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Foreign Investments in Electric Utilities: A Comparative Analysis of Belgian and American Companies in Argentina, 1890–1960

Published online by Cambridge University Press:  13 December 2011

Norma S. Lanciotti
Norma S. Lanciotti
Affiliation:
NORMA S. LANCIOTTI is professor of economic history and history of economic thought in the Department of Economics at the National University of Rosario, and researcher at the National Council of Scientific and Technical Research (CONICET), Argentina.
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Abstract

This article analyzes the performance of foreign electric-utility companies and the evolution of the electric-power industry in Argentina from 1890 until the end of the 1950s, when the electric utilities were nationalized. It focuses on the decisions and strategies of the subsidiaries controlled by two holding companies: the Société Financière de Transports et d'Entreprises Industrielles (SOFINA) and the American & Foreign Power Company. The study suggests that the divergence in the performance of these two companies was determined both by their investment patterns and by their financial styles and management decisions. The impact of private decisions and public regulation on the Argentinean electric-power system is also explored.

Type
Articles
Information
Business History Review , Volume 82 , Special Issue 3: Business in Latin America , Autumn 2008 , pp. 503 - 528
Copyright
Copyright © The President and Fellows of Harvard College 2008

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References

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16 In 1905–1906, DUEG purchased electric and tramway companies in Chile and Uruguay. Compania Hispanoamericana de Electricidad, Rapport pour l'exercice 1920 (Brussels, 1921), 7–8Google Scholar. Empresa de Luz y Fuerza was sold to American & Foreign Power in 1929. For the expansion of AEG, see Hertner, “German Multinational Enterprise before 1914,” 125–29; and Hertner, “Financial Strategies and Adaptation to Foreign Markets,” 145–59.

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20 American & Foreign Power, Annual Report, 1928, 4–6; Annual Report, 1929, 4–10; Monitor de Sociedades Anónimas, 1909, 180; The Argentine's Year Book, 1915–1919, 324. In Argentina, these American companies have been known as the ANSEC group since the 1930s. Revista Electrotecnica 1933, 433, 476.

21 Latin American electric utilities were owned by foreign companies until after the Second World War. The exception was Uruguay, where a public company, Usinas Eléctricas del Estado, was founded in 1912.

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26 Securities and Exchange Commission, Philadelphia, Holding Company Act 1935, release no. 7815, 12–14.

27 Unfortunately, data on expenses, profits and dividends per subsidiary are not available on American & Foreign Power Annual Reports.

28 SOFINA SA, Rapport, 1955, 56. After suffering losses in most countries, tramway companies were transferred to local governments in the 1930s. SOFINA sold the tramways of Montevideo in 1926 and the Chilean tramways in the 1930s.

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36 Section 40 of the new Constitution established that public utilities would be transferred to the state by acquisition or expropriation upon compensation and that the assets would be valued at historic costs. President Peron did not agree to valuate the investments at historic costs—a clause rejected by the American diplomats—and tried to modify this section without success.

37 Plan de gobierno 1947–1951, vol. 2, 31, 42, 51–52, in Archivo General de la Nación, Fondo Documental Secretaría Técnica. Presidencia de la Nación, 1946–1955, Legajo 456 (Planificación Primery Segundo Plan Quinquenal. Proyectos y objetivos); República Argentina, Dirección National de la Energía, Memoria de la Dirección General de Centrales Eléctricas del Estado.

38 American & Foreign Power, Annual Report, 1948, 5–6; 1949, 7–8; American Foreign Power Company Inc., registration under the Securities Act of 1933, composite registration statement, registration no. 2–12837, X956, S2.

39 American & Foreign Power, Annual Report, 1949, 7–8; 1950, 7. In 1948, the Industrial Bank was authorized to advance loans for the electric utility companies to pay wage increases until the rate adjustment was allowed. Subsidies an d loans were usually given to these companies to pay wages or guarantee minimum profits during the Peron administration. Loans were never cancelled and turned into debt.

40 Consejo Económico National, Plan Económico de 1952 (Buenos Aires, 1952), 27Google Scholar. It is well known that Perón preferred mixed public utility companies.

41 SOFINA S.A., Rapport, 1953, 24; 1954, 56; American & Foreign Power, Annual Report, 1948, 7–11.

42 The relations between United States an d Argentina turned difficult in 1941. When Ramón Castillo became President, the liberal group that supported American interests was excluded from the administration. From the American point of view, some Germanophile army officers had great influence in the government; and the U.S. government started an economic boycott restricting American exports to Argentina—mainly of fuel and equipment— and blocking the Argentinean imports. In 1946, President Perón tried to make a deal with American diplomats that would drive American investments into the Argentinean oil industry, but the attempt failed. Gadano, Carlos, Historia del Petróleo en Argentina (Buenos Aires, 2006), 565–608Google Scholar. Escudé, Carlos, “Las Restricciones Internationales de la Economía Argentina 1945–1949,” Desarrollo Económico 77 (Apr.-June 1980): 3–40CrossRefGoogle Scholar.

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44 This clause had not been fixed in the concessions of German and Belgian companies.

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46 This financing style was applied by all the Belgian companies in Argentina, as it can be observed in the annual reports of Hispanoamericana de Electricidad, Argentina de Electricidad, and Société d'Electricité de Rosario.

47 The other four electric holding companies controlled by Electric Bond & Share operated in the United States. Electric Bond & Share Co., Power for National Defense.

48 American & Foreign Power, Annual Report, 1925, 3–5; 1930, 7–8; 1939, 8; 1941, 5; 1942, 5–6.

49 After World War II, almost 50 percent of the new investments made by American electric utility companies were funded by long term loans, 35 percent by reinvesting profits and only 15 percent by issuing shares. Raúl Sáez, “Criterios Económicos para la selección y desarrollo de centrales y sistemas eléctricos,” in Estudios sobre la electricidad en América Latina, 277.

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51 In 1933, the U.S. government promoted the creation of the Tennessee Valley Authority to generate and distribute electricity in the rural areas affected by the Great Depression. TVA is still one of the largest producers of electricity; however, private ownership of electric utili-ties has always predominated in the U.S., since electric utility companies were not nationalized as in other countries. Thomas McCraw, ed., Regulation in Perspective: Historical Essays (Boston, 1981); Millward, Robert, Private and Public Enterprise in Europe: Energy, Telecommunications and Transport, 1830–1990 (Cambridge, U.K., 2005), 91CrossRefGoogle Scholar.