Preliminary draft: please do note quote
Paper prepared for XIV International Economic History Congress
Helsinki, 21st-25th August, 2006
Session 33
Foreign Investment in Urban Public Utilities:
long-run international and comparative perspectives
(Organisers: Albert Broder, Cezar Honorato & Alberte Martinez)
Capital, Technology and Nationalism:
a political economy of urban tramways in Latin America, c.1850-1940s
Colin M. Lewis
Contact details:
Department of Economic History,
London School of Economics & Political Science,
Houghton Street, Aldwych,
London WC2A 2AE.
Tel: + 44 - (0)20 - 7955 - 7065
Fax: + 44 - (0)20 - 7955 - 7730
E-mail: [email protected]
Preliminary draft: please do note quote
XIV International Economic History Congress
Session 33: Foreign Investment in Urban Public Utilities
Capital, Technology and Nationalism:
a political economy of urban tramways in Latin America, c. 1850-1940s
Colin M. Lewis (LSE)
Introduction:
Theories of the Firm and >Business Models= in Latin America
Tramways in Context: growth, urbanisation and the political economy of public utility
operations
Finance and Technology: organisation and ownership
Conclusions
Introduction
An examination of the history of the financing, management and operation of tramways in
Latin America offers insights into several themes that have long engaged business historians,
namely: >models= of corporate organisation; the dynamics of international investment; the
diffusion of innovation - in the broadest sense, including technology and managerial practices;
and the political economy of establishing and operating public utilities - often is rapidly
changing political and economic environments. The case of tramways serves to illustrate the
impact of key technoloy shocks on corporate finance and organisation, and the influence of
socio-political change, associated with modernisation and urbanisation, on the business
environment. Arguably, the sheer diversity of the experiences of tramway companies in Latin
America from, approximately, the mid-nineteenth century until the 1940s also means that the
continent provides a unique opportunity to test broader theories of corporate organisation,
and more specific arguments relating to the entrepreneurial and technical capacities of
>national capitalists bourgeoisies=.
In Latin America and elsewhere, the growth of tramway systems was conditioned by
two critical factors, the rapid growth of cities and the >electricity revolution=. The rapid
growth of cities created a market for a wide range of public services, including demands for
2
improved urban transport. Electricity signalled much more than the substitution of a modern,
cleaner, more effective from of traction for animal power or (in some places) steam. Electrical
power constituted a technology shock that transformed the economics of operation and
triggered consequential changes in the organisation and financing of the business. This had
implications for ownership and management, often resulting in the consolidation of large,
foreign-owned >conglomerates=, a process which in turn had repercussions for the politics as well as the economics - of operations. As will be shown below, the dynamics of the
organisation and operation of tramways also provides an opportunity to test theories of
business institutionality, namely, analyses that vaunt to superiority of managerial capitalism,
that explore the mechanics of free-standing companies, and studies that stress the flexibility of
networks of families as a form of corporate - particularly for parts of the world like Latin
America where the >rules of doing business= differed from those prevailing in the North
Atlantic economies.
This paper begins by surveying recent contributions to the business history literature,
paying particular attention for the focus on corporate organisation, and new currents in the
business historiography of Latin America. The second section considers the changing context
within which tramways operated. The third section analyses the impact of technology change
on finance, structure, and operations, illustrated by case-studies of two systems, tramways in
Buenos Aires and Mexico City. The paper concludes by noting the diversity of the tramway
>corporate model= in Latin America, highlighting forces making for (and limiting) the
consolidation of >conglomerates=.
Theories and Business >Models=
As a field of academic research, business history has expanded dramatically in recent decades
to embrace virtually everything in the >business past=, from the history of individual
companies to that of entire business systems1. Earlier work on entrepreneurship, the firm, and
the emergence of corporate managerial hierarchies have been complemented by research on
the international and the comparative, on inter-actions between the structure of enterprises and
macroeconomic performance, and on relations between business and government For Mira
Wilkins, business history entails the study of the growth and development of business as an
institution, though she admits that until the 1980s the literature was largely pre-occupied with
entrepreneurship and transnational enterprises2. Few would deny that an institutionalist
imperative derives from the work of Alfred D. Chandler Jr. The doyen of the discipline, he
offers the definitive account of the rise of the modern business corporation3. The relationship
1
Franco Amatori and Geoffrey Jones >Introduction= in Franco Amatori & Geoffrey Jones (eds.) Business
History around the World (Cambridge: CUP 2003) p.1.
2
Mira Wilkins >Business History as a Discipline= Business and Economic History XVII (1988) p.1.
3
Mira Wilkins >Introduction= in Mira Wilkins (ed.) The Growth of Multinationals (Aldershot:
Edward Elgar 1991) p.xiii; T.A.B. Corley >The Entrepreneur: the central issue in business
history?= in Jonathan Brown & Mary B. Rose (eds.) Entrepreneurship, Networks and Modern
Business (Manchester: Manchester University Press 1993) p.14; Franco Amatori and Geoffrey Jones
>Introduction= in Franco Amatori & Geoffrey Jones (eds.) Business History around the World
(Cambridge: CUP 2003) pp.2-3. The Chandler thesis was devised and developed across a large body of
writing. His principal, and most widely read, books include The Visible Hand: the managerial revolution
3
between firm and market is central to the Chandler approach, and indebted to transaction
costs theory elaborated by Coase, which presents the firm as a device to internalise contract
enforcement. The firm solves the co-ordination problem - the costs of persuading,
negotiating, and integrating distinct elements of the production process - in a changing
environment. Chandler employs these ideas to bridge the micro and macro aspects of
business operations. Indeed, it is precisely this link that sustains the claim of the subject to
constitute a separate discipline. The particular contribution of business history lies in its
engagement with the micro and the macro: from the perspective of a micro institution,
business history research facilitates an analysis of patterns of national growth4.
Concentrating on key problems confronting the firm - technologies of production, the
location of markets and supplies, and the requirements of marketing and distribution, Chandler
considers how solutions to these problems were shaped by distinct national histories of
geographical size, population, legal frameworks and educational systems. The timing of
revolutions in transport and communications and consequent changes in distribution and
production are also important. Yet, despite different national characteristics, market growth,
advances in technology, and competition compelled firms to make extensive investment in
new and improved processes of production, assemble marketing networks, recruit salaried
management teams, and develop organisational capabilities. The result was a system of
competitive managerial capitalism, or layered business bureaucracy, that routinised
Schumpeter-style dynamic innovation5. Although the linear assent of managerial capitalism,
which lies at the core of the Chandler model has been challenged, not least as regards Latin
America (as will be shown below), his contributions are widely acknowledged, particularly for
the pioneering focus on the inter-action between changes in technology and markets, the
formation of professional hierarchies, and the relationship between strategy and structure6.
Responding to a research agenda reshaped by Chandler, notably the rise of corporate
capitalism as the ultimate model of organisational efficiency, business historians of Britain and
elsewhere have returned to basics, re-evaluating the dynamics of >heroic entrepreneurial
capitalism=. For example, Rose argues that family partnerships characterised most branches
of manufacturing, commerce and finance in Britain and, according to Rose, even railways (the
ultimate corporate enterprise)7. Rose recognises that the introduction of full limited liability in
in American business (Cambridge Mas.: Harvard University Press 1977) and Scale and Scope: the
dynamics of industrial capitalism (Cambridge, Mass: Harvard University Press 1990). For a selection of
his contributions, see: Thomas K. McCraw (ed.) The Essential Alfred Chandler: essays towards a
historical theory of big business (Boston, Mass.: Harvard Business School 1988). The pioneering article
on transactions costs, acknowledged by virtually all scholars is: Ronald H. Coase >The Nature of the
Firm= Economica IV (1937) pp.386-405.
4
Franco Amatori and Geoffrey Jones >Introduction= in Franco Amatori & Geoffrey Jones (eds.)
Business History around the World (Cambridge: CUP 2003) p.7.
5
Alfred D. Chandler Jr. Scale and Scope: the dynamics of industrial capitalism (Cambridge, Mass.:
Harvard University Press 1994) pp.9-12.
6
Geoffrey Jones The Evolution of International Business: an introduction (London: Routledge 1996) p.17;
Franco Amatori and Geoffrey Jones >Introduction= in Franco Amatori & Geoffrey Jones (eds.) Business
History around the World (Cambridge: CUP 2003) p.3.
7
Mary B. Rose >The Family Firm in British Business, 1780-1914' in Maurice W. Kirby and Mary B. Rose
(eds.) Business Enterprise in Modern Britain: from the eighteenth to the twentieth century (London:
4
1862 shifted the balance towards joint-stock organisation, notwithstanding a persistence of
personal capitalism well into the twentieth century. An increasing proportion of new firms
opted for limited liability 8. This provokes a question. If family networks, and private joint
stock companies (and later the >defensive= holding company), remained a vibrant part of
business organisation in Britain, to what extent was this reflected among overseas firms,
especially those functioning in sectors and areas where neither new technology nor market
growth outstripped the financial resources of the extended partnership, or where the
competitive environment was not skewed by the presence of US or German corporate
capitalism?
Highly specialised, small-scale family business with thin managerial hierarchies spelt
the continuation of >personal= or >proprietary= capitalism through the nineteenth century and
well into the twentieth. There was a strong preference for a short- (rather than long-) term
approach to asset accumulation and management, and a dependence on economies that were
external to the firm instead of internal to it. Hence, while this >enterprise model= might have
served when Britain was the >first industrial nation=, according to its critics, the model was
inappropriate during an era of global competition, when comparative advantage lay with
capital intensive and technologically sophisticated production9. Nevertheless, one major
contribution by the new business history of Britain, of particular relevance to the study of
tramways in Latin America, is the revival of interest in family networks and holding groups.
The assertion that family networks and holdings were a long-lived feature of the British
corporate scene, and that they were often innovative and competitive, is of relevance for the
study of enterprises that originated from, and operated in, various parts of the world precisely
because it challenges the Chandler thesis about the linearity of the rise of managerial
capitalism, and assumptions about the universality of the corporate, multi-division businesses
as a benchmark of efficiency and modernity.
Although arguments about entrepreneurial capacity (and organisational flexibility) in
the British business historiography focusses mainly on firms operating at home, the view that
the predominant domestic corporate model was associated with resistance to innovation in
production, distribution, and management has implications for British enterprises operating
overseas. Were managerial weaknesses observed at home replicated abroad? Jones finds that
they were10. Historians of overseas businesses have drawn on the >failure= and >stagnation=
hypotheses when evaluating the performance of British companies in host economies,
deploying it to explain the fragility or osification of individual companies and the declining
presence of London firms in various sectors and markets during the inter-war period. For
example, the relatively early displacement of British-registered enterprises by European and
US firms in sectors such as tramways. Around the 1910s, did an entrepreneurial and
Routledge 1994) p.63.
8
Mary B. Rose >The Family Firm in British Business, 1780-1914' in Maurice W. Kirby and Mary B. Rose
(eds.) Business Enterprise in Modern Britain: from the eighteenth to the twentieth century (London:
Routledge 1994) pp.66-70.
9
Geoffrey Jones and Keetie E. Sluyterman >British and Dutch Business History= in Franco Amatori &
Geoffrey Jones (eds.) Business History around the World (Cambridge: CUP 2003) pp.111, 117.
10
Geoffrey Jones >Multinationals= in Franco Amatori & Geoffrey Jones (eds.) Business History around the
World (Cambridge: CUP 2003) p.357.
5
organisational >deficit= left British tramway companies in Latin America vulnerable
technology-induced >corporatisation= and globalisation= in an increasingly internationalised
sector that was being transformed by integration of the provision of urban transport services,
the generation of power, and the supply of equipment? If an entrepreneurial deficit limited the
capacity of some London firms to response to a technology-financial-organisational shock in
the 1910s, the same deficit may also be held responsible for the >mishandling= of increasingly
complex relations urban franchising authorities, and consumers of urban transport services,
after the 1920s.
