Market Relationships and Market Performance in Northeast Brazil

Author(s): Timothy J. Finan

Source: American Ethnologist, Vol. 15, No. 4 (Nov., 1988), pp. 694-709
Published by: Blackwell Publishing on behalf of the American Anthropological Association
Stable URL: http://www.jstor.org/stable/645514
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marketrelationships and marketperformancein

NortheastBrazil

TIMOTHYJ. FINAN-University of Arizona

The major contribution of economic anthropologists to the study of agriculturalmarkets has

been to demonstrate that price and quantity alone do not suffice as predictors of market behavior. Since Mintz's (1961) pioneering study of Haitian market women, it has become clear
that economic and social objectives are often intermingled, or that middlemen commonly employ strategies of a social content to achieve their economic intent. Often these strategies involve implicit, noncontractual agreements between buyer and seller that long-term steady and
exclusive market relationships are preferable to short-term price maximization. In his recent
writings, Plattner has characterized these relationships as "equilibrating" (Plattner 1983,
1985). Equilibratinginteraction functions as a kind of social stabilizer that counteracts the dangers of an uncertain marketenvironment. Plattnerdraws significantly upon Sahlins' (1972) notion of balanced reciprocity, that is, long-lasting partnershipsmaintained by continuing social
obligations, and argues that these relationships become more intense when the outcomes of
markettransactionsare unknown-that is, high-risk-and can only be evaluated ex post facto.
Equilibratingrelationships are minimally built on mutual trust, but in many cases may be
furthersanctioned through personal friendship, kinship, compadrio, or other social bonds that
complement economic interaction. Moreover, the traditional ethnographic examples such as
suki relations in the Philippines (Davis 1973; Dannhaeuser 1983), pratik among Haitian
women (Mintz 1961), and onibara in Nigeria (Trager1981) demonstrate that these relationships
are fully institutionalized within society and explicitly recognized by all market participants.
The internal logic of equilibrating relationships has been discussed from several perspectives.
ForMintz, pratik relations generate economies of scale in a highly competitive, capital-scarce
market.Tragerpresents onibara as an anti-riskmechanism useful in long-distance yam trading
where there are "no public channels of informationabout supply and demand. . ." (1981:137).
Dannhaeuser's study of suki relations in the Philippines illustrates how these individual strategies comprise the basic mechanism of market chain integration from supplier to retailer to
customer: "Suki, in short, is an informal way to stabilize commercial relations" (Dannhaeuser
1983:52).

Thispaper analyzes a large regional market for fruitsand vegetables in Northeast

Brazil. A single production zone, with its local network of middlemen, supplies
three major urban centers. As in many other markets where risk is high and information restricted, these middlemen have developed "equilibrating" relationships
to impose order on an uncertain environment. These relationships and their underlying logic are discussed here. These patterns of dyadic ties are related to individual success in the market and to the performance of the market system as a
whole. The analysis suggests that market participants use familiar social instruments-such as reciprocity-to make sense of an uncertain economic environment. [economic anthropology, markets, exchange, Northeast Brazil, agricultural
development]

694

american ethnologist

Common to this literatureis the hypothesis that market participants perceive indirect-usually long-term-benefits in yielding some direct short-term advantage. To mitigate the risks
inherent in a marketingenterprise, the actors interpretimpersonal, competitive relationships in
terms of familiar social and cultural texts, where trust injects a sense of predictability into outcomes. As a result, market interaction is transformed; it becomes personalized-to the perceived mutual benefit of both participants. Inthis sense the "market" itself is but partof a wider
social process whereby people carry out the business of everyday living.
This paper has a dual objective. Itfirstcontributes to existing ethnographic literatureon equilibratingrelationships by describing a fruit and vegetable market in the semiarid Northeast of
Brazil. The Serra da Ibiapaba, a highland production zone centrally located about 350 kilometersfrom the coastal city of Fortaleza, is the principal fruitand vegetable supplier for a region
encompassing the states of Ceari, Piauf, Maranhao, and Para. This market was studied intensively during 1977-78, during which time surveys of 62 middlemen (about one-half the total)
and 61 vegetable producers were carried out. There were return visits in 1981 and 1987 to
assess changes in the market.
Inthis market,equilibrating relationships shape and permeate the transactions of buyers and
sellers all along the market chain. They comprise a form of interaction that is socially recognized, long-lasting, and entails mutual responsibility. Linguistically,these social and economic
ties are distinguished as fregues relationships (the term fregues in Brazilian Portuguese means
roughly "customer," but with much heavier connotations of obligation than the English term
permits).In this analysis, fregues strategies are firstexamined in terms of individual market participants and the benefits they derive from such interaction.
As a second objective, this paper seeks to identify the relationship of individualized equilibrating strategies to the performance of the market system as a whole. In the anthropological
literature,detailed studies of market behavior (forexample, Davis 1973; Plattner1975) coexist
with thorough descriptions of regional markets (for example, Beals 1975; Cook and Diskin
1975; Smith 1976). This analysis examines the social dynamics that bridge human behavior
and the functioning of the system. It thus focuses on the causal relationships between individual, risk-reducingstrategies and the ability of the marketto channel goods and information.
Marketperformance is a technical term, firstformulated as a measure of marketefficiency in
Bain's (1959) model of industrialorganization. In this model, three variables-structure, conduct (that is, behavior), and performance-are causally linked in a linear fashion.1 Performance
is described as the system-wide consequences of market behavior, and the evaluation criteria
can include price levels, market margins, degree of market integration, and consumer satisfaction. In this case study of the Ibiapaba system, market integration and market stability are the
performance criteria under consideration.

