Business Versus Business? Grupos and Organized Business in Colombia

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

Structurally weakened associations and the Consejo's organizational deficiencies were important causes of these organizations' inability to sustain collective opposition to the Samper government. But these circumstances were aggravated by yet another factor: the role of the Colombian grupos.

GRUPOS AS KEY BUSINESS ACTORS

In many Latin American countries, important parts of the private sector are organized in the form of grupos, or networks of legally independent firms, affiliated with one another through mutual shareholding or by direct family ownership under a common group name (Zeile 1991, 3O).4 In Colombia, there are more than 15 grupos, but 4 stand out: Grupo Empresarial Bavaria, Organización Ardila Lülle, Organizatión Sarmiento Angulo, and Sindicato Antioqueño (Rettberg 2001b).5 For the past decade, these four grupos have owned one-fourth of the largest one hundred public and private companies in Colombia, according to sales, and have consistently owned at least six of the ten largest private domestically owned companies.6 In 1998, their combined sales amounted to over 12.5 percent of Colombia's GDP (Rettberg 2001b). Grupos are also key employers and sources of tax revenues. They hold controlling ownership of companies in the beer and soft drink industry, the cement industry, the food industry, the financial sector, and the mass media. Table 2 presents the grupos' main activities.

In the three largest grupos-Bavaria, Sarmiento, and Ardila-a controlling percentage of shares is owned by one person or a single family. In this sense, grupos are structured as corporate patriarchies, in which hierarchy is strictly enforced from the top down (Gereffi 1990, 97; Orrú et al. 1997). Each of the four Colombian grupos has developed a distinct specialty. Sarmiento controls 21 percent of the financial sector, while Ardila controls 33 percent of the sugar-refining sector and approximately half of the soft drink industry. Bavaria has a near-monopoly in the profitable Colombian beer industry.

The Medellín-based Sindicato Antioqueño is a different kind of grupo. Property is less concentrated and individual managers are more independent. Also, the Sindicato does not have a single core firm (like Cerveza Bavaria for Bavaria or Postobón for Ardila), but is composed of three large holdings in the insurance, cement, and food sectors. These, in turn, branch out in a multiplicity of open-stock subsidiaries, interlocked by mutual shareholding and by the presence of the CEOs on each other's executive boards.

Companies that later became grupo flagship companies originated during the 1940s, in the context of import substitution industrialization policy. Such is the case of the Colombian beer brewery Bavaria S.A. (Ogliastri 1990). In the 1970s, profits generated by these core firms and the small size of the domestic markets diminished the prospect that further investment in their traditional activities would yield additional returns (Fernández-Riva 1995, 24). In response to these limits on growth, in the 1980s the basic grupo structure emerged, as companies used subsidized development credit to acquire firms in new and unrelated industries, causing a wave of mergers and acquisitions (Hallberg 1990, 54; Fernández-Riva 1995, 27-29). In the 1980s, the ensuing processes of diversification of production and of horizontal and vertical integration gave rise to the current grupo structure (Peres 1998) with simultaneous participation in up to 20 sectors (Rettberg 2001b).