Hard Bargains: The Impact of Multinational Corporations on Economic Reform in Latin America

Abstract

This article promotes the idea that multinational corporations have independent agency in the process of economic reform in Latin American host countries. Through a number of pooled cross‐sectional time series analyses, it shows that accumulated foreign direct investment can affect policy reform in ways unanticipated by earlier theories predicated on the obsolescence of firms' influence after initial investment. The influence of firms varies across different reform areas, and competitive pressures lead firms to press alternately for liberal and illiberal reform measures. The study also considers sectoral issues, and argues that a preponderance of natural resource–oriented FDI can alter the impact of multinational investment on policy reform. Indexes of economic reform are measured against stocks of FDI and a number of political and economic control variables. Evidence shows that the dramatic increase in FDI in the region in recent years has bolstered firms' bargaining power and concomitant policy leverage.

Correlates of economic growth in developing countries: a panel cointegration approach

“…It is also interesting to note that neither of the interaction terms, which represent the differential influence of real FDI on real GDP by the African or Asian region, is statistically significant. Consequently, the effect that real FDI has on real GDP in the long-run does not depend upon whether a country is in Africa or Asia, and this result counters what previous studies have found (Egan 2010;Adams 2009;Mengistu and Adams 2007). 9 In addition, the 1990s financial crisis in Asia and Latin America did not appear to have much of a lasting impact on real GDP across these countries and years, ceteris paribus.…”

“…As mentioned in previous research, studies on FDI flows in Sub-Saharan Africa (SSA), Asia and Latin America suggest that the influence of FDI on economic development is not equally or uniformly distributed across countries and/or regions (Egan 2010;Adams 2009;Mengistu and Adams 2007). Therefore, in addition to the above-discussed explanatory variables, two interaction terms are included in order to capture the differential effect of real FDI across regions.…”

“…Recent research studies on FDI inflows in Sub-Saharan Africa (SSA), Asia and Latin America suggest that although FDI has some positive effects on economic development in these regions, the benefits are not accrued equally or uniformly across countries and across regions (Egan 2010;Adams 2009;Mengistu and Adams 2007). For SSA countries, it appears that FDI stimulates domestic investment and this in turn results in economic growth (Adams 2009).…”

The Global Production of Transportation Public–Private Partnerships

“…The literature on infrastructure PPPs and privatization more broadly often emphasizes the prevalence of large Western multinational firms in the provision of infrastructure worldwide (Holden, 2009; Torrance, 2009). In the more critical scholarship on PPPs, the market domination of these western multinationals is sometimes identified as a cause of poor project outcomes, including unequal connections to public services, fee structures that exclude poor users while profits leave the domestic country, deregulation as a result of heavy industry lobbying, and project failure when returns do not meet investor expectations (Pessoa, 2008; Egan, 2010). Yet the contemporary experience in the transportation sector illustrates how local firms in certain developing countries and regions are becoming more significant industry participants in their home countries and abroad, raising questions about the implications of PPPs involving participants from the global South.…”

Platform developmentalism: leveraging platform innovation for national development in Latin America

“…In this context, economic policy is heavily guided by multinational corporations and diversified business groups that benefit from the continued presence of low skill labour to extract a profit (Cimoli & Rovira, 2008;Schneider, 2008Schneider, , 2009Schneider, , 2013Serna & Bottinelli, 2019;Egan, 2010). There is every suggestion that platform enterprises will align with this logic given the lean business practices (Srnicek, 2017, p. 39) that lie at the heart of platform business models.…”