Following Mira Wilkins= ground-breaking research, it is unsurprising that students of
overseas business have devoted considerable attention to the free-standing company11. The
free-standing company was a particularly (but not exclusively) British phenomenon. It
provided an institutional framework that minimised risk and maximised funding opportunities,
particularly when London was the paramount world financial centre. Wilkins views the
management of these companies as lean and insufficiently structured, rarely consisting of more
than a few part-time directors and small cadre of administrators based in tiny City
headquarters12. Others have argued that, although a lack of deep, layered management
hierarchies may have made free-standing companies unsuitable for high-technology industries,
their intimate governance matrix (and tendency to franchise out financial and legal functions)
meant that they were adept at managing operations overseas, particularly in countries where
commercial and political institutions were themselves less formalised, as in many parts of latenineteenth century Latin America. Local contacts and close personal relations remained
critical to business success in the rapidly changing economies - or volatile polities - that
characterised much of Latin America well into the twentieth century.
Moreover, Wilkins recognises that free-standing companies (whether registered in
London or elsewhere) tended to cluster. Groups, centred on regions or activities, shared
services such as solicitors, and financial and engineering consultants, and were >thickened= by
devices such as inter-locking directorships and common shareholdings. Whether these
arrangements represented a late variant of >proprietary= capitalism, or a new structured,
institutionised financial and management network more approximate to classic, Chandlarian
corporate capitalism remains a matter of debate13. And, there is the point about the
importance of >flexibility= associated with free-standing companies and holding groups,
models that may have been better suited to the structure of emergent European capital
markets during the early phase of the ascendance of >finance capitalism=, as well as to the
11
Mira Wilkins >The Free-standing Company, 1870-1914: an important type of British foreign direct
investment= Economic History Review LXI 2 (1988) pp.259-82. Wilkins offers both a definition of the
free-standing company, and theorises about its places in the categorising of business organisations.
12
Mira Wilkins >The Free-standing Company, 1870-1914: an important type of British foreign direct
investment= Economic History Review LXI 2 (1988) pp.264, 265.
13
Geoffrey Jones >British Multinationals and British Business since 1850' in Maurice W. Kirby and Mary B.
Rose (eds.) Business Enterprise in Modern Britain: from the eighteenth to the twentieth century (London:
Routledge 1994) p.176, Merchants to Multinationals: British trading companies in the nineteenth and
twentieth centuries (Oxford:OUP 2000) pp.343-4 and >Multinationals= in Franco Amatori & Geoffrey
Jones (eds.) Business History around the World (Cambridge: CUP 2003) pp.357-8.
6
political economy of Latin America around 190014.
It is now widely recognised that the Chandlerian emphasis on the ultimate primacy of
the large-scale, vertically (and horizontally) integrated hierarchically organised firm has tended
to obscure the continuing vigour of family networks, and the emergence of business clusters,
not least in the international area. Internationally competitive, diversified vertical groupings
like the Japanese zaibatsu were owned largely by a single family or group of families. These
groupings, as with clusters of small businesses, have an international outreach and may enjoy
similar benefits to those assumed to be the preserve of corporations characterised by
professional, impersonal managerial hierarchies15. Family-centred networks subsumed several
types of firms - organisations based on extended families or tightly-knit groups of families,
religious affiliations, ethnic diasporas, and immigrant communities. In terms of international
business, multinational trading companies were amongst the most dynamics networks.
Neglected - or stigmatised as an archaic form of organisation - by much of the mainstream
literature, trading networks often sought to internalise a variety of operations, and exhibited
flexibility in shifting from one activity/area to another. All of these businesses functioned on
the basis of power and trust, characteristics that have a profound impact on structure and
behaviour, and serve as mechanisms for raising capital, recruiting management, obtaining
information and problem-solving. New research suggests that networks and clusters are an
enduring form of organisation that is not specific to any particular period or type of
economy16.
Though writing specifically about transnational corporations, the features that
Geoffrey Jones identifies as driving international business have a larger outreach. He observes
that periods of rapid economic growth tend to encourage ventures, while static market
conditions discourage them. This characteristic applies to both home and host economies:
rapid expansion in home economies fosters outward investment; rapid growth in host
economies, inward. Secondly, receptivity to foreign initiatives has similarly promoted
outward/inward business ventures. Thirdly, international operations broadly corelate with the
degree of capital liberalisation/control: activities have flourished when capital is allowed to
move freely across borders, and declined when restrictions are placed on the outward/inward
movement of capital. Fourthly, trade protection has influenced decisions to export to (or
produce in) markets. Finally, transport and communication technology have determined the
pace of market growth, the nature and effectiveness of managerial control, and the location
14
John Cantwell >The Changing From of Multinational Enterprise Expansion in the Twentieth Century= in
Alice Teichova, Maurice Lévy-Leboyer & Helga Nussbaum Historical Studies in International Corporate
Business (Cembriedge: CUP 1991) pp.16-21.
15
Mary B. Rose >The Family Firm in British Business, 1780-1914' in Maurice W. Kirby & Mary B. Rose
(eds.) Business Enterprise in Modern Britain: from the eighteen to the twentieth century (London:
Routledge 1994) pp.61-62.
16
Mark Casson and Mary B. Rose >Institutions and the Evolution of Modern Business:
Introduction= in Mark Casson & Mary B. Rose (eds.) Institutions and the Evolution of Modern
Business (London: Frank Cass 1998) p.3; Geoffrey Jones Merchants to Multinationals: British trading
companies in the nineteenth and twentieth centuries (Oxford: OUP 2000) pp.5.
7
decisions of firms17. These factors, along with specific national business
cultures/characteristics, also conditioned the timing and nature of corporate overseas
engagement - foreign direct investment in wholly-owned subsidiaries, joint-venture
partnerships with local businesses or other foreign firms, licensing or management
arrangement with local enterprises, or combinations of these devices. The Jones typology
serves as a template against which to evaluating changes in the organisational and ownership
structure of national and international businesses in Latin America (and forms of engagement
among them), and to appraise the impact of technology change and nationalism on the
tramway sector.
Before the 1980s, the body of work on Latin America drawing directly on business
history concepts was decidedly limited. The first preliminary attempt at a literature survey was
published in the mid-1960s, more than thirty years after the first compilation about Latin
American economic history, and it would be another twenty years before the publication of the
second, major review. The most systematic business history literature survey published to
date is by Rory Miller and Carlos Dávila18. Yet, as Miller argues, even in the 1980s, what
passed for Latin American business history remained largely the study of foreign business
and/or of business imperialism19. For Latin America, as elsewhere, the problematic of
17
Geoffrey G. Jones The Evolution of International Business: an introduction (London: Routledge 1996)
pp.22-23, and, for a more recent evaluation, Multinationals and Global Capitalism: from the nineteenth
to the twenty-first century (Oxford: OUP 2005).
18
Although much of the material was only subsequently regarded as >economic history=, the first systematic
continent-wide literature survey was Harvard University, Bureau of Economic Research in Latin America
The Economic Literature of Latin America: a tentative bibliography (Cambridge, Mass.: Harvard
Uuniversity Press 1936). The first explicitly economic history survey, containing detailed bibliographies
and historiographical essays was: Roberto Cortés Conde & Stanley J. Stein (eds.) Latin America: a guide
to Economic History, 1830-1930 (Berkeley: University of California Press 1977). The business history
surveys are: J.P. Baughman >Recent Trends in the Business History of Latin America= Business History
Review XXXIX 4 (1965), pp.425-38 and H.V. Nelles >Latin American Business History since 1965:
a view from north of the border= Business History Review LIX 4 (1985), pp.543-62). Recent
successors to Baughman and Nelles are: Tamás Szmrecsányi & Ricardo Maranhão (eds.) História de
empresas e desenvolvimento econômico (São Paulo: Ed. USP 1996); Carlos Dávila L. de Guevara & Rory
Miller (eds.) Business History in Latin America: The Experience of Seven Countries (Liverpool:
Liverpool University Press 1999); Carlos Dávila L. de Guevara >La historia empresarial en América
Latina= in Carmen Erro (ed.) Historial empresarial: pasado, presente y retos de futuro (Barcelona:
Editorial Ariel 2003) pp.349-81; María Ínes Barbero >Business History in Latin America: issues and
debates= in Franco Amatori & Geoffrey Jones (eds.) Business History around the World (Cambridge:
CUP 2003) pp.317-35; Reinhard Liehr and Colin M. Lewis >Introduction= in Reinhard Liehr & Colin M.
Lewis (eds.) Doing Business in Latin America (forthcoming). Institutional >delay= is neatly captured in
the appearance of dedicated journals: the Boletín de fuentes para la historia económica y social (Mexico),
which devoted considerable space to business history appeared in 1990, and História Econômica +
História de Empresas [Economic History + Business History] (Brazil) in 1999, compared with Business
History Review (USA) in 1926, the Journal of Economic and Business History (USA) in 1928, and
Business History (UK) in 1958.
19
Rory Miller>Business History in Latin America: an introduction= in Carlos Dávila & Rory Miller
(eds.) Business History in Latin America: the experience of seven countries (Liverpool: Liverpool
University Press 1999) pp.6-7.
8
evaluating the content and direction of the Latin American business history literature arises
from the soft boundaries of the subject. In addition, much of the critical research output
produced in Latin America has been made by development economists and sociologists who
draw on methodologies that are not always familiar to traditional historians of business.
Barbero and Miller comment on definitional problems reflected in the language of the
literature. The terms historia de empresa and historia empresarial are both translated as
>business history=, and often used interchangeably20. As the term suggests, authors
contributing to the historia de empresas (history of firms) literature may be depicted as
adopting a more institutional approach, focussing on the evolution of companies and their
interaction with the general economic and social environment. The historia empresarial
(entrepreneurial history) material tends to prioritise the study of entrepreneurship, the
formation of business groups, and innovation. Yet, it would be a mistake to pigeonhole these
respective approaches as narrowly indebted to Chandler or Schumpeter. As with writing on
economic history, until the 1980s the business history of Latin America could appeared
somewhat disconnected from the mainstream literatures21.
The predominance of structural approaches in the general history and social science
material on Latin America - successively, modernisation theory, structuralism, dependency and
(most recently) neo-political economy and new institutional economics - conditioned the
business literature, which until the 1990s was largely located within the >imperialism= and
>backwardness= paradigms. Studies of the firm or the entrepreneur were viewed through the
same optic. Thus, there was a tendency to downplay the dynamism of the private sector, and
to perpetuate negative views about the capacity of domestic firms, implicitly reinforcing
assumption of inadequacy or dependency, and of a general failure by the domestic bourgeoisie
to emerge as an agent of national, capitalist development. Indeed, this focus appeared to be
strengthened by initial attempts to promote studies of Latin America that were both explicitly
business historical in approach and rejected the imperialism/dependency framework, namely
the work of Christopher Platt22.
20
Rory Miller >Business History in Latin America: an introduction= in Carlos Dávila L. de Guevara & Rory
Miller (eds.) Business History in Latin America: The Experience of Seven Countries (Liverpool:
Liverpool University Press 1999) pp.9-10; María Ínes Barbero >Business History in Latin America: issues
and debates= in Franco Amatori & Geoffrey Jones (eds.) Business History around the World (Cambridge:
CUP 2003) p.318.
21
Stephen Haber >Introduction: economic growth and Latin American economic historiography= in Stephen
Haber (ed.) How Latin America Fell Behind: essays on the economic histories of Brazil and Mexico,
1800-1914 (Stanford: Stanford University Press, 1997) pp.5, 7, 10; Rory Miller >Business History in
Latin America: an introduction= in Carlos Dávila L. de Guevara & Rory Miller (eds.) Business History in
Latin America: The Experience of Seven Countries (Liverpool: Liverpool University Press 1999) p.7; .
