Latin America

56 Results

 

Calderón: Economic Arguments Needed to Fight Climate Change

Former President of Mexico Felipe Calderón says the United States Congress and Chinese coal plants are the biggest obstacles to fixing climate change. Open for comment; 3 Comments posted.

When Do Alliances Make Sense?

Analyzing drilling leases in the Gulf of Mexico, John Beshears explores a question as old as business itself: When does it pay to make an alliance? Open for comment; 1 Comment posted.

First Look: March 19

When daily deals misfire on merchants … Lessons of war for negotiators … The unexpected effect of electronic monitoring of criminals. Read More

No Taxation without Information: Deterrence and Self-Enforcement in the Value Added Tax

This research investigates the effectiveness of the Value Added Tax in facilitating tax enforcement and sheds light on the role of information and third-party reporting for taxation. Drawing on results from two field experiments with over 400,000 Chilean firms, it provides evidence for the self-enforcing power of the paper trail in the VAT and for spillovers in tax enforcement through firms' trading networks more generally. The findings also show that while the VAT paper trail seems to be highly effective in Chile overall, the mere existence of a VAT system, in the absence of credible deterrence, does not lead to self-enforcement. Results have implications for public finance in developing countries and for tax policy in general. Read More

These Are the Good Old Days: Foreign Entry and the Mexican Banking System

In this paper, the authors take on an aspect of contract design that is fundamental to explain economic development and financial stability. They study the incentives contained in the "partnership" contract between bankers, the government, depositors, and bank shareholders, and examine how the incentives that come out of that contract explain the volatility of the banking system. The main insight is that bankers in developing countries with weak property rights demand rents (such as high barriers to entry) and lax regulation, as a way to compensate them for the political risk they face of being expropriated by the government or used for policy objectives (for example, if the government forces banks to buy its debt). Depositors, on the other hand, demand deposit insurance in case bankers are reckless, while minority shareholders demand high returns to compensate for the risk of insider lending or reckless behavior on the part of bankers. Then, the combination of high barriers to entry, lax regulation, and deposit insurance induces bankers to take on more risks to try to maximize their rents, and does not encourage depositors and minority shareholders to monitor bankers either (as the government limits downside risk for them). This dynamic, in the case of Mexico, led to frequent banking crises between the 1970s and the 1990s. This was the case until 1997, when the government allowed foreign bankers take over the largest domestic commercial banks and improved the monitoring of banks. This increased the stability of the system. There has not been a crisis since then, partly because of improvements in regulation and partly because foreign bankers have been more conservative, not only because they have standardized procedures to deal with risk but also because they are closely monitored by their parent banks abroad. Read More

Want People to Save More? Send a Text

What's the most effective way to encourage people to save their money? The answer lies in a combination of peer pressure and text messages, according to new research by Assistant Professor Dina D. Pomeranz. Open for comment; 6 Comments posted.

Leviathan in Business: Varieties of State Capitalism and their Implications for Economic Performance

State capitalism, the widespread influence of the government in the economy, still looms large in developed and developing countries after over two decades of extensive state reform and privatization. Research by Aldo Musacchio and Sergio G. Lazzarini documents the extent and reach of state capitalism around the world and explores the economic implications of these new forms of state capitalism. There are three key arguments: First, state capitalism in the twenty-first century combines majority ownership of state-owned enterprises with a hybrid form that includes minority equity investments as well as other forms of support for private firms (such as subsidized loans). Second, all of those forms are present around the world, both in rich and poor countries, and in most cases they co-exist. Although some countries appear to have a prevalence of the minority investor mode while other countries emphasize the majority mode, in most cases the two modes jointly occur. Third, the emergence of those modes is explained by a host of environmental, political, and historical factors; and the economic performance of each mode depends on certain contingencies that should affect their benefits and costs, such as the economic distortions that they may generate. Read More

