Notes

1 Introduction: The Emergence and Evolution of Business Groups in

1 . We use the term Central America to denote , , , , , and . 2 . See, for example, the presentation of Grupo Multi-Inversiones in Chapter 4. 3 . This is different from the network-based DBGs as depicted by Hamilton and Feenstra (1995), which are horizontal networks of companies bound together by a set of social norms and economic self-interest between conceptually equivalent units. 4 . http://www.elperiodico.com.gt/es/20120830/economia/217191/. For a critical debate of the law proposal discussed, see http://www.plazapublica.com.gt/ content/una-ley-de-competencia-que-legitima-los-monopolios 5 . See Chapter 5 in this volume. For further information see also http://white. oit.org.pe/spanish/260ameri/oitreg/activid/proyectos/actrav/proyectos/ proyecto_ssos/act_regionales/mexico_nov2010/documentos/3erdia_cancun1. pdf 6 . http://hdrstats.undp.org/en/indicators/103006.html

3 Regional Shifts and National Trajectories: Differences in the Context and Strategies of Business Groups

1 . We have limited our tagging to the three sectors where a group is strongest; we have not included all sectors as we have attempted in this table to under- stand what the principal focus is, and have not been so interested in minor investments. 2 . Interview, Dionisio Gutierrez, April 2013. 3 . http://www.diariodefusiones.com/?page=ampliada&id=323 4 . http://wvw.nacion.com/ln_ee/2009/diciembre/08/economia1729553.html; http://www.revistasumma.com/negocios/988-avalan-compra-de-walmart- centroamerica.html 5 . http://www.diariodefusiones.com/?Bancolombia_adquiere_el_40%25_ de_Grupo_Financiero_Agromercantil_de_Guatemala_en_US__216_ millones&page=ampliada&id=576&_s=&_page=centro_caribe. It also bought HBSC’s operations in Panama in 2013. 6 . http://www.globalcement.com/news/itemlist/tag/Cementos%20Progreso 7 . http://www.aviancataca.com/Lang/es/ri/gobierno/composicionJuntaDirec- tiva.html and Registro Comercial. 8 . The companies include: Banco Industrial, Banco del País (HN), Financiera Industrial, Almacenes Generales, Almacenadora Integrada, Seguros El Roble, Fianzas El Roble, Mercado de Transacciones, Westrust Bank (International) Limitad Contécnica, and Servicios MCilliples de Inversión. The list of

197 198 Notes

shareholders includes: Juan Miguel Torrebiarte Lantzendorffer, José Antonio Arzú Irigoyen, Rodolfo Kong Vielman, José Luis Gabriel Abularach, Ramiro Castillo Arevalo, Rafael Felipe Soares Riépele, Mario Rey Rosa Quiroz, Tomás Rodríguez Schlesinger, Carlos Springmuhl Silva, Juan Luis Bosch Gutiérrez, Luis Estuardo Godoy del Valle, Pablo Capuano Arís, José Andrés Castillo Arenales, José Roberto Bouscayrol Lemus, Eduardo Antonio Herrera Alvarado, Juan Antonio Godoy Barrios, Ernesto José Viteri Arriola, and Victor David Benchoam Perera. 9 . Construction became an important area of investment for local Nicaraguan business groups after the devastating earthquake that destroyed Managua in 1972. 10 . Foreign companies would normally operate with local partners, as in the case of the Spanish Unión Fenosa, which bought the electricity distribution company Disnorte-Dissul in 2000. It had the Pellas and the OCALSA group as minority shareholders from 2001 to 2011. 11 . Most maquila industry in Nicaragua is in textiles and is dominated by American and South Korean companies, with some investors recently coming from other countries in the region, such as Honduras. 12 . As an exception, the Durman Esquivel group opened a factory for PVC tubes in Panama in 1975 as an early process of internationalization that involved opening sales offices in the whole region during the 1980s. 13 . The cement company CEPASA, privatized in 1994, was acquired by the Mexican company CEMEX, while the fertilizer producer FERTICA was bought by a Chilean-American consortium in 1998 (Hidalgo-Capitán, 2003). 14 . Interview with the director of corporate affairs of FIFCO, February 2012. 15 . FIFCO has also invested in real estate activities, particularly the beach resort Reserva Conchal, and in residential projects in the Guanacaste province. 16 . The decay of the Costa Rican capital market is the origin of the process of diversification of the Sama group. Founded as a brokerage house and investment bank in 1976, it shifted its strategy to become a private equity company due to the lack of opportunities in the Costa Rican capital markets. In recent years, the group has acquired companies with financial problems from different sectors (e.g. poultry and banana production, and advertising) with the aim of selling them after their recovery. 17 . In 2001, the companies listed on the Costa Rican stock exchange reached their historical peak of market capitalization, whose value represented 18.55 percent of GDP. By 2011, the listed companies represented only 3.53 percent of GDP. 18 . Interview conducted in June 2011. 19 . Only two Panamanian groups have a strong presence in agriculture: the Calesa and Melo groups. The first is a conglomerate that runs sugar and rice farms, shrimp, cattle and pork production, and animal-feed factories. The second is the biggest poultry producer in Panama. 20 . All these families are of Jewish origin. Like those who formed the ‘Arab’ groups in El Salvador and Honduras, immigrants of Jewish origin were able to establish themselves in Panama initially in the retail and finance sectors, and they have consolidated in recent years as the most important economic groups in the country. 21 . Interview with Stanley Motta, May 2011. Notes 199

22 . Particularly for the funding of real estate projects, having a strong domestic bank allows these groups to think about the medium to long term. They can, for instance, survive downturns in the real estate market without resorting to panic selling. 23 . http://www.laestrella.com.pa/online/impreso/2012/02/23/intereses-fa- miliares-en-las-hidroelectricas.asp http://www.laestrella.com.pa/online/ impreso/2012/02/23/intereses-familiares-en-las-hidroelectricas.asp 24 . http://mensual.prensa.com/mensual/contenido/2010/05/24/hoy/ panorama/2193724.asp