the Ibiapaba vegetable market, Northeast Brazil

The Northeast of Brazil is a nine-state region that covers about 18 percent of the total land
area and has 39 million inhabitants, about 30 percent of the national population. Although
once the economic and political center of the country, the Northeast has long since become
an economically marginalized and underdeveloped region with acute problems of low income, endemic poverty, and precarious health conditions. In contrast to the economically diversified center-south axis, the Northeast remains a rural-based society whose agriculture is
characterized by a highly unequal distribution of resources among subsistence farms, large fazendas, and export crop plantations. Periodic and severe droughts occasion regular crises of
survival among rural inhabitants. Despite strong rural-urbanpopulation flows, Northeastern
cities have little industryrelative to the South, and both unemployment and underemployment
constitute serious economic problems.

markets in Northeast Brazil

695

The Serra da Ibiapaba is a highland plateau that runs just east of the Ceara-Piauf border
squarely in the middle of the vast semiarid hinterland, the sertao (Figure 1). It extends about
100 kilometers in a north-south direction and is about 60 kilometers wide. At its eastern edge,
the plateau rises to about 1000 meters in altitude, which then declines toward the west. In
contrast to the sertao, the plateau has substantial rainfall during the moist winter season; for
this reason, the Serratraditionally has been a haven for refugees from the drought in the neighboring sertao. About 215,000 people live on the plateau's 4800 square kilometers, and 70 percent of the economically active population is in agriculture (CEPA1987:25).
The relatively high population density of the plateau has engendered a minifundia patternof
land utilization, where 90 percent of the landholdings are 10 hectares or less (CETREDE
1976:175). Under traditional land-use patterns, farmers produced manioc (for processing into
a rough flour) and bush beans on drier soils, while sugar cane (converted to a rustic brown

+.

Kt
r%1Inmters
Wt"wI WW'

"l

25

seat
Municipio

* Municipiodistrict
----Municipio boundary
Main notional highway
Paved state road
road
--Gravel
I
1Carrosco
C7 Humidand/or transition
$ Sertao
Figure 1. The Serrada Ibiapaba, Ceara, Northeast Brazil.

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american ethnologist

sugar block called rapadura)was cultivated in the moist valley bottoms. The region also supplied a diversity of fruits, principally banana and avocado.
Surroundedby the stark panorama of the sertao, the Serra appears lush and verdant with its
permanent water sources and tropical vegetation. In fact, these ecological differences help explain the Serra'straditional role in localized exchange networks of agricultural products. Historically, the Ibiapaba region was isolated from the more populated coastal areas but economically tied to the surroundingsertao (Fontenelle 1969). Truckscarried rapadura,fruits,and manioc flour to population centers in the sertao and returnedwith cowpeas, livestock, and manure
for the cane fields. During the 1960s sugar cane producers began to feel a slackening of demand for rapadura, as refined sugar became more available. Local extension efforts initiated
programsto introduce intensive vegetable production, principally tomatoes, and a small number of innovative farmers began to experiment with the new crops.
The capital city of Piauf, Teresina was part of this interiorexchange network. Small volume
middlemen took sugar cane rum, rapadura,and fruitsto this urban market350 kilometers away
and brought back manufactured wares, dried meat and offal, and other consumer items. These
marketersto Teresina, pejoratively called "maloqueiros de mil quilos" (1000-kilo marketeers),
began to transporttomatoes.2 They encountered a strong demand for vegetable products, principally tomatoes, and through the agency of these middlemen, the Serrabecame a regularsupplier to the Teresina market.
What began modestly as a marketingexperiment by a small group of middlemen soon blossomed into a major transformationof local agriculture.Although the traditional cane and manioc system continued to exist, resources shifted rapidly into vegetable production. Middlemen
then moved into other urban markets, and production spiraled upward. By the middle 1970s,
the Serra had become the major supplier of vegetables for Teresina, Sao Luis (population,
564,000; distance, 600 kilometers), and Fortaleza (population, 1,588,000; distance, 350 kilometers), and a partial supplier for Belem (population, 1,121,000; distance, 1000 kilometers).
This expansion from a small, regional center for highland products into a primary vegetable
supplier for four states is outlined in Table 1.
Residents in Ibiapaba frequently refer to these agricultural changes as the "tomato fever."
Although several types of vegetables are cultivated, the new agriculture is associated symbolically with tomatoes, the dominant crop. Vegetables are produced on moist valley land and
irrigableslopes; and in contrast to traditional sugar cane practices, vegetable technologies demand an intensive use of land and labor resources. Farmerswho for years resisted the introduction of fertilizersand chemical products on traditionalcrops have readily accepted the technological package associated with vegetable production, including fertilizer, chemical pest
control, spacing, and improved seed. Most farmers prefer to manage several relatively small
fields (average plot is 1.1 hectare) at different stages of the productive cycle and located in
differentareas to minimize risks of disease. Two seasons are distinguished-rainy (December
Table1. Annualvolumeof tomatoessuppliedthroughthe Ibiapabamarketsystem.