Creating a Venture Ecosystem in Brazil: FINEP’s INOVAR Project

Since the mid-1990s, several groups in Brazil have been working on developing an indigenous venture capital ecosystem, largely to stimulate the establishment of innovative companies and help them gain access to capital. In 2000, the Brazilian government's Agency for Innovation (Financiadora de Estudos e Projectos, or FINEP), with support from the Multilateral Investment Fund (MIF), unveiled INOVAR, a program to address these needs. In the 12 years since INOVAR's debut, the program has had two iterations and has been recognized as a role model for government efforts to stimulate a VC ecosystem. In this paper, Ann Leamon and Josh Lerner present a brief background on private equity in both Latin America and Brazil, then explore the genesis of INOVAR (Innovation), the details of the program, and its results. They conclude with challenges to be addressed. Read More

Clear and Present Danger: Planning and New Venture Survival Amid Political and Civil Violence

Strategy theory often takes for granted the role of state institutions in providing stable, predictable environments in which new firms are founded. Yet, many states around the world (such as Iraq, Sudan, South Sudan, Syria, and the Democratic Republic of Congo) lack political institutions of sufficient strength to ensure personal safety and public order, thereby creating environments where civil and political violence can ferment. This paper explores the impact of such violence on new venture processes. Results show that comprehensive planning was negatively correlated with venture survival in such environments. While there are implications for strategy theory, the study is also relevant to entrepreneurs and organizations promoting new venture planning in less-developed countries, particularly those experiencing political and civil turmoil. Currently, prospective entrepreneurs are taught the importance of business planning by both universities and non-governmental organizations that offer entrepreneurial training. But this study suggests that such training will have mixed effects on new venture survival, depending on the extent to which these entrepreneurs pursue ventures in violent and uncertain environments. In such contexts where governments fail to maintain public safety and order, these training programs may actually increase the likelihood of new venture failure. Read More

Big BRICs, Weak Foundations: The Beginning of Public Elementary Education in Brazil, Russia, India, and China

Economists have argued that the "Great Divergence" between the developed and underdeveloped world in the nineteenth century was reinforced—if not caused—by rapid improvements in schooling that occurred in the advanced economies. Explaining differences in economic development today may hinge on understanding why most societies failed to develop adequate primary education in the late nineteenth and early twentieth centuries. This study sheds new light on the comparative experiences of Brazil, Russia, India, and China (BRIC) during the formative years of their primary education systems. Read More

What Do Development Banks Do? Evidence from Brazil, 2002-2009

Private firms in developed and developing markets find themselves competing with the so-called "national champions"—private and state-owned enterprises that receive entitlements, mostly trade protections and/or subsidized credit from the government. Most of these national champions get support by proposing long-term projects with large capital investment that would usually not be easy to fund using private capital. This paper, written by Research by Sergio G. Lazzarini, Aldo Musacchio, Rodrigo Bandeira-de-Mello, and Rosilene Marcon, uses evidence from Brazil to look at what happens to firm performance, investment, and financial expenditures when companies get subsidized credit from the Brazilian National Bank of Economic and Social Development, known as BNDES. Read More

How ‘Hybrid’ Nonprofits Can Stay on Mission

As nonprofits add more for-profit elements to their business models, they can suffer mission drift. Associate Professor Julie Battilana says hybrid organizations can stay on target if they focus on two factors: the employees they hire and the way they socialize those employees. Open for comment; 14 Comments posted.

Big BRICs, Weak Foundations: The Beginning of Public Elementary Education in Brazil, Russia, India, and China, 1880-1930

In deducing why some nations are more developed than others, it makes sense to look at their educational systems. While comparative studies on the subject focus either on developed nations or on differences between developed and developing economies, this paper hones in four of the largest developing nations at the turn of the twentieth century: Brazil, Russia, India, and China (BRIC). Research was conducted by Aldo Musacchio of Harvard Business School, Laktika Chaundhary of Scripps College, Steven Nafziger of Williams College, and Se Yan of Peking University. Read More

Leviathan as a Minority Shareholder: A Study of Equity Purchases by the Brazilian National Development Bank (BNDES), 1995-2003

There is a trend in many developing countries toward governments buying minority stakes in private companies. While there has been ample discussion on the wisdom of such actions, little has been said about how governments can make such interventions work better. This paper aims to fill that void, using data from the Brazilian National Development Bank (BNDES). Research was conducted by Sergio G. Lazzarini of the Insper Institute of Education and Research, and Aldo Musacchio of Harvard Business School. Read More

Panama Canal: Troubled History, Astounding Turnaround

In their new book, The Big Ditch, Harvard Business School professor Noel Maurer and economic historian Carlos Yu discuss the complicated history of the Panama Canal and its remarkable turnaround after Panama took control in 1999. Q&A with Maurer, plus book excerpt. Open for comment; 5 Comments posted.

