The storms of history have brought more wreckage than treasure to South American shores. Though pre Columbian civilizations like the Chavin, the Muisca, the Nazca, the Huari, and the Inca were sophisticated and often technologically superior to their North American neighbors, the continent has been at a disadvantage since European colonization. Native populations were decimated by the infectious diseases introduced by the Spanish and Portuguese colonists and the African slaves they brought with them, and cultures were destroyed as the Spanish went about a religious conversion campaign that far exceeded those attempted by other European settlers. When the wars of independence were fought, they had a racial element missing from that of the United States, where Englishmen sought self-rule apart from other Englishmen; in South America, many of the colonists seeking independence were mestizos, descended from both the natives and the Spanish.
Most of South America gained independence in the 19th century. Guyana did not become independent from the United Kingdom until 1966; Suriname, from the Netherlands, in 1975; and French Guiana remains a French holding. Through the second half of the 20th century, South America was one of the parts of the world where the Cold War was fought. Argentina, Brazil, Chile, and Uruguay had their governments replaced by American-sponsored military dictatorships that detained, tortured, and killed thousands of political prisoners in the name of national security. Colombia continues to exist in a state of unrest, and both it and Bolivia contend with their deeply ambivalent relationships with the coca plant and the illegal overseas cocaine trade, responsible for so much of the trade balance and yet an obstacle in their relations with the rest of the world. For decades, across much of South America, the governments’ reputation has been one of corruption, greed, fiscal mismanagement, and diplomatic disaster. Since the end of the Cold War, debt has been a severe problem. Few of these countries have government agencies equipped to deal with their crises, necessitating emergency measure after emergency measure.
The continent suffers from a long and persistent history of high inflation, high interest rates, and difficulty attracting foreign investment money. The economic gap between the rich and the poor is greater than in most parts of the world, the average standard of living lower than that of Europe or North America. Despite the pronounced shift to the left in South American politics, free market policies are still strong and look to remain so, integrated into the new South American liberalism. With the Cold War in the past and the continent no longer used as a battlefield between a North American power and a Eurasian one, there is considerable movement towards continental integration of economies and other spheres. The old customs unions of Mercosur and the Andean Community are being merged into the new UNASUR.
Regional Trade Agreements
Mercosur, the Mercado Común del Sur (Southern Common Market), was a trade agreement signed in 1991 by Argentina, Brazil, Paraguay, and Uruguay, to promote free trade and movement between those countries. It was itself an expansion of the PICE (Programa de Integración y Cooperación. Económica Argentina-Brazil) between Brazil and Argentina, and has since been joined by Bolivia, Chile, Colombia, Ecuador, and Peru as associate members; Venezuela awaits ratification of its member status, applied for in 2006. Unlike the EU agreements, Mercosur provides for no common currency; but with nearly $3 trillion in combined gross domestic product, the Mercosur nations represent the fifth-largest economy in the world.
The Andean Community (Comunidad Andina, CAN) is a similar trade bloc, originally signed into existence as the Andean Pact until 1969 and reorganized in 1996. Member nations are Bolivia, Colombia, Ecuador, and Peru. From 1999 to 2004, Mercosur and the Andean Community negotiated a merger to create a South American Free Trade Area. Venezuela left the CAN and petitioned for membership in Mercosur, with the stated intention of rejoining the CAN, though statements made by the Venezuelan government since then have been unclear, with some of them implying that the CAN is expected to die off to make way for a new integrated trade bloc.
In any case, UNASUR (Union de Naciones Suramericanas, the Union of South American Nations) is the product of those negotiations. Current and former members, full and associate, of both Mercosur and CAN are expected to be integrated into a single customs union modeled after the European Union, joined by Guyana and Suriname. Intent was declared by representatives of twelve governments at the end of 2004, and work has continued since then. Work has been slow, but the success of the European Union after decades of partial measures encourages both participants and onlookers. In addition to trade agreements and the free movement of people among countries, UNASUR is expected to oversee significant infrastructure improvements, such as the construction of the Interoceanic Highway that will run from the Atlantic to the Pacific, better integrating the Pacific nations of Chile and Peru with the highway systems of the rest of the continent. The South American Energy Ring is planned to connect Argentina, Brazil, Chile, Paraguay, and Uruguay with natural gas.
All nations of South America will be part of UNASUR except for French Guiana—a French department, and part of the European Union—and the Falkland Islands, South Sandwich Islands, and South Georgia, contested territories claimed by both the United Kingdom and Argentina. If successful, the UNASUR integration should have considerable positive impact on the free market policies of the continent, providing further business opportunities for the companies in operation.
Argentina
The state-owned Banco de la Nación Argentina is the largest bank in that country, with 616 domestic branches and 15 internationally. Founded in 1891, it employs 16,000 people. A scandal recently damaged the bank’s reputation, when it was discovered that in the 1990s, the bank’s directors had been bribed in connection with a large IBM contract. The bank was subsequently ranked last of all Latin American banks in an independent survey of banking ethics conducted by Latin Finance magazine.