Year
1974
1975
1976
1977
1978
1979
Averageannual
percentagechange

Fortaleza
1180.8
2440.5
6531.8
6444.1
9239.5
10220.2
80.2

Annualvolumeof marketedtomatoes(metrictons)
Teresina
Sao Luis
1302.1
617.8
1327.2
604.4
1869.6
759.7
1869.4
971.1
2080.0
2540.7
2624.7
2856.6
16.0

44.8

Belem
474.3
984.4
2098.3
966.3
1870.1
2002.5
53.5

Source:Weberet al. 1978; CEASA

markets in Northeast Brazil

697

to June) and dry (Julyto November)-and sharp seasonal supply variations occur because of
production difficulties during the rainy season (Weber et al. 1978). Nonetheless, many farmers
attempt to have at least some land in production throughout the year.
The shift of resources to vegetables has occasioned major changes for farmers. On the one
hand, they have discovered in their economic environment new opportunities to increase incomes (Finan 1981:141). On the other hand, input and labor costs are high, the crops perishable, and prices often unpredictable. The increased integration into the market has introduced
Ibiapabafarmersto previously unknown risks related to both production and to marketing.
The Serrada Ibiapabahas seven political units (municipios) of which six produce vegetables.
The oldest producing municfpio, Tiangua, is located on a majortrunkroad connecting Teresina
and Fortaleza(Figure 1), while the most recent large producer, Guaraciaba do Norte is located
at the far end of the Serra, about 70 kilometers from Tiangua. In this analysis, market patterns
from these two production zones and from the three urban markets for which Ibiapaba is the
major supplier will be described.
Despite its relatively small and homogeneous production area, the Ibiapaba market system
has developed a very heterogeneous structure.Itvaries according to how several critical market
functions are divided among participants.Marketsystems organize such functions as assembly,
classification, storage, transportation, and debulking, and the market chain is structured by
combinations of middlemen that perform these services. Each urban market has distinct characteristics as a result of economic historical factors unique to each city. Alternative chains may
compete to supply product in a given urban market, and competing chains imply different levels and distinct types of risk.

market structures in the Ibiapaba region

In the Ibiapaba region, middlemen move in and out of the market system with great frequency. Formanand Riegelhaupt (1970) have noted from research elsewhere in the Northeast
that marketing attracts a large number of people in areas where underemployment is great.
Fieldworkobservations suggest that the total number of middlemen in the Serravaries during
the year from 100 to 150, depending on changing perceptions of economic opportunities and
ease of marketentry. The 1977-79 survey of Ibiapaba middlemen classified marketersby both
function and economic characteristics, as described below.3 All the interviewed marketers
came from the region except for one vertically integrated wholesaler located in Fortaleza.
The Ibiapaba market is a rural-based, indigenous system, yet highly complex and variable.
From a functional perspective, different middlemen in the system provide varying combinations of market services. In some cases, a single middleman-here referredto as nonspecialized-performs buying, bulking, crating, transporting, and resale functions. In other cases,
middlemen specialize in some subset of market functions. Figures 2-4 outline the different
combinations that comprise the alternative market structuresfor Teresina, Sao Luis, and Fortaleza, respectively.
In Teresina, the original market for Ibiapaba vegetables, the multifunction nonspecialized
middleman predominates. These middlemen maintain small-volume operations. They purchase their produce on the farm, classify, crate, and then transportit to Teresina. Upon arrival
at the Teresina central market in early morning, they sell their vegetables a few crates at a time
to large numbers of retailers. As Figure 2 demonstrates, the wholesale sector in Teresina remains underdeveloped. Several large-volume middlemen market directly to supermarkets,
which account for about 20 percent of total supply.
Since Sao Luis traditionally depended on long-distance supply lines for many basic foodstuffs, an oligarchy of large-volume traders came to dominate urban distribution networks.
These urban wholesalers continue to control the vegetable market in Sao Luis (Figure 3), and

698

american ethnologist

TERESINA,PIAUI

Occasional

flow of products

Figure2. Marketchannels between Ibiapaba and the Teresina urban market.

SAO LUIS, MARANHAO

90%

So Luis

Specialized

Rural

90%

10%

'

OI

20%

Supermorkets

Assemblers

20%

Specialized"
Middlemen

2a'

a80%
Iblpobo

Urban
Wholesalers

-Luis

'Cooperatives

--

-Occasional

Market

flow of products

Figure 3. Marketchannels between Ibiapaba and the Sao Luis urban market.