22
See D.C.M. Platt (ed.) Business Imperialism: an inquiry based on British experience in Latin America
(Oxford: Clarendon 1997). Although Platt was anxious to refute both the >imperialism of free trade=
thesis, and the broader economic imperialism/dependency construct, the title of the edited volume
appeared to confirm the extent to which structuralism/dependency had come to shape the research agenda
for Latin America. Platt=s exchange with dependistas can be followed in: D.C.M. Platt >Dependency in
Nineteenth-century Latin America: an historian objects= Latin American Research Review XV I (1980)
pp.113-30; Stanley J. and Barbera H. Stein >D.C.M. Platt: the anatomy of autonomy= Latin American
Research Review XV I (1980) pp.131-46; D.C.M Platt >Dependency and the Historian: further
objections= in Christopher Abel and Colin M. Lewis (eds.) Latin America: economic imperialism and the
state (London: Athl;one 1985) pp.29-39. Platt made several contributions to British-Latin American
9
It remains a paradox of the 1960s that, just as dependency theory was displacing
developmentalism, a number of seminal working addressing, among other themes, the social
origins of entrepreneurs and corporate organisation appeared. Offering a positive analysis of
export-led growth as an engine of industrial expansion, studies by Cornblit and Dean
(respectively on the Argentine and Brazil) nevertheless sustained the gloomy assessment of
native talent by stressing the highly personal nature of national business organisations, the
over-representation of foreigners within the entrepreneuriat, and a >detachment= of business
from power and politics 23. Although this view was not unchallenged, it would be another ten
years of so before historians directly confronted key elements of this thesis. Writing on Brazil,
associated with the Campinas School, shows how endogenous entrepreneurs were active
alongside immigrants and foreign corporations and how, by c.1900, firms were becoming
more formal, in part in order to gain access to institutional sources of finance. Other authors
question the narrow link between entrepreneurial initiatives and the export sector drawn by
Dean and sustained by the Campinas School, demonstrating how business interests largely
unconnected with export activities contributed to the growth of manufacturing in the interior
of Brazil24. There is now an impressive body of work on the nineteenth and twentieth
centuries pointing to national entrepreneurship - and greater formality of firm organisation across various sectors in many areas of the continent 25. In addition to Brazil, the literature is
particularly rich for Mexico and Colombia26. From this re-discovery and re-vindication of
commercial and financial relations that are relevant for students of business history and produced a short,
but pioneering, survey of documents available in Latin America and the UK: D.C.M. Platt >Business
Archives= in Peter Walne A Guide to Manuscript Sources for the History of Latin America and the
Caribbean in the British Isles (London: Athlone 1973) pp.442-513.
23
Oscar Cornblit > Inmigrantes y empresarios en la política argentina= Desarrollo Económico VI 24 (1967)
pp.641-91; Warren Dean The Industrialization of São Paulo, 1880-1945 (Austin: University of Texas
Press 1969).
24
A positive, structuralist view of the >national bourgeoisie is offered by Fendando H. Cardoso Ideologías
de la burgesía industrial en sociedades dependientes (Argentina y Brasil)(México: Siglo XXI 1971),
available in abridged form as >The Industrial Elite= in Simon Lipset (ed.) Elites in Latin America (New
Yoprk: OUP 1967) pp.94-114 . Two excellent research monographs by scholars associated with the
Campinas School are: Wilson Cano Raizes da concentração indústrial em São Paulo (São Paulo 1981)
and W Suzigan Indústria brasileira: origem e desenvolvimento (São Paulo 1986). See also the narrower
but no less challenging Zelia Maria Cardoso de Mello Metamorfoses da riqueza: São Paulo, 1845-1895
(São Paulo 1990). For a persuasive account of entrepreneurial activity in a non-export region, and the
importance of family firms, see: Sérgio de O. Birchal Entrepreneurship in Nineteenth-century Brazil: the
formation of a business environment (London: Macmillan 1999) and >Empresarios brasileiros: um estudo
comparativo= VII Seminario sobre Economia Mineira (1995) pp.393-427.
25
For general studies, see: Mário Cerruti & Menno Vellinga (eds.) Burgesía industrial en América Latina y
Europa Meridional (Madrid: Editoroial Alianza 1989); F. Florescano (ed.) Orígenes y desarrollo de la
burgesía en América Latina (México:Fondo de Cultura Económica 1985; Wilson Pérez (ed.) Grandes
empresas y grupos industriales latinoamericanos (México: Siglo XXI 1998)
26
For Colombia, see: Carlos Dávila L. de Guevara Historia empresarial de Colombia: estudios, problemas
y perspectivas (Bogotá: Universidad de los Andes 1991); Luis Ospina Vásquez Industria y protección en
Colombia, 1810-1930 (Bogotá: Editorial Santa Fé 1955); Marco Palacios Coffee in Colombia: and
economic, social and political history (Cambridge: CUP 1980) Frank Safford The Ideal of the Practical:
Colombia=s struggle to form a technical elite (Austin: Texas University Press); For Mexico:Mário
Cerruti Propietarios, empresarios y empresa en el norte de México: Monterrey, de 1848 a la
10
national entrepreneurial capacity emerged an awareness of the importance of business
networks. As elsewhere, the family business was found to be alive and well in nineteenth and
early twentieth century Latin America. There was emphasis on the dynamics of family
networks. Some of the largest industrial and retailing conglomerates in present-day Latin
America are controlled by grupos financieros, grupos económicos, or capitanes de industria
who trace their origins back to late nineteenth century networks27.
New research on the success and increasing institutionality of family/social networks
questions the Chandlerian perspective. Surveying recent contributions to the business history
of Latin America, Barbero defines three positions. First, there is a body of work that rejects
the adequacy of >organisational synthesis= as the history of big business in the continent is
quite different from the USA: > ... the Chandlarian model has little relation with the reality of
the firm in underdeveloped countries ...=. Secondly, some authors seek to integrate the
concepts and inductive approach of Chandler within an eclectic design that recognises the
distinctness of local conditions. Thirdly, a school which deploys the Chandler model of US
managerial capitalism as a template against which to evaluate the organisation and
performance of large corporations in Latin America28. Irrespective of starting point, all
positions reject the tendency to juxtapose family firms or family networks and big business as
located at opposite ends of both a chronological and efficiency spectrum.
Implicitly acknowledging the revisionism of Rose and others, as in other >latedeveloping economies=, business historians of Latin America now recognise that grupos were
a key instrument in the consolidation of business. In politically and economically fragile
countries, or when commercial and financial links were tenuous, trust and knowledge were
highly valued commodities. Trust had a particular economic function for businesses networks
based on social groupings like an individual extended family, alliances of families bound by
marriage, or ethnic diaspora29. Perhaps this explains why family cluster firms appear to have
globalización (México: Siglo XXI 2000); Carlos Marichal and Mário Cerruti (eds.) Historia de las
grandes empresas en México, 1850-1930 (México: Fondo de Cultura Económica 1997).
27
Studies that detail the historical continuity of family and social networks (and often their emergence as
global players) include: María I. Barbero >Mercados, redes sociales y estrategias empresariales en los
orígenes de los grupos económicos: de la Compañía General de Fósferos al Grupo Fabril (1889-1929)=
Estudios Migratórios Latinoamericanos XV 44 2000) pp.119-145; Jorge Basave Kunhardt Los grupos
de capital financiero en México (1974-1995): la etapa de consolidación (México: 1996); Daniel
Chudnovsky, Bernardo Kosacoff & Andrés López (eds.) Las multinacionales latinoamericanas: sus
estrategias en un mundo globalizado (Buenos Aires: Fondo de Cultura Económica 1999); Mário Cerruti
Propietarios, empresarios y empresa en el norte de México: Monterrey, de 1848 a la globalización
(México: Siglo XXI 2000); Raúl Green & Catherine Laurent Bunge & Born: puissance et secret dans
l`agro-alimentaire (Paris: Publisud 1985); Luis Gutiérrez and Juan Carlos Korol >Historia de empresa y
crecimiento industrial en la Argentina: el caso de la Fábrica Argentina de Alpargatas= Desarrollo
Económico XXXX 111 (1988) pp.401-24; Donna J. Guy >Dependency, the Credit Market and Argentine
Industrialization, 1860-1940= Business History Review LVIII 4 (1984) pp. 532-561.
28
María Inés Barbero >Business History in Latin America: issues and debates= in Franco Amatori &
Geoffrey Jones (eds.) Business History around the World (Cambridge: CUP 2003) pp.329-30.
29
Mark Casson & Howard Cox >International Business Networks: theory and history= Business and
Economic History XXII 1 (1993) p.43.
11
had an extended shelf life in Latin American business. However, it is important to distinguish
between (largely) single-family businesses, especially prominent in early initiatives in various
sectors during the mid-nineteenth century, and the multi-family clusters which had emerged by
the early decades of the twentieth century and which were often internationally >connected=
though holding arrangements, notably in sectors were technology change was rapid and
associated financial costs large and lumpy. What differentiates grupos from the conventional
family firm, and what gives them greater scope, is the fact that owner-managers were B and
are - drawn from several families. The >holding= pool of finance and high-level management
is substantially larger, the general resource base more robust and resilient. Grupos tend to be
a multi-company entities, transacting in different markets under common entrepreneurial and
financial control. Although the grupo constitutes a form of business organisation different
from that encountered among large enterprises in advanced industrial economies, the multifamily business cluster in Latin America is usually more formally constituted than the
conventional family firm and, perhaps for this reason, better able to manage the transition from
one generation to another, avoiding the (now much questioned) Buddenbrooks syndrome - a
weakening of entrepreneurial drive across generations in family-run business30.
30
Nathaniel H. Leff >Industrial Organisation and Entrepreneurship in the Developing Countries: the
Economic Groups= Economic Development and Cultural Change XXVI 4 (1978) p.663.
12
Grupos-cum-holdings manifest a flexibility and ability to evolve into large-scale,
structured business bureaucracies. Consequently, according to Marichal, business historians
of Latin America need to complement the Chandler thesis about the organisational evolution
of big business by drawing on models such as >holding companies=, >investment groups= and
>entrepreneurial networks= (as well as the free-standing company and >mixed corporation=).
A number of large corporations can be observed in Latin America well before 1930, few
neatly fit the Chandler mould31. Many Latin American grupos familiares, or family network
clusters, appeared more robust than the fragile, weakly integrated holding groups observed by
Wilkins32. Once again, this leaves the free-standing company as something of an anomaly. Or
does it? Around the end of the nineteenth century, scholars have observed pattens of
organisation common to >national= business clusters and free-standing companies. Devices
such as inter-locking directorships, shared legal and financial representation, and crosscompany stock and equity swaps can be observed in both cases. Of course, some of these
features were also to be found among embryonic transnational corporations of the period. As
already stated, clusters facilitated a pooling of information and resources, strengthening the
liquidity of individual entities. Indeed, business was often >internalised=. Cluster hierarchies,
however, were much more opaque than the layered, managerial strata associated with
transnationals and (at least in theory) free-standing companies. Yet, as Charles Jones argues
with conviction, free-standing companies were often linked with clusters, an association that
was particularly noticeable amongst nineteenth-century >British= business in Latin America.33
Embryonic international holding companies were growing in importance, not least
among tramway companies, by the First World War. Holding firms became a prominent
feature of the utilities sector, and in the area of commodity production, processing and
marketing. These entities defy easy categorisation. Some holdings were ephemeral and their
administrative structure almost impossible to unravel, others were much more durable, even if
their administrative hierarchies no less difficult to fathom. An important, often neglected,
feature of these business networks-cum-clusters-cum-free-standing companies was their
>Anglo-Latin American= (or Euro-Latin American) character.34 The most successful grupos
31
Carlos Marichal >Introducción= in Carlos Marichal (ed.) Las inversiones extranjeras en América Latina,
1850-1930: nuevos debates y problemas en historia económica comparada (Mexico: El Colegio de
México/Fondo de Cultura Económica 1995) pp.19-22, and >Avances recientes en la historia de las
grandes empresas y su importancia para la historia económica de México= in Carlos Marichal & Mário
Cerruti (eds.) Historia de las grandes empresas en México, 1850-1930 (México: Fondo de Cultura
Económica 1997) pp.24-33; Daniel Chudnovsky, Bernardo Kosacof & Andrés López (eds.) Las
multinacionales latinoamericanas: sus estrategias en un mundo globalizado (Buenos Aires: Fondo de
Cultura Económica 1999) pp.73-76.
