Foreignization and Industrial Economic Power in Argentina
Pablo Manzanelli and Martín Schorr

This decisive process of de-nationalization of the nucleus of economic manufacturing power cannot be separated from a series of domestic “attraction” factors that offered, even in a context of de-industrialization like we encounter in the 1990s, certain advantages to localize multinational capital. These are laid out in the wide-ranging and varied benefits derived from the Foreign Investment Law, approved during the military dictatorship from 1976-1983 (21.382). Among other advantages, the following stand out: (a) implementation of horizontal policies, namely commercial and financial liberalization, deregulation of a wide variety of markets, extreme liberalization of the legal framework to establish guarantees and earnings for foreign investors, and the signing of bilateral treaties to protect investment with “lion’s share” clauses for Argentina; (b) the government decision to support Mercosur, with the resulting expansion of internal “demand” and the possibility to deploy complementary production strategies among partners located in member countries (especially Brazil); and (c) the activation of important sectorial incentives, like the special regime to promote automotive assembly.

In the post-convertibility era, many of these advantages were maintained for foreign capital, while others were added in a context of strong earnings expansion for leading oligopolies to favor their generally high propensity for exports.12 In this context, the process of foreignization of the elite business sector encompasses a variety of mechanisms. For example, some foreign companies increased their sales by merging some of the firms they controlled (as is the case of Dow Chemicals, which absorbed pbb Polisure and Dow AgroSciences). Another method was to completely or partially buy out large oligopolistic national companies in the domestic market. (Brazilian capital played a large role in this.) For example, this was the case for the meat-packing companies cepa, SWift, Finexcor and Quickfood, the warehouse Peñaflor, the cement company Loma Negra, the leading oligopoly in beer production (Quilmes), one half of the local iron and steel duopoly (Acindar), the holding company Pecom Energía, the textile company Alpargatas and the food companies Fargo, Molfino Hermanos and Trigaglia (Table 3).

Table 3

12 Regarding this topic, it is worth point out that Law 21.382 is still in place, as well as the multiple benefits for foreign capital found in the same law and a variety of complementary regulations. Privilege schemes for automotive terminals and assembly of electronic products in Tierra del Fuego were also maintained, and in some cases, expanded. On the other hand, it should also be noted that, since Law 25.924 was approved, a regime to “promote investment in capital goods and infrastructure works” has been implemented, which has resulted in an important transfer of income to a handful of large national and foreign companies with oligopolistic positions in predominant branches of the industrial sector. Finally, the regime to import key goods for large investment projects is still in place (an instrument that dates back to the 1990s and has been a source of profit for many large foreign capital companies).