4 From Oligarchs to Transnational Business Group Leaders? The Shifting Strategies of Key Business Groups

1 . Interview with Jaime Rosenthal, September 29, 2011. 2 . Interview with Jaime Rosenthal, September 28, 2011. 3 . He resigned in 1988 over the unconstitutional extradition of the mythical Honduran drug lord Juan Ramon Matta Ballesteros to the United States after he had offered to pay Honduras’s foreign debt. 4 . http://www.cenosa.hn/v1/index.php?option=com_content&view=article&i d=1&Itemid=3&lang=en 5 . Interview with Jaime Rosenthal, September 28, 2011. 6 . Interview with Jaime Rosenthal, September 28, 2011. 7 . According to the CNR, Ricardo Poma is president of the financial company Faralan de C.V., whereas Andres is president of Calapa de C.V., and Fernando of Masala de C.V. 8 . Interview with Fernando Poma, March 8, 2011. 9 . El Economista, Extranjeros financiaron campaña electoral de Laura Chinchilla, July 7, 2011, http://www.eleconomista.net/2011/07/07/actualidad/126672- extranjeros-financiaron-campana-de-laura-chinchilla-html 10 . See, e.g., http://www.expansion.com/2013/04/30/empresas/tmt/1367302380. html, Palencia Prado, 2014. 11 . Interview with Juan Guilllermo Gutierrez, The Star, February 7, 2011 and author interview with Dionisio Gutierrez Mayorga, April 16, 2013. 12 . Arturo and Juan Guillermo Gutierrez have set up a website with documenta- tion from this lawsuit up until 2008: www.casogutierrez.com. The lawsuits are also covered in a number of newspaper articles in Guatemala and Canada. See, for example: Family empire comes to Toronto, fighting follows, The Star , July, 2, 2011, http://www.thestar.com/news/gta/2011/02/07/family_empire_ comes_to_toronto_fighting_follows.html. 13 . Interview with Dionisio Gutierrez, April 16, 2013. 14 . http://www.campero.com 15 . http://www.casogutierrez.com/docs/FederalComplaint.pdf 16 . https://globalmanetwork.com/telefonica-sale-of-interest-to-corporacion- multi-inversiones 17 . http://www.prnewswire.com/news-releases/dionisio-gutierrez-leaves-guate- mala-105757368.html 18. http://www.publico.es/espana/129329/neoliberalismo-como-bandera 200 Notes

19 . The Hacienda Hermanos Motta became a meeting place for all the genera- tions of the family and it is the only business in which all the descendants have a equal ownership. 20 . http://www.panamaamerica.com.pa/notas/245618-tenemos-todo-para-ser- exitosos 21 . In some cases, some of his brothers would be partners in the investment, but not always. Therefore, the current Grupo Motta is defined as the port- folio of companies and investments managed by the sons of Alberto Motta Cardoze. 22 . Interview with Stanley Motta, May 11, 2011. 23 . Interview with Stanley Motta, May 11, 2011. 24 . In a controversial interview with the magazine America Economia in 2010, President Martinelli bragged about calling Stanley Motta and asking why he had declared only one dollar in income to the tax authorities. 25 . Through a marriage between the grand-son of Francisco Alfredo Pellas, Francisco Alfredo Pellas Chamorro, and Carmen Chamorro Bernard, the daughter of Ernesto Chamorro, the family descendants had also acquired stakes in manu- facturing and food processing companies, under the umbrella of E. Chamorro Industrial (ECISA), founded in 1969. The current leader of the group, Carlos Pellas Chamorro, has unified the companies under Grupo Pellas Holdings. 26 . According to Carlos Pellas Chamorro, between 1990 and 2000 the group invested approximately US$250 million in Nicaragua. 27 . The thermal plants are fueled by burning the sugar cane bagasse, and during the harvest period the electricity provided by the group represents almost 7 percent of national consumption. 28 . The interest in formally qualified managers in the region is reflected in the support Carlos Pellas Chamorro has given to the Instituto Centroamericano de Administración de Empresas (INCAE) during the last decade. Many of its managers come from the institution and Carlos Pellas is currently the vice- president of its board. 29 . Ernesto Fernández Holman (Grupo Ayucus) and Ramiro Ortiz Mayorga (Grupo Promerica), for instance, are former executives of Banco de América Central (BAC).

6 Central American Business Groups, Innovation, and Institutional Conditions

1 . For a survey of the theoretical foundations and recent developments of evolutionary economics, see Castellacci (2007). 2 . This second variable has been obtained from question B.2a, assuming that a firm is domestically owned if at least 50 percent of it belongs to private individuals, companies, or organizations. 3 . In addition to this R&D variable, we have used a dummy variable indicating whether the firm has introduced a new product in the period (NEW_PROD). The new product dummy measures the outcome of innovation. It is inter- esting to use this variable, along with the R&D dummy, in order to see whether the main patterns investigated in the paper hold for the innovation performance of firms in addition to their innovation propensity. Notes 201

4 . The recursive bivariate probit is a seemingly unrelated regression model with correlated disturbances, in which the dependent variable of the first equation appears on the right-hand side of the second equation. The model is estimated by MLE. Greene (2002, pp. 715–716) points out that in such a model the endo- geneity of one of the RHS variables of the second equation can be neglected because this term does not affect the maximization of the log-likelihood (in contrast to the case in a linear recursive model not estimated by MLE).

