The Role of Foreign Capital
and the Insertion in South America
Paula Belloni, Andrés Wainer *
Date received: July 5, 2013. Date accepted: September 26, 2013

The last decade has seen the rise of a new political age in the majority of South American countries, which can be characterized as post-neoliberal. However, this new stage has been built on the foundation of neoliberalism. This base is composed of the following: strong capital concentration, the hegemony of trans-national capital and growing dependence on the production of commodities for export. This work aims to analyze the insertion profile of South America in the global market and its relationship to foreign capital from 2001-2011, with a special emphasis on old and new forms of dependence that characterize South American economies and the challenges they face.

Keywords: South America, foreign direct investment, trans-national capital, capital flows, financialization.

Latin America joined the global market at the end of the nineteenth century through the provision of food and raw materials, albeit subordinated to the dynamics of industrialized countries. The industrialization process that would follow, starting after the 1930s crisis and the Second World War, largely rearticulated Latin American economies with the global economy, but could not alter the dependent, imbalanced and unequal nature of development in the region. This process and its consequences were accompanied by a rise in original conceptual approaches that ended up as some of the principal contributions of Latin American thought to the social sciences.

First, the founders of the Latin American structuralist school of thought, the majority of whom were linked in some way to the Economic Commission for Latin America and the Caribbean (eclac) created at the end of the 1940s, focused on the contradiction between the position the region held in the global market as a provider of raw materials and the needs of its incipient industrialization process. The central idea of this school of thought is that the world is divided into central and peripheral countries, where the latter mainly export raw materials and import industrial goods, and as such, are harmed by deteriorating terms of exchange.1

Consequently, economic development – and improvement in jobs and associated incomes – can only come, according to these eclac authors, by deepening the industrialization process driven by the State. In this way, the idea was to limit the “natural” market trends towards specialization in sectors with proven comparative advantages (natural resources).

“Dependence theories” emerged in the 1960s, based on the ideas of Latin American structuralism, but also debating with this school of thought and contributing a novel way to conceive of the dependent nature of Latin American countries. Although the concept of dependency encompasses a relatively broad set of authors, many of them began with different theoretical concepts and even methodologies (Boron, 2008).

On the one hand, there is a classic and foundational work by Cardoso and Faletto, Dependency and Development in Latin America: A Sociological Interpretation, which, although has some points in common with the eclac school, was one of the first to maintain that the fact that Latin American countries were relatively behind was due not to the lack of capitalist development but rather precisely due to a particular form of development. That is, the fact that the region was “falling behind,” was not because it was in a lower state of capitalist evolution which it could overcome through the appropriate "developmentalist" policies, but rather because the region found itself in a “situation” of dependency that resulted from its particular mode of development. The advance of capitalist relations of production in the region reinforced this dependency, and the relationship between dominant local elites and foreign capital played a decisive role in this dynamic.

The other main aspect of dependency theory has been the Marxist perspective, although with important nuances among authors. The people behind this school of thought generally agree that one of the central elements that characterize dependent countries is the transfer of value from these nations to imperialist countries, but they differ in identifying the main mechanisms through which this transfer (commercial, financial, productive, etc.) takes place. In this school of thought, the situation of dependency cannot be resolved in the framework of capitalist relations of production, as it is a global system that tends to generate and reproduce asymmetries.2

At the end of the twentieth century and the beginning of the next, a good portion of the ideas emerging from structuralist and dependency schools of thought were overshadowed by theories that maintained that globalization could dilute national differences. Free trade, accelerated capital mobility and the strong expansion of trans-national companies generated new development opportunities for lagging countries that would make the distinction between central and peripheral nations unnecessary. The elimination of trade and productive barriers would lead to equal conditions for all countries, with which it would finally be possible for “emerging" countries to achieve development (as some “successful” cases have shown, like those in Southeast Asia and, more recently, China).