32
Mira Wilkins >The Free-standing Company, 1870-1914: an important type of British foreign direct
investment= Economic History Review LXI 2 (1988) p.265.
33
Charles A. Jones >Los antecedentes de la moderna corporación transnacional: los grupos de inversión
británicos en América Latina= in Carlos Marichal (ed.) Las inversiones extranjeras en América Latina,
1850-1930: nuevos debates y problemas en historia económica comparada (Mexico: El Colegio de
México/Fondo de Cultura Económica 1995) pp.70-95, and >Institutional Forms of British Foreign Direct
Investment in South America= Business History XXXIX 1 (1997) pp.21-41.
34
Charles A. Jones >Los antecedentes de la moderna corporación transnacional: los grupos de inversión
británicos en América Latina= in Carlos Marichal (ed.) Las inversiones extranjeras en América Latina,
13
or clusters were those controlled by financial houses, and (whether through formal holdings,
family ties and/or internal rules of conduct) able to generate loyalty and cross-network
cohesion35. In some countries and sectors, gruops and free-standing companies seems to
operate in quite different universes, in others, the frontiers were less clear-cut. Moreover,
during periods of political turmoil and in the colder climate of the inter-war decades, when
international capital markets were tight, some free-standing companies and >international
clusters= appeared to >go native=36. This was not a one-way street. Sometimes crises
resulted in the >internationalisation= of firms. On other occasions >nationalisation=, that is,
firms fell into the hands of domestic capitalists or were taken over by the state. Perhaps, as
Geoffrey Jones argues, the deciding factor was structural rather than conjunctural - the locus
of control. Namely, whether effective control was exercised from head office in the home
country, or decision-making located in the host economy37. Most of these entities operated a
dual administrative structure: a board of directors, formally based in the >home= country of
registration, and a management body in the host economy, charged with operational decisionmaking. In those cases where effective control lay with the local management committee, the
>home= holding company was probably little more than a shell, a vehicle for securing
portfolio funding. The pre-1914 concentration of free-standing companies and business
clusters in Latin America makes the continent a particularly important area for business
historians, in general, and also explains why business historian of Latin America are now
devoting so much attention to these forms of organisation.
To conclude, new contributions to the business literature on Latin America pinpoint
several distinct elements that are both reflect the mainstream historiography and differ from it.
First, networks (family-based, often of merchant or immigrant >diaspora= origin) prove to be
a resilient expression of business organisation in many countries. Secondly, at the beginning of
the twentieth century, a disproportionate number of free-standing enterprises were located in
Latin America, particularly in the River Plate economies. These firms remain prominent until
1850-1930: nuevos debates y problemas en historia económica comparada (Mexico: El Colegio de
México/Fondo de Cultura Económica 1995) pp.79, 81-2, 83-93.
35
Jorge Basave Kunhardt Los grupos de capital financiero en México (1974-1995): la etapa de
consolidación (México: 1996); Donna J. Guy >Dependency, the Credit Market and Argentine
Industrialization, 1860-1940= Business History Review LVIII 4 (1984) pp. 532-561; Geoffrey Jones
Merchants to Multinationals: British trading companies in the nineteenth and twentieth centuries
(Oxford; OUP 2000) pp.58-61.
36
Carlos Marichal >Avances recientes en la historia de las grandes empresas y su importancia para la
historia económica de México= in Carlos Marichal & Mário Cerruti (eds.) Historia de las grandes
empresas en México, 1850-1930 (México: Fondo de Cultura Económica 1997) p.32; Christian Suter >Las
fluctuaciones cíclicas en las inversiones extranjeras en 185B1930: el debate histórico y el caso
latinamericano= in Carlos Marichal (ed.) Las inversiones extranjeras en América Latina, 1850-1930:
nuevos debates y problemas en historia económica comparada (Mexico: El Colegio de México/Fondo de
Cultura Económica 1995) pp.44-8; Andrés Regalsky Mercados, inversiones y elites: las inversiones
francesas en la Argentina, 1880-1914 (Buenos Aires: Editorial de la Universiad Nacional de Tres de
Febrero 2002) pp.140-60; Reinhard Liehr & Mariano Torres >From Free-standing Company to Public
Enterprise: the Mexican Light & Power Company, and the Mexican Tramways Company, 1902-1965=
mimeo. (2002) pp.13-15.
37
Geoffrey Jones The Evolution of International Business: an introduction (London: Routledge 1996) p.34.
14
the inter-war period and dominated sectors such as railways and public utilities. Thirdly, a
conflictive-collaborative relationship between and amongst Transnational Corporations
(TNCs), state corporations and private national enterprises appears to have been a special
feature of the Latin American business landscape towards the end of the twentieth century.
Conglomerates from different >home= economies co-operated and foreign groups engaged
with state corporations and private businesses. >Local= peculiarities noted by business
historians writing about Latin America included the particularly long shelf-life of family
businesses-cum-grupos-cum-holdings, and a precocious association of >modern= corporate
business in many countries with foreign-owned enterprises or, at least, companies registered
overseas.
What further general points emerge from the national and international business history
literature? The literature on international business points to a process of institutional change
from merchant partnerships and mercantilist monopoly trading companies to transnational
corporations. While chartered companies and (often ephemeral) merchant houses were
involved in trade and often >backward= linked into production, usually focussing on a
particular area of the world, transnational corporations integrated finance, production and
distribution across many national frontiers. Growth and diversification of activities was
accompanied by profound organisational change - from the loosely structure, personal
capitalism of the family firm to the hierarchical, bureaucratised corporate capitalism of big
business. Yet, though corporate capitalism may be the principal expression of modern
industrial firm, the organisational transformation of the firm was far from linear or universal.
Quite distinct structures occurred at particular periods and in specific national and regional
contexts. Though corporate capitalism emerged early, and rapidly became hegemonic, in the
USA by the early twentieth century, and subsequently emerged as the principal manifestation
of international business thereafter, in other places the pace and process of organisational
change was different. Older form of capitalism survived, or evolved differently. Family
businesses continued. Networks consolidated and deepened. Free-standing companies
multiplied. Clusters, holding companies and investment groups emerged. Some of these other
expressions of business exhibited features that were proximate to, or ultimately transformed
into, corporate capitalism, other did not. Particularly in Latin America, by the middle of the
twentieth century grupos económicos or grupos financieros had become a prominent feature
of the business landscape, their position being enhanced with the retreat state-owned
enterprises in the 1990s. These family-cluster firms combined features of proprietorial and
corporate capitalism. At home, these companies operated alongside international businesses
and, in several cases, in collaboration with them. Moreover, some of these familyconglomerates functioned like transnational corporations, doing business overseas,
occasionally in multiple sectors. They are multi-functional, multi-regional organisations
dependent on institutionalised managerial teams.
Tramways in Context: growth, urbanisation and the political economy of public utility
operations
For much of the period studied, tramways were the principal form of rapid urban transit in
Latin America as elsewhere. Various factors shaped the growth, proliferation, consolidation
and decline of tram companies. These included topography, the pace and character of urban
growth, technology, finance, and the distinct political economy of the market for city
transport. Inter-connexions among these factors are, of course, dynamic. For example, the
15
initial location of tramways was determined by existing features of the urban landscape, but
the appearance of trams also changed the layout of cities, and the socio-economic character of
urban life.
Horse drawn urban railways are generally acknowledged to have been functioning by
the 1850s, usually linking rail termini to city centres. According to McKay, the first true
tramway began operation in New York in 1852. Although also horse-powered, what
differentiated the company from earlier urban railways was the use of specially designed,
sunken rails. Although this innovation represented a substantial increase in construction costs,
it capitalised on the reduction in friction associated with all railed forms of transport, without
the disruption to others vehicular road traffic occasioned by the laying of conventional rails on
the surface of roads. As a result, the horse-drawn tramway rapidly displaced both horsedrawn omnibuses and earlier city-centre railways in New York. Elsewhere, progress was
slower. As late as 1869 true tramways were observed in very few European cities, the main
breakthrough occurring in the 1870s when >tramway mania= broke out in such cities as
Liverpool, Le Harve, Marseille, Paris, Leipzig, Dresden, Munich, Dusseldorf, Karlsruhe and
Cologne. In several parts of Europe, the arrival of tramways coincided with urban renewal
projects that entailed the removal of former fortifications. The destruction of city wall and
filling-in of moats yielded broad >ring boulevards= ideally suited for the laying of dedicated
tramlines and low-level platforms in central reservations38.
Latin America was no laggard. Several street railways operating horse-drawn vehicles
were functioning by the 1850s. Havana is usually credited as the pioneer city, variously
described as operating an urban steam railway in 1837 and a tramway in 1858. Horsepowered street railways soon opened in Mexico City (1857), Buenos Aires (1863), Valparaiso
(1863), Arequipa (1875), and Lima (1878). By the late 1860s, urban railway companies in
Brazil, for example in Rio de Janeiro and Recife, are credited with operating steam-powered
systems. While some of these companies were already being described as tramways, it is more
likely that they were urban railways, rather than true tramways39. Tramways proper were,
however, a feature of the 1870s, though there is little evidence of a European-style >tramway
mania=. In addition, with very few exceptions, horses and mules remained the main form of
>traction= until the end of the century. In short, unlike the USA and many European
countries, in Latin America there does not seen to have been successive technology
displacement: namely steam replacing animals, and steam in term being displaced by
electricity. Although there were some exceptions, the general tendency was for a technology
>leap= from tracción/tração de sangre to electricity at the beginning of the twentieth century.
For example, the Anglo-Argentine Tramway Company, poised to become the largest tramway
network in Latin America, and one of the most extensive in the world, only began the switch
from horse-drawn vehicles to electric-powered trams in the mid-1890s. Electrification was
completed in 190440. Elsewhere, London-registered tramways appear to have embarked on
38
John P. McKay Tramways and Trolleys: the rise of urban mass transport in Europe (Princeton: Princeton
University Press 1976) pp.14-15, 16-17.
39
Arnold J. Bauer Goods, Power, History: Latin America=s material culture (Cambridge: CUP 2001)
p.160; Allen Morrison >Tramway Pioneers in Latin America= [www.tramz.com/tw/p.htm1] pp.1-16.
40
Raúl García Heras Transportes, negocios y política: la compañía Anglo-Argentina de Tranvías, 18761981 (Buenos Aires: Editorial Sudamericana 1994) p.17.
16
electrification even later.
The timing of the electrification of tramways in Buenos Aires which, by the early
twentieth century, was substantially >British= owned, differed little from that of systems at
home. In the United Kingdom, tramway electrification had hardly started in 1895 and was not
completed until 1913. Indeed, compared with operators in Austria-Hungary, Germany, and
France, British companies were markedly reluctant to convert to electricity41. This resistance
to innovation by firms operating in the tramway sector at home and overseas would seem to
corroborate the Geoffrey Jones thesis of the >transmission= of business failure. That is,
British businesses were slow to adopt new managerial/organisational arrangements or
technology, irrespective of whether firms were function within the confines of the domestic
market or in host economies overseas. By contrast, several early Brazilian tramways founded
US and European interests, and subsequently associated with the Toronto-registered Light &
Power Group seem to have pioneered electrifications, and did so considerably in advance of
London firms. By the 1880s, short lines in Rio de Janeiro and Niteroí were operating batterypowered trams, with electric traction being introduced in 1892. Electrification began around
the same time in São Paulo. The Light drew on US and British engineering expertise, but was
principally dependent on European capital markets for finance.42.