7 The Role of the State: Government Financial Policies and Business Group Strategies

This chapter is a revised version of Kasahara (2012). 1 . A similar argument is made by Falleti (2005) in her study of decentralization processes in Latin America. 2 . These typologies are strongly based on Schneider (2009a). 3 . This concept is from Collier and Collier (1991). 4 . The exclusion of small banks, despite the fact that they belong to busi- ness groups, relies in the fact that most were sold due to management and funding problems. Small banks still present in countries such as Costa Rica and Honduras have not been a target for acquisition neither by domestic or foreign institutions. 5 . A common example of this effort by the USAID was its requirement that development program funds be managed by private institutions and not state-owned banks. As a result, 40 percent of private banking institutions’ assets in Costa Rica in the mid-1980s came from credit lines provided by the USAID, according to the agency’s own reports. 6 . In 2010, state-owned banks held 64 percent of the total assets in the Costa Rican banking system, while foreign banks represented 32.6 percent of all holdings. Private domestic banks only held 3.4 percent of the industry’s total assets. 7 . He was elected Second Vice-President of Laura Chinchila’s administration in 2010. 8 . Not only shareholders, but also important clients had Jewish origins. After Scotiabank bought Interfin, a local bank launched a publicity campaign to attract Jewish clients. See El Financiero , July 16, 2006. 9 . He was also a shareholder in six other financial institutions, including the Banco de San José, which was bought by the Nicaraguan Banco de América Central in 1985. 10 . Despite the fact that Samuel Yankelewitz was also a shareholder of Banex and its first chairman of the board. See Araya and Kam (1994, p. 78). 11 . Groups would rather use the banks to obtain cheap credit for the expan- sion of their core activities. Florida Ice Farm & Co., for instance, obtained many cheap loans from BANEX that made possible the modernization of its production line during the 1990s. See Sánchez-Ancochea (2006). 12 . Other Costa Rican business groups had a previous participation in smaller financial institutions. Francis Durman, the leader of Grupo Montecristo – a holding that has investments in manufacturing, medical services, and tourism – was a shareholder of the Banco de San José. Also, the Garnier 202 Notes

family – with investments in the advertising, manufacturing, and distri- bution of pharmaceutical products – was an important shareholder of the Banco del Comércio. 13 . In contrast to previous governments, Cristiani’s administration implemented a broad program of economic liberalization and introduced incentives for export diversification. 14 . Many business groups would use bank employees and common citizens as their proxies to acquire shares, counting on the authorities’ inability to enforce this rule. As a result, most banks were nominally acquired by small investors, while their boards would be composed of well known Salvadorian businessmen. 15 . These complex arrangements of indirect control would be made redundant in 1995 with the approval of a new banking law. 16 . With the exception of Canadian Scotiabank’s acquisition of Banco Ahorromet in 1997, all other mergers were conducted between Salvadorian institutions. 17 . For an example of this type of analysis, see Paniagua (2002). 18 . Banco de Comércio was controlled by the Belismelis family (manufacturing and coffee processing); Banco Agrícola Comercial was controlled by the Baldocchi and Kriete families (coffee, wholesale, and aviation); and Banco Salvadoreño was owned by the Simán family (textiles and retail). 19 . That seems to be the strategy adopted by the most regionalized Salvadorian business groups, such as Grupo Poma (Banco Ahorromet) and Grupo Simán (Banco Salvadoreño). Both sold their assets in the banking sector and promoted the regionalization of other activities, such as construction and retailing. 20 . A few years later, GEFG increased its participation to 75 percent of the shares of the group. However, in practice, the control of the firm was kept in the hands of the Pellas group. 21 . Grupo Pellas is one of the biggest business groups in Central America, sprawling from sugar and rum production to electricity, tourism, finance, and the manufacturing of food and cleaning products. 22 . Over the years, Hollmann established many investments in the agro- export sector (mainly coffee and African palm), infrastructure, real estate, and tourism. These investments are now managed by the U.S.-based Grupo Ayucus. 23 . Grupo Promérica developed a strategy of tying its branches and credit card operations to retail chains such as Price Smart and Payless Shoes – represented by Ortiz Mayorga and other partners in Central America. Ortiz Mayorga also has important investments in real estate, construction, and tourism, mainly in Costa Rica. 24 . Son of Eduardo Montealegre Callejas, founder of Banic. 25 . Grupo Lafise also has investments in real estate, agriculture, and dairy products. 26 . The Banco Nacional de Desarrollo (Banades) was closed in 1997, and the Banco de Credito Popular (BCP) was liquidated in 2000. The exception was Banic, which sold 60 percent of its shares to private investors linked to former Nicaraguan President Arnoldo Alemán Lacayo in 1998. The deal was contested in the courts, and in the face of significant evidence of mismanage- ment, the bank was liquidated and absorbed by Banpro. Notes 203

27 . Some controversial transactions are analyzed by Rocha et al. (2011). 28 . Other Central American groups had also entered the market by the mid-2000s. Banistmo (PA) opened a bank in 2004, while Grupo ASSA, owned by the Panamanian Stanley Motta, became a majority shareholder of the Banco de Finanzas. In 2006, the Salvadorian Banco Cuscatlán also started operations in the country. 29 . Jorge Bueso Arias is the brother of Guillermo Bueso, a former president of the Banco Atlántida, who died in 2009. 30 . Banco Corporativo, Banco Hondureño de Crédito y Servicio and Banco Capital. 31 . Banco del País, owned by the Larach family, sold 90 percent of its shares to Guatemala’s Banco Industrial in 2007. Banco Futuro belonged to former Vice-President Vicente Williams Agasse and was sold to the Nicaraguan Banco Lafise in 2004. 32 . The name of the bank was Banco de la Producción and it was sold to FICOHSA in 2003. 33 . Robert Vinelli, a director and shareholder of Banco Atlántida, commented in an interview how the offers from foreign groups were rejected as too low (El Financiero , March 5, 2007). 34 . Ficohsa, for instance, has a remittances division with 14 offices in the United States. 35 . Brother of Ramiro Castillo Love, and current president of the board of Castillo Hermanos Holding, whose main company is the brewery Cervecería Centroamericana. 36 . The U.S. Agency for International Development, the International Finance Corporation, and the Inter-American Development Bank were the main promoters of the project. 37 . The Botrán family has its main investments in sugar, rum, and the energy sector, as an electricity provider. 38 . Among its main shareholders are the Herrera, Viejo, Falla Arís, and Valdes O’Connell families. 39 . Guatemalan banking authorities clearly favored domestic groups for the acquisition of banks in financial difficulty. The decisions were often contro- versial, lacked clear criteria, and were characterized by serious conflicts of interest. 40 . Between 1989 and 1998, the number of banking institutions in Honduras jumped from 20 to 34. However, many of these new institutions were badly managed and suffered instances of fraud, surviving mainly through political connections before going bankrupt. As a result, there were 18 banks in opera- tion by 2010. 41 . See Zimbalist and Weeks (1991). The reform created two classes of bank: banks with a general license, which could conduct operations in Panama, and banks with international licenses, which could only make transactions abroad. For the purposes of this article, we consider only the banks with a general license, which focus their operations in the domestic market. 42 . During the period 2000–2010, Panama had an average yearly growth of 5.8 percent of GDP. 43 . The expansion was in part financed by the sale in 2001 of Cervecería Nacional to Grupo Bavaria from for US$275 million. 204 Notes

