Developmentalism, Nationalism and Political Risk: Big Business and Government Rations During “Revolutionary Government of the Armed Forces (1968-1980)” in Perú
Using the notion of political risk this paper studies the link between political regimes and business performance in Perú between 1968 and 1980. Peru, like most South American countries, was governed by a military dictatorship. But unlike their regional counterparts, Peru’s military leaders introduced a radical program of social and economic reforms that entailed, among other measures, the nationalization of multinationals engaged in the exportation of raw materials, the creation of a series of new state-run firms, and an agrarian reform process.
Relations between the military junta and multinational firms hinged on the political and economic plans of the former. Among the first to fall under state control was the International Petroleum Company, a firm that symbolized the subordination of the Peruvian economy to foreign capital in 20th-century nationalist discourses. On the other hand, American banks had more room for maneuverer when selling their assets to the Peruvian government. Meanwhile, the government opened negotiations with Japanese and European multinationals in a bid to attract foreign direct investment to the Peruvian market. Meanwhile, multinational producers of non-durable goods would base their decision as to whether to remain in Peru on their prospects of expansion under the rules imposed by the regime, and on their capacity to manage the political risk that came of operating in the Peruvian economy.
Within Peru, the agrarian reform spelled the end of the traditional business elite. This gap was filled by upwardly mobile entrepreneurial families, and by established family-owned companies whose core business lay in sectors other than agricultural exports or mining.
These special characteristics of the Peruvian military dictatorship render it a key case study in this context to study how political risk affect the management and strategy of both local big business and multinational enterprise in developing countries.
