Corporate Collaborators

March 3, 2006; Page A11
The Wall Street Journal Editorial Page

A new economic model of a collectivist nature is emerging in parts of Latin America with the complicity of some private-sector foreign companies. It was first developed in the 1990s by Fidel Castro’s government as a consequence of the sudden cutoff of Soviet aid and was later adopted by Venezuela after the rise to power of Hugo Chávez. Very likely, Bolivia will move in the same direction. It is what Chávez calls “21st-century socialism.”

In 1991, when the Soviet subsidy to Cuba — estimated at $5 billion a year — ended, the demise of communism on the island seemed inevitable. Suddenly, the Cubans’ already low levels of consumption shrank by 30% to 50%, plunging the country into a real famine. Faced with this situation — which left thousands of Cubans disabled by malnutrition — Castro was forced to find capital and know-how in the West to keep his foundering economy afloat. But he did so without renouncing his dictatorship or the economic model based on state monopolies tightly controlled by the government.

Quite simply, he invited foreign businessmen to become partners with his government in “joint ventures” in which the foreign investors contributed the capital and management while the Cuban state leased to them a docile and cheap labor force, a sales territory and a captive market that was not subject to the risks of competition or the conflicts of labor unionism.

To ensure that the entrepreneurs would not be the Trojan horse of feared democratic changes, the government appointed numerous retired army officers and members of the political police as directors and top executives of the joint ventures. To them, the government assigned a dual mission: to make sure that corrupt foreign businessmen did not contaminate the selfless Cuban workers, and to watch the workers closely so they wouldn’t deviate from the noble principles of socialism.

By late 1998, when Hugo Chávez came to power, Castro already had proven that he could avail himself of foreign capitalists to finance — without risk — the largely unproductive Cuban dictatorship. So the Venezuelan gradually began to re-examine and rewrite the contracts with the foreign investors, especially in the sector of the exploration and exploitation of oil fields, heeding the premise of his Cuban comrade that association with international businessmen would strengthen state-owned capitalism. Oil companies operating in Venezuela that were affected by the rewriting of contracts included British Petroleum, Chevron, BP, ConocoPhillips, Total, Repsol YPF and Statoil. Exxon preferred to sell its installations to Repsol and withdraw from Venezuela. Whereas Lenin had stated that capitalists would be willing to sell the rope with which they’d be hanged, Castro had demonstrated that capitalists would gladly build the gallows using the executioner’s blueprint if they could somehow make a buck.

After the presidential election victory of Evo Morales, Bolivia may be the third Latin American country to go this route. Vice President Álvaro García Linares, a former university professor and one-time guerrilla sent to prison for fighting against a democratic government, said so recently in an article published in Paris by Le Monde Diplomatique. Bolivia, he said, is going to develop “Andean-Amazonian capitalism,” in reality a new name for the old discredited socialism. Of what does that new contrivance consist? According to Don Álvaro, of “constructing a strong state that will regulate the expansion of the industrial economy, extract its surpluses and transfer them to the communitarian sector, so as to foster forms of self-organization and mercantile development that are properly Andean and Amazonian.” To achieve that objective, which basically means to exploit the major natural-gas deposits that exist in Bolivia, Messrs. Morales and García Linera will have to become partners with big foreign companies. Companies that are likely to be most affected are Spain’s Repsol YPF and Brazil’s Petrobras.

To participate in these joint ventures in countries where human rights and labor laws are not respected should constitute a serious ethical problem for foreign businessmen and investors.It is absolute hypocrisy to state that an international entrepreneur should not invest in countries that use child labor or violate certain ecological standards while allowing that entrepreneur to associate with tyrannical governments that horribly mistreat the workers and, in particular, the societies they subjugate.

For example, the foreign hotel chains operating in Cuba allow their partner, the government, to practice a policy of apartheid by forbidding Cubans to use hotel facilities, even if they can pay with foreign currency. According to Delfin Fernandez, a defector from Cuban counterintelligence writing and speaking in the Spanish media, some foreign hotels even allow the installation in their rooms of concealed video cameras to record guests in compromising situations that lead to blackmail. To what degree are those businessmen participating in criminal activities? Note that it is not the same to invest or create an enterprise in a country ruled by dictatorship as to join the dictators and become accomplices of their misdeeds.

Business schools in the Western world usually teach courses in ethics. And that’s good, because we assume that the system of market economies and free enterprise, the counterpart of democracy, rests on moral convictions whose tenets are the upholding of truth, the observance of fair rules and respect for people’s dignity. If we expect politicians and professionals to behave in accordance with a strict deontological code and demand that they be punished if they deviate from the rules, why should we exclude businessmen from the same obligations and standards?

International businessmen and investors should ponder hard the type of responsibility they assume when offered a partnership in Latin America with tyrannical governments or tyrannies in the making. It is well to remember that some of the German companies that collaborated with the Nazis in World War II ended up paying indemnities to the regime’s victims for several decades. Something like that might happen again.

Mr. Montaner is an author and syndicated journalist living in Madrid.

2 thoughts on “Corporate Collaborators”

  1. “It is absolute hypocrisy to state that an international entrepreneur should not invest in countries that use child labor or violate certain ecological standards while allowing that entrepreneur to associate with tyrannical governments that horribly mistreat the workers and, in particular, the societies they subjugate.”

    That should apply before Morales and after. Just because these countries have democracy doesn’t mean workers aren’t being enslaved. Whether to the left or the right, there is far too much child labor and exploitation related to North American companies.

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