The Argentinian winery Al Este Bodega y Viñedos was founded in 1999, in the Medanos community of Buenos Aires, where local soil and weather conditions are significantly similar to those of Bordeaux, inspiring a tradition of wine-making that originated with European immigrants in the 1900s. Al Este was founded in 1999 as the first premium winery in the Buenos Aires province, with assistance by Italian winemakers and French and American oak barrels for aging.
Argentinian-based Aluar is one of the largest aluminum smelters in South America, producing over 400,000 tons a year. The company was founded in 1970 and has 2000 employees, and revenues of about $2 million a year.
The most famous of Argentina’s recovered factories—businesses taken over by the workers during the Argentinian financial crisis at the start of the 21st century—is Brukman, a textile factory in Balvanera. Half of the employees were fired during the crisis, the remaining workers’ salaries cut so severely that few of them could not afford bus fare to get to work. Fifty workers—a third of the remaining workforce—assembled in the factory and demanded a travel allowance in addition to their salaries. The owners agreed to go get the money in order to begin paying out such an allowance, left, and never returned—abandoning the factory. The protesting workers had remained in the factory overnight waiting for their money, and resumed operations on their own. The owners have since attempted evictions, but have been unsuccessful—though the factory has been stormed on their behalf by infantry troops and local police, with dozens wounded. The factory, as a workers’ collective, continues to operate, and has raised salaries and paid off old debts.
Colombia
Founded by the merger of two smaller airlines in 1940, Avianca is the largest airline and designated flag carrier of Colombia. It’s headquartered in Bogota, and is jointly owned by the National Federation of Colombian Coffee Growers and the Synergy Group multinational conglomerate. Its six subsidiary airlines operate throughout South America (Helicol, SAM Colombia, Tampa Cargo, OceanAIR, VIP, Aerogal) and in Nigeria (Capital Airlines), making it one of the largest airlines in the Americas. International destination cities include Cancun and Mexico City, Fort Lauderdale, Los Angeles, Miami, New York, Washington, D.C., Madrid, and Barcelona. Further European destination cities have been canceled following the adoption of codeshare agreements with Air France and Iberia Airlines; there are also agreements with Air Canada, Delta, Grupo TACA, and SATENA. VIP Lounges are operated throughout the Colombian and Ecuadoran airports.
Brazil
Petrobras (Petroleo Brasileiro) is a semi-public energy company in Rio de Janeiro, Brazil, and the most profitable company in that country. Founded in 1953, it has a monopoly on Brazilian oil until 1997, and continues to produce 2 million barrels of oil a day—its primary oil field, the Campos Basin, produces 80 percent of the country’s oil. Between 2007 and the summer of 2008, the company announced the discovery of three mega fields in the pre-salt layer of Brazil. The stock actually suffered somewhat upon the discovery of the third mega field, because of investor suspicion: citing the need for trade secrecy, the company has divulged little information about the mega fields, and there is concern that they may be over reporting their potential. Still, the company has a longstanding reputation for transparency and fair-dealing, and in the last three years has been commended by Transparency International, the consultancy firm Management and Excellence, and its placement on the Dow Jones Sustainability Index.
The Brazilian videogame company Tectoys was founded in 1987, capitalizing on the lack of competition in the electronic toy market. After producing their own toys for a time, they contracted with Sega Enterprises to become the exclusive distributor of Sega products in Brazil, and thus rode the wave of success that accompanied the video game boom with the Sega Master System, Mega Drive, Saturn, and Dreamcast. Not until 1993 did Nintendo have a Brazilian distributor, which gave Sega (and thus Tectoys) the lion’s share of the video game market, an advantage it did not enjoy in many countries. There were even Sega games produced specifically for the Brazilian market—a rarity outside of the United States and Europe. When Sega withdrew from the hardware market, Tectoys was prepared with a diversified product range that included DVD players, mp3 players, and portable karaoke machines, and in 2005 opened Tectoy Mobile, a publisher of cell phone games. Much to the surprise of many, though, they continue to manufacture Sega consoles and games, because demand never completely disappeared; while the video game market in other countries was driven by competition between two to four manufacturers, the almost complete dominance of the Brazilian market by Sega may have superseded the cutting-edge fetishism that in other markets makes older games less marketable.
The economic disparity in South America is well summed-up by Daslu, a Brazilian boutique in Sao Paulo. Opened in a classical-style mansion in 1958, Daslu consists of 30 stores selling 60 designer labels of clothing and accessories, including Louis Vuitton and Jimmy Choo. Recently relocated, the “boutique” now takes up four stories, and is as well-known as a place to people-watch—it is a shopping destination for both domestic and international celebrities—as a place to shop. Its relocation placed it immediately next to a shantytown inhabited by some of the city’s poorest people, a contrast even more unfortunate in light of the criminal investigation into Daslu’s possible tax evasion.