44 . Alberto Vallarino Clemént, former CEO of Banistmo, has an active political career, standing as a presidential candidate in 1999 and 2009 and being minister of finance of the current Martinelli administration until 2011. 45 . According to an author interview with Raul Alemán, executive vice-president of Banco General, the group’s other firms are the result of a strategy to increase returns on assets due to the small scale of the Panamanian economy. 46 . As Alberto Vallarino stated in an interview: ‘We always knew that we should work hard in order to be attractive to important foreign groups, because they are not interested in them. In other words, we needed to consolidate a regional financial network with enough scale.’ Revista Summa, December 2006.

8 Between the Back and the Front Stage: The Political Strategies of Central American Business Groups

1 . The exception here is, of course, Costa Rica, which has had an uninterrupted democracy since 1949. 2 . There are only a few firms belonging to DBGs in Central America that have ‘directors of government affairs’ or ‘institutional relations.’ One is Copa Airlines, controlled by the Motta family, which has a Director of government affairs and strategic alliances. More commonly, owners of Central American DBGs are their own messengers. Some major exceptions have occurred during international trade negotiations. During the negotiations for the DR-CAFTA and the Association Agreement with the European Union, large Central American groups had paid lobbyists in Washington and Brussels, respectively (Bull, 2012). 3 . We do not mean that legislators are excluded from DBGs’ plans. Members of the legislature provide important aid during the negotiating process of bills. And in cases of antagonistic Presidents, as we will see below, legislators can become valuable allies in the pursuit of destabilization strategies. Nonetheless, interactions between legislators and members of DBGs in Central America are much less frequent than those with Presidents. Members of DBGs, for instance, are rarely involved in campaigns for legislative seats, while they are normally directly involved in presidential campaigns in Central America. 4 . Since the 1994 election, the PRD always obtained a majority in the 71-seat National Assembly. The ideological polarization between the political parties and the electoral rules that favor personal identification instead of party identification have favored ‘pork barrel’ practices by Presidents to gain legis- lative support (Otero Felipe, 2008). 5 . Corporación MEDCOM owns two of the main TV channels in Panama (RPC and Telemetro) and radio stations. Through MHC Holdings, the González- Revilla family has stakes in banking and telecommunications. 6 . The Motta family has been a shareholder in the Manzanillo International Terminal – a former military U.S. base transformed into a commercial port – since 1993. 7 . Federico Humbert Arias was the leader of a group called ‘Independientes por Martín,’ whose objective was to raise funds among businessmen for Torrijos’s first presidential campaign in 1999. Notes 205

8 . In 1999, President Moscoso gave Cartier watches to each of the 72 deputies of the National Assembly as Christmas gifts. Years later, she would admit during a TV show that the watches were given by the Motta family and were not bought with her personal funds as she had previously stated. 9 . Scandals and political paralysis led to several cancellations of projects that interested the main Panamanian business groups, such as the cancellation of public auctions of the TV channels, the privatization of the administration of Tocumen International Airport, and the expansion of the Colón Free Trade Zone. 10 . Besides the supermarket chain, Martinelli has important investments in finance, media companies, hydro plants, and sugar mills, many of which are companies competing with other DBGs. 11 . Varela and Vallarino are businessmen themselves and very well connected with business groups. Varella is the owner of a traditional Panamanian rum factory, while Vallarino was one of the main shareholders of Banistmo – one of the biggest banks in the country, which was sold to HSBC in 2006. 12 . One of the main targets was Grupo Motta. In 2010, during an interview, Martinelli mentioned that Stanley Motta had declared only one dollar as personal income (América Economia, 2010). 13 . The most serious case was the one involving a land-titling scheme in the coastal area of Juan Hombón that directly benefitted the parents of Martinelli’s chief of staff, Demetrio Papadimitriu – who resigned months later for ‘personal’ reasons. 14 . Not coincidentally, Varella was recently nominated as the PA’s presidential candidate for 2014 and received strong support from the Motta and González- Revilla families. 15 . Scrutiny by the tax authority (DGI) is a common threat in Panama and has been often used by the Martinelli government against businessmen consid- ered as part of the opposition. 16 . Since presidential re-election is not allowed in Panama, Martinelli will not be able to run in 2014. 17 . Former Presidents from the PUSC Rafael Calderón (1994–1998) and Miguel Ángel Rodríguez (1998–2002) were tried and convicted of corruption during their respective administrations. 18 . Contrary to other countries in the region, however, the strong civil society and public sector unions in Costa Rica would considerably slow the process of liberalization and even implode the privatization of state-owned compa- nies (Bull, 2005). 19 . Rodolfo Jiménez Borbón is a controversial public figure in Costa Rica. The businessman was directly involved in a scandal related to non-declared funds for the campaign of former president Abel Pacheco. He was also directly involved in the negotiations to allow presidential re-election in Costa Rica and acted as promoter of the second mandate of former President Oscar Arias. His son, Jaime Jiménez Solera, is a partner in JBQ, an advertising agency responsible for the electoral campaigns of the last three Presidents. 20 . Because of a looming deadline for the ratification of the CAFTA-DR, President Arias called the referendum as a last resort to overcome the deadlock in the National Assembly promoted mainly by the PAC – the second biggest party in the legislature at the time. 206 Notes