since they prefer to deal in large-scale transactions, the Ibiapaba suppliers tend to be largevolume middlemen themselves. To reduce the time and risk of purchasing from many small
producers in the Serra,these large-scale firmsbuy from ruralassemblers, middlemen who specialize in bulking, classifying, and crating activities. The assemblers buy vegetables from producers in the countryside and store them in warehouses located in Tiangua and Guaraciaba.
On prearrangeddays, the middleman arrives with his truck and loads it, then transports the
vegetables to Sao Luisfor sale to the wholesalers. In comparison with the Teresina market, Sao
Luis middlemen are fewer in number, and entry into this market is limited by access to substantial amounts of capital.
In Fortaleza,a more complex structureexists (Figure4). Several middlemen have supply contracts with the supermarket system, which accounts for about 20 percent of the total volume
marketed. Also several urban wholesalers in Fortaleza have vertically integrated enterprises.
They either rent land in the Serra and install sharecroppers, or they directly finance the input
costs of small independent farmers. On Mondays and Thursdays,these integrated wholesalers
transporttheir products to Fortalezafor resale to urban retailers.On Tuesday and Fridaymarket
days, nonspecialized Ibiapaba middlemen sell to urban wholesalers in the Fortaleza market.
As the marketfunctions vary among different market middlemen, so do their economic characteristics. Two major criteria for classifying middlemen along an economic dimension are

markets in Northeast Brazil

699

FORTALEZA,CEARA

Figure4. MarketchannelsbetweenIbiapabaandthe Fortalezaurbanmarket.

used in this study: scale-the average volume of vegetables marketed, and size-the level of
fixed investment in the marketenterprise. An analysis of economic informationfrom the sample
easily defined two groups-small scale and size, and large scale and size. Between these, however, lies a more ambiguous residual group that sheds light on the dynamics of marketing in
Ibiapaba. This intermediate group includes the middlemen who market a small volume but
own a truck and middlemen who market a large volume but own no capital equipment. Table
2 summarizes this classification.
In a region of high unemployment, marketing activities constitute a common source of income. As Table 2 indicates, working and fixed capital requirementsfor the subgroup I are minimal and thus allow an easy and less risk-laden entry into the market. These middlemen tend
to be young and come from low-income families. Almost invariably, the available market for
low-capital beginners is Teresina. The absence of a wholesale market in Teresina reduces the
possibilities for large-scale marketing outside the supermarket system; thus, middlemen who
wish to increase the size of their enterprise can opt for two strategies. One is to purchase a truck
and rent space to Teresina-bound colleagues; the other such strategy is to increase working
capital and shift to a larger market, such as Fortaleza or Sao Luis. Subgroup II is comprised of
middlemen who have adopted these market strategies.
In the last group are found the heavily capitalized, large-volume middlemen concentrated
in the marketswith strong urban wholesale structures.These marketershave an aggressive entrepreneurialspirit and sizable amounts of initial capital, including a truck. Several have complementary incomes outside their market activities.
Thus, it is difficult to stereotype the middleman in the Ibiapabamarketsystem. Differentfunctional types operate in different markets,and the functional typology is furthercrosscut by great
variation in the economic characteristics of the marketfirms. Some, such as Teresina marketers,
performa wider range of marketfunctions yet remain small-volume. Others sell large quantities
of product to a more restricted market. The Fortaleza market has a dual structure that varies
according to the day of the week. Such widespread variation in channel structure between
marketsand within markets furtherimplies that middlemen face varying costs and risks at different links of each chain. It is as a response to these uncertainties that the fregues equilibrating
relationships become significant.

market risks and fregues strategies

Ibiapaba middlemen are nightriders.They prepare their loads during the day of the journey,
then travel at night over long distances on precarious roads. Serious accidents and even death
are not uncommon consequences of this routine. Despite such dangers to life and limb, mid-

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american ethnologist

Table 2. Economic classification of Ibiapaba middlemen according to economic char

Economic characteristics (medians)

Subgroups
1.
Ilb

IIIc
P-Value
(Kruskal-Wallis)

3af
0_

z
o0
Z

a)
P*
m

0)
N

Winter
Summer
volume
volume
kgs/trip
1900
2125
7100
9500
7550
10350
< .01

< .01

Working
capital

Fixed
capital
1978 Cr$

Total
debt

6333
20333
41000

840
5250
294600

286
17000
132500

< .01

< .01

< .01

Source: Ibiapaba Middleman Survey

avolume < 80 crates and size < Cr$ 50000
bvolume > 80 crates and size < Cr$ 50000, or
volume < 80 crates and size > Cr$ 50000
'volume > 80 crates and size > Cr$ 50000
dSampledoes not include specialized assemblers who do not travel.