This idea of “convergence” between developed and “emerging” countries has been central to neoliberal ideology, but it is not exclusive to this school of thought. In fact, various critics of capitalism have also maintained that national differences would lose relevance in this new stage, where a trans-national capitalist class would emerge whose interests would surpass those of respective national states. Facing this situation, the only key contradiction that would remain would be between the bourgeoisie and the proletariat, as national-level issues would no longer be relevant.3

Keeping in mind how capitalism has evolved in the world over the past decade, this work will ascertain that there are still significant national differences underlying global hierarchies. In this context, this work will seek to determine if there have been significant changes in the role played by Latin America in the international division of labor, beginning with the idea that, although the last decade has seen the onset of a new political phase in the majority of Latin American countries, which has been called "post-neoliberal" (Sanmartino, 2009; Thwaites Rey and Castillo, 2008), this new phase has been built on the foundation of neoliberalism, where there is high concentration of capital, hegemony of trans-national capital and a growing dependence on the extraction/production of natural resources for exportation (López and Belloni, 2012; Wainer, 2011).

In this framework, this work would like to contribute to the study of two related hypotheses. First, we provide evidence that there is some correlation between the political-ideological orientation of governments and the dynamics of foreign direct investment over the past decade in South American countries. Second, we provide empirical data to support the idea that increasing foreign capital flows in the twenty-first century do not seem to have had positive effects in terms of diversifying the export structures of these countries. As a result, the most important conclusion of this analysis is that the foreign direct investment that flowed into the region over the past decade has contributed to deepening the profile of specialization associated with static comparative advantages (based mainly on the abundance of natural resources) in the South American region.

This work has the following structure: first, in order to understand the global context in which the region was inserted throughout the first decade of the twenty-first century (2001-2011), the analysis begins with a brief description of the most recent global economic transformations linked to the internationalization of capitalist relations of production. Then, it provides an account of the growth of trans-national capital in South America with a focus on the differences between countries depending on the political-ideological orientation of their governments. The third section analyzes how the export structure of South American countries has evolved. Finally, the last section outlines a few conclusions to measure the depth of changes in South America in the post-neoliberal phase and the main challenges the region will face in terms of economic development.


According to neoliberal thought, the significant changes that the global economy has undergone over the past decades generated new opportunities for “emerging” countries. Certainly, transformations that occurred after the United States left the Bretton Woods system (1971-1974) led to a growth in liberalization and deregulation of capital movement, which, simultaneous to the drop in the earnings rate – part of the origin of the prevailing mode of accumulation crisis4 up until that point – pushed large companies to reduce costs by transferring the most labor and natural resource intensive production processes to peripheral countries.5

This is a process of productive and financial internationalization that has led to a strong increase in foreign direct investment (fdi) all over the world and, of course, in South America. Although some multinational companies have been present in this region for over a century, the nature and weight of these companies, as well as their role, have varied significantly over the past decades.6 On the one hand, unlike during the substitution phase, the majority of leadership regarding the production process currently comes directly from headquarters, which takes into account the global needs of the company and includes the partial production processes of the rest of associated companies around the planet. On the other hand, the trans-nationalization of capital requires that companies achieve a certain size in order to compete, which leads to an accelerated increase in capital concentration and centralization and gives foreign capital a decisive competitive advantage over merely national capital (Arceo, 2011).

Even so, the ways in which foreign capital is inserted in South American economies did not emerge only as a global production strategy in the new global division of labor. They also responded to local economic policies to attract and incentivize fdi. In fact, according to the economic precepts of neoliberalism, at the end of the 1980s and throughout the 1990s, South American countries pushed forward economic reforms that expanded market dominance and reduced the degree of national autonomy.

The objective of these structural reform projects was to “modernize” these economies through specialization in goods, where each country would have comparative advantages by reconverting, or directly abandoning, areas in which production was "inefficient," except in a few sectors where the effective degree of protection would allow for local production to subsist. In this way, in the 1990s, the transfer of an accumulation strategy was consolidated, where the State played a central role in attempting to "fill the empty holes" of the input-product model, a poorly articulated and highly trans-nationalized productive structure in which the main objective became to increase exports.

At the same time, there was greater labor flexibility and increasing job precariousness, as well as the dismantling of the historical struggles of the labor movement, measures driven by civil-military dictatorships and the neoliberal governments of the region to reduce labor costs and adapt the workforce to the new demands of capital. This phenomenon was accompanied by direct transfers of resources from the State to the most unprotected social groups, aiming to maintain a certain level of internal consumption, and, fundamentally, as a method of social containment.7

However, not only did neoliberal development fail to resolve the economic, social and political problems of South America, but it also generated new problems, especially related to the trans-nationalization of capital and increasing financial vulnerability. By the end of the 1990s, the limits of the neoliberal mode of development were clear, expressed mainly in the crises suffered by the two largest countries in the region, Brazil (1998/99) and Argentina (1999/2002), with strong political, social and economic repercussions.