Medium Term Business Cycles in Developing Countries

Business cycle fluctuations in developed economies tend to have very strong effects on developing countries, says a new study by Harvard Business School professor Diego Comin, Norman Loayza and Luis Serven of the World Bank, and Farooq Pasha of Boston College. The researchers have developed a quantitative model capable of explaining the amplitude and persistence of the effect that U.S. shocks have on Mexico's macroeconomic variables. The model is then used to provide an account of the drivers of business fluctuations in developing economies. Read More

Foreign Entry and the Mexican Banking System, 1997-2007

What are the effects of foreign bank entry in developing economies? In recent years, governments around the world have been opening up their banking systems to foreign competition. In Mexico, for example, the market share of foreign ownership of banks increased fivefold between 1997 and 2007. In this paper, Stanford professor Stephen Haber and HBS professor Aldo Musacchio describe their detailed study of the impact of foreign entry in Mexico during that period. Overall, results suggest that while foreign entry in Mexico is associated with greater stability of the banking system, it has not increased the availability of credit, and foreign entry is not a solution to a property rights environment that makes contract enforcement costly. Read More

The Empire Struck Back: The Mexican Oil Expropriation of 1938 Reconsidered

The Mexican petroleum expropriation of 1938 looms large as the beginning of Latin American resource nationalism and the apogee of America's "Good Neighbor" policy. In Mexico, the expropriation is viewed as a patriotic triumph, in which the federal government seized control of the country's most valuable natural resource. In the U.S., the temperate reaction of the Roosevelt Administration is seen as the decisive break with Washington's imperial relationship towards Latin America. Washington "curbed its finance capital," it is said, and downgraded the protection of American overseas private investments. In this paper, HBS professor Noel Maurer explains how the actual historical record diverges substantially from the accepted view. Read More

Strategy and Execution for Emerging Markets

How can multinationals, entrepreneurs, and investors identify and respond to new challenges and opportunities around the world? In this Q&A, HBS professors and strategy experts Tarun Khanna and Krishna G. Palepu offer a practical framework for succeeding in emerging markets. Plus: Book excerpt with action items. Read More

What Brazil Teaches About Investor Protection

When Brazil entered the 20th century, its companies were a model of transparency and offered investor protections that government did not. Can our financial regulators learn a lesson from history? HBS professor Aldo Musacchio shares insights from his new book. Read More

The Great Leap Forward: The Political Economy of Education in Brazil, 1889-1930

In 1890, with only 15 percent of the population literate, Brazil had the lowest literacy rate among the large economies in the Americas. Yet between 1890 and 1940, Brazil had the most rapid increase in literacy rates in the Americas, catching up with and even surpassing some of its more educated peers such as Mexico, Colombia, and Venezuela. This jump in literacy was simultaneously accompanied by a brisk increase in the number of teachers, number of public schools, and enrollment rates. Why were political elites in Brazil willing to finance this expansion of public education for all? André Martínez-Fritscher of Banco de México, Aldo Musacchio of HBS, and Martina Viarengo of the London School of Economics explain how state governments secured funds to pay for education and examine the incentives of politicians to spend on education. They conclude that the progress made in education during these decades had mixed results in the long run. Read More

The History of Beauty

Fragrance, eyeliner, toothpaste—the beauty business has permeated our lives like few other industries. But surprisingly little is known about its history, which over time has been shrouded in competitive secrecy. HBS history professor Geoffrey Jones offers one of the first authoritative accounts in Beauty Imagined: A History of the Global Beauty Industry. Read More

