Transnational Corporations versus the State

Transnational Corporations versus the State: The Political Economy of the Mexican Auto Industry

DOUGLAS C. BENNETT
KENNETH E. SHARPE
Copyright Date: 1985
Pages: 320
https://www.jstor.org/stable/j.ctt7ztjh9
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  • Book Info
    Transnational Corporations versus the State
    Book Description:

    The historical-structural method employed here rejects analyses that are excessively voluntaristic or deterministic. The authors show that while the state was able to mitigate certain adverse consequences of TNC strategies, new forms of dependency continued to limit Mexico's options.

    Originally published in 1985.

    ThePrinceton Legacy Libraryuses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These paperback editions preserve the original texts of these important books while presenting them in durable paperback editions. The goal of the Princeton Legacy Library is to vastly increase access to the rich scholarly heritage found in the thousands of books published by Princeton University Press since its founding in 1905.

    eISBN: 978-1-4008-5780-7
    Subjects: Business

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. TABLES
    (pp. vii-viii)
  4. ACKNOWLEDGMENTS
    (pp. ix-xii)
  5. ABBREVIATIONS
    (pp. xiii-2)
  6. 1 INTRODUCTION
    (pp. 3-13)

    In 1960, the automobile industry in Mexico consisted of a dozen small firms that assembled vehicles from imported kits. By 1970, there was substantial automobile manufacture in Mexico: 60 percent of each vehicle sold in Mexico was produced there. By 1980, Mexico had become a significant exporter of automotive parts, particularly to the United States. Cars “made in the U.S.” had a fair chance of containing Mexican-built engines, springs, windshields, or transmissions, and automotive exports had become a point of friction between the U.S. and Mexican governments. Moreover, during these years, the automobile industry was the engine for a new...

  7. 2 THE STATE AND DEPENDENCY IN MEXICO
    (pp. 14-50)

    Shortly after taking office in December 1958, the López Mateos administration singled out the automobile industry to be a centerpiece of its efforts to stimulate further industrial growth in Mexico. The Great Depression and World War II had deprived Mexico of manufactured imports, and this artificial protection had propelled the country into a surge of industrialization along an import-substitution path. Following the war, the policy instruments of tariffs and quotas were instituted to continue the protection of the domestic market, but by the mid-1950s this surge of industrialization was showing signs of exhaustion. Domestic manufacture of virtually all consumer nondurable...

  8. 3 TRANSNATIONAL CORPORATIONS IN THE WORLD AUTOMOBILE INDUSTRY
    (pp. 51-79)

    As early as 1925, still in the halcyon days of the Model T, the Ford Motor Company took advantage of the restoration of internal peace in Mexico, government tariff reductions, and low labor and transportation costs to establish an assembly operation in Mexico City. General Motors followed suit in 1937, on the eve of the oil expropriation. Both of these were, from the beginning, wholly foreign-owned subsidiaries.¹ In 1958, these two firms accounted for more than half the vehicles sold in Mexico (see table 3.1).

    The rest of the industry at the time—aside from a small number of cars...

  9. 4 A FRAMEWORK FOR ANALYZING STATE-TNC BARGAINING
    (pp. 80-93)

    In 1961-1962, in 1968-1969, and again in 1977, there were major episodes of bargaining between the Mexican state and the transnational automobile firms. Chapters 5, 7, and 9 each examines one of these encounters in some detail, but we first need to develop a general framework for analyzing them. In what has proven to be a seminal formulation, Kindleberger and Herrick conceptualized the relationships between tncs and host-country governments as one of “bilateral monopoly”: one buyer and one seller of an investment project:

    In a typical situation, a company earns more abroad than the minimum it would accept and a...

  10. 5 THE FIRST BARGAINING ENCOUNTER, 1960-1962
    (pp. 94-116)

    When Adolfo López Mateos took office as president of Mexico in December 1958, his chief economic policy makers set themselves the task of creating an automobile manufacturing industry in Mexico. The conflict that ensued pitted for the first time the Mexican state against foreign corporations in a manufacturing sector.

    Initial planning was accomplished by an interministerial committee with representatives from the Ministry of Industry and Commerce, the Ministry of Finance, the Ministry of National Properties, and the Bank of Mexico. It was chaired by Carlos Quintana, a high official of nafin, the state industrial development bank. nafin staff provided technical...