As suggested by pioneer companies mentioned above, early tramways were mainly
clustered in the principal - and usually fastest growing - cities. These were often port-cities
whose expansion was propelled by the post-1870s commodity export-boom. In such cities,
urban modernisation was associated with the construction of new harbour and dock facilities,
the development of gas and electricity, the introduction of street lighting, the provision of
potable water and main drainage, as well as tramways. Like burgeoning cities in Europe and
North America, urban modernisation in Latin America, was dependent on the >public utilities
revolution=, a process that under-pinned the transformation of the urban social space as
epitomised by the laying out of new parks and avenues, investment in sanitised municipal
mercados modelos, the building of escuelas normales and public opera houses and, of course,
slum clearance which paved the way for the erection of new government ministries, parliament
buildings, and elite and upper middles class residential districts, as well as those cathedrals of
modernity - railway stations43.
41
John P. McKay Tramways and Trolleys: the rise of urban mass transport in Europe (Princeton: Princeton
University Press 1976) pp.80-1, 83.
42
Chales A. Gauld The Last Titan: Percival Farquhar, American entrepreneur in Latin America (Stanford:
California Institute of International Studies/Glenwood 1972) pp.65-6; Flávio A.M. de Saes A grande
empresa de serviço público na economia cafeeira, 1850-1930 (São Paulo: Hucitec 1986); Duncan
McDowell The Light: Brazilian Traction, Light and Power Company Limited, 1899-1945 (Toronto:
University of Toronto Press 1988); Allen Morrison >Tramway Pioneers in Latin America=
[www.tramz.com/tw/p.htm1] pp.10-11, 12.
43
Richard M. Morse >Trends and Patterns of Latin American Urbanization, 1750-1920= Comparative
Study in Society & History XVI 4 (1974) pp.416-47; James R. Scobie Buenos Aires: plaza to suburb,
1870-1910 (New York: OUP 1974) pp.70-91; Jeffrey Needell A Tropical Belle Époque: elite culture and
society in turn-of-the-century Rio de Janeiro (Cambridge: CUP 1987); Armelle Enders Histoire de Rio
de Janeiro (Paris: Fayard 200) pp.210-13,225-30, 240; Michael Johns The City of Mexico in the Age of
Díaz (Austin: Texas University press 1997); José C. Moya Cousins and Strangers: Spanish immigrants
in Buenos Aires, 1850-1930 (Berkeley: University of California Press 1998) pp.150-58; Arnold J. Bauer
Goods, Power, History: Latin America=s material culture (Cambridge: CUP 2001) pp.160-64.
17
Although Latin America did not become an urban continent during the >tramway era=,
the population of most capital and port cities grew substantially. Whether due to immigration
or natural increase, with the exception of Mexico, annual average rates of national population
growth during the classic period of export-led growth ranged between 1.5 and three percent
for all the large- and medium-sized economies44. Rates of urbanisation were faster than those
of population growth. This was critical for tramways which depended on high volumes of
concentrated demand for successful operation - and expansion, particularly when
electrification spelt large, lumpy investment costs. Another feature of several early tramway
cites is worth recording - topography. In addition to concentrated demand, the lay of the land
in ports such as Buenos Aires and Havana, and even cities hemmed in by mountains such as
Rio de Janeiro and Valparaiso, was conducive to cheap tramway construction and operation.
Horse and steam tramways required a fairly level terrain. Only with the advent of electricity
was it possible to contemplate the efficient operation of trams in more heavily graded terrain.
Perhaps this was why, by 1910, Buenos Aires became the pre-eminent >City of Tramways= in
the world45.
If the pace and pattern of urban growth in many Latin American cities before 1930s
was suited to tramways, what which occurred after the 1940s was not. With the exception of
the Southern Cones economies, which were already largely urban societies, Latin America
became an urban continent within two generation of the 1930s. This process was driven by a
population explosion, rapid rural-urban migration, and the emergence of >mega= primate
cities characterised by dramatic spacial growth, the emergence of peripheral and city-centre
shanty districts, very high levels of underemployment, and >marginality= - uneven capitalist
development. Between 1930 and 1980, the share of population living in urban areas increased
from approximately 30 to over 60 percent. Around mid century, absolute urban population
growth of over 40 million a decade was being recorded46. Urban expansion of this magnitude
and character stretched existing tramway technology - and the resources of tramway
companies - beyond its limits. Unsurprisingly, by the end of the 1960s, trams had virtually
disappeared from the streets of cities in Latin America.
The political economy of the market, and the nature of the business set tramways apart
from many other areas of corporate activity. Like railways and other public utilities, tramways
were >natural= monopolies. This aspect of the business inevitably resulted in close
government supervision. In addition, once electricity became the principal source of power,
44
Rosemary Thorp Progress, Poverty and Exclusion: an economic history of Latin America in the
Twentieth Century (Washington: Inter-American Development Bank/Johns Hopkins University Press
1998) pp.22, 23; Victor Bulmer-Thomas The Economic History of Latin America since Independence
(Cambridge: CUP 2003) pp.411, 412; Richard Salvucci >Export-led Industrialization= in Victor BulmerThomas, John H. Coatsworth & Roberto Cortés Conde (eds.) The Cambridge Economic History of Latin
America, Vol. II: the long twentieth century (Cambridge: CUP 2006) pp.276-7.
45
José C. Moya Cousins and Strangers: Spanish immigrants in Buenos Aires, 1850-1930 (Berkeley:
University of California Press 1998) p.153.
46
Alan Gilbert Latin American Development: a geographical perspective (London: Pengiun 1974) pp.83127; Paul Singer Economia política de la urbanización (Mexico: Siglo XXI 1975); Victor BulmerThomas The Economic History of Latin America since Independence (Cambridge: CUP 2003) pp.306-7.
18
tramway companies became large, lumpy investments. Given the scale of investment and the
length of time needed to bring projects to fruition, from the perspective of the companies,
legislative authorisation was essential to condition the market and to promote investor
confidence. For government, licensing signalled a recognition of the conflict between implicit
monopoly and opportunities for rent-seeking, on the one hand, and public service functions
associated with social overhead projects, on the other. In short, tramways rapidly became
large technical systems, the construction, operation and evolution of which were determined
by social and technical factors47.
Determined by demography and technology, a stylised life-cycle of tramway
technology can be presented in the following terms. In the first phase, operations were
established in fairly densely settled (often pre-industrial) cities characterised by narrow,
congested streets where horse-drawn trams competed for space (and business) with carts and
other forms of non-railed transport, and with pedestrians. In the second phase, while
tramways still competed with other forms of transport in highly congested central districts, the
introduction of electric traction, the development of new residential and industrial zones (many
times associated with the construction of wide avenues and boulevards) facilitated the laying
of dedicated tram-rail systems that gave tramways a considerable edge in terms of economy,
speed, and comfort. New technology fostered the consolidation of a third phase when trams
became the principal form of mass urban transport - linking suburbs to the centre, and
connecting residential, commercial, industrial and recreational districts. The golden age of
mass tram transport was brought to an end with the arrival of the fourth phase of city
development associated with suburbanisation and the internal combustion engine - a lethal
innovation from the perspective of fixed-route tram operators. Cars and flexible bus routes
(initially operating in outlying parts of the urban sprawl, though rapidly extended into
established and central parts of cities) first competed with, and then displaced trams as the
main mass carriers, save where trams were driven underground or provided with dedicated
47
The Large Technical Systems (LTS) approach is particularly appropriate for the study of urban tramways
because it views them in >socio-technical= and not simply technical terms. That is, and approach that
includes the institutional framework, technical aspects of construction and operation, and user
expectations. See Arne Kaijser >How to Describe Large Technical Systems and Their Change over Time=
in Gunilla Jönson & Emin Tengström (eds.) Urban Transport Development: a complex issue
(Heidelberg: Springer-Verlag 2005) pp.12-3.
19
routes.48
While the stylised history of urban tramways has near universal application, several
characteristics of tram companies were either specific to Latin America, or assumed particular
importance there. First, tramways were often visibly >modern= enterprises (even early
tramways which relied on animal traction) and/or rapidly assumed an innovative, technically
advanced aspect. Secondly, and increasingly obvious as networks were consolidated, trams
constituted a novel addition to street-life and urban architecture. In this respect, they may
have appeared more >foreign=, even when largely dependent on domestic finance. Thirdly,
public utility companies were amongst the earliest large employers of urban labour, another
feature that distinguished them from domestic and foreign enterprises operating in other
sectors. This feature was especially pronounced in the >pre-industrial= cities of Latin
American. Fourthly, and as indicated above, tramways were regulated by government, usually
municipal authorities. In short, they were established and operated in accordance with a
specific framework of permissive legislation that, in addition to demarcating routes, impacted
directly on operational and managerial decision making. For example, franchises often laid
down conditions of carriage - fares and the frequency of services, and set out basic
requirements about safety. Finally, it is worth re-emphasising the impact of technology on the
operation of tramways, given the role of municipal government in the franchising and
supervision of new urban transport systems. With the introduction of electricity, operations
became more capital intensive, requiring a fairly long gestation period between inception and
operation, or from initial, partial inauguration to full network service.
48
John P. McKay Tramways and Trolleys: the rise of urban mass transport in Europe (Princeton: Princeton
University Press 1976), Chapters II & III; Arne Kaijser >How to Describe Large Technical Systems and
Their Change over Time= in Gunilla Jönson & Emin Tengström (eds.) Urban Transport Development: a
complex issue (Heidelberg: Springer-Verlag 2005) p.16.
20
In this respect, the business of operating a utility was always more political than the
environment confronting firms in other sectors - manufacturing, commerce or finance49.
Consequently, suppliers of utility services were invariably subject to the laws of politics as well
as to the rules of the market. Thus, in the case of many tramways companies operating in
Latin America, from the first prices were fixed (or administered) rather than being determined
by input costs or the mechanics of competition. Later, when the principle of regulated prices
had become firmly entrenched, regulation became a source of friction in corporate-state
relations. Companies were irked by the obligation to secure official sanction for what they
regarded as minor operational changes, issues that should be determined by commercial
considerations or management decision, rather than the fiat of town hall politicians and
officials. Hence demands by companies for greater operational freedom. Administrators, on
the other hand, wished to tighten regulatory regimes, not least as ideas about the role of the
state and the shape of the political universe changed. Tramways were particularly susceptible
to the >democratisation= of urban life around 1900, and the rise of populism after the 1930s.
And consumers had recourse to non-market forms of redress if aggrieved over the price or
quality of service - whether complaints were focussed on tramway companies, politicians, or
others, sabotaging overhead cables and torching tram cars was a convenient means of
manifesting discontent. By the inter-wars decades, the willful destruction of property had
become and occupational hazard for tram companies. All these factors had an impact on
profits and on relations with government and society. Finally, around the turn of the twentieth
century utility companies were confronted with substantial advances in operating technology,
changing consumer expectations and (often) an exponential growth in demand for services as
cities expanded. For foreign-owned tramways companies in particular, the inter-war decades
were a lethal conjuncture that entailed competition from motor cars and buses, rising
operating costs - often associated with demands for better wages and working conditions
advanced by effectively organised trade unions, a political climate that was both more
>democratic= and nationalist, and exchange depreciation. Moreover, by the late nineteenth
century, utility services rapidly became a widely consumed product, perhaps one of the first to
be enjoyed by almost every sector of urban society. This was a lucrative but potentially
politically explosive mix.