Although there are some nations whose economies still continue in the neoliberal tradition (like Chile, Peru and Colombia), South America has generated political and economic processes that have given rise to a time period that could be characterized as “post-neoliberal,” in which national autonomy has increased with respect to the 1990s. Despite differences in the respective macroeconomic regimes (Bastian and Soihet, 2012) of Brazil and Argentina, and to a lesser extent, of Uruguay and Paraguay,8 there has been greater state intervention in the economy, a shift towards a “national-popular” discourse and policy that, in general terms, could be called "neo-developmentalist" (Féliz, 2007; Katz, 2012). In other countries in the region (Venezuela, Bolivia and Ecuador), more radical anti-neoliberal and anti-imperialist projects predominate, although not without their contradictions. With some nuances, in general terms, these systems seek greater popular participation and have long-term anti-capitalist goals.

Although the inflow of foreign capital in South America has reached an all-time high in the current "post-neoliberal" stage, the different political-ideological orientations of its governments have seemed to play a role in its unequal penetration. This question will be addressed below.


In the last three decades of the twentieth century, the way in which the global economy evolved, including the delocalization of a significant portion of manufacturing production from central to peripheral countries, the privatization of public enterprises and neoliberal policies related to deregulation and liberalization, as previously described, led to overall increases in fdi around the world, especially towards middle-income countries (Arceo, 2011).

In this way, in the context of the greatest growth in the history of fdi on the global scale,9 between 1991 and 2000, South America accumulated an average investment flow of 31.852 million US dollars, while flows into South America from around the world grew from 3.5 percent to 6.4 percent between 1991 and 1999, accentuating foreign control of decisions related to production and commercialization.

The weight of foreign capital in the product of these economies (ratio between the inventory of fdi and gdp) went from 10.3 percent to 22.1 percent between 1991 and 1999. In an early stage, fdi flows were mainly directed towards the purchase of state assets through the privatization of public enterprises, whereas, starting in 1995, operations in private assets began to prevail. In both cases, these transactions were purchases of existing companies through mergers and acquisitions, whose share of fdi flowing into the region, according to unctad data, went from 39.2 percent in 1991 to 51.7 percent in 2000.

Still, far from the neoliberal precepts that argued that fdi would modernize and expand the productive structure, in this way driving growth of the product, the growing interference of foreign capital did not contribute significantly to capital formation, or to redefining the profile of productive specialization or to "trickle-down" effects. Rather, the growing weight of trans-national companies in South American economies, in the framework of the restructuring of dominant classes, has actually given foreign capital greater economic and political power within the dominant bloc, as it has acquired a central role in defining the mode of accumulation (Arceo and Basualdo, 2006).

In terms of the productive pattern, the fact that trans-national companies have more direct access to modern technology and means of production have allowed them to achieve lower production costs than the rest of national firms, in this way obtaining extraordinary earnings (when compared with the average rate of the economy), that allows them to continue to displace local capital in the nucleus of sectors they penetrate. As a consequence, part of the national capital has had to specialize in performing activities complementary to those performed by foreign capital, or national capital has ended up in less dynamic activities where differences in productivity are lower because they are less labor-intensive or more dependent directly on natural resources, like primary production, the commercial sector or certain services. This means that the origin of capital in large measure determines different accumulation capacities, which is accentuated with concentration and foreignization. The result has been profound structural heterogeneity, where foreign capital tends to control the most dynamic nuclei of the industrial structure and, on the contrary, national capital generally ends up in activities with lower levels of productivity, with the exception of activities that exploit natural resources and/or where State participation is a fundamental component.

Following recovery from the economic crisis that the majority of countries in the region experienced due to the exhaustion of the neoliberal model (1999-2003), fdi flows have considerably increased, even with respect to the previous decade (see Figure 1).10 Except for 2009, where there was a decrease in flows due to the international crisis, the inflow of foreign investment has systematically increased since 2004, reaching an all-time high of over 120 billion US dollars in 2011. In that year, the region accounted for the greatest inflow of foreign capital in the world, with the share of fdi to South America at 7.9 percent of the total, while the weight of fdi in the gdp of the set of selected countries reached an annual average of 27.5 percent over the whole decade (2001-2011).

