The Political Economy of Expropriation: Three Peruvian Cases

The politics of the period are covered by G. Philip , The Rise and Fall of the Peruvian Military Radicals 1968-76 (London: Athlone Press, 1978).

There would be no point in providing a comprehensive bibliography of this highly studied case, but see A. Pinelo , The Multinational Corporation as a Force in Latin American Politics; a case study of the International Petroleum Company in Peru (Praeger, 1973). This, whatever its faults, does provide a basic introduction.

See G. Philip, op. cit., Chaps. 2 and 3.

This is clear from press reports at the time. One well-placed American executive later told me that he believed that the régime's October measures were fully justified and only objected to the measures taken in February 1969. It should be remembered that, during this time, a number of well-known Peruvian conservatives were actively supporting the government and it was widely felt that these would be able to prevent rash acts.

The Hickenlooper Amendment to the American Foreign Aid Act of 1962 mandated the Executive branch to cut off all aid to, and suspend the sugar quota of, any country which expropriated American property without taking adequate measures to provide compensation.

Quoted in the Financial Times (February 25, 1969). Whether the analogy was accurate is, of course, another question-

El Comercio (April 10 and April 12, 1969).

Caret as (December 12, 1968).

J. Einhorn , Expropriation Politics (D. C. Heath, 1974).

E.V.K. Fitzgerald , The State and Economic Development; Peru since 1968 (Cambridge Univ. Press; 1975), p. 71.

March 19, 1971.

September 6, 1971.

May 6, 1972.

See Latin America (April 7, 1972) and subsequent issues. I subsequently discussed this article with its author.

C. Goodsell , American Corporations and Peruvian Politics (Harvard, 1974), pp. 46, 49.

The Quarterly Survey of the Economist Intelligence Unit on International Business, 4th Quarter 1973, has a special survey of the Cerro issue and provides useful information on the motivations of the company.

One source in a position to know recounted the story of how, at one key interview between General Velasco and a high company official, disaster struck when the official tried to harangue Velasco. Velasco then instructed his interpreter to " tell that man that, if he doesn't stop pointing his finger at me, I'll nationalise his company." Even if somewhat exaggerated, this story does appear to reflect the nature of personal relationships between company and government at that time.

EIU, p. 24.

Ibid., p. 24.

Financial Times, September 30, 1973.

The U.S. $76m. was finally redistributed in late 1974. Cerro received U.S. $10m. (which suggests strongly that the bulk of its compensation was received in the remitted U.S. $74m) and IPC U.S. $22m. The other companies, some of whom were highly dissatisfied with their share, received the remainder.

Thus, according to Hunt " estimates ... show that Toquepala earned an after-tax return of around 19 per cent. for Southern Peru, whereas Marcona earned about 28 per cent. on its iron ore venture. The corresponding figures for U.S. manufacturing investment in Peru stand at about 16 or 17 per cent." S. Hunt , " Direct Foreign Investment in Peru; New Rules for an Old Game," in A. Lowenthal (ed.), The Peruvian Experiment; Continuity and Change Under Military Rule (Princeton, 1975).

Goodsell , op. cit, p. 49.

These are discussed in more detail in G. Philip, op. cit., Chap. 6.

Banco Central de Reserva, Memoria Annual.

Fitzgerald, op. cit., p. 71.

One of these was interview in Marka (May 10, 1975). See also G. Thorndike , No ! Mi General (Lima, 1976).

Andean Report (October, 1976).

This point runs counter to the argument put forward by M. Bronfenbrenner , "The Appeal of Confiscation in Economic Development," in Economic Development and Cultural Change (April 1955), Vol. 4. Bronfenbrenner, however, completely ignores taxation, which greatly increases the revenue accruing to host governments even without nationalisation. Moreover, Bronfenbrenner was concerned with the effect of socialisation of the entire economy and not with the mere takeover of a few companies which, while individually large, were far smaller than the entire capital stock of the country concerned.

S. Hunt , op. cit, p. 347.

For a discussion of an earlier period see C. Payer , The Debt Trap (Penguin, 1975). However, the power of the IMF has increased considerably after the 1973-74 oil price increases.