Endowments, Fiscal Federalism, and the Cost of Capital for States: Evidence from Brazil, 1891-1930

Do endowments matter in determining the cost of capital for a country or state? Endowments, according to Banco de México's André C. Martínez Fritscher and HBS professor Aldo Musacchio, are the conditions that determine what kind of commodities can be produced and exported in a determined geographical region. Studying the determinants of the risk premium of the bonds issued by Brazilian states between 1891 and 1930—a period of extreme decentralization of fiscal revenues and expenditures in Brazil—the researchers find that risk premia are highly correlated with state public revenue per capita. Because these revenues came, to a large extent, from the taxes states levied on commodity exports, the researchers argue that endowments mattered to determine the cost of capital for states. Read More

Medium Term Business Cycles in Developing Countries

At the end of 2007, the U.S. economy entered a recession that, by the first quarter of 2009, had reduced U.S. GDP by 2.2 percent. The Mexican economy was showing no sign of distress until the U.S. recession began. Despite that, Mexican GDP declined by 7.8 percent during the same period. This and similar episodes from other developing countries motivate several questions: Why do shocks to developed economies affect developing countries to such an extent? Does the response of developing economies to shocks that originate in their developed neighbors account for the larger volatility of developing economies? More broadly, what ingredients do macroeconomic models need to incorporate in order to account for the unique features of economic fluctuations in developing economies? To investigate these questions, the researchers developed a two-country asymmetric model to study the business cycle in developing countries. The mechanisms introduced in the model should provide an accurate account of business cycles in other developing countries. Read More

Business Summit: The Evolution of Agribusiness

Agribusiness has come to be seen not just as economically important, but as a critical part of society. The future for this massive industry will be both exciting and complex. Read More

The Unseen Link Between Savings and National Growth

Professor Diego Comin and fellow researchers find a little observed link between private savings and country growth. The work may offer a simple interpretation for the East Asia "miracle" and for failures in Latin America. Q&A. Read More

Bank Accounting Standards in Mexico: A Layman’s Guide to Changes 10 Years after the 1995 Bank Crisis

Mexico was the first emerging market compelled to reformulate the financial reporting of its banks as a result of a financial crisis. In the last decade, Mexico has undergone a process of internationalization of its banking industry. Today, more than 80 percent of the equity of Mexican banks belongs to internationally active bank corporations. This internationalization demands more transparent regulation, including standardized accounting rules and better disclosure of information. The case of Mexico can therefore serve as an example of the relevance of these changes, as well as of their scope and limitations. This paper attempts to clarify the nature and structure of the new accounting standards, and explains how they have affected financial statements and their interpretation. Read More

The Lessons of Business History: A Handbook

Compiling a handbook on the current thinking in any area of study seems daunting enough, but the just-published Oxford Handbook of Business History carries an even larger mission: bring the lessons of business history to current research in other disciplines and to the practice of business management itself. A Q&A with coeditor Geoffrey Jones. Read More

Laws vs. Contracts: Legal Origins, Shareholder Protections, and Ownership Concentration in Brazil, 1890-1950

The early development of large multidivisional corporations in Latin America required much more than capable managers, new technologies, and large markets. Behind such corporations was a market for capital in which entrepreneurs had to attract investors to buy either debt or equity. This paper examines the investor protections included in corporate bylaws that enabled corporations in Brazil to attract investors in large numbers, thus generating a relatively low concentration of ownership and control in large firms before 1910. The case of Brazil is particularly interesting because, in Latin America before World War I, it boasted the second-largest equity market and largest number of traded companies. As HBS professor Aldo Musacchio shows, the considerable variation of investor protections over time at the country level, and even at the company level, urges cautions against notions about the persistency of institutions, especially of legal traditions. Read More