Figure 1. Gross Foreign Direct Investment in Selected South American Countries,* 2001 and 2011

*The largest economies in the region have been included:
Argentina, Brazil, Bolivia, Chile, Colombia, Ecuador, Peru, Paraguay, Uruguay and Venezuela.
Source: Prepared by the authors based on data from unctad.

As can be seen in Table 1, the principal destination of fdi in the region in 2011 was Brazil (with 54.7 percent of total flows into the region), followed by Chile (14.2 percent), Colombia (10.9 percent), Peru (6.8 percent), Argentina, (5.9 percent), Venezuela (4.3 percent), Uruguay (1.8 percent) and, with significantly lower shares, Bolivia (0.7 percent), Ecuador (0.5 percent) and Paraguay (0.2 percent).

However, not all countries have experienced the same trans-national capital dynamics in the post-neoliberal period. Between 2001 and 2011, inflows of foreign capital grew more in countries where neoliberal type policies still predominate, like in Peru, Colombia and Chile, or in countries that still use certain developmentalist practices, like Uruguay, Argentina and Brazil. In fact, in line with the trend of growing foreign investment in the region, in nearly all of these countries (Brazil, Chile, Colombia, Peru and Uruguay), inflows of fdi reached all-time highs in 2011.

By contrast, in countries with more radical policies, like Venezuela, Bolivia and Ecuador, fdi flows have varied little with respect to 2001. It is notable that although fdi increased in 2011, in Venezuela, fdi had a general downward trend starting with the nationalization of "strategic sectors" that were in the hands of subsidiaries of trans-national companies.11 Ecuador also saw a downward trend in fdi in 2004, although with a strong inflow of over 1 billion US dollars in 2008 and a strong increase in 2011, from 158 million in 2010 to 567 million US dollars in 2010, which conceals the overall trend.

Also, if we analyze the behavior of foreign capital in terms of the weight of fdi in gdp (a proxy for the degree of foreignization of economies), the previously described trends become clear. On the one hand, fdi has increased at a greater annual average rate in both countries that continue with neoliberal type economic projects (Colombia, Peru, Chile) and those that are rather more neo-developmentalist (like Uruguay and Brazil), while the variation in fdi and its weight in gdp has been lower in countries like Ecuador, Venezuela and Bolivia.


Argentina has certain peculiarities that should be taken into account when studying how the weight of fdi has evolved in its economy. In this sense, it is important that the strong inflow of capital through buying and selling between foreign actors, that is, transactions that maintain the significant weight of foreign capital in the economy reached in the preceding decade, led to the consolidation of the foreignization that developed during the neoliberal stage and explains, in large measure, the fact that the gravitation of foreign capital to the economy has grown at lower annual rates than in other countries in the region. Also, the importance of foreign capital in the economy of Argentina is even more evident when we take into account the fact that its weight grew despite the country registering the highest product growth rates out of the entire region during the period under consideration.12

Another peculiar case is Chile, the South American economy with the second-highest presence of foreign capital. On the one hand, its high degree of foreignization (67.4 percent) means that the growth of foreign capital is lower, because a significant portion of operations necessarily take place through mergers and acquisitions between foreign actors (eclac, 2012). Also, the high share of foreign capital in the product at the beginning of the series means that the percentage variation in the rate is rather low.

Finally, in Paraguay, the share of fdi inventory in gdp has remained almost unchanged between 2001 and 2011 (going from 15.7 percent in 2001 to 15.1 percent in 2011 with an annual average of 16.1 percent for the entire decade), which indicates that growth in the investment inventory has been similar to product growth.

Consequently, taking into account that historically, the capital reproduction and accumulation patterns in South American economies have been largely determined by the ways in which foreign capital has participated in the cycle of local capital and by how the local economy was articulated with the global economy (Marini, 1979), and also considering that starting with the internationalization of capital at the end of the twentieth century, trans-national companies largely operated as a vehicle to transfer value from peripheral to central countries, it is useful to ask: what are the effects of this growing presence of foreign investment on the accumulation patterns of South American economies and how these economies are integrated into a new world context with needs for capital accumulation on a global scale?

