|through the manipulation of charges for services and transactions by the head office of the MNC back in America or Europe on behalf of its local subsidiary. An arbitrating mechanism will shame the MNC out of trying the most obvious dodges that do exist, while rigorous unilateral searching by your country's own tax inspectors will sometimes be unfair, and often be expected to be.|
Pending the development of clear and relatively stable policies toward MNC's by Latin-American governments, American and European MNC's would be well-advised not to overplay their hands. While these policies may or may not parallel the recommendations outlined above, they will eventually delineate--either formally or informally--the constraints and incentives under which the MNC's will be expected to operate.
American and European MNC's currently have no effective means of speaking with one voice, even if broad consensus were to be achieved. Therefore it is incumbent upon MNC's to operate under a set of informal ground rules such that the constraints that the governments eventually do impose, and the concessions they grant, will be most favorable.
The ground rules I suggest are far fewer in number than my recommendations for the Latin-American governments, and fall under the broad caveat of avoiding the impression that the host country is being exploited, particularly economically.
More specifically, the American and European MNC operating in Latin America should hire out as much work as possible to local subcontractors, repair shops, service contractors, and the like, and acknowledge an obligation to give local nationals a sense of participation by training and employing nationals in top management, as well as conducting some R & D locally.
The second of these informal ground rules involves neither seeking nor accepting special concessions unavailable to local businessmen, nor attempting to achieve domination by buying out local companies in traditional fields long favored by local investors.
And finally, in recognition of the fact that the host country benefits more from taxes that help infrastructure development than wage inflation for favored labor forces, the MNC must refrain from avoiding taxes by manipulating charges for services and transactions on behalf of a particular affiliate, so as to disguise real earnings. Thus the higher productivity of the MNC can be of benefit both to the corporation and to the host government.
Richard Barnet and Ronald Miller. The Latin- Americanization of the United States.
At a particularly tense moment in the Watergate crisis, the veteran White House correspondent of Time magazine archly referred to the United States as a banana republic. Indeed, the constitutional crises provoked when the President is investigated to determine whether he is committing high crimes in office or the Vice-President is forced to resign for pettier crimes committed in a lesser office are more reminiscent of Latin-America than what has generally been thought to be the world's most stable political system. Such parallels can be overdone. The hysterical political metaphor is not a substitute for analysis. The United States is not "becoming" another Brazil any more than it is "becoming" another Nazi Germany or Soviet Union, despite dire predictions from the left and the right. Nevertheless, it is now