L11 Privatization (2)

L11 Privatization (2) - Investment Waves of enthusiasm and...

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    Privatization and Foreign  Investment Waves of enthusiasm and disappointment
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    Foreign Investment in the 19 th  & Early  20 th  Century 19 th C Transportation and Communications revolution based on railroads, steamships, and the telegraph Investment in railroads in Latin America Opened in Cuba in 1838 for sugar production Tremendous British investment in railroads in Argentina Transatlantic telegraph cable completed in 1866 Developing countries received a large share of FDI in 1914 (45%) than in 1992 (20%)
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    19 th C Financial Integration “Before WWI a vibrant, free-wheeling capital market linked financial centers in Europe, the W. Hemisphere, Oceania, Africa & the Far East. A 19 th C reader of the Economist Mag could track investments in American railroads, S. African gold mines, Egyptian govt debt, Peruvian guano, and much more” Maurice Obstfeld (1998)
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    Enter – the Great Depression and then  Dependency Disappointment with export-led growth strategies – Depression in the U.S. and Europe meant that markets disappeared for Latin America Turn to dependency theory, anti-exports, inward orientation, anti-foreign investment, and nationalized foreign interests became state enterprises Return to open markets in the 1990s
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    Privatization around the world Thatcher in the UK Crumbling of socialism in former Soviet Union Began in Lat Am with Pinochet in Chile in the mid-1970s But many other countries in Lat Am by mid-1980s 56% of all Privatization in 1990-94 took place in Lat Am
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    The pace varied Mexico began slowly in mid-1980s, Brazil got started later and sold Telebras In 1998 for a record $19.2 billion
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    Why did they privatize SOEs?
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