21 . During his period at the BCIE the Costa Rican press would link Alfredo Ortuño to several cases of conflict of interest related to loans to companies managed by his relatives and business partners. 22 . The brother of President Laura Chinchilla, Adrián Chinchilla Miranda, who also works as her political advisor, has conducted business with Rodolfo Jiménez Borbón, president of the board of FIFCO. Both are partners in real estate projects in the capital San José. 23 . PAC, as a rule, would not accept campaign contributions from big businessmen. 24 . The law privatizing the state-owned telecommunications and electricity companies (i.e. ‘Combo ICE’) was approved in a first vote in the National Assembly during the government of President Miguel Ángel Rodríguez. However, due to strong public protest, the law was never voted in the second round to be approved. In the case of the free -trade agreement with the U.S. (CAFTA-DR), during the second presidency of Oscar Arias, the use of a refer- endum was an alternative to overcome the lack of a qualified majority in Congress required to approve the trade agreement. 25 . Interview by the author, San José, Costa Rica, June 2011. 26 . Grupo Jiménez and Grupo Improsa have also diversified into real estate and tourism in recent years. 27 . The fiscal reform was approved in a first vote in the Assembly, but was consid- ered unconstitutional by the Supreme Court due to disrespect of legislative procedure. Despite being directly affected by the reform, DBGs opted for a strategy of not engaging directly in the debate, letting business associations criticize the bill. 28 . The exception being Grupo Pellas, which maintained its activities in commerce and manufacturing during the Sandinista period. 29 . The FSLN, led by Daniel Ortega, has adopted a very pragmatic legislative behavior and sought to increase its power in government and state bureauc- racy in exchange for its support of market-oriented economic policies (Martí I Puig, 2010). 30 . However, a poll conducted in 2007 showed that the members of the PNH identify somewhat more with the right (average 6.79 on a scale where 10 is all the way to the right) than with the PLH (5.35) (Elites, 2008). 31 . Another key characteristic is the dominance of family ties. For example, 72 percent of PLH deputies and 69 percent of PNH deputies in the 2006–2010 period had a family member (mostly an uncle or father) who was also a poli- tician (Elites, 2008). 32 . President Suazo Córdoba (1982–1986) of the PNH was known to base his support structure on the chief of the armed forces, General Gustavo Alvarez Martínez, the U.S. Ambassador, John D. Negroponte, and a small part of the private business sector, headed by the Miguel Facussé family (Molina, 1986). 33 . http://archivo.laprensa.hn/Ediciones/2008/12/25/Noticias/Gobierno- decreta-salario-minimo-en-5–500-lempiras 34 . http://www.miningwatch.ca/news/honduran-mining-law-passed-and- ratified-fight-not-over 35 . ARENA won 39 seats in 1994, 28 in 1997, 29 in 2000, 31 in 2003, 32 in 2006, 35 in 2009, and 33 in 2012. The FMLN gained 21 seats in 1994, 27 in 1997, Notes 207

31 in 2000 and 2003, 32 in 2006, and 35 in 2009, declining to 31 in 2012 (http://www.electionresources.org/sv/diputados.php?election=2006). 36 . The list can be found at: http://www.fusades.org/index.php?option=com_k2 &view=item&layout=item&id=124&Itemid=102 37 . Interview with Alfonso Goitia, Ministry of Economy, El Salvador, November 16, 2012. 38 . This is perhaps best documented in the anonymously authored report Grupos de Poder en el Petén (http://isla.igc.org/GuatemlElctns/the-peten-report.pdf).

Conclusion

1 . El Salvador does also present some analogies with this pattern, although it is in many respects a mixed case that it is difficult to place clearly in one or the other model.

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ADOC, Grupo, 42, 50 Banco de Construcción y Ahorro, 59 Advanced School for Economics and Banco de Crédito Centroamericano Business, 81 (BANCENTRO), 6 Aerorepublica, 86 Banco de Occidente, 152 african palm, 46, 57, 62, 68–9, 202 Banco del Comercio, 8, 63 Agrisal, Grupo, 42, 50, 55, 59–60, 68 Banco Desarrollo, 59 Agromercantil, Grupo Financiero, 57 Banco G&T Continental, 154 Alemán, Arnoldo, 65 Banco Industrial, 61, 154 Alianza Liberal del Pueblo (ALIPO), 75 Banco Mercantil (Honduras), 152 Aliaxis, 91 Banco Reformador, 155 arab families/groups, 33, 44 60, 63, see Banco Salvadoreño, 60 also immigrants, arab Bancolombia, 57 Argentina, 3 Banex (Costa Rica), 146 Arias, Oscal, 170, see also National Banistmo, Grupo, 49, 146, 156–7 Liberation Party Barret, Agencia, 74 Aspen Action Forum, 86 Beck, Richard, 146 ASSA, Grupo, 84 Belismelis, Grupo, 42, 49–50, 55, 60 Atala Faraj, Grupo, 10, 40, see also Bolaños, Enrique, 65 Fichosa Borbón, Rodolfo Jiménez, 146, 170 Atlántida, Grupo, 42, 50, 63, see also Bosch Banco Atlántida Felipe, 83 Aval, Grupo, 90 Bosch, Juan Guillermo, 83 Avianca, 55, 60 Bosch, Juan Luis, 59, 82–4 Azcona Hoya, José, 75 Botran, 43, 51 Bourgeoisie, 6, 11, 28, 61 Bahía de Tela, 64 Brazil, 3, 28 Bain Btesh, Grupo, 43, 48, 49, 63, 60 & co, 90 Bueso, Guillermo, 175, see also capital fund, 78 Atlántida, Grupo Baldocchi Dueñas, Archie, 60 Baltodano, family, 65 Cabcorp (Grupo Castillo), 8, 44, 51, banana production, 9, 46, 63, 74 55, 61–2 Banco Agromercantil, 154–5 CACIF (Coordinating Comittee of Banco Ahorromet, 59, 80 Agrarian, Comercial, Industrial, Banco Anglo Costarricense, 9 and Financial Associations), 84–5, Banco Atlántida, 9, 42, 50, 63, 151–2 183–4 Banco Continental, see Continental, Calleja, Grupo, 48 Grupo; Rosenthal, family Calsa, Grupo, 44, 48, 51, 55, 65 Banco Custcatlán, 59, 80 Campollo, Grupo, 44, 51, 67 Banco de América (BANAMER), see capitalism Banco de América Central dirigiste, 34 Banco de América Central (BAC), 65, familial, 34 89, 90, 92, 149 hierarchical, 3–6

