Fresh Look Reviews

The book begins by looking at how market conditions in the region were similar to those of Spain two decades earlier. Both experienced similar “processes of political and economic liberalization,” though at different times. Spanish firms that developed strategies following Spain’s period of economic liberalization found that they could easily adopt those same methods to the transforming economies of Latin America. Managers concluded that “in Latin America it would be easier to replicate their firms’ corporate cultures and transfer their advantages,” Toral writes.

Toral explores the four most important investment destinations for Spanish MNEs: banking; telecommunications; energy; and oil and natural gas. Here, Toral specifically focuses on the investment decisions of seven Spanish firms before each would go on to expand (the names have since changed): Banco Bilbao Vizcaya Argentaria (BBVA); Santander Central Hispano (SCH); Telefónica; Endesa; Iberdrola; Unión Fenosa (UF); and Repsol-Yacimientos Petrolíferos Fiscales (Repsol YPF).

But new sectors—Spanish venture capital, private equity and textiles—and companies have emerged even more recently, most notably the Inditex Group (the owner of 5,154 stores worldwide, including Zara and Zara Kids).

The firms examined in Toral’s book reaped massive success in Latin America. Some, like Telefónica, have gone on to become major global players in their industries. Now one of the largest telecommunications groups in the world, Telefónica became the largest single private investor in Latin America, having poured more than $100 billion into the region over the past two decades.

By 2009, Toral notes, its customers in Latin America had grown from zero in 1988 to more than 167 million. A rapid rise in fixed-line and cellular demand was complemented by a smart business strategy that prioritized geographic expansion, a focus on individual consumers and diversification.

It is interesting to read this book in the context of the Spanish (and European) economic crisis. The year 2010 was a particularly bad year for the Spanish economy, which contracted 0.1 percent. This year looks to be better (with 0.7 percent estimated growth)—but still weak.

The economic crisis is further accelerating the transformation of Spanish corporations, which are now increasingly looking outward for investment opportunities. Multinationals are significantly raising their profile, precisely because—as Toral shows—they invested massively in Latin America. Santander and Telefónica alone invested a fresh $14 billion in the region in 2010.

But Spanish interests are not confined to Latin America: in September 2010, Santander acquired a 70 percent stake in Bank Zachodni WBK for $3.7 billion, Poland’s third-largest bank in terms of branch offices. The construction group Actividades de Construcción y Servicios, S.A. (ACS) successfully acquired a majority share in Hochtief, Germany’s largest construction company, in early 2011.

This international expansion is reflected in the positive showing of Spanish corporations in the IBEX 35, the benchmark stock market index of Spain’s principal stock exchange. In the first quarter of 2010, almost 53 percent of the IBEX 35 revenue came from overseas—an increase of almost 3 percent from the previous year.

In some cases, overseas income greatly outweighed that from the domestic market. For example, the food processing group Ebro Foods, S.A., saw 94 percent of its total income originate abroad in 2010, while Gamesa Corporación Tecnológica, a manufacturing company focused on wind energy, generated 80 percent of its income from overseas. This trend will increase: 95 percent of Inditex Group store openings are now overseas, especially in Asia.

With the deepening of the crisis, there was mounting concern that Spanish FDI to Latin America might suddenly grind to a halt.

It is true that the record levels reached in previous years are unlikely to be seen again soon. As Toral notes, FDI peaked in 2002, when Spain accounted for 22 percent of all FDI stock received by Latin America. But by 2009, Spanish FDI stock in Latin America fell to 13 percent of total global outflows, and FDI destined for Latin America accounted for barely 10 percent of all investment outside Spain.

However, this does not mean that Latin America has lost its appeal. Far from it.

Spain’s comparative loss of weight is due to the upsurge in new Asian investors arriving on the scene—plus the investment boom by Latin Americans in their own continent. While Banco Santander was taking complete control of its Mexican subsidiary, Telefónica was doing the same with Vivo in Brazil. Together, the two companies invested a respectable $10 billion in Mexico and Brazil last year.

On the energy front, the oil company Repsol YPF announced plans to continue investing in Latin America with some $5 billion in prospective oil projects in Brazil.

And that’s not all. Today’s crisis in Spain may prompt many firms whose presence in Latin America is still rather limited to speed up their overseas expansion plans. One such company is Indra Sistemas, S.A., an information technology company that multiplied its contracts in the region in 2010, particularly in Brazil, Peru and Chile. In the energy sector, Acciona Energy last year signed the largest-ever loan in Latin America for renewable energy—$375 million—while Abengoa announced a $180 million investment to build Mexico’s largest cogeneration plant.

