Business Versus Business? Grupos and Organized Business in Colombia

Latin American Politics and Society, Spring 2005 by Rettberg, Angelika

ABSTRACT

This article examines business political behavior in Colombia during the scandal-ridden presidency of Ernesto Samper (1994-98), highlighting the mechanisms by which grupos (diversified economic groups) undermined the ability of organized business to present collective political positions. Evidence that the presidential campaign had been funded by drug traffickers prompted business associations to demand Samper's resignation. But grupos, the firms of which are affiliated with associations, supported the president. This division weakened the position of organized business regarding the resignation, as well as its own political legitimacy. This study argues that grupos face strong incentives to act outside business associations to advance their particular interests. Scholars assessing the strength of organized business in Latin America will increasingly encounter the impact of grupos on business institutional responses to policy.

In January 1996, Fernando Botero, former campaign director and highranking official in the administration of Colombian president Ernesto Samper, publicly admitted that Samper knew that drug traffickers had contributed money to his 1994 campaign. This confession triggered one of the most severe crises in Colombia's recent history, generating widespread opposition to the government and polarizing Colombian society. Among the groups that mobilized against the government-which included students, housewives, labor, and the Catholic church-business was a leading voice. Breaking with a long tradition of close business-government cooperation, the Colombian Business Council (Consejo Gremial), a semiformal union of the 15 most important business associations, responded to Botero's confession with the suggestion that the president resign.

Only once before had Colombian business made a similar demand. In 1957, a united business front forced General Gustavo Rojas Pinilla out of power following a company and bank lockout (Rettberg 2000, 2001a; Saacute;enz 2002). Unlike Rojas Pinilla, however, Samper withstood business opposition and ruled until the end of his constitutional mandate in 1998. The consequences for Colombian business were grim. The United States, Colombia's largest trading partner, decertified Colombia's efforts in the war against drugs and threatened to impose economic sanctions (Crandall 2001), while the country plunged into the worst economic crisis of the past few decades.

In contrast to similar critical junctures in Argentina and Brazil, where scandals involving presidents Carlos Menem and Fernando Collor de Mello failed to generate massive business opposition, Colombian business in the 1990s at first produced a joint call for the president's resignation. This was largely due to the high stakes represented by the threat of U.S. economic sanctions, which would have primarily targeted Colombian exports and financial services, two sectors which led business opposition. Remarkably, however, the initial impulse failed to consolidate. The Colombian business response gradually faded and turned the 1990s into a case of failed political action by the business community.

In light of the earlier, successful business opposition in the 1950s, this article asks what was different in Colombia in the 1990s about how business responded to crisis; that is, what explains business's loss of impetus in the 1990s and inability to sustain a collective response to crisis with negative effects on business interests.

This study proposes that a significant part of the answer can be found in the behavior of three of the country's four largest economic groups (grupos in Spanish), which supported the Samper government. Economic groups, a common developing-country corporate phenomenon of lhe past three decades, are "groups of firms held together through interlocking directorates, holding companies, cross-financing, and often continued family ownership" (Granovetter 1994, cited in Maxfield and Schneider 1997, 45). Earning their support was no small achievement for the Samper government; sales of the four largest Colombian grupos amount to more than 12.5 percent of the country's GDP (Rettberg 2001b), nearly three points above the Latin American average of 9.6 percent (Peres 1998, 3).

This split between grupos and organized business is a recurring phenomenon in the relationship between business and politics in Colombia, as well as in other Latin American countries, illustrating some of the difficulties of collective action faced by weak corporate organizations when exposed to competition from other actors (Olson 1965, 1982, 1995; Hardin 1982). The divergence has important consequences for the way business interests are integrated into the policymaking process. As this study will argue, grupos undermine the ability of business associations to muster collective business positions.

The central purpose of this article is to shed light on the mechanisms whereby grupos have this debilitating effect on organized business. Although it focuses on Colombia, the article is of wider relevance. Most important, it invites scholars to assess some of the consequences of the 1990s market reforms in their emphasis on dismantling business-state ties in search of greater efficiency, competition, and transparency. The Colombian case suggests that while the reforms were effective in isolating states from organized business by cutting off many of the selective, sector-specific incentives used by associations to induce member loyalty and to protect their access to policymakers, the reforms also created room for corporate organizational forms, such as grupos, to gain privileged access to the policymaking process.