ensino ou extensão acadêmica

18

In the second phase I will conduct a “border trip” to potential case study locations, visit

stakeholders and attempt to contact informants.

Phase III: April 2020 – June 2020

I will relocate to Foz do Iguaçu for three months. In Foz do Iguaçu, I will conduct interviews

with identified smuggling market stakeholders, while observing border dynamics. During this

phase, I will work out of IDESF and UNILA, while seeking to establish more connections and

insertion points in the smuggling market in Foz do Iguaçu as well as my other cases to further

my research objectives.

Phase IV: June 2020 – August 2020

During the fourth phase of my field activities I will relocate to my second case, likely Ponta

Porã, north of Foz do Iguaçu, for two months. The activities I will undertake are the same as in

Phase III.

Phase V: August 2020 – October 2020

In the penultimate phase of my field activities I will move to my third case locale, for two and a

half months. Again, the activities undertaken will be the same as in Phases III & IV.

Phase VI: November 2020 – December 2020

In the final phase of my field activities I will re-visit case study smuggling markets, academics,

and legal experts.

Contingency Plan

Of course, very little runs as smoothly as planned and I am preparing contingency plans as

to how I will be able to accomplish this research in case my access to information leads down an

alternative path. To this extent, I will keep my eyes and ears open to other dynamics of the

governance of smuggling markets and violence – the crux of this PhD dissertation.

For example, it is possible that I may encounter individuals that will be able to show me how

the “Rota Caipira” is managed.12 The “Rota Caipira” is part of a large smuggling route starting in

Peru, moving through Bolivia and Paraguay into Brazil. From Brazil’s border, goods are

transported to large consumer markets in Brazil (i.e. Sao Paulo, Rio, Brasilia, Salvador) and

ports of export, such as Santos, where they are then distributed across the globe. In addition to

illegal drugs, smuggled products include electronics, counterfeit pharmaceuticals, cigarettes and

arms (Ramos 2009; Aguiar 2015; Adorno and Dias 2019; Manso and Dias 2018; De Abreu

2017). Studying the governance of this value chain along its whole course would not be out of

tune with the research agenda I am following to pursue a line of inquiry regarding the “Rota

Caipira” including why violent conflict sometimes occurs.

12 “Caipira” is a term for rural inhabitants of the south-central region of Brazil. Ponta Porã is located on,

and considered important to the “Rota Caipira”

19

Next Steps

The obvious next steps for the PhD dissertation revolve around data collection. One issue I

need to address are gendered – or sex-specific – homicide rates operationalised to indicate

gendered violence levels. As of now, the homicide rates I use (apart from 2010 data gained from

the national census) are representative of the total population, male and female. Knowing that the

violence linked to smuggling markets is almost exclusively male, my results most likely

underrepresent just how volatile and extreme the violence is in smuggling markets. Other issues I

need to address include ascertaining just how much of the recorded violence is linked to

organised crime, how much goes unreported, how much is linked to police operations, and how

much violence occurs on the other side of the border in the opposing countries.13

13 A recent U.S. Department of State report on Paraguay claims that much of the violence is linked to

organised crime and levels of violence are almost symmetrical on both sides of the border (United States

2016).

20

Annex I: Maps

Map of South America

21

Homicide Rate Map of Brazil*

Map of Brazil and Case Study States

*Mapping data from author’s dataset;

maps created using QGIS software

22

Homicide Rate Map of Case Study Municipalities

23

Annex II: Preliminary Illustration of Foz do Iguaçu’s Smuggling Market

Market: Foz do Iguacu - complimentary market with comparative advantages for each country Paraguay: Large illicit market | Brazil: Designer shopping, tourists |Argentina: Casino, tourists

Special Economic Zone: International duty-free zone with neighbouring countries

Known Goods: Electronics, Tobacco, Agricultural Products, Drugs, Weapons, Household items

Borders: Argentina and Paraguay - areas characterised by poverty, inequality, and crime

Possible main governance actors: Ethnic Groups, Gangs, Landowners

Informal Actors “Interest” Groups State Actors Traders

• See: Ethnic Groups

• Organised on ethnic and

national lines – supply

products and set up new

businesses

• Importers / Shop Owners

• Not expected to integrate,

but make money – set up

institutions

• Charged 10% of

wholesale price, possible

to bribe customs officials

to avoid – possible link

with Tax Police (?)

Tobacco Industry

• Production of both licit

and illicit tobacco

• Possible links with traders

(?)

Military Police (State)

• Deterrent against crime, does not

carry out investigations

• Heavily Armed

Couriers

• (almost) No border

control if not travelling in

bus (see: Tax Police,

Highway Police)

• Mobilise merchandise

from one country to the

other

• Taking advantage of

allowance: Sacaleiros,

laranjas, camelos (females

only)

• Target high value, low

volume goods (ie.

Electronics, Tobacco)

Indigenous Groups

• See: Money Exchangers

• Guarani; Mbya, Nhandéva

• Assisting couriers, linking

supply to demand

Civil Police (State)

• State level investigative police

Money Exchangers

• See: Indigenous Groups;

Unions

• Fixed Rate

• Operated by locals –

Guarani

• Link flows of cash from

abroad into local market

Ethnic Groups

• See: Traders

• International migrants

make up ≈ 40% of area’s

population

• Own land on both sides of

the border

National Force (State)

• Selected units of Military Police

members from over the country;

work to assist efforts between

Federal and Military Police

24

• Important for money

laundering due to parallel

tax structure

• Chinese and Taiwanese

traders formed the

“Chinese Association of

Ciudad Este” - takes care

of public spaces

• Lebanese and Syrian

traders formed the

“Chamber for Electronics”

– active in local elections

Gangs

• Possible links with

farmers, ethnic groups (?)

• “Balseros” - Operate on

water between Paraguay

and Brazil

• Move drugs, weapons,

agricultural products

Farmers

• Soy, Cattle

• Paraguayan land owned by

Brazilian farmers

• Own land on both sides of

the border

• Demand for agricultural

products

Police (Federal)

• Investigative Unit

• Focus: organised criminal activity

beyond tariff/tax control; drugs,

weapons, gang activity, money

laundering

Unions

• See: Money Exchangers

• Union of Money

Exchangers

• Ambiguously

“officialises” informal

work

• Creates a parallel tax

structure

Tax Police (Federal)

• See: Couriers

• Along with Federal Highway

Police, inspects all buses entering

Brazil from Paraguay inspected

Highway Police (Federal)

• See: Couriers

• Along with Federal Tax Police,

inspects all buses entering Brazil

from Paraguay inspected Questionable Political Groups

• Al Qaeda (?)

• Hamas (?)

Politicians (Local)

• See Ethnic Groups

• Link with landowners (?)

Source Material: First-hand Knowledge, Aguiar (2010), Various News Reports

25

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