Finance and Technology: organisation, consolidation and ownership - some illustrative
histories
Complementing the life-cycle of tramways outlined above, a further stylised chronology of
Latin American tramway history can be presented. Early initiatives, around the 1850s were
associated with local initiatives and/or a modest foreign corporate presence. Fairly sustained
growth from the 1870s to the end of the century was characterised by competition, financial
crisis and corporate consolidation - principally orchestrated by >London= companies. After
1900 there was a further process of horizontal network consolidation and vertical integration
49
Linda & Charles Jones, & Robert Greenhill >Public Uitlity Companies= in D.C.M. Platt (ed.) Business
Imperialism: an inquiry based on British experience in Latin America (Oxford: Clarendon 1997) pp.1146.
21
involving the combination of electricity generation, tramway operations, and equipment
supply, a process that often involved the displacement of British by European and US power
and transport conglomerates. Finally, during and after the inter-war decades, financial- and
technology-shock induced domesticisation, namely local buyouts and nationalisation (or
municipalisation). This Latin American life-cycle is illustrated by the case-studies that follow.
That is, Buenos Aires, home to arguably the largest tramway system in the world, and Mexico
City, among one of the first to be electrified.
International businesses appeared early in Latin America. At Independence, foreign
merchant houses were able to operated legally. European merchants rapidly established a
presence in finance and production, besides dominating international trade50. Free-standing
companies were also well-established by the end of the nineteenth century in sectors like
railways, banking, and public services - not least tramways. Following investment booms in
the 1880s and the immediate pre-First World War years, by 1914 Latin America was host to
one-third to total world direct overseas investment 51. Free-standing companies were the
preferred vehicle for British and French and, to a lesser extent, German and US direct
investment in the region. In 1938, Latin America remained the principal host continent for
British, European and US international investment. Free-standing companies still typified
British and French foreign direct investment in the region, though US and German activities in
mining, manufacturing and utilities might by this stage be better described as prototransnational or >conglomerate=52.
The British contribution to tramways in Latin America was less pronounced, and more
rapidly displaced, than in sectors such as railways and banking. This may be explained by a
large >national= presence and the impact of the >electricity revolution=. From Mexico to the
Argentine, most pioneer tramways had been organised by domestic entrepreneurs, including
foreign merchants. Two technical processes had a profound impact on the ownership and
operations of tramways: first, the introduction of mechanical traction, secondly, the shift to
electricity. As already indicated, the switch from animal power made large scale operations
more profitable than small. Horse-drawn trams were a low-cost, accessible technology which
50
Túlio Halperín Donghi The Contemporary History of Latin America (London: Duke University Press
1993) pp.80-81; Rory Miller Britain and Latin America in the Nineteenth and Twentieth Centuries
(London: Longman 1993) pp.40-2; D.C.M. Platt Latin America and British Trade (London: Adam &
Charles Black 1972) pp.XXX.
51
Geoffrey Jones The Evolution of International Business: an introduction (London: Routledge 1996) p.31.
52
Esperanza Durán European Interests in Latin America (London: Routledge & Kegan Paul 1985) pp.53-4;
Geoffrey Jones The Evolution of International Business: an introduction (London: Routledge 1996) p.48.
22
did not advantage foreign operators over domestic interests who, moreover, were likely to
enjoy the political influence necessary to secure municipal concessions. Mechanical power,
and the need to extend systems to cope with urban growth, tipped the balance in favour of
companies able to raise funds overseas. Hence, amalgamation and the displacement of >local=
by London capital in many cities. However, if the shift to mechanical power appeared to
favour British enterprises, the shift to electricity did not. The electricity revolution fostered a
further round of corporate amalgamation and sectoral integration. While there were cases of
tramway companies installing generator capacity, in most cases electricity generating
companies (and electrical generator manufacturers) established forward linkages with
tramways in order to guarantee a market for power - and equipment sales. British tramway
operators were overwhelmed by competitors. As in the case of the Anglo Argentine
Tramways (which by 1914 operated the largest single private system in the world), London
registration may have continued, but effective ownership lay elsewhere. A British presence
was sustained by holding companies like Whitehall Electrical Investments Limited, but in areas
where >municipal socialism= was not the order, the emergence of >Light & Power=
corporations after the 1900s in Asunción, Guayaquil, Quito, Rio de Janeiro, Santiago de Chile,
São Paulo, Valparaiso marked a shift to French, German Italian, North American and Spanish
ownership and, occasionally, a resurgent domestic presence.
The first tramway in the city of Buenos Aires was financed by local and mercantile
capital.53 It was franchised by the law of 26th October, 1868, to run along two axes: roughly
north-south (linking the principal railway termini, Plaza Constitución, Estación Central and
Retiro) and westward from the centre. The early history of tramways was one of rapid
expansion accompanied by consolidation on a scale even more spectacular than that observed
amongst British overseas banks. With the first route functioning in 1869, others concessions
were awarded shortly thereafter. In 1870 nine companies were already in operation or about
to open. The vast majority of these enterprises were registered locally. By 1875
amalgamation had reduced the number of companies to six, three being listed in London.54
With the formation in 1876 of the Anglo-Argentine Tramways Company Limited, the rhythm
of consolidation increased. The Anglo-Argentine was set up to acquire the lines of the trailblazing Tranvía Argentino which been in operations since 1869. Thereafter it obtained control
of the Tranvía Nacional in 1878, the Boca and Barracas Tramway Limited in 1887 and the
Tranvía Central in 1890. In the process, national capital was marginalised.55
The Anglo-Argentine was not the oldest London registered company - the City of
Buenos Ayres Tramway Company Limited had been formed in 1870 - but by the 1880s had
come to operated the most extensive system in the recently federalised capital. Its tracks ran
for 65 miles, compared with the City company's 40 miles, in a total network of 183 miles - a
53
Alberto.B. Martínez >Estudio topografico de Buenos Aires' in Censo General de población, edificación,
comercio e indústrias de la ciudad de Buenos Aires (Buenos Aires 1889) pp.248-50; James .R. Scobie
Buenos Aires: plaza to suburb, 1870-1910 (New York: OUP 1974) pp. 160-7.
54
Vera B. Reber British Merchant Houses in Buenos Aires, 1810-1880 (Cambridge, Mass.: Harvard
University Press 1979) p.127; Raúl García Heras Transportes, negocios y política: la compañía AngloArgentina de Tranvías, 1876-1981 (Buenos Aires: Editorial Sudamericana 1994) pp.15-7.
55
The Times The Times Book on Argentina (London: The Times 1927) pp.122-3; James R. Scobie Buenos
Aires: plaza to suburb, 1870-1910 (New York: OUP 1974) pp.166-7.
23
system about the same length as that then in operation in London.56 Similar policies were
pursued by other large firms resulting in the consolidation of several loosely regional networks
serving different parts of the city and neighbouring suburbs. Another round of flotations,
acquisitions and mergers took place between 1904 and 1909 with the result that the
Anglo-Argentine was responsible for virtually the whole tramway system of the federal capital.
The lines of remaining independent firms were gradually integrated into the network: the City
of Buenos Ayres Tramway Company was absorbed in 1904), the Buenos Ayres and Belgrano
Tramway Company Limited in 1907, the Buenos Ayres Electric Tramway Company and the
Belga-Argentina tramway 1908 and, finally, the Buenos Ayres Grand National Tramway
Company Limited and the La Capital Traction and Electric Company (Buenos Aires) group
and the La Nueva and Metropolitano in 1909.57 Most of these amalgamations were financed
by the issue debentures. Yet even as the Anglo was absorbing existing lines, new tramways
were being projected involving local and European capital.58 At its maximum extent the
company ran services over some 430 miles of track, about 75 per cent of the total system in
the city of Buenos Aires, excluding the light railways in the docks.
56
The Economist, 28th March 1891 pp.402-3; Mulhalls, Handbook, 1892, p.296.
57
Municipalidad de Buenos Aires, Memoria de la Intendencia Municipal de Buenos Aires, 1908, (Buenos
Aires, 1909) pp.vii-viii; Anglo-Argentine Tramways Company Limited, (hereafter Anglo-Argentine),
Report of the Directors to the Shareholders and the Revenue Account and Balance Sheet for the Year
Ending December 31st, 1908 (hereafter Report ...) (London, 1909) pp.4-5, Report ... 1909 (London,
1910) pp.6, 10-11. Both the company and the municipal authority viewed fusion as fostering speedier
communications between the suburbs and the centre.
58
The Times The Times Book on Argentina (London: The Times 1927) pp.122-3.
24
What provoked the early growth of the system and the near hegemonic position
obtained by the Anglo-Argentine? The rapid growth of the city of Buenos Aires is an obvious
explanation. Another is provided by the process of technological change and yet another by
the political economy of public utility operations. The city of Buenos Aires grew rapidly
around the turn of the century and was transformed from a modest colonial-style capital into
one of the great metropolises of the western world. The change in the landscape and economy
of the city, as in its social composition and cultural life, was marked. The huge expansion in
urban population meant good business for tramways and for the Anglo in particular. Indeed,
the peculiarities of urban growth in Buenos Aries could not be explained without reference to
the tramways. Topography was partly responsible for the spatial spread of the city. The
flatness of the pampa accounts for the tendency of the city to grow outwards rather than
upwards. Nevertheless, it was the tramways that assisted this process, integrating barrios and
linking groups of city blocks (cuadras) to central districts. Before the turn of the century, the
tram was the most important factor accounting for the westward march of the city across the
pampas59. By the 1920s, more distant residential suburbs would be developed by the railways
for the emergent lower-middle and working classes.
Arguably, the Anglo was the principal beneficiary of this expansion. By the early
twentieth century, company annual reports were peppered with references to construction the expansion of the port, the development of new industries, the opening of banks and shops
and the inauguration of public projects in central zones and the erection of blocks of flats and
houses in virtually every barrio - all of which meant increased demand for its services.60 The
Anglo would claim that the exponential growth in passenger traffic resulted from efficiency
gains associated with amalgamation, a process that made for integrated services and lower
operating costs. As indicated above, in 1910 Anglo-Argentine trams handled 85 percent of
the total tramway passenger traffic of the city. This was to place a managerial gloss on a
process that was driven by technical rather than conventional commercial or administrative
convenience.
Technological change was an imperative, possibly the most important factor,
underlying consolidation and integration in the utilities sector across the globe during the late
nineteenth century. Electrical power was not scale-neutral. The history of tramways shows
that there was a close correlation between traction and scale of operation. When horses were
the main form of tramway traction, many companies had been relatively small usually
operating a few lines in geographically circumscribed zones. Horse-drawn tramways were a
relatively cheap technology accessible to all-comers. There were few barriers to entry into the
industry and little difference between domestic and foreign firms. Arguably, at this stage, the
critical element was the concession which set out the terms of operation and in this area local
companies may have enjoyed better political connexions and so a competitive edge over
59
José C. Moya Cousins and Strangers: Spanish immigrants in Buenos Aires, 1850-1930 (Berkeley:
University of California Press 1998) pp.153-8 Raúl García Heras Transportes, negocios y política: la
compañía Anglo-Argentina de Tranvías, 1876-1981 (Buenos Aires: Editorial Sudamericana 1994) p.14
60
See, for example, Anglo-Argentine, Report...1908 (London, 1909) p.7, Report...1909 (London, 1910)
p.10, Report...1910, (London, 1911) pp.4, 8, 10, Report...1911, (London, 1912) p.4. See also
Municipalidad de Buenos Aires, Memoria de la Intendencia Municipal de Buenos Aires 1908, (Buenos
Aires, 1909) p.xiii which charts improvements in the quality of construction as well as the physical growth
of the city between 1904 and 1908.
25
foreign rivals. However, as García Heras has shown, the operating environment changed
dramatically with the shift to electrical power. 61 Electricity also provided short-haul tramways
with an efficiency gain over railways and encouraged the expansion of the network into some
outer suburbs previously served exclusively by rail.
While precise causality may be disputed, once the feasibility of electric powered trams
had been demonstrated, two inter-related changes occurred, namely the amalgamation of
tramway companies and the integration of power generation and urban transport. Saes offers
a convincing account of the impact of technological change on the integration of urban utility
services in Brazil.62 There is little reason to doubt that the situation in Buenos Aires was any
different. Indeed, the history of the Anglo-Argentine suggests that the parallels were strong.