  11. 6 THE CONSEQUENCES OF IMPORT SUBSTITUTION
    (pp. 117-154)

    The initial intention of the López Mateos government was to create a fully Mexicanized auto industry—majority Mexican equity in both the terminal and supplier firms. Faced with the resistance of the two major wholly foreign-owned tnc subsidiaries, Ford and gm, and the likely disapproval of the U.S. government, the state managers dropped their proposal for Mexicanization of the terminal firms in the final version of the 1962 decree; only the supplier industry was required to be majority Mexican owned. Concerned to protect the firms with Mexican capital, the state managers instituted a policy of production quotas for each terminal...

  12. 7 THE SECOND ENCOUNTER, 1969
    (pp. 155-175)

    In October 1969, representatives of the terminal firms were summoned to the office of Luis Bravo Aguilera, director of industries in sic. A new automotive policy was read and explained to them.¹ It required each terminal firm to make a steadily increasing amount of exports to compensate for the imported content of its vehicles. Shortly afterward, there was a meeting of the terminal firms at the headquarters of the amia, their trade association. There were complaints about the new policy and even a few confessions of responsibility for having allowed this new requirement to take effect. But no attempt was...

  13. 8 THE CONSEQUENCES OF EXPORT PROMOTION
    (pp. 176-200)

    When the Echeverría administration came to power in 1970, Guillermo Becker was named director of industries in sic, a position he had already held at the end of the López Mateos administration. The export-oriented automobile policy that he inherited promised to generate foreign exchange to meet the country’s import bill, spur further industrialization, and provide new sources of employment, which were all major goals of Echeverría. Becker and his team might not have chosen such a policy themselves—they were skeptical that the automobile industry was sufficiently well established to commence exporting—but they also saw considerable harm in reversing...

  14. 9 THE THIRD ENCOUNTER, 1977
    (pp. 201-226)

    The growing economic crisis in Mexico at the end of the Echeverría administration led top policy officials to review the 1969acuerdoand the 1972 decree. Export requirements were not stemming the automobile industry’s trade deficit. Guillermo Becker, the director of industries, and his staff began to consider a policy change. They were not, however, fully cognizant of the changes taking place in the world auto industry, and they assumed that the best alternative would be to raise the level of domestic content. While the initiative came from Becker and sic, much of the planning was done in the Interministerial...

  15. 10 EXPORT PROMOTION IN AN ERA OF OIL AND DEBT
    (pp. 227-247)

    The 1977 decree reaffirmed the Mexican government’s commitment to an export-oriented strategy in the automobile industry. As with the 1969acuerdo, its implementation has crystallized a situation of dependency characterized by two major problems. One is a conflict over how much of the benefits of new export markets would flow to firms in the nationally owned parts industry and how much to the foreign-owned auto makers. The other is that the Mexican auto industry is vulnerable not only to fluctuations in the world market but to the vagaries of U.S. government trade policy as well. These problems have unfolded, however,...

  16. 11 SUMMARY AND CONCLUSIONS
    (pp. 248-272)

    The organization and content of this book have been informed by an historical-structural approach which seeks to avoid both the implicit determinism and the voluntarism of more conventional approaches in American social science. It is founded on the straightforward premises that human beings make crucial choices which shape the course of their lives—they “make their own history”—but that these choices are constrained by structures, the historical products of the actions of previous generations, which shape what they want and limit what they are able to do. Structures are political, economic, social, and cultural institutions; they involve two or...

  17. POSTSCRIPT
    (pp. 273-276)

    Like his predecessor, Miguel de la Madrid Hurtado assumed the presidency of Mexico in the midst of an economic crisis. Unlike López Portillo, however, de la Madrid had no prospect of an early return to economic expansion.

    When the oil boom came to an abrupt halt in 1982, it left Mexico with inflation running close to 100 percent and with $80 billion of foreign debt. The debt was not only a public-sector debt; many private firms had borrowed abroad to finance expansion during the boom. With the devaluation of the peso, many firms found themselves with debts that exceeded the...

  18. APPENDIX A DIPLOMATIC NOTE FROM THE UNITED STATES TO MEXICO, FEBRUARY 1, 1978
    (pp. 277-278)
  19. APPENDIX B INTERVIEWEES
    (pp. 279-280)
  20. BIBLIOGRAPHY
    (pp. 281-294)
  21. INDEX
    (pp. 295-300)
  22. Back Matter
    (pp. 301-301)