Relationship between government and entrepreneurs
According to Hickson & Pugh (1995, p.71), the typical Latin American company inevitably suffers from hierarchical and unnecessary structures, overworked in innocuous tasks and major problems of communications, largely caused by poor management information systems that often do not even exist.
All of this, not to mention the great contempt with which most managers face the importance of strategic direction. One of the most characteristic and also problematic traits is that almost all of the large Latin American company has its share control in the hands of an individual or at most in the hands of one or two families.
This leads to a loosening of controls
over results and a lack of professional management, that is, shareholders often do not charge for results because they are the executives themselves. It is common for business owners to be unable to clearly separate company boundaries from family boundaries. The reverse is true in the United States, where the capital of the large corporation is much more dispersed and minority shareholders press much more for consistent results. In
Latin American companies, it is difficult to find the separation between the Board of Directors and the Executive Board. While in most American companies it is very difficult to find out who owns these, such a dispersion of shares, in Latin American companies it practically always exists and, it is well known, who owns it. The “owner-owned” mentality makes them sometimes, instead of taking their earnings out of the distributed dividends,
prefer to do so through indirect earnings, for example, by setting up personal companies that are suppliers to the main group. this means that it is common for service transfer prices between companies in the same group to be determined by the group of individuals who control the group’s holding company, which, at least, distorts business profitability.
These facts also end up being negative
for the development of the stock market, since the minority shareholder, in general, receives very little protection. It is interesting to note that, even in the North American way of managing companies, with strong minority shareholding, there are situations that are out of control and become a nightmare for everyone, as we saw in the recent subprime crisis, when large companies in the
- United States United had to resort to Large Asian Funds, especially. The attitude towards the stock market, however, is not the only big difference that exists between the Latin American way and the North American way
- of managing companies. The other difference is of a philosophical nature and is linked to the historical role that companies played in the economic development of the two regions.
While in the United States, companies and entrepreneurs took on a preponderant role even in the process of conquest and territorial integration that took place throughout the 18th and 19th centuries, as shown by the great railroads, almost all private, in Latin America, the entire process of colonization, conquest and territorial integration in the main countries took place under the aegis of the State, with private initiative being totally absent.
In other words, we can say that if the United States had been colonized by Spain or Portugal, this interiorization would have been entirely conducted, implemented and operated by the government. Some rare cases of entrepreneurial entrepreneurs such as Barão de Mauá, in Brazil, were harassed by other entrepreneurs of the time and even boycotted by the Empire.
This stance started in the 18th century
on the initiative of the Portuguese and Spanish crowns and remained intact after the political independence of the various nations. All of this colonization characteristic has generated a cultural aspect that continues today, which is that the Latin American private investor American acts if the government acts earlier. But it is not only this aspect that characterizes a kind of paternalism, as defined by Fairbanks & Lindsay
- (2000, p.132-6): Latin American entrepreneurs often choose to hand over highly complex decisions to the government that concern their own businesses. It is common for there to be lobbying and pressure from
- business associations on government officials to obtain tariff protections to prevent the entry of imported products or facilities for
- exporting products, including even currency devaluations. Fairbanks & Lindsay (2000)
emphasize that the s a fact of enormous importance in the region, and that it is very common for governments to be manipulated so that certain companies or sectors obtain competitive advantages that in general end up being ephemeral. Fukuyama (1996, p.52), when mentioning the three societies with the greatest influence of the State, and excluding all socialist countries, cites France,
Mexico and Brazil, and makes a point of emphasizing that even in Japan, a country with a very strong presence of the State, its performance has always been more limited compared to those three countries, two of which are leaders in Latin America. Other important authors have already dedicated themselves to analyzing the relationship between the State and businessmen.
One of the most important analyzes of the Latin American “spirit” was made by Carlos Alberto Montaner in the chapter he wrote in the book Culture Matters, organized by Harrison & Huntington (2000, p.56-63). Montaner describes how the elites behave in Latin America and focuses especially on the role and form of action of entrepreneurs.