219 220 Index capitalism – continued Colombia, 3, 49 institutional configuration of, 22 Colón Free Trade Zone (CFTZ), 68, 85 network-based hierarchical, 6 commerce (incuding retail and oligarchic, 31 wholesale), 6, 9–10, 28, 41–5, 49, state-regulated hierarchical, 6 54–6, 58–60, 65–7, 69, 71, 73, 75, transnational, 5, 27, 29, 56–7 85–7, 92 varieties of, 1, 3, 20, 30–5 Comparative institutional analysis, Carghill, 56 190 Carhco, Grupo, 49, 56 CONADI, see National Investment Carribean Basin Initiative (CBI), 14 Corporation Carso, Group, 13, 80, see also Slim, Constitutionalist Liberal Party (PLC), Carlos 172–3 Castillo, see also CabCorp construction and real estate, 41, 43–5, Bernal Diáz del, 8 49, 52, 61, 71 Carlos Enrique Mata, 61 Continental, Grupo, 20, 42, 47, 50, Corporación, 44 74–8, 81, 86, 87, 152–3, see also family, 8, 61 Rosenthal, family Grupo Hermanos, 51, 61 contract enforcement, 98 Love family, 61 coordinated market economies (CME), Castro Larchner, Luis, 81 31, 31 Cementos del Norte, 76 Copa Airlines, 57, 68, 86, 169, see also Cementos Progreso, see also Novella, Motta, family family; Progreso, Grupo; Corporación Interfin, 145 Torrebiarte family corporate strategy Central American Brewery, 61 organic, 139–40 Central American Common Market portfolio, 139–40 (CACM), 11–12, 27, 57 COSEP, see Superior Council of Private Cervecería Centroamericano, 61–2 Enterprise Chacón Torrebiarte, Luis, 81 Costa Rica, 4, 8–10, 12–13, 15–18, 20, Chamorro, Violeta, 65 33, 43, 45–6, 49–51, 56, 65–70, Chile, 3 72, 76, 79, 81, 88–93, 144–6, Chinchilla, Laura, 81, 170, 172, see 169–72 also National Liberation Party cotton classes production, 10 dominant, 6 Cressida, Group, see Dinant Group ruling, 6 (Facussé family) Clorox, 56 Cristiani Coase, Ronald, 24 Alfredo, 147, 178 Coen, Grupo, 44, 51, 55, 65–6 Cristiani, Grupo, 9, 42, 49, 50 COENA (Consejo Ejecutivo Nacional critical juncture, 139 de ARENA), 81, 178–81 Cuba, 10 co-evolution, 5–6, 19, 21, 23, 25, Cuestamoras, Grupo, 43, 49, 51, 67–8, 25–6, 28 92, 170–1 coffee Cuyamel Fruit Company, 63 elite, 8–9, 59, 61–2 production, 46, 58, 61, 63, 65 De Sola trade, 9–10 Group (Homarca), 9, 60 Colgate, 56 Democratic Revolutionary Party Colom, Albaro, 84 (PRD), 166 Index 221

Diario Tiempo, 74 Facussé Differentiation, sectoral, 20, 22, 28, Adolfo, 175 30, 37, 41, 45, 47, 49, 62, 71 Facussé, Carlos Flores, 175 Dinant, Group (Facussé family), 11, Facussé, Miguel, 1, 11, 175, 177 40, 42, 50, 55–8 Farabundo Martí National Disagro, Grupo, 49, 51 Liberation Front (FMLN), 59, 82, Dominican Republic – Central 178, 180 America Free Trade Agreement Ficohsa, 10, 40, 152, see also Atala (DR-CAFTA), 14, 15, 170 Faraj, Grupo Durman Esquivél financial institutions, 9, 23 Arturo, 91 international, 12, 62, 69 company, 91 financial sector, 8, 13 family, 67 Financiero Agromercantil, Grupo, 44, Francis, 91 51, 62 George, 91 Florida Ice and Farm (FIFCO), 53, 57, 68, 146, 170 Econometric model, 106, Foreign Direct Investments (FDI), 15 125 franchise, 27–8, 45, 48–9, 52–6, 71–2, economies 83, 149 developing, 3, 23–4 FSLN, see Sandinista National emerging, 24–5 Liberation Front transnational, 3 Fuentes Knight, Juan Alberto, 84 education levels, 17, 18, 31, 33 General Electric El Salvador, 1, 4, 8–11, 13, 15–18, 20, Capital corporation, 57 146–8, 178–81 Finance, 92 Eleta family, 167, see also González- General Motors, 78 Revilla, Corporación Medcom Goldstein elites, 2, 5, 8–11, 33, 35, 63 family, 63 agro-export, 11, 59, 61–3, 72, Goldstein, Gilberto, 76 85, 89 González Hoffman, José Ignacio, 81 families, 10 González-Revilla transnational, 27 Corporación Medcom, 166–7 Empresa General de Inversiones (EGI), family, 40, 51, 70, 169 40, 43, 50, 70, 88 Grupo Multiholding (MHC), 70, 88, Banco General, 156–7 157, 166–7 energy Grand Alliance for National Unity privatization, 67 (GANA), 180, see also Saca, projects, 49, 68 Antonio Elias sector, 13, 42–5, 47, 57, 59, 61–3, Grand National Alliance, 183 67, 70, 81 Granja Villalobos, 82 entry barriers, 24–6, 35, 37, 119 Grinbaum, Elias Reifer, 145 Escobar, Carlos Patricio, 79 Group-affiliated firms (GAFs), Evans, Peter, 28 95, 115 Excel Automotriz, 53, 79 Guatemala, 4, 8–11, 13, 15–17, 20, export 153–5, 181–5 intensity, 99 Guatemalan Republican Front (FRG), performance, 94 182 propensity, 99 Guillén, Mauro, 24, 28, 41 222 Index

