The apologists for the Alliance for Progress herald the Latin American Common Market proposed at Punta del Este last April as the major instrument of “development” in Latin America (see especially Lincoln Gordon’s article in Foreign Affairs, July 1967). For these government spokesmen and social scientists, “development” is tantamount to the establishment of a diversified industrial base and increased productivity. What they do not adequately discuss is who will exercise control over the industrial base.
Yet their business counterparts candidly admit what the ideologues ignore – that is, a common market “reform,” which places no substantial barriers to the inflow of foreign capital, must inevitably lead to domination by large, foreign based global corporations rather than to the growth of indigenous Latin American companies. The superior technology, marketing facilities, and capital resources of such corporations ensures their control over any market they are allowed to penetrate. (Note, for example, how U.S. corporations captured control of European growth industries such as aerospace and electronics after the establishment of the European Common Market.) An article in the June 1967 issue of Fortune Magazine entitled “A Latin American Common Market Makes Common Sense for U.S. Businessmen Too” puts the situation bluntly:
For U.S. private enterprise, the common market spells enticing new opportunity. Apart from the traditional mining (Anaconda, Creole Petroleum) and farming (United Fruit, W.R. Grace), U.S. investment until now has mostly gone into manufacturing for “import substitution” – producing for a national market under protective tariffs. But U.S. businessmen are beginning to see in the Latin American common market the advantages that they seized upon in the European Common Market: the chance to move to the broader, more competitive, and potentially more profitable task of supplying a market big enough to be economic on its own terms.
In many a boardroom, the common market is becoming a serious element in planning for the future. Ford Motor do Brasil, which makes Galaxies, thinks it could mesh nicely with Ford of Argentina, which makes Falcons, thus deriving economies of scale by producing both cars for larger markets. Kodak, which now makes photographic paper in Brazil, would like to make exportable film in Mexico and cameras and projectors in Argentina. I.T.T., with telecommunication-equipment plants in Argentina, Brazil, Chile and Mexico, wants to “rationalize production, interchange parts, and raise production high enough to export from Latin America to other parts of the world,” says Vice President Gerhard Andlinger, the company’s group executive for Latin America. Other corporations interested in rationalizing or expanding operations include G.E., Remington Rand, Otis Elevator, Worthington, Firestone, Deere, Westinghouse Air Brake, American Machine and Foundry.
As Fortune implies, the only benefit to local Latin American capitalists is the possibility of capital participation in the formation of subsidiaries of foreign controlled corporations.
This may sound like a U.S. take-over of the whole Latin-American economy, and plenty of Latin-American businessmen believe that’s just what’s afoot. But the fear is not necessarily valid. As things stand now, most foreign-owned enterprises in Latin America. reinvest a lot of their profits, thus tending more and more to be part of the landscape. Yet if they are really going to take up residence and- avoid the take-over charge, U.S. subsidiaries will have to admit Latin Americans more readily to an ownership role. Telling them to buy stock in the parent company on Wall Street is so far not the answer, since getting the dollars, and getting them out, is balked by currency restrictions and tax law.
A quick sentence in the Punta del Este declaration hints at a long-range
solution: a common market stock market, which would let an Argentine buy
stock in a Venezuelan brewery, or a Colombian buy stock of Brazil’s Willys-Overland.
Such participation by local capitalists in so-called joint ventures with foreign corporations bears only the illusion of local control. No matter how large a percentage of the stock is in the hands of local investors, the foreign interests maintain effective dominance through management contracts. A full documentation of the use of this device to maintain “day-to-day control” despite “the window dressing of a 50-50 or even minority split” may be found in a Business International monograph entitled “Management Contracts Abroad” (1963).