In terms of the accumulation and capital reproduction patterns, it is important to note the growing concentration of sectors in which foreign capital is invested in the region. According to the eclac (2012), in keeping with recent years, in 2011, for example, 57 percent of fdi in South America, not including Brazil, was directed to the natural resources sector, while 36 percent was in services and only 7 percent in manufactures, which shows a clear trend towards primarization of fdi. In Brazil this trend has been mitigated due to the magnitude of the domestic market, with an important weight in other sectors such as, for example, the food industry, services and real-estate activities, leaving fdi with less of a relative share in natural resources (9.2 percent).

However, the fact that fdi has undergone primarization to a greater extent in the rest of the region than in Brazil does not mean that this has not been also been true in Brazil (Nascimento and Nascimento, 2012). Moreover, we must consider the type of relations that Brazil has historically maintained with the rest of the South American countries.

On the one hand, in the 1950s and 1960s, Brazilian industrial development and strong inflows of fdi from central countries led to an organic composition and stronger development of productive forces that allowed the nation to replicate and complexify the typical subordinate relationships between central and peripheral nations in the region with the objective of resolving contradictions facing the reproduction of capital in the local economy (Marini, 2007). In addition, although the Brazilian economy has undergone significant re-primarization over time in its productive structure, which some authors see as "truncated accumulation" (De Oliveira, 2009), its relatively greater size and massive financial capacity – especially the National Social and Economic Development Bank (bndes) – allow it replicate relations of subordination with the rest of South American countries through the growing internationalization of Brazilian companies (Luce, 2008) and unequal technology exchange with South American countries (Carcanholo and Saludjian, 2012). For these reasons, Brazil has come to occupy a significant place in the process to denationalize and extract the surplus of countries in the region.13

In summary, the dynamics of foreign capital flows that have evolved since 2001 have accentuated a distribution structure of fdi that is increasingly concentrated in sectors mainly linked to the processing of natural resources. In this way, a small group of trans-national capital has become consolidated in local economies,14 accentuating and restructuring a re-primarized profile of specialization and, as will be shown below, external insertion based on the provision of natural resources and/or export of industrial commodities.


In the context of the described evolution of the global economy and the new territorial and global division of labor – in particular, the strong growth of Asian economies, and with it, the demand for raw materials and the prices boom –, in the last decade, countries in the region have become inserted into the global market through the "Commodities Consensus" (Svampa, 2012). Despite the serious social and economic consequences of the neoliberal development model and a shift towards criticism of new political processes that emerged in the twenty-first century, countries in South America have only deepened the primary export model of the neoliberal period based on the extraction and exportation of natural resources (and derived manufactures), in some cases with negative environmental consequences.

It is a scheme fundamentally based on the appropriation of nature and is scarcely diversified, ever more dependent on international insertion as suppliers of raw materials and food. This can be seen in the weight of primary products in the export profile of South America, which, as indicated in Table 2, has intensified with respect to the neoliberal model. This trend was especially accentuated starting in 2005 with the beginning of the spike in commodities prices, increasing the share of primary products to an annual average of 46.0 percent of exports.

This concentration in the export structure of South America is accentuated from the perspective of inside each technology category, as merely three primary products, mainly exported by the South American region, explain growth of approximately eight percentage points in the export structure between 1991-1997 and 2005-2011 (see Table 3). In this sense, notable products include, first, petroleum oil and bituminous minerals, which went from an annual average of 12.8 percent of exports from the region to 17.7 percent. Copper, the second-most exported product from South America, has gained share as well, going from an annual average of 4.3 percent of exports in 1991-1997 to 5.9 percent in 2005-2011. Also, soy, the third most-exported primary product, went from 1.8 percent annually of exports to 3.5 percent in the time periods considered.

Similarly, in basic manufactures linked to primary sources (basic manufactures 2), the other category whose share has substantially increased in regional exports (by nearly three percentage points between 1991-1997 and 2005-2011), copper minerals and their concentrates and iron ore and its concentrates explain an annual average of 4.4 percent growth between the time periods. Another product in this category, in the framework of the extraction-export model, whose weight has doubled in the export structure, is gold (non-monetary), going from an annual average of 1.2 percent of exports in 1991-1997 to 2.5 percent from 2005-2011 (see Table 3).

Also, although the region has seen a slight increase in high-technology exports with respect to the neoliberal time period (see Table 2), this increase is fundamentally explained by increased exportation of aircrafts (which went from an annual average of 0.3 percent of exports in 1991-1997 to 1.1 percent in 2005-2011)15 and of pharmaceutical products and drugs, especially unclassified drugs or those containing hormones, although this group has an extremely low share within the basket of exported goods.