Gutierrez internationalization, 4, 18, 20, 26–7, Arrturo, 82–3 29, 65, 70, 83, 86, 95, see also Gutierrez, Dionisio, 1, 59, 82–4 international expansion Gutierrez, Juan Bautista, 82 Intur, Grupo, 42, 48, 50, 54 Gutierrez, Juan José, 83 Inversiones Bahia, 43, 51, 81, 88 Gutierrez-Bosch, family, 9, 20, 49, 82–5, 154–5 joint ventures, 27–8, 52–6, 60–1, 67–8, 70–1 hegemonic bloc, 6 Heilbron family, 86 Kafati, family, 48, 63 Henkel, 56 Karims, Grupo, 42, 46, 49, 54 Hererra Kattan, Grupo, 42, 50, 63 family, 10, 62, 183 Kriete hierarchical market economies Grupo, 42, 51, 55, 60, 81 (HME), 31 Kriete, Ricardo, 60 Hollman, Ernesto Fernández, 149 Kriete, Roberto, 60, 79, 81 Homarca, see De Sola, Grupo home market, 98 La Fragua, Grupo, 56, 67 Honduras, 4, 8–13, 15–18, 20, 151–3, labor 174–8 markets, 18, 24–5 Humbert reforms, 13 family, 40 relations, 3, 5, 18, 31, 33, 35, 37 Humbert Arias, Federico, 167, 169 skilled, 17–18, 24 stock, 17 immigrants unions, 17 arab, 10, 60, 63 Lacayo, family, 65 European, 60 Lady Lee, Grupo, 42, 48, 50, 54 North America, 60 Lafise, Grupo, 44, 49, 51, 56, 150 Improsa, Grupo, 43, 49–50, 68, 170 Larach industry, 9, 11 Grupo, 54 informal sector, 17 Larach, Jorge, 74 informality, 17 liberal market economies (LME), 31 innovation, 17, 20, 26, 32, 38, 59, 69, Liberal Party (Honduras), 74, 174–5 115 liberalization, 12, 20, 28, 35, 37–8, institutional 64–7, 69–71, 89, 95 context, 19–20, 22 Libertad y Desarrollo, 84 voids, 23, 118 Liderazgo Empresarial, 84 institutions Lieberman, Luis, 145 informal, 5, 32, 34, 36–7 Lobbying, 35 legal, 23 Loveable, Grupo, 42, 46, 48, 50, 63 political, 5 regulating, 20 McClearly, Rachel, 85 integration, 188 macroeconomic Inter-American Dialogue, 86 stabilization, 22 International Bank of Miami, 79 volatility, 2, 24, 34 international expansion, 22, Maduro 30, 37, 39, 49, 71, see also Grupo, 42, 50 internationalization Maduro, Ricardo, 80, 176 International Monetary Fund, 12 Malouf, family, 48, 54 Index 223 maquila, 13, 15, 45–6, 48, 58, 62–3 National Liberation Party (PLN), 92, market development, 95, 115 169–71 Martinelli National Party of Honduras (PNH), Democratic Change (CD), 168 174–5 Grupo, 48, 51, 71, 89 National Progress Party (PAN), 182 Ricardo, 71, 167–8 National Republican Alliance Melo, Grupo, 43, 58 (ARENA), 58, 81, 178–81 Mesoamérica nationalization, 58, 65, 89, 140 energy fund, 68, 81 Nestlé, 56 Grupo, 81 networks, 4–5, 7 telecommunications, 81 Nicaragua, 1, 4, 8, 10–11, 13, 15–18, Mexico, 3 20, 33, 41, 44, 45, 48–9, 51, 64–8, MHC Holding, 43, 51, 88 70, 72, 86–7, 89–92, 148–51, mining, 44, 45, 47, 62, 63 172–4 MNE, 95 Nicaraguan Commodity Exchange monopolies, 4, 11–13, 47, 62, (BAGSA), 66 67, 79 Novella Montecristo, Group, 20, 43, 51, family, 9, 47, 72, 76 67–8, 90–2, 171, see also Durman Numar, Grupo, 43, 50, 68, 81 Esquivél, family Moscoso, Mireya, 167 oligarchies, 31, 58, 60–1, 73 Motta oligopolies, 4, 11, 47 Alberto, 85 Ortega, Daniel, 66, 91 Motta, Arturo, 85 Motta, family, 40, 157 Pacheco, Abel, 170, see also Social Motta, Grupo, 20, 57, 69–70, 81, Christian Unity Party 85–9, 169, see also Inversiones Paiz Bahía family, 56, 68 Motta, Stanley, 1, 86, 167 Supermercados, 56 Movimiento Liberalismo Renovardor Palencia Prado, Mayra, 61 (LIBRE), 75 Palestine Multi-inversiones, Grupo, 9, 20, 49, migrants, 10 51–2, 81–3, 90, 155, see also origin, 11 Gutierrez-Bosch family Panama, 4, 13, 15, 155–8, 166–9 multilatinas, 4, 29–30, 52, 82 Panama Canal, 69, 89 multinational companies (MNC), 3–5, Panameñista Party, 166 11, 15, 18, 20, 22, 26–9, 31–4, 37, Pantaleon, Group, 10, 44, 51, 57, 62, 39, 41, 45–9, 52–4, 56, 59–64, 69, see also Herrera, family 71–2, 91–2 paragons, of development, 22–3, 26 parasites, of development, 22–3, 25–6, Nación, La, 146 37 Nasser, Freddy, 13, 64, 175, see also Parmalat, 49, 66 Terra, Group Pellas Chamorro, Carlos, 1, 81, 90–1, National Association of Private 149, 173–4 Business (ANEP), 178, 180 Pellas, Francisco Alfredo, 89 National Center for Registers (NCR), Pellas, Grupo (Pellas-Lacayo), 10, 20, 18 44, 51, 53, 57, 65–8, 86–7, 89–91 National Investment Cooperation PepsiCo, 53, 55, 62 38 (CONADI), 63–4, 75 Pérez-Balladares, Ernesto, 166–7 224 Index