Avibras is a Brazilian defense company, founded in 1961 and headquartered in São José dos Campos. With about 600 employees, it develops and manufactures air-to-ground and surface-to-surface weapon systems, guided missiles, artillery, armored vehicles, aircraft defense systems, and most famously, the Astros II MLRS, the most advanced multiple rocket launcher. Its Tectran division focuses on civilian transportation and telecommunication equipment.
Venezuela
One of Venezuela’s largest television networks, Venevision controls a significant portion of the country’s entertainment industry. The company was founded in 1961 when businessman Diego Cisneros purchased the assets of the bankrupt Television Venezolana, and expanded to encompass multiple VHF and UHF channels around the country. Much of its content in the 1960s and 1970s was purchased from American television network ABC. Since the 1990s, it has broadcast 24 hours a day, 7 days a week, and many of its more popular programs are exported to Spanish-language rebroadcasts in other countries, such as Univision in the United States.
Industrias Pampero, a Venezuelan distillery, makes some of the world’s finest rums, and is principally responsible for Venezuela’s success in rum exports. Most of the distillery’s production is done at the nineteenth-century estate in Ocumare, Hacienda la Guadalupe. The Ron Pampero brand is known for its cowboy on horseback logo—Pampero means “from the Pampas,” i.e. a plainsman, a cowboy, a ranger.
Chocolates El Rey, a Venezuelan chocolatier, was established in 1929 and especially since the 1990s has become one of the world’s leaders in super-premium chocolate. It is one of the few non-European brands to be mentioned in the same breath as Callebaut and Valrhona, and capitalizes on the many types of cacao native to Venezuela (whereas European companies have to contract with African or South American cacao producers). One of the premium cacao beans, the trintario, is a hybrid of the chocolatey criollo beans and the disease-resistant forastero cultivar.
Uruguay, Ecuador, And Chile
Based in Montevideo (Uruguay), Infocorp is a software company and a local partner with Microsoft. It is best known for financial and business software. Another software company in Uruguay is ARTech Consultores, famous for developing the GeneXus program that has since been sold in dozens of countries. Used mainly for developing applications for Windows and the internet, GeneXus is a software development tool that generates code in Cobol, Visual FoxPro, Ruby, C#, Java, and Visual Basic, with support for standard database management systems like MySQL and Oracle.
Marathon Sports is an international athletic equipment company based in Ecuador, and primarily serving customers in Ecuador, Bolivia, and Colombia. Originally a chain of sporting goods stores, since 1994 it has been producing uniforms for sports teams, and has accumulated a number of exclusive contracts.
Parque Arauco is a real estate holding company based in Chile, and responsible for operating a number of shopping malls in Chile and Argentina. Focusing on the property management of nonresidential properties, the company was founded by Jewish immigrants to Peru who relocated to Chile in the 1940s, originally to work in the textile industry. One of the nine children in the large family, Jose Said, opened Parque Arauco in 1979, and has been principally responsible for it since. By operating in both Chile and Argentina, it was not nearly as badly affected by Argentina’s recession as other Argentinian developers were, and it has benefited significantly from its recovery.
Minera Escondida is a Chilean mining company that operates two open pit copper mines in the Atacama Desert in the northern reaches of the country, constituting the largest copper mine in the world. Nearly a tenth of the world’s copper production is owed to Escondida, which began operations in 1990 and has reserves of some 34 million tons of copper remaining. Escondida is a significant part of the Chilean economy, accounting for 15 percent of its exports and employing over 6,000 people directly. In 2007 alone, the mining company paid $2.2 billion in taxes to the Chilean government.
Multinationals
The Argentinian multinational Organización Techint is the largest steel manufacturer in South America, and owns stock in over 100 companies in 35 countries, focusing on steel, oil and gas, engineering, and service companies (notably including cable installation, having been responsible for the 1990s upgrade of the Argentinian telecommunications system). Divisions include health care research group Humanitas, oil explorer Tecpetrol, gas transmitter Tecgas, Techint Engineering Construction, steel supplier Ternium, and tube supplier Tenaris.
Responsible for a fifth of Argentina’s dairy production, SanCor is responsible for a disproportionate 90 percent of its dairy exports. Founded as a dairy cooperative in 1938 in the “milk basin” around the Cordoba and Santa Fe provinces, the company manufactures a variety of fresh and shelf-stable dairy products available around the world.
Bibliography:
- Werner Baer and Donald Coes, eds., United States Policies and the Latin American Economies (Praeger, 1990);
- Leslie Bethell, Latin America: Economy and Society Since 1930 (Cambridge University Press, 1998);
- Patrice Franko, The Puzzle of Latin American Economic Development (Rowman & Littlefield, 2007);
- Jeffry A. Frieden, Manuel Pastor Jr., and Michael Tomz, Modern Political Economy and Latin America: Theory and Policy (Westview Press, 2000);
- Robert Patricio Korzeniewicz and William C. Smith, eds., Latin America in the World Economy (Praeger Paperback, 1996);
- Nicola Phillips, The Southern Cone Model: The Political Economy of Regional Capitalist Development in Latin America (Routledge, 2004).
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