SMALL LATECOMERS INTO THE GLOBAL MARKET POWER CONFLICT AND INSTITUTIONAL CHANGE IN CHILE AND URUGUAY Juan Ariel Bogliaccini A dissertation submitted to the faculty of the University of North Carolina at Chapel Hill in partial fulfillment of the requirements for the degree of Doctor of Philosophy in the Department of Political Science. Chapel Hill 2012 Approved by: Evelyne Huber Jonathan Hartlyn Graeme Robertson Lars Schoultz John D. Stephens ii [Typ e a © 2012 Juan Ariel Bogliaccini ALL RIGHTS RESERVED ii Abstract JUAN ARIEL BOGLIACCINI: Small latecomers into the global market: Power conflict and institutional change in Chile and Uruguay (Under the direction of Evelyne Huber) In analyzing post-liberalization models of capitalism in Chile and Uruguay, this dissertation argues that the conflict over power and distribution among the principal actors of the productive system define the model followed by the political economy. In other words, the conflict between coalitions formed by business, labor and parties is the key to understanding why the political economy follows a liberal or coordinated path. [Typiii The dissertation combines a cross-regional analysis of market institutions spheres of e a relations and their complementarities using quantitative data; a historical sociological comparison of conflict over power and distribution for Chile and Uruguay; and a process tracing analysis of coalitional formation and bargaining over two initiatives that embody the conflict over power and distribution for the post-neoliberal period: tax and labor reforms. The findings demonstrate that Chile and Uruguay are developing different models of capitalism, which challenge the dominant approach to the region which postulates the existence of a single and coherent model. These models are the liberal one for Chile and the coordinated one for Uruguay, which implies an extraordinary potential for future cross-regional comparisons and the importance of abandoning regionally built models in order to pursue higher levels of generalization. In this regard, I propose an improved typology that integrates developing political economies into the analysis. My iii findings also demonstrate that the process of creating market institutions is both political and historical and, therefore, that ahistorical analyses based on economic equilibrium characteristics are insufficient to understand the causes of the differences in terms of models of capitalism. The cross-regional quantitative analysis suggests that with the exception of Chile, the model of capitalism of the Southern Cone political economies shares many characteristics with the Mediterranean ones, allowing merging the two groups of countries into a single subtype of coordinated market capitalism: the Statist coordinated type. [Typiv e a iv To Lucia v [Typ e a v Acknowledgements My interest in the models of capitalism in Latin America grew out of an intuition concerning the shortcomings of attempts in the literature to understand regional differences and their importance for cross-regional comparison. This work is my contribution to the analysis of production regimes and the struggle for redistribution between business, labor and the state that takes place during the productive process. The analysis is based on two premises. First, that the creation and evolution of market institutions are political and historical processes; and second, that our comparative efforts vi should not be limited to regionally based classifications. Rather, we should at least try to [Typ e a engage in higher levels of generalization that enable us to transcend regional specificities. I have had the good fortune of watching two great scholars Evelyne Huber and John D. Stephens at work from up close and have even had opportunities to assist them. In the best American tradition, I got “two for the price of one.” I have been able to learn a great deal from them and in this also I have been very fortunate. Institutionally, the consortium between the University of North Carolina and Duke University has been another excellent benefit, offering me the resources of two great universities. I was granted a carrel at Davis Library upon my arrival to Chapel Hill during the fall of 2006. For the following five years, I joyfully immersed myself in Davis Library’s extensive book collection. vi Many bright and generous people helped me improve this dissertation. The list is long, but my indebtedness is deep. First and foremost, I thank Evelyne Huber, my advisor and mentor, for her extreme generosity and patient advice. John D. Stephens, Jonathan Hartlyn and Lars Schoultz also have been extremely generous with their advice and help during my years of graduate study and each read various drafts of the different chapters. Fernando Filgueira has been extremely generous and helpful in reviewing at length several of the chapters, and in particular I owe him for his insights when crafting Chapter 2. Graeme Robertson, Maurizio Ferrara, Juan Pablo Luna, Rafael Piñeiro, Diego Hernandez, Federico Rodriguez, Santiago Cardoso, Sara Niedzwiecki, Santiago Anria, Cecilia Rossel, Lucia Monteiro and Diego Gianelli also read drafts of the chapters and offered me invaluable comments and suggestions. vii I am also thankful to the participants in several workshops where I presented [Typ e a some chapter drafts for their comments and suggestions. In particular, I received extremely useful comments from a workshop at the Political Science Institute at the Catholic University in Chile and another one at the IPES Institute at the Catholic University of Uruguay, both held in 2010 during my fieldwork. In 2011, I presented a draft of Chapter 3 at the ‘Dualization in Europe and Latin America’ workshop held in Chapel Hill; and in 2012 I presented Chapter 4 the at the Universidad Diego Portales’ Political Science School. I am thankful to participants in these events as well. My research has been funded by the Graduate School at the University of North Carolina at Chapel Hill (Dissertation Field Research Grant and Dissertation Completion Grant); the Institute for the Study of the Americas at the University of North Carolina at Chapel Hill (Luiz Varela Quiroz Fund) and by the Political Science Department at the University of North Carolina at Chapel Hill (Uhlman Summer Research Fund and vii Summer Top-ups). Evelyne Huber and John D. Stephens also offered me Research Assistantships that helped fund my work during this period. I am thankful to all these institutions and scholars. I thank in particular Lars Schoultz, David Schwartz and Alicia Nin for their impressive editing. I am most indebted to Lars Shoultz in this respect. Maria Marta Sobico and David Schwartz have supported me all through the graduate school and dissertation process. The administrative staff at the UNC Political Science Department has been exceptionally kind and patient with me all these years. I am particularly grateful to Chris Reynolds, Shannon Eubanks and Carol Nichols. I am indebted to Mr. Manuel Jose Guzman, the Chilean Senate’s Archive Director, for his extremely helpful assistance with the search of parliamentary viii documents. I also want to thank my friend Maria de Lourdes Velasquez for her generous [Typ e a involvement in carrying some of these documents from Valparaiso to Santiago, and to Fernando Filgueira, Cecilia Rossel, Jaime Laso, Francisca Donoso and Maria de Lourdes Velasquez for their involvement in making some of the interviews possible. I am thankful to the Political Science Institute at the Catholic University in Chile for hosting me during the fieldwork. In particular, I am thankful to Juan Pablo Luna. Rafael Piñeiro and Felipe Monestier were very generous also in lending me their library cards in order to allow me to use the library. The IPES Institute at the Catholic University in Uruguay hosted me during the fieldwork. I particularly want to recognize the support of IPES director, Federico Rodriguez, during the fieldwork stage. Last but not least, I have had in Cecilia Giambruno an excellent and dedicated research assistant during the dissertation’s fieldwork stage; she made it possible to organize the collected data in a timely manner. viii My family and friends have generously tolerated my occasional moods and frustrations. Writing a dissertation can be a very gratifying process as well as a frustrating one. However, I have not shared my gratification as readily as I shared my frustration. I am thankful for their patience and understanding. My wife has been supportive and patient during my graduate years at Chapel Hill and particularly so during the fieldwork and writing processes, at great cost to herself. Her support, however, included continually exhorting me to balance my obstinate preference for work with the other good things of life. Although I have not always appreciated this exhortation, I am lovingly thankful to Lucia, with whom I am as fortunate as one can wish to be. ix J. A. B. [Typ e a Chapel Hill, North Carolina April 9th, 2012 ix Table of Contents List of Tables ................................................................................................................... xiv List of Figures .................................................................................................................. xvi List of abbreviations ....................................................................................................... xvii Introduction ..........................................................................................................................1