Fort

diemen fret much more over the risks they face in the marketplace. These risks include ownership of a highly perishable good, variable prices, and payment default.
The presence of luck notwithstanding, the secret to success in this market is continuity. The
system operates like an economic carousel which, if abandoned, is very difficult to remount.
If, however, market participants can survive the temporary setbacks and maintain the flow of
products, marketrisksbecome more manageable. It is critical to this riskmanagement that middlemen maintain a constant source of supply, a steady buyer, and the necessary capital to cover
the transactions.The fregues relationship provides a major instrumentto achieve this continuity
and to reduce market uncertainty and risks.
The pressure to maintain a regular supply network dominates the lives of Ibiapaba middlemen. Much "spare time" is spent combing the countryside for new plots about to come into
production or cultivating relations with potential suppliers, so holidays or vacations are considered only at the risk of losing customers. Fregues relations with farmers (or specialized assemblers) enhance the predictability of product flow and facilitate organization. Middlemen
closely accompany the production patternsof their regularsuppliers and often provide market
advice as to the timing of planting and consumer preferences. Fora special fregues, a middleman may partiallyfinance production costs.
At the other end of the marketchain, the middlemen need a guaranteed outlet for their product. The most unnerving and omnipresent fear is to take possession of a crop for which buyers
cannot be found. Glutted markets can occur during times of heavy Ibiapaba production or
when unexpected quantities of vegetables enter from outside the region, and urbanwholesalers
are reluctant to assume ownership of stock that may not find a retail buyer. Yet middlemen
cannot easily reduce their marketed volume, because of commitments to farmers. Here fregues
relations function as an implicit agreement between supplier and wholesale buyer. The Ibiapaba middleman sells only to his fregues wholesaler-even during periods of short supply and
high prices when a competing buyer may offer slightly more. In return for this loyalty, the
wholesaler agrees always to accept the Ibiapaba product, even when marketsare oversupplied
and prices are low.
Working capital is needed to keep the system functioning. Middlemen themselves attribute
almost a sacred quality to their capital fund (capital de giro), since it indicates the true health
of the enterprise. There is little formal credit available, and banking facilities are not commonly
used for market transactions. Many middlemen carry their working capital on their person to
meet immediate cash needs. The majority of farmers in the Serra prefer payment at farmgate
for their vegetables, and transportationcosts cannot normally be deferred. In some markets,
where middlemen must await payment from their buyers, they also accrue lodging expenses.
The working capital estimates for different markets, presented in Table 2, represent average
needs, the amount of capital necessary to purchase, transport,and transact.
Critical loss of capital is an ever-present risk to even the most vigilant of middlemen, and it
can occur in several ways. The most unpredictable threat to working capital resources comes
through price variation. Ibiapaba middlemen assume ownership of their goods without certainty of the subsequent resale price in the urban market. As one middleman to Fortaleza anecdotally explained, marketing is an adventure in which one never really knows the outcome
until it is over. Product prices vary in such a way that only general seasonal trends are predictable. Table 3 compares tomato price levels and uses a coefficient of variation measure to estimate price variability between seasons and among different markets in the system.4 During
the rainy season, prices are higher and vary more from day to day. During the summer harvest
period, prices are more depressed and vary less. Also, producer prices in Guaraciaba are consistently lower than what Tiangua farmers receive. Despite these general patterns of price behavior, neither producer nor middleman can predict the level prices will reach on a given day
or in a given market. In this sense, each trip is an adventure.

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american ethnologist

Table3. Pricevariationat Ibiapabafarmgatelevelsand in urbanwholesalemarkets,perkilogramof firstclasstomatoes.a

Winterseason
(February 1979-August
1979)
Average

Summerseason
(August 1978-February
1979)
Markets

Average
price

Tianguafarmgate
Guaraciabado
Norte-farmgate
Fortalezawholesale
Teresinawholesale
Sao Luiswholesale

Cr$
4.02
(N= 31)
3.27
(N= 79)
5.13
(N=99)
5.71
(N= 99)
6.4
(N= 99)

CVb

22.6
23.2
21.1
19.9
16.5

price

Cr$
6.19
(N=32 )
5.38
(N= 80 )
8.31
(N= 120)
10.38
(N= 116)
10.23
(N= 120)

CVb

33
19.5
33.1
23.7
29.3

Sources:SIMA(ServicoNacionalde Informacao
de MercadoAgricola);IbiapabaMiddlemanProject
aAllpricesare in cruzeiros(Cr$).
bThecoefficientof variation(CV)is calculatedas a ratioof the standarddeviationto the arithmeticmean.
Thehigherthe number,the greaterthe variationaroundthe mean(see Weberet al. 1978).
Marketersstrive to control market information or to pass their risks of price variation backward in the chain to producers. In the Fortaleza and Sao Luismarkets,a strong urbanwholesale
sector sets prices in both directions-to retail buyers and to middlemen suppliers. The risk of
a downward swing in prices lies entirely with the Ibiapaba suppliers. To counter this risk, middlemen attempt to share it with farmers. In the absence of an efficient market information system, these middlemen can exaggerate market conditions in an effort to reduce producer prices
and protect capital reserves. As one astute marketer revealed, when the urban prices are low,
middlemen returnto Ibiapaba "chorando" (bewailing their luck); however, when prices are
unexpectedly high, they return in solemn, church-like silence.
The fregues relationship also helps offset the loss of capital. Middlemen ask their steady producers (or assemblers) to share in potential misfortunes caused by price variation, by adjusting
farm prices after the wholesale transaction. Only in the context of close fregues ties would a
farmerbe willing to deliver his product without a settled price and payment in full.
Another major threat to working capital is payment default. The Ibiapaba market system has
little liquidity and practically no access to formal credit. However, it is standard marketing procedure for middlemen to be paid only after their wholesale buyers have resold the product. In
Teresina and Sao Luis, middlemen arrive at central markets, sell their vegetables, then wait for
their buyers to resell down the market chain in order to receive payment. Besides the cost of
remaining in the urban center for several days awaiting payment, Ibiapaba middlemen face the
furtherriskthat unscrupulous buyers simply will default. Table 4 indicates that over 70 percent
of Ibiapaba middlemen have suffered payment default problems that average almost half of
working capital needs.
The majordefense against payment default has been the careful selection of buyers. No legal
recourse exists for unrecovered debts, since most transactions are recorded on scrap paper. It
is estimated that default and stay-over expenses represent about 14 percent of total variable
costs; however, many middlemen maintain a working capital fund that can ill afford even one
instance of default.
The incidence of fregu6s relationships in the Ibiapaba marketsystem is pervasive. The survey
found that 66 percent of the middlemen maintained such ties with their urban buyers, with a
range varying from 57 percent for the small-scale (mostly Teresina) marketersto 76 percent for
the large-scale group. Nearly 75 percent of the middlemen also claimed to have fregues ties

markets in Northeast Brazil

703

Table4. Paymentdefaultlevelssufferedby Ibiapabamiddlemen,by groupand by class.