A Resource Belief-Curse: Oil and Individualism

Capitalism is not as widespread as economists would hope. Data from surveys of public opinion, as well as on the distribution of political parties, confirm the idea that capitalism doesn't flow to poor countries. In some countries, anti-market sentiment has increased in recent years, a period where the price of oil and other primary commodities have soared. This combination of anti-market sentiment and high oil prices has led to renegotiations of oil contracts and even nationalizations in some countries such as Bolivia and Venezuela. It is tempting for economists trained in the theory of political capture to argue that this is just another instance where special interests exploit the circumstances to make an extra dollar. Given that these nationalizations are often popular with the majority of voters, however, the researchers resist this temptation and ask if there are explanations where a positive correlation emerges between voter anti-market sentiment and dependence on oil. Read More

How Property Ownership Changes Your World View

When Argentine squatters were granted property title it changed the way they viewed the world. HBS professor Rafael Di Tella discusses his research into how property ownership affects our beliefs and also our attitudes toward capitalism. Read More

How Magazine Luiza Courts the Poor

Brazilian retailer Magazine Luiza has developed an innovative strategy for selling to the poor, combining technology with great service that please both customers and employees. The question of how the company can grow without sacrificing the special qualities that have made it successful is at the heart of a case study developed by Harvard Business School professor Frances X. Frei. Read More

The Business of Global Poverty

Nearly half of the planet's population subsists on $2 a day or less. What role should business play as the world confronts what may be the most explosive socioeconomic challenge of the new century? Read More

Handicapping the Best Countries for Business

India? South Africa? Russia? Which are the best countries for a firm to invest in? In a new book, Professor Richard Vietor looks at the economic, political, and structural strengths and weaknesses of ten countries and tells readers how to analyze the development of these areas in the future. Read our Q&A and book excerpt. Read More

Risky Business? Protecting Foreign Investments

After a string of forced nationalizations of private enterprises in the 1960s and 1970s, the pendulum swung back and companies were again encouraged by host countries to build and run major infrastructure projects such as power and water. But a set of new property protections has done little to manage the risk in many of these politically unstable environments. Professor Louis T. Wells, coauthor of a new book on making foreign investment safe, discusses the current landscape. Read More

Improving Public Health for the Poor

Microfinance may offer a window on new methods for widening access to healthcare for the poor, says Harvard Business School's Michael Chu. He and colleagues at the Harvard School of Public Health have embarked on a new project to serve this critical sector. Bringing together public healthcare and market forces "could have huge impact," he says. Read More

India Needs to Encourage Trade with China

Although India and China have increased bilateral trade over the last five years, the amount is far less than what would be expected. Harvard Business School professor Tarun Khanna says India has primarily itself to blame. From The Economic Times. Read More

Corporate Governance and Networks: Bankers in the Corporate Networks of Brazil, Mexico, and the United States circa 1910

Brazil today looks like a typical case in which business groups and close relations between companies and banks play an important role to overcome information and monitoring problems. This was not always the case. To study how the development of financial markets can change the interaction between banks and corporations, Musacchio compared the importance of interlocking boards of directors between corporations and banks in Brazil, Mexico, and the United States at the turn of the twentieth century. This paper and previous research support Musacchio's hypothesis that financial markets in Brazil were sustained by an institutional framework that protected investors, enforced credit contracts, and promoted regular financial disclosure of company accounts. The development of bond and stock markets, and the relatively good corporate governance practices in Brazil before 1930, made connections with bankers less necessary. Read More

The Strategic Way to Go to Market

Too often channel strategies develop at the last minute--when a product is ready to go to market. But this haphazard approach leaves a lot of efficiencies and synergies by the wayside, says V. Kasturi Rangan. Enter the concept of the "channel steward." Read More

Political Turmoil and Mexico’s Economy

Professor Noel Maurer's historical research into Mexico and other countries with unstable governments shows that their economies perform better than might be expected. Why? Read More

What Roosevelt Took: The Economic Impact of the Panama Canal, 1903-29

The Panama Canal was expected to bring great economic benefits to the people of Panama. Instead, the United States received most of the benefits. This was a deliberate act on the part of the U.S. The U.S. didn't allow Panamanian businesses to sell goods or services in the Canal Zone, it avoided the employment of Panamanian workers, and it used its military leverage to force Panama into accepting a low payment for the Canal territory. Read More

Bankers, Industrialists, and Their Cliques: Elite Networks in Mexico and Brazil During Early Industrialization