In addition, when we analyze the export profile of various South American countries (see Table 4) by large sectors,16 it appears that exports from these countries have become increasingly concentrated in products linked to natural resources and their manufactures. While Venezuela, Ecuador, Colombia and Bolivia specialize in the energy sector (with a strong weight of exports linked to oil in Venezuela, Ecuador and Colombia and to natural gas in Bolivia), Argentina and Uruguay are concentrated in agro-industry and primary products (Ecuador, as well, in this last case), while Chile, Peru and Bolivia are specialized more in the extraction fields.

This specialization in natural resources is also associated with a strong concentration of products in export sectors. The most significant example here is the energy sector, in which crude oil alone accounted for 83.1 percent of annual exports from Venezuela, 50.4 percent of external annual sales from Ecuador and 28.8 percent annually in Colombia from 2001-2011. At the same time, in Bolivia, natural gas accounted for an average of 33.8 percent of annual exports in the same time period. The extractive sectors are also significant, where copper and copper ore predominate (accounting for 49.8 percent of annual exports in Chile and 22.1 percent in Peru).

In this way, although the last decade has seen changes in the role the State plays in the economy and shifting political-ideological orientations of governments, and discussion has begun again with regards to economic development and its alternatives in South America, the region has regressed structurally, as it is even more of a primary exporter than it was in the decade prior. This form of global economic insertion has reinforced a dependent capital accumulation pattern characterized by growing appropriation and exploitation of raw materials for export and greater concentration and foreignization of productive structures, aggravating the structural problems of imbalanced and heterogeneous economies and North-South and South-South asymmetries.

In this sense, the fact that South American countries in this new international division of labor would find it difficult to compete internationally, besides in natural resources and associated manufactures – with a few exceptions –17 accentuates the heterogeneity of productive structures, and with it, dependence on products with higher technology content brought in from outside. This, together with the fact that trans-national companies operating in national economies are sending money out of the country,18 tends to recreate structural problems, like external restrictions on growth, an issue identified and studied by Latin American thinkers between the 1950s and 1970s (Braun and Joy, 1968, Díaz Alejandro, 1969; Diamond, 1973).

Finally, it is notable that the trend towards exporting commodities and low added value primary goods from South America is aggravated when we consider commercial balances. According to Comtrade data, the overall surplus of the commercial balance for countries in the region as a whole from 2001-2011 is the product of export success, basically in three sectors: raw materials, food and animals and hydrocarbons (which contribute, respectively, 80.9 percent of sectors with a positive balance). Although there is a surplus in manufactures, in fourth place with a weight of 10 percent among sectors with a positive balance, this is fundamentally explained by the export of basic manufactures, like non-ferrous metals, where a single product in Chile (unrefined and refined copper) contributed approximately 181.6 percent of the commercial balance for the sector in the period under consideration.19

South American countries are still mainly supported by an accumulation dynamic in which the growing adoption of imported technology, the lack of local production in the means of production and capacity to develop special materials, combined with the lack of research and development infrastructure, deepens the contradictions of dependent accumulation.

To summarize, in the twenty-first century, the reversal of the terms of exchange in favor of commodities – in the framework of economies open to international trade – and the determining presence of foreign capital, although with variances among national economies, accentuated the reprimarization of the South American productive structure, which began in the decade prior. The most significant difference between the two periods lies in the fact that asymmetries are no longer exclusive to the industrialized center and the set of peripheral countries, but rather, in growing measure, between different peripheral countries, where South American nations have consolidated their status as primary-export countries.


Until now, South America has not been able to rework the central role of foreign capital in its national economies; nor has it been able to break the dependency generated by exporting natural resources and derived products. Rather, these trends seem to have been aggravated in a global context of high commodity prices, growing Asian demand and an increase in foreign direct investment. The general orientation of foreign capital has deepened the specialization pattern based on comparative advantages derived from natural resources.

Still, the political and ideological differences between the governments of the region and the unequal capacity of popular sectors to struggle and resist have defined the different ways in which various South American countries participate in the global market, but these ways can be grouped into three general trends.