Usually, vertical integration was first triggered by power generating companies searching for a
guaranteed market. Once a tramway company adopted electrical traction, there was then a
tendency for horizontal integration in the transport sector. Electricity was efficient. It was
also expensive. Hence the quest for economies of scale through vertical and horizontal
expansion. Hence too, the tendency to capital diffusion. It was at this stage that the Anglo
turned increasingly to continental European capital markets. Again, causality defies precise
analysis: was the Anglo searching for finance to effect a modernisation of the sector or were
European energy companies and suppliers of electrical equipment seeking guaranteed markets
for their products through vertical consolidation. Whatever, the consequence was a
mushrooming of new capital issues by the Anglo, the rapid absorbtion of competitive lines, an
increasing dependence on continental European finance (British stockholdings were almost
relegated to a rentier character notwithstanding London registration) and ever closer links
with European suppliers.63 In the case of the Anglo, electrification entailed an increasingly
close relationship with the Société Financière de Transports et d=Entreprises Industrielles
(SOFINA), an international holding company registered in Belgium. SOFINA was closely
connected with another Brussels registered company, the Compagnie Générale, a financeindustrial consortium, and Allgemeine Electricitats Gesselschaft (AEG), the German electrical
firm. These businesses integrated finance and the manufacture of electrical equipment - both
for power generation and transport. By 1930 effective control of the Anglo company lay in
Belgium, though whether this entailed Belgian or German capital continued to exercise the
British Foreign Office, as García Heras shows64.
The degree of concentration in the sector achieved by the Anglo before the First World
War is remarkable. The development of electrical energy may have been the principal reason
why sectoral consolidation proceeded rapidly. Yet, as with other utilities, there was almost a
pathological tendency towards amalgamation driven by the nature of the business. In this
61
Raúl. García Heras, Transportes, negocios y política: la compañía Anglo-Argentina de Tranvias, 18761981 (Buenos Aires: Sudamericana 1994) pp.16-8.
62
Flávio A.M. de Saes A grande empresa de serviço público na economia cafeeira, 1850-1930 (São Paulo:
Hucitec 1986) pp.146-55.
63
Raúl. García Heras, Transportes, negocios y política: la compañía Anglo-Argentina de Tranvias, 18761981 (Buenos Aires: Sudamericana 1994) pp.18-9, 36-8, 88.
64
Raúl. García Heras, Transportes, negocios y política: la compañía Anglo-Argent.ina de Tranvias, 18761981 (Buenos Aires: Sudamericana 1994) pp.9-10, 37-8
26
respect, technological change provided not only the incentive for sectoral dominance but also
a presentational gloss for cruder tendencies. Franchising authorities and consumers were told
that amalgamation would facilitate innovation and administrative convenience - for the
company and the municipality alike. This type of argument raised expectations without
necessarily reducing public suspicion of consolidation. If, for the company, the eradication of
competition was a paramount imperative, it could argue that earnings (stable dividends) were
essential to sustain capital inflows upon which network growth and improvement depended.
This was the perennial justification for `secure revenue': modest, reliable income promoted
shareholder confidence and so the flow of funds essential if consumer needs were to be
addressed. In the case of the tramways, if Buenos Aires residents desired a better quality of
service implicit in electrification, improvements which included faster and more frequent
services and the laying of track underground to ease congestion, this could only be guaranteed
by a level of tariff income sufficient to meet the reasonable expectations of shareholders. By
the eve of the First World War, the problem of traffic congestion in central Buenos Aires was
widely acknowledged.65 Critics tended to hold the Anglo responsible for a disproportionate
share of traffic accidents and bottlenecks, occasioned as trams negotiated tight curves at the
corners of narrow streets street laid out on a colonial grid pattern. The long-term solution to
traffic density clearly lay in the opening of new underground lines - as demonstrated by the
success of the first section of the underground railway inaugurated in 1913. Consequently, the
company began to place greater emphasis upon qualitative improvements to services than on
the physical expansion of the network.
Various projects were submitted to the municipality after the War. Although the
second section of the first underground was completed, no further lines were built by the
Anglo-Argentine. An ambitious scheme for an extensive network of lines was thwarted by
growing conflict with the municipality over rate regulation, a conflict in part provoked by
>unregulated= bus competition.66 During the 1920s, the company attempted to sustain its
position by up-grading tramway services. Lines were re-laid (usually in conjunction with
municipal road improvements) and electrification standardised. New cars were introduced and
more lines were operated by single motorised units. Between 1923 and 1927 the total number
of cars grew from 2,439 to 2,569, virtually the whole of the increase being accounted for by
powered units (only two new trailers were added to the park) while an additional 460
motorised vehicles were on order in 1928. Finally, in 1926 the company inaugurated its own
fleet of buses.67 The result was faster running speeds (outside the central zone of the city) and
more frequent services. Yet, parallelling concerns of Mexico Tramways, the company became
65
W.H. Koebel, Argentina Past and Present (London: Adam & Charles Black 1914) p.167; AngloArgentine, Report ... 1909) (London 1910) p.6.
66
The original underground railway concession, dated 18th March, 1910, awarded to the Anglo by the
municipality envisaged three lines (which partly mirrored the original tramway congestions). The first
route was to be a four mile line from Plaze de Mayo to Plaza Primera Junta (the first section to Plaza Once
to be completed by mid-1913 and the remainder within another two years). The second line would connect
the main railway termini at Plaza Constitución and Retiro, some two and a half miles to be completed by
the end of 1914. The construction of the third line, from Plaza de Mayo to Plaza Italia (a little less than four
miles), would be co-ordinated with city street widening on the north side of the city, namely Diagonal
Norte and Avenida Santa Fé, see Anglo-Argentine, Report...1909, (London, 1910) pp.6-8.
67
Compañía de Tranvias Anglo Argentina Ltda., Cinco años de trabajos y perfeccionamientos técnicos,
(Buenos Aires, 1928).
27
increasingly alarmed at the growing number of buses operating in the federal capital and was
acutely aware that improved services in the centre of the city could only be provided by
underground lines.68 However, insufficient attention was given to the possibility of network
growth which might have discouraged buses running into the centre from barrios beyond the
range of the tramway or where tram services were thin on the ground. Within ten years the
company would be devastated by the mushrooming of independent taxi-buses (colectivos)
operating on fixed routes. It simply could not compete.
In the mid 1920s, when only a few bus routes had been franchised, the tramways were
handling over 80 per cent of passenger journeys. At the end of the decade, with more routes
licensed, buses accounted for about one third of the traffic. By 1939, the tramways, buses and
colectivos each carried about 30 per cent of total passenger traffic with the underground
handling the balance.69 Repeatedly, the company expressed the hope that the beautification of
Buenos Aires, particularly the street widening and the construction of dual carriageways into
the centre of the city, would ease traffic congestion and improve running times. The pace of
urban improvement inaugurated before the First World War accelerated during the 1920s but
the result was not as anticipated by the Anglo. The construction of the diagonales and
conversion of narrow calles into avenidas (for example, Corrientes, Córdoba, de Mayo and
Santa Fé) simply gave motor vehicles even easier access to the centre. Between 1919 and
1939 the population of the city of Buenos Aires increased by two-thirds, paved highway route
mileage nearly doubled while the number of private cars licensed by the municipality increased
from 4,800 to 53,500. In 1923 200 buses were registered: in 1933 the figure was 1,800. Data
for colectivos only exists for the post 1933 period: in that year there were 2,800, by 1937
records show 3,400 vehicles.70 As the city expanded, urban growth was most observed in the
outer suburbs where land prices were cheaper. Western districts were particularly favoured by
the burgeoning lower middle class which aspired to home ownership. Suburban commuters
now had access to employment in the centre by means of cheap taxi-buses that plied along
macadamised highways. By failing to agree terms with the municipality for the construction of
cut-and-cover underground lines and by concentration on improving the quality of existing
lines rather than pushing track into new suburbs, the Anglo became an easy target for
colectivos, consumers of urban transport services and politicians.
68
Anglo-Argentine, Report...1928, (London, 1929) pp.5, 8, Report...1929, (London, 1930) p.5.
69
Raúl García Heras Automotores, norteamericanos, caminos y moderinización urbana en la Argentina,
1918-1939 (Buenos Aires: Libros de Hispanoamérica 1985) p.101.
70
Raúl García Heras Automotores, norteamericanos, caminos y moderinización urbana en la Argentina,
1918-1939 (Buenos Aires: Libros de Hispanoamérica 1985) pp.94-8.
28
The deterioration in relations with first the local authorities and subsequently
customers and employees was marked by a series of protracted disputes over concessions,
street widening, fares and working practices. Failure to agree underground railway fare
structures saw concessions for new lines awarded to European and local consortia.71 Mired in
political disputes and overtaken by capital famine triggered by the inter-war depression, the
company had no effective response to the catastrophic growth in road competition after 1930.
Attempts to squeeze wages and adjust working conditions occasioned violent confrontation
with workers and charges by the municipality that the company was acting unconstitutionally.
Fare increases, even when accepted by the city government, led to boycotts by passengers,
attacks on company property and an accelerated drift of custom to the buses.72 Complaints
about deteriorating services - delays, poor time keeping and shoddy rolling stock - rose as
profits fell and little provision was made for depreciation.
Since the beginning of the century, some commentators had observed the shadow of
economic nationalism in virtually every dispute involving British utility companies and the city
government.73 The souring of relations between the Anglo and the city government during the
1920s over issues such as taxes, tariffs and concessions may also have been a function of the
methods of financing pre-First World War take-overs. It was not simply a question of a
pattern of corporate development that emphasised the quality rather than the extent of
services. As indicated above, most amalgamations were funded by increasing debenture
capital. A top-heavy capital account may have engendered greater caution on the part of the
Board of Directors and heightened sensitivity to changes in the political environment in
Buenos Aires, not least as receipts per car-mile plummeted from 17.53 pence (d) in 1922 to
12.58 pence in 1932.74 As argued below, companies which had raised a larger proportion of
equity capital were less traumatised by income contraction during periods of economic
contraction.
The company=s much vaunted solution to this grim situation was transport
co-ordination - a project to integrate tramway, underground and bus services in the city.
Backed by the Argentine federal government and enjoying financial and diplomatic support
from London, the Anglo-Argentine assumed that the scheme was both technically feasible and
politically acceptable. In this it was mistaken. The municipality procrastinated alarmed at the
strength of popular feeling against the project mobilised by bus operators who, with some
justice, presented the arrangement as a device to bale out a foreign company at the expense of
consumers and independent local (colectivo) lines. Buenos Aires transport co-ordination was
only finally enacted just before the outbreak of the Second World War. The whole episode
proved the undoing of the company. Part of the price to be paid for co-ordination was direct
state representation in the new authority and new promises about system up-grading in terms
of quality and extension. It will never be know whether or not the scheme was feasible and
71
Raúl. García Heras, Transportes, negocios y política: la compañía Anglo-Argentina de Tranvias, 18761981 (Buenos Aires: Sudamericana 1994) pp.85-8.
72
Anglo-Argentine, Report...1931, (London, 1932) pp.5, 7-9, Report...1932, (London, 1933) pp.4-5, 7-9.
73
Buenos Aires Standard quoted in The Economist, 7th November 1903 p.1892.
74
Anglo-Argentine, Report...1931, (London, 1932) p.11, Report...1932, (London, 1933) p.11.
29
might have ensure a continued British presence in the sector. The project was overtaken by
the outbreak of War which placed further strain on existing capacity and prevented investment
in new lines. One of the first acts of the 1943 military government was to intervene directly in
the affairs of the Buenos Aires transport co-ordination authority, marginalising the managerial
role of private sector interests.75 The new regime was unmoved by the protests and claims of
expatriate managers and foreign shareholders and when new investment again became possible
decided upon a bus and underground strategy. Trams were to be removed from the streets of
Buenos Aires as the direction of traffic circulation soon change from the left-handed
>English= system to the right.