Middlemen
Middlemenby class (N)
GroupI (25)
GroupII(10)
GroupIII(17)
Totals(52)
Middlemenby market(N)
Fortaleza(12)
Teresina(29)
Sao Luis(8)

Numberaffected
(N) %of row
18
72.0
6
60.0
13
76.5
37
71.2
7
20
7

Middlemanlossesfromdefault
Percentof
Averagelosses
(in 1978 Cr$)
workingcapital
4178
54.8
15233
59.0
30585
43.2
10850
45.0

58.3
69.0
87.5

10343
5645
21271

20.1
40.4
51.9

Source:IbiapabaMiddlemanSurvey
with their producers or other suppliers. At both buying and selling ends, about half the middlemen with such relationships had cultivated them for more than two years.
Insum, middlemen develop fregues relationships to maintain a steady, well-functioning market and to protect critical capital reserves. From the individual perspective of the middleman,
these relationships are purposive strategies developed to neutralize the many risks inherent in
the market enterprise. The intended benefits of such a strategy are clearly economic, since it
involves a mutual agreement between market participantsto preserve their respective positions
in a volatile and often unforgiving market. The substance of a fregues relationship, however, is
drawn from the social context and sanctioned in a social realm. Its idiom-well understood in
ruralBraziliansociety-is that of reciprocity ratherthan of impersonal exchange. In its essence,
this marketbond is a social analogue of all the other relationships that make up the social networks in which these marketersparticipate.
The Ibiapabavegetable market is large, complex, and fraughtwith uncertainty. Under these
conditions, the fregues relationship provides middlemen a strategyfor riskmanagement, which
results in direct or indirect economic benefits. These advantages are realized either directly
through reductions in transaction and handling costs or indirectly through the maintenance of
a secure position in the market. The particularproblems that generate a fregues response differ
from one marketchannel to another. In the Sao Luisand Fortaleza markets,this strategy is used
to mitigate the effects of a power imbalance between Ibiapaba middlemen and urban wholesalers; in Teresina,the fregues relationship reduces payment default. Butfor all cases, this social
mechanism promotes individual survival in the economic arena.

fregues relationships and market performance

In standard economic analysis, middlemen pursue short-run profit incentives among alternative markets.Inthis ideal world with perfect information, middlemen assess alternative urban
outlets, compare prices and the different transportationcosts to each market, then select the
market where the difference between price and cost is greatest. As a consequence of these
individual maximizing decisions, supplies flow to the market of highest return until the price
(hence, profit)is lowered to a level comparable to other markets.The system is in "equilibrium"
when price levels in the alternative markets are equal except for the varying costs of transportation. At equilibrium, profit incentives are equalized across alternative markets,and the system
is said to be integrated.
Why is market integration a desirable situation? In the simplified market model, producer,
middleman, and consumer interactby transmittingboth goods and information. Inthis manner,
markets perform an economic function in society by coordinating producer supply and con-

704

american ethnologist

sumer demand. This service incurs a cost that is borne by one or all of the participants in the
market. In an integrated market, competing middlemen provide marketingservices to producers and consumers at "lowest possible costs under existing circumstances" (Southworth,Jones,
and Pearson 1979:158). The total supply produced in Ibiapaba, in effect, is distributed according to relative levels of urban demand in each alternative market. When, however, barriersto
marketentry reduce competition, one consumer pays more relative to another, or one producer
receives less relative to another.
Empiricalevidence suggests that the Ibiapaba marketdoes not meet the criteria of a perfectly
competitive, integrated market. Tomato prices from the three urban markets and from two producer areas in Ibiapaba were gathered during 1978-79.5 The sample of 363 market observations-gathered nearly continuously on successive market days-were used to compare differences in price levels at alternative wholesale marketsand in marketmargin estimates of Ibiapaba middlemen. Forthe wholesale price analysis, average marketingcosts to each urban market were calculated on the basis of middleman interviews. Then the wholesale price series was
adjusted to reflect these differences in transportationand handling. This adjustment factor included stay-over expenses and an estimate of average losses due to payment default.
To calculate market margins, it is necessary to understand beforehand the different market
channels and market scheduling. For example, tomatoes that enter the Fortaleza market on
Tuesdays and Fridaysare produced and sold in Tiangua, but the vertically integrated wholesalers supply the Fortaleza market with tomatoes from Guaraciaba do Norte on Mondays and
Thursdays.Producer prices from the two zones are consistently different, so the marketmargins
will also differ. As a general rule, the margins reflect the actual gross payment to Ibiapaba marketersfor their direct marketcosts and the returnto their own labor, capital, and management.
In an integrated market, it is predicted that adjusted average wholesale prices will not differ
greatly because competition brings alternative markets into equilibrium. Similarly, market margins will not vary widely from one wholesale center to another once the differential costs and
riskshave been incorporated. However, the empirical comparison of wholesale prices among
the three principal markets (Table 5) revealed a large average difference in adjusted tomato
prices. For about three-fourthsof the observations, the wholesale prices differed by more than
Cr$ 1.00 per kilo of tomatoes, an amount that represents from 50 to 100 percent of the target
minimum margin declared necessary by the middlemen.
Similardivergence was found in the middleman margin estimates (Table 6).6 If the declared
minimum margins constitute accurate bases to compare true differences in marketingcosts, the
differences in estimates margins reflected significantly more than transportationand handling
costs of entering alternative markets. Even in the Fortaleza market, there was significant variation in margins from the Monday-Thursday marketsto the Tuesday-Friday markets. These results argue strongly that neither wholesale price differences nor actual income incentives are
sufficient to attractmiddlemen from their established market patterns. As a result, the Ibiapaba
marketsystem appears inflexible and segmented, with consequent higher costs for some urban
consumers and some Ibiapaba producers.
Table5. Tomatopricedifferencesin urbanwholesalemarketsservedby the Ibiapabamiddlemen.a
Wholesalemarket
comparisons
Teresina-Fortaleza
Sao Luis-Fortaleza
Sao Luis-Teresina