First, there are countries like Chile, Peru and Colombia that understand that fdi, in a free market context, plays a decisive role in the economic growth and development of peripheral countries, and therefore foster the inflow of foreign capital and the total exploitation of natural resources, and have much in common with the neoliberal paradigm.

There is another set of countries where, rather than partial and relatively low appropriation of revenue, there are good conditions to exploit natural resources with few legal changes regarding the regulation of these activities in the hands of foreign companies (Brazil, Argentina and Uruguay). These governments employ national-popular rhetoric where the State plays a more active role and achieves greater legitimacy through the redistribution of part of the surplus generated by primary and extractive activities, but they do not address the negative environmental, social and productive consequences of this new dependent dynamic. Although this logic finances the economy for a time, it does not allow for progress towards a structural change that would bring about sustainable and more equal long-term growth.

A third group of countries, who have nationalized key economic sectors and set stricter regulations for trans-national capital, have begun to gain sovereignty by appropriating a greater portion of the local surplus through the income generated by strategic resources like oil and gas (this is true of Bolivia, Venezuela, and, to a lesser extent, Ecuador).

What is certain is that the differences between South American countries, depending on the political orientation and development projects of the respective governments over the past decade, have had unequal effects on foreign direct investment flows. Although the governments in the region with the most radical projects have managed to retain a greater portion of the surplus generated in the national space through a variety of measures, until now, we have not seen structural changes that could break the dependency of these countries where fdi has been moderated.

In general, the surplus retained in these countries has allowed them to achieve greater equality through direct and indirect transfers from the State to the most marginalized sectors of the population, but this surplus has not been reinvested in knowledge-intensive sectors in any significant way that would contribute to producing a qualitative change in the productive structure. In this sense, the position of South American countries in the international division of labor has not changed, and nor have the contradictions in their accumulation and reproduction patterns that result. It would seem that, given the current conditions in which the region finds itself, the pending task of development will not be achieved without effectively transcending the limits imposed by the dominant relations of production, as has been said in other contexts by the Marxist theory of dependence.


The authors would like to thank Enrique Arceo for reading this work and acknowledge the valuable comments of the anonymous evaluators. Any errors or omissions are exclusively the responsibility of the authors.


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* National Council for Scientific and Technical Research (Conicet), Argentina. and, respectively.

1 The ideas regarding deteriorating terms of exchange, as a result of external insertion through the export of raw materials with increasingly lower prices and the import of manufactures with relatively higher value, and the unequal distribution of technical progress among countries, which gives rise to central and peripheral nations, were originally proposed by Raúl Prebisch (1949).

2 Although there are a variety of perspectives, this school of thought encompasses classic works by, among other authors, André Gunder Frank (1970), Theotonio Dos Santos (1968) and Ruy Mauro Marini (2007).

3 Some examples of this Marxist view, although with various nuances, are found in works by Nigel Harris (2003), John Weeks (1981), William Robinson (2008) and Alex Callinicos (2001).

4 In keeping with Enrique Arceo (2011) and Giovanni Arrighi (1999), a mode of accumulation on the global scale is delimited by the conformation of a block of the dominant class (in a determined stage of capitalist development) in the hegemonic State on the world scale, which ends up defining the way in which the international economic order is regulated. The global division of labor favors activities in which capital from the hegemonic country is developed. It also favors a certain direction of international capital flows and population and forms of investment and resources transfers.

5 This shift from local work was possible thanks to technology advances in communication and a substantial decrease in transportation costs (Arceo, 2011).

6 In the stage prior to import substitution, the arrival of foreign capital in South America was fundamentally motivated by the need to supply the growing demand for raw materials and food in central countries and, in some cases, the local government needs for financing. Although the beginning of the import substitution process began to develop industrial bourgeoisies in the largest countries of the region, by the end of the 1950s, trans-national companies began to actively get involved in the most dynamic manufacturing sectors, quickly becoming the hegemonic group within the power bloc (Fajnzylber and Martínez Tarragó, 1976; Furtado, 1965; O'Donnel, 1977). Back then, it was assumed that the development needs of local industry exceeded the internal savings capacity, and as such, in accordance with the developmentalist conception, it was necessary to resort to external savings. From that perspective, the idea was that foreign capital would diversify the industrial structure and facilitate the transfer of the most advanced technology.

