The Impact of Globalization on Argentina and Chile

The Impact of Globalization on Argentina and Chile

Business Enterprises and Entrepreneurship

Edited by Geoffrey Jones and Andrea Lluch

During the first global economy of the late nineteenth century and early twentieth century, Argentina became one of the richest countries on earth, while Chile was an economic backwater. During the contemporary era of globalization, liberalization and institutional reforms in Chile provided a context in which business grew, while in Argentina, institutional dysfunction made productive business hard to sustain. This book explores the complex relationships between corporate behavior, institutions and economic growth through the contrasting experiences of Argentina and Chile. In nine chapters written by prominent business historians, the work addresses the role of business in these two eras of globalization, examining the impact of multinationals, the formation of business groups, and relations between business and governments. It places the regional experience within the context of the worldwide history of globalization.

Chapter 3: Multinationals, business groups, and Chile’s energy politics

Marcelo Bucheli

Subjects: business and management, entrepreneurship, international business, economics and finance, economic psychology

Extract

This chapter studies the relationship between Chilean business groups, foreign oil multinationals, and Chile’s energy politics between 1913 and 2005. The chapter employs Nathaniel Leff’s definition of business groups as a ‘multicompany firm which transacts in different markets . . . under a common administrative and financial control [where] participants are linked by relations of interpersonal trust, on the basis of similar personal, ethnic, commercial, background’. Business groups have been crucial actors in the industrialization process of the major Latin American and Asian countries. They are characterized for having their roots in the family business, a diversified portfolio of investments in a wide variety of sectors (banking, manufacturing, and trade), and close relationship with policy makers. In this chapter I show how business groups can become an important tool for industrializing net oil-importing countries aiming to increase domestic control of the oil industry, without expropriating foreign property. The Chilean state forced the multinationals to create a cartel with a domestic firm, and initially the foreign companies opposed this. In the long term, however, the multinational enterprises (MNEs) benefited from this arrangement because of the domestic firm’s affiliation with the local business groups.

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