Studying Business Associations in Latin America

By Rivarola, Andrés | Ibero-americana, July 1, 2000 | Go to article overview

Studying Business Associations in Latin America


Rivarola, Andrés, Ibero-americana


I. INTRODUCTION

The purpose of this note is to review recent research around business associations in Latin America and provide some new theoretical points of view for studies in this area. My first assumption is that the current research of state-business interaction is weak in the analysis of the contemporary role of the nation-state. There appears to be a narrow understanding on how national institutions are influenced by the globalization process. Secondly, the explanation of action and change is limited because it generally presumes rationality to be self-evident rather than meaningful. Following this line of thinking, the studies over emphasize the rent-seeking argument, failing to understand the different solutions that exist under distinct cultural systems. In my opinion, an important reason for the shortcomings of current research is that there are two concepts that are defined too narrowly, namely, institutions and legitimacy. With regard to the former, while current research generally see institutions as rules (e.g. property rights), I also view them as cultural models. In the latter concept, while it is seen as a way of lowering transaction costs, I propose to analyze legitimacy in terms of the degree of cultural support given to an organization or a policy.

Before proceeding with the discussion on these assumptions, I want to make clear that the meaning of "current research" is only related to the studies presented here. These were selected among those that I consider to be to the most representative studies conducted on the issue in the last decade. The first work is the volume edited by Ernst Bartell and Leigh A Payne (1995) where the emphasis is on the study of the relationship between business and democratic stability. Second, a study edited by Francisco Durand and Eduardo Silva (1998) who focus on the role of encompassing business associations. Finally, the wide-ranging study edited by Silvia Maxfield and Ben Ross Schneider (1997) that include contributions from, among others, Stephan Haggard and Peter Evans. These scholars analyze varying conceptions of business as well as leaving ample room for cross-regional comparisons. Moreover, I am aware that the definition of business is very broad and I do not pretend to cover the whole field. My focus will therefore be primarily on the discussion around business as a political actor.

II. CURRENT RESEARCH TRENDS

Let us start by analyzing the work of Maxfield and Schneider et al. They present a very clarifying conceptual differentiation of five areas for private sector analyses. These are business as capital, sector, firm, association and network. My discussion is centered on the second field, viz. the sector in which the associations are studied as political actors.

Some of the key concepts used by Maxfield and Schneider and their collègues are information, reciprocity, credibility and trust. Information is basically seen as a transaction cost, where "efficiency" is equated with free flow of information. Following this line of thinking, they maintain that a key task for policymakers is to identify vulnerable sectors where capitalists perceive the costs of free riding to be high (Maxfield and Schneider 1997:32). The next concept, 'reciprocity', is related to the reciprocal agreements and monitor compliance from the state where state actors must have the capacity and autonomy to improve performance in return for subsidies. Thirdly, 'credibility' means that the capitalists believe what state actors say and then act accordingly. It is explained as, inter alia, dependent on the flows of information, the reputations of officials and the degree of institutionalization of the rules. Finally, the last aspect, 'trust', increases the voluntary exchange of information, makes reciprocity more likely and reduces uncertainty (Ibid.:11-14). In their view, more reciprocity, credibility and trust, implies a reduction of information costs that in turn signifies increased gains for the actors. …

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