As Toral reminds us, interpreting the next wave of Spanish investments requires an understanding of the first wave. This makes Toral’s book a very timely read. Readers without much background knowledge will find it readable and easy to understand, but regional scholars will also find it informative. The book also nicely complements
previous studies, in particular The Rise of Spanish Multinationals: European Business in the Global Economy (2005), Mauro Guillén’s milestone on the issue of Spanish corporate internationalization.

In the new decade, Latin American investors are poised to return the favor. With Brazilian, Mexican and Chilean companies making inroads in Europe, Spain is a lucrative target. The Spaniards would be well advised to keep their attention focused on the region, and encourage an even greater two-way connection with Latin American MNEs when they arrive.

Despite its limitations and traumas, Mexican society completed the task that history demanded of it in ushering in an end to one-party rule.

The real problem is that the country’s political, economic and cultural elites have failed repeatedly to exercise leadership. In 1968, the masses took to the streets of the capital and faced the bayonets in Tlatelolco Plaza and elsewhere to demand basic freedoms. In 1985, civic organizations and citizens stepped in and led the recovery efforts when the government was paralyzed by an 8.1-magnitude earthquake that shook Mexico City. But the enthusiasm for change displayed on these and other occasions was squandered by the political leaders. Castañeda occasionally notes the mediocrity of Mexican leaders, but he fails to give it the weight that it deserves.

The fourth chapter, for example, focuses on the reasons for the failure of democracy. But here, when discussing the presidency of Vicente Fox (2000–2006), Castañeda falls into a linguistic vagueness that weakens his analysis. “The crucial decision that Mexico has not made, and essentially for the types of cultural reasons we have been arguing,” he writes, “lies squarely in the refusal to truly consummate a break with the authoritarian past.” By holding the entire country responsible, the book conveniently avoids assigning blame for any missteps to particular individuals.

However, blame should be assigned. In 2000, Mexican citizens challenged the authoritarian machinery and responded to the call for tactical voting to oust the Partido Revolucionario Institucional (PRI) from the presidency. Fox, a member of the Partido Acción Nacional (PAN), won the election; but his campaign promises were never fulfilled. Castañeda observes that Fox’s inner circle was divided between reformists and those who preferred to negotiate pacts with the old regime. In the end, the negotiators won “the new president’s favor” and those who were for change—including Castañeda—“lost, and [their] defeat has persisted.” In other words, Mexico did make the right decisions; those who failed were the ones in charge of carrying them out. Yet Castañeda still blames Mexico in general—rather than the political elites—for the lack of change.

The substantive arguments Castañeda uses to criticize Mexican society disappear in his analysis of the Fox administration. But in this reviewer’s judgment, Fox was an irresponsible and frivolous president who allied himself with the old regime and permitted the concentration of political, economic and coercive power. His failures are responsible for the current crisis of representation in Mexican politics, including the ongoing monopoly on political power by a small clique of elites. Yet, even without strong leadership, Mexicans remain determined to shake off pessimism and passivity. People—despite being ignored or closed off by the system—continue to call for the justice denied them by the governing elites.

Yet Castañeda seems unable to resist the temptation to hold society at large responsible for the failures of the elites. For example, in discussing efforts to institute class action lawsuits, which provide a legal channel for challenging the voracity of monopolies and oligopolies, he attributes the attempt at legal reform to “a group of legislators and legal experts” who pushed for the changes in 2008. “Perhaps the best proof of Mexico’s obsessive individualism and its resistance to any change in this field lay in the tardiness of this reform effort,” he writes. “The constitutional amendments were ratified in mid-2010, but the implementing legislation was still pending in 2011.”

But two fundamental details are omitted here. The class action issue was in fact placed on the national agenda because of the work of the civic organization Alconsumidor. Beginning in 2005, Alconsumidor began to persuade legislators, academics and some in the media of the need to revamp Mexico’s legal system. As of June 2011, the reform remains held up due to the lobbying efforts of large Mexican and foreign corporations that are determined to continue exploiting Mexican society with obscene prices and commissions. Failure to pass such reform is yet another sign of the complicity of political elites.

It should be recognized that important figures among the elites are committed to democracy and justice. Castañeda is certainly one of them. While serving as Fox’s foreign minister, he distinguished himself by accelerating the country’s political opening and by helping to anchor and position the country’s transition in international circles. His efforts while in office show that high-level officials who commit themselves to change can make a difference. It was a shame, therefore, that he left the foreign ministry to build a presidential candidacy—which, as it happened, failed in part because of the lack of support from elites. Having returned to the world of intellectuals and commentators, Castañeda’s self-appointed role today is to spark debate about the country’s future. But his effectiveness as a change agent is hampered by his pessimism.

He wonders, “Why can’t Mexico, or any other country, conserve its specificity and simultaneously achieve modernity and well-being?” His answer is clear: “It can, but only if its soul ceases to be a burden for its people, if its character and culture become instruments of change, and no longer of immobility.” But it is not cultural inheritance that accounts for the mediocrity of the political elites and their resistance to change and for the crisis of Mexican democracy. Rather, it is their defense of special interests and their selfishness and corruption.