Peru, 3 Rosenthal, Yani, 68 Phillip Morris, 54, 60 Rosenthal, Yankel, 63 Pipasa, Corporación, 56 Royal Ahold, 56, 67 political systems presidential, 35–6 Saca, Antonio Elias, 179–80 proportional, 36 Salume, Grupo, 42, 50, 55 Pollo Campero, 82–3 Salvadoran Foundation for Economic Poma and Social Development Alberto, 79 (FUSADES), 179–80 Poma, Bartolomé, 78 Sama, Grupo, 43, 50, 56 Poma, Ernesto, 79 Sandinista National Liberation Front Poma, Fernando, 79 (FSLN), 64, 66, 91, 172 Poma, Grupo, 20, 42, 49, 50, 53, 56, Schneider, Ben Ross, 3, 28–9, 59–60, 78–82 32–3 Poma, Luis, 78 Scotiabank, 80 Poma, Ricardo, 1, 60, 79 Segovia, Alexander, 4, 47 Poma, Roberto, 78 Siman, Grupo, 10, 42, 49, 50, 54, Portillo, Alfonso, 85 59–60, 79 privatization, 12–13, 35, 58–9, 64–5, Siman, Roberto, 60, 179 67, 75, 81, 140 Slim, Carlos, 13 Procter & Gamble, 11, 56 Social Christian Unity Party (PUSC), productvitity, 2, 3, 17, 26, 38 169–70 total factor, 17 Solid, Grupo, 49, 5, 57, 66–7, 70, 86, Progreso, Grupo, 9, 47, 76–8 89 Project Survey Database, 101 Somoza, Anastasio, 64, 89 Promérica, Grupo, 44, 51, 67, 149–50 Standalone firms (SAFs), 94, 115 Quetzaltenango, 9 State capture, 25, 185 Quijano, Grupo, 43, 48, 51, 83 Strachan, Harry, 33, 81, 90 Quiros, Grupo, 42, 50 sugar production, 8, 10–11, 15, 46, 58, real estate, see construction and real 61–2, 64, 89–90 estate SumaRSE, 86 Real Hotels & Resort, 53, 80 Super 99, 48 Regalado Dueñas, Tomas, 8, 60 Superior Council of Private Enterprise Regalado, Grupo, 42, 50 (COSEP), 66, 174 regionalization, 5 Superselectos, 48 regulatory reform System of Central American deregulation, 140, 145 Integration (SICA), 12, 14, 27 reregulation, 140, 142 rent-seeking, 25, 37, 194–5 Taca research & development (R&D), 17 Airlines, 55, 60 resource-based view of the firm, 24 Grupo, 60, see also Kriete, Grupo retail and wholesale, see commerce tariffs, 11, 14 Roble, Grupo, 53, 78–80 telecommunications, 11, 13, 42–3, 45, Romero, Grupo, 60 47, 59, 61, 62, 64, 67, 70, 80, 81, Rosenthal 85–6, 92 family, 20 Telefónica of Spain, 81 Rosenthal, Jaime, 76–8, 175, 177 Terra, Group, 13, 49, 64, 175 Index 225

Tio Pelón, 43, 50, 68 Vacarro brothers, 9, 63 Torrebiarte, family, 47, 57, 154, 183 Varela, Juan Carlos, 168, see also Torrijos Panameñista Party Martin, 70, 166–7 Varieties of capitalism, see capitalism, Torrijos, Omar, 155–6 varieties of tourism, 13, 41–5, 52–3, 61, 64, 66–7, 75, 85, 92 Wal-Mart, 48–9, 56, 67, trade, 11, 14–15 83, 92 agreements, 15 World Bank Enterprise Survey, 19 transaction costs, 24 World Bank Investment Climate Transal Park, 79 Index, 17 transnationalization, 5 World Economic Forum, 17

Unilever, 56, 57 Yankelewitz, Samuel, 145 United States, 9, 14, 49, 59, 65, 74–6, 78, 80, 83, 86 Zablah, Grupo, 42, 48, 50, 54, United States Agency for International 60, 179 Development (USAID), 12, 58, Zamora LLanes 145–6, 179 family, 66 Uno-Pacific, Grupo, see Hollman, Zelaya, Manuel, 176–7 Ernesto Fernández Zeta, Grupo, 43, 46, Uribe 50, 68 family, 56 Zingone, family, 68