Mexico and Brazil had different institutional structures in the early 20th century. Did entrepreneurs in these two countries organize their business networks differently to deal with the different institutional settings? And, how can we compare the impact of the institutional structure of Mexico and Brazil on the networks of entrepreneurial finance and entrepreneurship in general? In this research, Musacchio and Read look at the networks of interlocking boards of directors of major joint stock companies in two large Latin American societies in 1909. Read More

How Organizations Create Social Value

A study of smart practices by social and business organizations in Iberoamerica. Research by HBS professor James Austin, HBS senior researcher Ezequiel A. Reficco, and UNIANDES professor Roberto Gutiérrez. Read More

Why IT Matters in Midsized Firms

What does IT actually contribute to a business? Is IT a commodity like electricity or is it a crucial element of competitive advantage? In a study of over 600 medium-sized global firms to analyze the business benefits that IT can enable, the authors found that IT capability was key to profitable business growth. This was true in both the U.S. product and services sectors as well as in Germany and Brazil. Read More

Public Pension Reform: Does Mexico Have the Answer?

Mexico may have found a formula for avoiding most of the misfortunes that could arise when individuals invest their own funds. What's the right way to support an aging workforce? And why is it that a concept—life-long security—that should bring comfort to all of us is so distasteful to address in public? Closed for comment; 10 Comments posted.

What Developing-World Companies Teach Us About Innovation

A mini case study by professor Donald N. Sull and coauthors on how three businesses in developing countries overcome a lack of resources to succeed. From Strategy & Innovation. Read More

Lessons from a Nasty Trade Dispute

Even if the World Trade Organization rules in favor of your country’s government, it may not mean the end of a business dispute. HBS professors Rawi Abdelal and Laura Alfaro explain why. Read More

George C. Lodge

Whether the subject is Third-World development or national competitiveness, George Lodge, Jaime and Josefina Chua Tiampo Professor of Business Administration, Emeritus, has exercised his talent for seeing the big picture in a prolific outpouring of books, cases, and articles. Read More

Big Companies, Big Opportunities—Big Questions

Markets that were once protected in Latin America are suddenly open to competition from all sides. For large companies, this new playing field presents wonderful opportunities—but great risks, too. Read More

Making the Most of Government Upheaval

Why do some firms in emerging economies quickly rise above the rest? What are their competitive secrets? New research by HBS professor Rogelio Oliva and his colleague Fernando F. Suarez suggests a few answers. Read More

Group Therapy

By filling gaps in the infrastructure of emerging economies, business groups can both foster and deter entrepreneurship in various ways. Peter K. Jacobs explores the research of HBS associate professor Tarun Khanna in this article from Working Knowledge. Read More

Building Bridges Between Education and Business

How can Latin American universities and businesses join forces to stimulate more case writing in the region? In small group discussions at the conference, senior business executives and academics sat down to sort out the barriers and enablers they see in the case-writing process—and presented a host of suggestions for enhanced communication and collaboration in the future. Read More

Faculty Research Looks to Latin America

HBS faculty have long found Latin America a fertile landscape for in-depth study. In Buenos Aires, nine members of the faculty presented synopses of their latest research—the raw material for present and future case studies, journal articles, books and new management ideas. Read More

Under the Magnifying Glass: The Benefits of Being a Case Study

What is it like for a company to go under the business school magnifying glass? According to executives from four Latin American enterprises that have been the subject of case studies at HBS and elsewhere, the process is both nerve-wracking and intensely enlightening. While case studies may be a great way to educate students in an MBA classroom, they said, their companies discovered unforeseen advantages for themselves, as well. Read More

A Latin American Vision: New HBS Research Center Opens

With the President of Argentina as guest of honor, the School’s new Latin America Research Center formally opened in August in Buenos Aires with an inaugural dinner and a two-day research conference. The conference, called Partnering for Knowledge Creation, brought together 130 top academics and business leaders from all over Latin America, as well as a number of HBS faculty, to discuss new research and abundant opportunities for collaborative efforts in the future. Read More