Cost
adjustment
factor
(Cr$)
0.48
0.74
0.26

Adjusted
price
differences
(Cr$/kilo)
1.23
1.65
0.96

Differences
near0.0
(Percent)
21
27
28

Differences
> Cr$1.00
(Percent)
79
73
72

Sources:SIMA(ServicoNacionalde Informacaode MercadoAgricola);IbiapabaMiddlemanProject

aAllpricesare in 1978 cruzeiros(Cr$)

markets in Northeast Brazil

705

Table6. MarketmarginsforIbiapabamiddlemento urbanmarkets,1978-79.'

Urbanmarket
(Farmgate)
Fortaleza
(Tiangua)b
Fortaleza
(Guaraciaba)c
Teresina
(Tiangua)
Sao Luis
(Guaraciaba)

Declared
Estimated
minimum
Estimated
minus
declared
margins
margins
Cr$perkiloof tomatoes
0.61
- 0.39
(N= 64)
1.00
2.60
1.00
1.60
(N= 85)
3.30
1.80
1.50
(N= 64)
2.58
2.10
0.48
(N= 78)

Estimated
Estimated
> Cr$1.00
lowerthan
declared
abovedeclared
Percentof totalobservations
35.9

17.2

2.4

76.5

18.8

62.5

43.5

43.4

Sources:SIMA(ServicoNacionalde Informacao
de MercadoAgrfcola);IbiapabaMiddlemanProject

aAlIpricesin 1978 cruzeiros(Cr$)

bOnlyTuesdayand Fridaymarketdays
cOnlyMondayandTuesdaymarketdays
Ethnographicinterviews help to understand the significance of the price and market margin
information. Middlemen agreed that there was little movement between markets in response
to price signals. Eventhose marketerswho travel to Sao Luisand pass through Teresina en route
would not be tempted by higher profits to unload part of their cargo in the closer market. In
effect, middlemen considered it foolhardy to switch destinations in response to wholesale price
differences, because the risk of entering a new market without a confirmed buyer was simply
too high. And the time and effort needed to cultivate new reciprocal relationships were sufficiently demanding to dissuade impulsive leaps from one marketto another.
As an illustrativecase in point, the growers' cooperative in Guaraciaba do Norte decided to
begin marketing its members' production in the Sao Luis market. Cooperative officials contacted a wholesale buyer and made arrangements for a truckload at an agreed price. Some
Ibiapaba middlemen viewed this new colleague as a threat to their market position, but most
anticipated the-in their minds-inevitable outcome. After several trips, the cooperative representative unwittingly accepted a check without funds from the Sao Luis buyer, and the cooperative-its capital lost-stepped out of the market.This example demonstrates the types of
effective blocks to marketentry that can reduce integration.
The impact of fregues relationships on the marketsystem now becomes a relevant theoretical
issue. It is possible that as a strategic response to existing market risks, this equilibrating interaction imposes a measure of rigidity on the system. Figure 5 presents a conceptual model of
how equilibrating relationships can influence market structure. Under ideal conditions of perfect competition, buyers and sellers can interact in any combination in any marketplace. But
where conditions of riskpredominate, middlemen devise strategies to "carve out" and segment
the market. In effect, entry into alternative markets is not open and free, as economic models
would have it, because the market itself is organized more on strong dyadic principles of reciprocity ratherthan on impersonal market exchange. Simply stated, Ibiapaba middlemen do
not shift from one marketto another in response to price changes.
Itis indeed possible that other factors-such as capital requirements-restrict entry into specific markets,and that poorly structuredmarketchannels, ratherthan behavioral strategies, are
responsible for marketsegmentation. Causal linkages are not easy to establish because fregues
bonds are themselves a response to existing conditions. However, Schwimmer has suggested
that in Ghanian fish and yams markets enduring market relationships "constitute an aspect of
marketstructurein themselves and have an effect upon the level of competition and the regulation of existing supply and distribution structures" (1979:699). So, too, in the Ibiapaba system, the fregues agreements act as a glue in which economic transactions are set-with a
dampening effect upon competitive forces.