7 In the 1990s, backed by the World Bank, countries began to implement targeted social plans with benefits for the most vulnerable social groups. This practice was formalized and made universal in the following decade, no longer under the auspices of international agencies, but rather as income policies of post-neoliberal South American governments. Some examples of these types of benefits include the Family Aid Package implemented in Brazil, the Solidary Chile System, the Program Together in Peru, the plans Heads of Household and the Universal Allocation Per Child in Argentina. There are also similar social policies in Venezuela, but rather than being a single plan, they exist in different programs whose resources are centralized in the Single Social Fund, created in 1999 (Wainer, 2010).

8 Paraguay is more complex to describe due to the fact that its economy is relatively less developed and its political system is very unstable. Even so, the government of Fernando Lugo (2008-2012) can be considered among the set of "progressive" governments in the region, as he was the first President since the 1940s to reach power outside of the traditional Colorado Party. Although his government has not produced profound economic transformations, it has implemented moderate income redistribution in favor of more marginalized social groups, which was more than enough reason to illegitimately remove him from power through an institutional coup led by the Liberal and Colorado parties in the Paraguayan parliament in mid-2012.

9 Total fdi flows from various countries increased significantly at the end of the 1980s. According to unctad data, between 1985 and 1990, these flows nearly quadrupled, going from approximately 55 billion US dollars to 207 billion, while in 2000, they reached a record high of 1.4 trillion US dollars.

10 For an overall vision of fdi flows to Latin America between 1990 and 2009, see Morales (2010).

11 Even in 2006 and 2009, Venezuela saw negative values in fdi flows, which are due to repatriation of capital towards headquarters or loans from subsidiaries abroad to headquarters (external financing).

12 Although during convertibility in the 1990s, the share of foreign capital rose notably in the economy of Argentina, it was also consolidated following the collapse of the macroeconomic regime in 2002. In fact, while the share of foreign capital in gdp was on average 14.4 percent between 1992 and 2001, from 2002-2011, it was on the order of 29.2 percent, even though the product saw substantially greater growth in this last time period.

13 It is notable that by 2011, 43 percent of the 500 largest multi-Latin American companies by size measured in sales were Brazilian. Some of the Brazilian companies that operate in the South American region include: Petrobras (with activities in Argentina, Uruguay, Chile, Paraguay, Bolivia, Peru, Colombia and Venezuela), Vale (in Argentina, Chile, Paraguay and Peru), Odebrecht (in Venezuela, Argentina, Colombia, Ecuador and Peru), jbs friboi (in Argentina, Chile, Uruguay and Paraguay) and Ultrapar (in Venezuela, Argentina and Colombia).

14 Some of the large-scale trans-national subsidiaries operating in South America dedicated mainly to primary productive branches include: Barrick Gold, Yamana Gold and Meridian Gold – some of thelargest companies with open air mega-mining enterprises – Dreyfus, Cargilla, Nidera and Bunge – grain exporters – Danone and Kraft – food producers – and Monsanto and recently Nidera – companies that produce biotechnology packages for grain and oilseed production.

15 It is useful to note that although Brazil is a key exporter of aircrafts (Embraer), the growth in exports has also been influenced by the return of rented aircrafts that were leased (rented with option for purchase), which Argentina has done, as these are recorded as sales abroad (cep, 2007).

16 The classification of sectors used methodology from Arceo (2011) based on the Center for Prospective Studies and International Information (cepII) and Comtrade data.

17 One of these exceptions is the South American motor vehicle industry – nearly exclusive to Brazil and Argentina .which has grown its exports significantly, the majority within the region, thanks to Mercosur agreements. Seven so, this sector is largely protectionist with scarce local development. For this reason, despite growth in production and exports, the automobile industry had pronounced commercial deficits in both Brazil and Argentina.

18 According to eclac data, the practice of trans-national companies located in Latin America sending their profits back to headquarters has increased considerably over the past decade, reaching a high of 93 billion US dollars in 2008. Within the region, Chile has sent the most money out between 2008 and 2010, accounting for 20 percent of the total in Latin America and the Caribbean (eclac, 2012).

19 An interesting case regarding export balances is found in Brazil. As the most diversified economy in the regions, in recent years, it has seen its export structure become rapidly simplified: high technology manufactures went from 12.9 percent in 2001 to merely 4.4 percent in 2011. In the same time period, primary products and basic manufactures went from 51.5 percent to 69.5 percent of total exports.