Foreigners who arrive in Mexico eager to be well-informed are often advised to read a variety of newspapers. Castañeda’s new book can help provide that same panoramic view of Mexican society for non-Mexicans. But while it offers a wide-ranging critique of Mexico’s character flaws, it misses the deeper causes behind the crisis of Mexican democracy.

The book’s editors, University of Toronto assistant professor Kevin Lewis O’Neill and Harvard University doctoral candidate Kedron Thomas, have collected contributions from an international group of anthropologists to explore through ethnography the ways in which Guatemalans experience and adapt to this changing, precarious and dangerous environment. They analyze how contemporary social and economic dynamics play out in the lives of ordinary people in Guatemala City through the lens of anthropologists who closely consider the effects of neoliberalism.

In a stimulating introduction, O’Neill, Thomas and Thomas Offit of Baylor University argue that life in Guatemala City today is marked by neoliberal paradigms of governance.

This ideological and structural orientation, they claim, exists throughout the world and has three main effects: increased inequality in income distribution and reliance on unstable, precarious forms of income generation; heightened concern with security and a consequent loss of trust in the state’s ability to provide safety; and stepped-up privatization of public spaces. According to the authors, comparing Guatemala City to places that suffer similar degrees of social inequality, crime and urban violence, such as Johannesburg and Rio de Janeiro, provides a critical window on the ways in which neoliberalism works and how the local population reacts to its supposed effects.

One cross-cutting theme is the increased privatization of security and the growth of a culture of self-reliance. As the editors note, “The spike in violence in the postwar period has prompted not public debates about the structural conditions that permit violence to thrive in the first place, but rather a new set of practices and strategies that privatize what would otherwise be the state’s responsibility to secure the city.”

Rather than the strengthening of the state, which was supposed to follow at the end of the war, what has occurred is the devolution of law enforcement to private firms and communities. The social contract between government and society has been replaced by a fragmented patchwork of legal and illegal self-help initiatives, including community-organized policing, the growth of the private security industry and “social cleansing” of suspected delinquents.

A second theme—brought out in chapters by Deborah Levenson of Boston College and Camus—is the erosion of the professional urban middle and working class. As a result, Guatemala City lost a key constituency that believes in a modernist, statist notion of progress and development. The city previously offered possibilities for personal advancement, autonomy and reinvention, but today inhabitants of urban neighborhoods see life getting worse, not better.

They also increasingly blame young people for violent crime. As Camus observes, “The neighborhood’s young men have gone from being their community’s hope to being understood as a threat and a danger.”

There is also an ethnic dimension to these transformations, reflecting Guatemala’s deep history of racism and segregation.

The increasing number of Indigenous residents in Guatemala City—Mayan migrants from the countryside are now approximately 25 percent of the city’s population—have destabilized established economic and racial hierarchies. In interviews with the authors, many of the poor, non-Indigenous middle- and lower-class city dwellers blame these “out of place” Indigenous migrants for the violence and crime that affect their everyday lives.

A third theme in the book is the patterns of rural and urban economic restructuring in Guatemala. Using new research, authors analyze these patterns and reach the conclusion that, despite multiple forms of physical and economic insecurity, there have been many winners in this new neoliberal urban environment.

In a fascinating chapter, Offit tells the story of Don Napo, a successful Mayan entrepreneur who runs a street-trading shoe emporium in downtown Guatemala City and has become a “retail king.” Napo, who migrated to the city in the 1970s, found a niche in the shoe market to start a family-based business operated by family members and workers from his hometown in the western highlands. One of the keys to his economic success is the social solidarity created through deep linkages within the Maya community. This allows him to “appeal to the youths’ family ethos to ensure loyalty as he represents his interests as theirs, though they have no formal ownership stake.”

In this book, as in similar publications, ethnographic approaches to understanding neoliberalism face inevitable limitations. For example, there is little analysis here of the ways in which new forms of violence serve Guatemala’s ruling class (which now comprises traditional elites and organized crime).

There is also an unfortunate unevenness in quality across the chapters. Yet despite these drawbacks, the editors and contributors to this volume do an excellent job of revealing how the urban poor are stigmatized and criminalized, illustrating the “neoliberal logics of space, security and citizenship” referred to in the chapter by Rodrigo J. Véliz and O’Neill.

This work will help guide the discussion and debate on how neoliberalism has contributed to social upheaval and dislocation in Latin America and beyond.

Clearly, the challenge of finding more inclusive and democratic forms of urban renewal that can provide economic and physical security for the inhabitants of Guatemala City—and many other cities across the world—has yet to be met.