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american ethnologist

PERFECT COMPETITION

Sao Luis

Teresina

Fortoleza

BARRIERS TO ENTRY
(Equilibrating relations)

Sao Luis

Teresina

*
()

Fortolezo

Ibiapoba middlemen
Urban wholesalers

of the impactsof equilibratingrelationson marketentry.

Figure5. A conceptualrepresentation
The same glue, however, also enhances stability in the market. The complex arrangements
among market participants, including farmers, certainly function to maintain the flow of products and information under conditions of high uncertainty and considerable risk. To some extent, this stability is achieved because the market is organized much along the lines of the wider
society. In his book on middleman exploitation (1959), Chaturvediargues that relative positions
of marketparticipantsin society also structurethe distributionof market power. If,then, Northeast Brazil is a society characterized by unequal positions of power articulated through reciprocal interaction, the Ibiapaba marketers have learned to survive in their market by following
the same survival tactics practiced in all their social interaction.

summary
The Serrada Ibiapaba is an agricultural region that has experienced rapid change over the
last two decades. This process might well be described as economic development insofar as
farmtechnologies have modernized and farmerincomes have increased. Marketmiddlemenmuch maligned in many agricultural societies-have played a dynamic role in this transformation, by promoting the increased integration of local farmers into a market economy. This
change has occurred in a precarious environment of uncertainty and risk, and market participants have had to develop adequate risk management behaviors to assure their economic survival.
This advance of the market economy in Ibiapaba has followed traditional patterns of organization. Middlemen and farmers alike have resorted to time-tested social relationships to in-

markets in Northeast Brazil

707

terpret and determine their economic transactions. The fregues bonding patterns have provided
the necessary instruments to work within the context of high risks and, consequently, to enhance individual success. These social ties ultimately represent a trade-off in which short-term
gain is sacrificed for permanence.
At a system level, analogous trade-offs are observed. The Ibiapaba market does not adhere
to the ideal model of an integrated market because this locally understood reciprocity rather
than impersonal exchange organizes the participants. The result of these relationships is that
the market maximizes stability instead of integration.
This regional market resembles many others in rural societies. The principles of market exchange do not gain full dominance even when the economy is undergoing major change. Existing analytical models of economic behavior only approximate the reality of market interaction, because participants modify impersonal exchange to conform to familiar social surroundings. It is this effort to recreate society within the market system that best explains the behavior
of Ibiapaba middlemen and their fregueses.

notes
Acknowledgments. A version of this paper was presented to the 1985 Annual Meetings of the American
Association for the Advancement of Science in Los Angeles, California. Carlos Velez-lbanez and James
Greenberg have provided critical commentary on these ideas; I wish to thank and exonerate them from the
responsibilityfor possible error.
'The structure-conduct-performancemodel has been applied frequently to agricultural market studies
in developing countries. The dominant logic is that the structureof a market-measured primarilyin terms
of the number of buyers and sellers and ease of entry-results in a set of predictable market behaviors
(monopoly pricing, for example), which in turn determines the efficiency of the marketin distributinggoods
and information. The model has provided useful analytical categories; however, the unilineal causation
poorly reflects the reality of marketdynamics.
2Maloqueiros are a locally recognized institution in the Serra da Ibiapaba. The derivation of the word
itself provides insights into its social significance. In the Northeast, a "maloca" is a band of suspiciousacting marginals who live out in the brush and merit no trust. The maloqueiro is not usually considered a
member of mainstream society.
3Thisstudy has adopted a technical vocabulary to describe the middleman sample, discriminated by
function. The following table summarizes this functional terminology:
Middleman

Sample N

Specialized rural
assemblers

Nonspecialized
middlemen

41

Specialized
middlemen

11

Integrated
wholesaler

Functions

Urban market

Assembly,
Classification

Fortaleza,
Sao Luis

Assembly,
Classification,
Transportation,
Debulking
Transportation

Teresina,
Fortaleza

Production,
Assembly,
Classification,
Transport,
Debulking

Fortaleza

Fortaleza,
Sao Luis

Source: Ibiapaba Middleman Project

4All price data in this analysis are for first-class tomatoes. Although middlemen also market other vegetabes, tomatoes are the dominant crop and constitute more than half the weight of any truckload. Thus,
this analysis assumes that price variation for the secondary vegetables does not significantly differfrom that
of tomatoes, and that middlemen will seek to attain the same per-kilo margin for these vegetables that they
do for tomatoes.
STheBel6m market was not included in this analysis because it is has a seasonal demand for Ibiapaba
tomatoes. The tomatoes from Belem's other major supplier, Sao Paulo, are treated as a differentiated product by consumers, but not so in published price data. It is thus impossible to separate these two products
in the marketat a given time.

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american ethnologist

6Thedeclared minimum margins are reported from interviews with middlemen to the different markets.
The declared minimum was expressed as the difference between buying and selling prices that would cover
marketexpenses and provide the necessary returnsto remain in the business. Estimatedmargins were calculated from the price data, using wholesale and producer prices (the latterlagged one day to reflect actual
time of purchase).

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submitted 27 February1987
revised version submitted 24 February1988
accepted 25 April 1988

markets in Northeast Brazil

709