Abstract: Multinational Corporations, Domestic Elites, and Economic Nationalism: The Latin American Oil Industry
In the early twentieth century, the governments of the oil-producing nations in Latin America opened their doors to foreign investors to exploit this resource. For countries with little capital and high levels of poverty, the presence of this mineral resource and the interest by foreign investors was considered a blessing. By the 1920s and the 1930s, however, the previously welcomed foreign investors faced several challenges, which went from higher taxes and royalties to outright expropriation. The literature on Latin American oil nationalism has focused on the diplomatic maneuvers between the multinationals' home countries and the oil-producing governments, and the role of labor unionism in the development of oil nationalism. In this paper I study the evolution of the policies toward foreign oil companies in Latin America by considering the way the producing countries' domestic elites organized themselves, for which I use the theories of collective action and political survival. I show that in countries with low levels of industrialization, the domestic elite sought to influence oil policy by using its personal and family connections at the government. In this type of country, the elite's main interest was to profit from the rents paid by the foreign oil multinationals or from management jobs in the industry. On the other side, countries with relatively high levels of industrialization had a local elite organized in formal associations that sought to influence economic policy. In this type of country, the local elite sought to profit from the oil industry by providing services or goods to the multinationals, by associating with the foreign firms in cartels or joint ventures, or by having access to cheap energy sources. Formal associations were also important channels of knowledge and information transfer among the government, the foreign firms, and the domestic elite, which permitted these three actors to coordinate economic policy among themselves.