The predicament of the Anglo in the 1930s and 1940s was singular but not entirely
unrepresentative of utilities generally, and tramways in particular, as illustrated by the history
of Mexico Tramways recounted below. For example, attempts to combat competition by
merger were not unusual, though few enterprises could boast the Anglo-Argentine=s
apparently steady progress towards sectoral supremacy. Of course, that progress was neither
effortless nor costless. As the company discovered, there was always a political price to be
paid, either at the moment of consolidation or subsequently. And there were organisational
and financial feature of amalgamation that lent weight to popular criticism. Takeovers and
mergers invariably involved an exchange of stock, an occasion generally accompanied by
excessive valuations and the introduction of a great deal of >water into capital accounts. Prior
charged, watered stock represented an enduring burden to equity stock holders, was often
reflected in higher charges to consumers and always reduced a company's flexibility of
response to crises. The Anglo-Argentine=s difficulty in coping with the challenge mounted by
colectivos, as underscored by the more extreme example of Mexico Tramways, was not simply
due to the technical superiority of the internal combustion engine. Buses operating on the
public highway may have enjoyed a hidden subsidy and were able to respond with greater
flexibility and speed to changing patterns of urban settlement compared with trams running on
fix routes constructed with private capital. Nevertheless, some of the problems of the
company were a function of the means by which consolidation had been achieved. The pursuit
of monopoly effected by means of heavily geared capital accounts burdened revenue, limited
innovation and encouraged shrill complaints to government.
75
Raùl García Heras Transportes, negocios y política: la compañía Anglo-Argentina de Tranvias, 18761981 (Buenos Aires: Sudamericana 1994) pp.121-41, 169-86 >State Intervention in Urban Passenger
Transportation: the Transport Corporation of Buenos Aires, 1939-1962= Hispanic American Historical
Review 74:1 (1994) pp.85-8, 98.
30
The early trajectory of the Mexico Tramway Company Limited differs little from that
of the Anglo in Buenos Aires. It emerged in 1906 as the result of the fusion of a number of
local- and London-registered enterprises. Some of the precursor tramways were formed in the
early 1870s, other followed in the more stable 1880s. There was, however, one main
difference with the experience of Buenos Aires. Even at this early stage there was a
substantial presence of North American (principally Canadian) capital. Although registered in
London in 1907, the company was firmly in the hands of the Light & Power Group, the
Montreal-Toronto syndicate headed by F.S. Pearson76. According to Armstrong and Nelles,
the principal vehicles of the Pearson Group, initially Brazilian Traction and Mexico Tramways,
were overwhelmingly Canadian controlled and, indeed, represented around 90 percent of all
Canadian investment in Latin America at the beginning of the twentieth century77. (Later,
both holdings would operate under the name Light & Power.)
Across the republic, while some companies had been formed in the 1860s and 1870s, it
was principally during and after the 1880s that most large cities acquired tramways, often at
much the same time as street lighting was introduced78. Perhaps because markets were small,
most power companies also operated on a relatively small scale and sought to supply factories
and commercial establishments as well as tramways and municipalities anxious to introduce
public lighting. According to Liehr and Torres, by 1911 there were more than a hundred local
and regional light and power companies in operation, mostly owned by national and immigrant
entrepreneurs79. In this respect, conditions in power generation differed little from that in the
tramway sector. Namely, there was a multiplicity of small or local operators. In short, both
sectors were ripe for consolidation. Tramway consolidation was pioneered by a local
business, Compañía Limitada del Ferrocarriles del Distrito, founded in 1882 by members of
the Mexico City business and political elite80. Initially a street railway, Ferrocarriles del
76
Manuel Vidrio >Sistemas de transporte y expansón urbana: los tranvías= in Alejandra Moreno Toscano
(ed.) Ciudad de México: ensayo de construción de una historia (Mexico: INAH 1978) pp.201-17;
Christopher Armstrong & Vivien H. Nelles >La empresa corporative en el sector de servicios púplicos: el
desempeño de las compañías canadienses en México y en Brasil, 1896-1930= in Carlos Marichal (ed.)
Las inversiones extranjeras en América Latina, 1850-1930: nuevos debates y problemas en historia
económica comparada (Mexico: El Colegio de México/Fondo de Cultura Económica 1995) pp.127, 1301; Carlos Marichal >Avances recientes en la historia de las grandes empresas y su importancia para la
historia económica de México= in Carlos Marichal & Mário Cerruti (eds.) Historia de las grandes
empresas en México, 1850-1930 (México: Fondo de Cultura Económica 1997) p.27; Reinhard Liehr &
Mariano Torres Bautista >Los free-standing companies británicas en el México del porfiriato, 18841911= Historia Mexicana XXXXVII (1998) pp.635-53.
77
Christopher Armstrong & Vivien H. Nelles >La empresa corporative en el sector de servicios púplicos: el
desempeño de las compañías canadienses en México y en Brasil, 1896-1930= in Carlos Marichal (ed.)
Las inversiones extranjeras en América Latina, 1850-1930: nuevos debates y problemas en historia
económica comparada (Mexico: El Colegio de México/Fondo de Cultura Económica 1995) p.127.
78
Manuel Vidrio >Sistemas de transporte y expansón urbana: los tranvías= in Alejandra Moreno Toscano
(ed.) Ciudad de México: ensayo de construción de una historia (Mexico: INAH 1978) pp.201-17; Georg
Leidenberger >The Mexico Tramways Company: business performance and public positioning, 19001945= mimeo (2001) pp.4-5.
79
Reinhard Liehr & Mariano Torres >From Free-standing Company to Public Enterprise: the Mexican Light
& Power Company, and the Mexican Tramways Company, 1902-1965= mimeo. (2002) p.4.
80
Georg Leidenberger >The Mexico Tramways Company: business performance and public positioning,
31
Distrito appears to have embarked on a programme of modernisation that included the
amalgamation of independent carriers, the conversion of the system to a true tramway, and a
switch from animal power to electricity. Possibly the enterprise was insufficiently capitalised
to effect all these tasks simultaneously. For whatever reason, it soon became a target for
foreign takeover, and was acquired in 1896 by a London group headed by South African
diamond millionaires Juliua Wernher and Alfred Beit who registered the company as the
Mexico Electric Tramways Company, and pushed ahead with the programme of integration
and electrification81.
While Ferrocarriles del Distrito-cum-Mexico Electric Tramways drove consolidation in
the tramway sector, the then Halifax-based and registered Mexican Light & Power Company,
formed in 1902, was looking to consolidate energy production. Gradually, the company
acquired and absorbed a group of firms engaged in gas production, steam power supply and
thermal electricity generation in Mexico City and central Mexico. By the 1920s, the company
was also interests in hydroelectricity Firms taken over by the Canadian group had previously
been registered in Mexico and overseas, had been founded by local, British, and European
capitalists, and relied on German and British engineers and suppliers. By 1910 Mexican Light
& Power had moved its head office first to Montreal and then Toronto 82. Perhaps the move to
Toronto was occasioned by the aggressive strategy of acquisitions and expansion embarked on
after 1905, a process of rationalisation and growth that demanded very large amounts of
funds, and so required Pearson to establish a strong profile in the business and financial capital
of Canada83. It was also the case that some of the acquisitions proved extremely costly, and
the company make have over-invested in energy generation, anticipating a growth in demand
that simply was not there.
Most writers attribute the fusion of electricity generation and tramway operations to an
over-supply of power. Perforce Pearson had to bang heads together, persuading the Wernher
Beit group to sell Mexico Electric Tramways to the Mexico Tramways Company which had
been set up for that purpose. Mexico Tramways then raised the capital necessary to acquire
the ailing Mexico Light & Power Company84. In effect, it was the tramway which absorbed
1900-1945= mimeo (2001) p.5.
81
Christopher Armstrong & Vivien H. Nelles >La empresa corporative en el sector de servicios púplicos: el
desempeño de las compañías canadienses en México y en Brasil, 1896-1930= in Carlos Marichal (ed.)
Las inversiones extranjeras en América Latina, 1850-1930: nuevos debates y problemas en historia
económica comparada (Mexico: El Colegio de México/Fondo de Cultura Económica 1995) pp.130-1;
Georg Leidenberger >The Mexico Tramways Company: business performance and public positioning,
1900-1945= mimeo (2001) p.5.
82
Reinhard Liehr & Mariano Torres >From Free-standing Company to Public Enterprise: the Mexican Light
& Power Company, and the Mexican Tramways Company, 1902-1965= mimeo. (2002) pp.1, 4-9.
83
Christopher Armstrong & Vivien H. Nelles >La empresa corporative en el sector de servicios púplicos: el
desempeño de las compañías canadienses en México y en Brasil, 1896-1930= in Carlos Marichal (ed.)
Las inversiones extranjeras en América Latina, 1850-1930: nuevos debates y problemas en historia
económica comparada (Mexico: El Colegio de México/Fondo de Cultura Económica 1995) pp.130-1.
84
Georg Leidenberger >The Mexico Tramways Company: business performance and public positioning,
1900-1945= mimeo (2001) pp.6-7; Reinhard Liehr & Mariano Torres >From Free-standing Company to
Public Enterprise: the Mexican Light & Power Company, and the Mexican Tramways Company, 19021965= mimeo. (2002) pp.11-12.
32
the power company, though the group subsequently became known as Light & Power. In
addition to the >direction= of takeover, there was another difference with the Anglo in
Buenos Aires. Like it counterpart in Brazil, the Mexico group operated in various parts of the
republic, becoming a nation-wide, rather than a regional enterprise. Anglo operations were
narrower in outreach, perhaps because the Buenos Aires market place was so large. National
consolidation in the Argentinian energy sector tended to occur after the 1930s, and did not
entail quite the same integration of transport and power generation as occurred in parts of
Mexico and Brazil under the auspices of Light & Power.
In many other respects, however, the experience of the Mexico company differed little
from that of the Anglo, save that the vicissitudes of the inter-war decades were intensified by
the Mexican Revolution. Echoing the experience of the Anglo, Leidenberger observes that
Mexico Tramways > ... moved from being a modernizer and monopoly provider of a crucial
urban service, streetcar transportation, to facing extensive competition by jitney and bus
systems ... during times of extensive demographic and physical growth of the city.=85 Like the
Anglo, Mexico Tramways was ultimately trapped between technology shift and a considerable
change in the rules of the public debate signalled by >urban democratisation= and a new
ideology of state action. The nationalist, anti-monopolistic and populist/corporatist rhetoric
and policies of the Mexican Revolution allowed foreign companies even less room for
manoeuvre. For example, unlike its counterpart in the Argentine, Mexico Tramways was
actively discouraged from entering the bus business.
With the end of the military phase of the Revolution, Mexico Light & Power was able
to raise new funds to extend hydroelectricity facilities but, by the end of the 1920s became
dependent on the ubiquitous SOFINA to complete and extend hydro electricity projects. In
exchange for capital and equipment advances the Brussels conglomerate obtained a subatantial
state in Toronto companies in Mexico. As Liehr and Torres argue, in the energy and
electricity sectors only really big international players could survive. Holding conglomerates
like SOFINA enjoyed substantial technical and financial economies of scale and scope when it
came to bond issues, manufacture, technology development, and the management of
subsidiaries. By the 1930s, Toronto Light & Power operations in Mexico had effectively
passed to SOFINA86.
Irrespective of whether control lay in Toronto, Brussels, or elsewhere, the subsequent
history of the Mexico tramway differed not so greatly from that of its Argentinian counterpart,
though the increasingly interventionist stance of the Mexican state may have heightened and
intensified tendencies observed in other parts of the continent 87. Relations between the
85
Georg Leidenberger >The Mexico Tramways Company: business performance and public positioning,
1900-1945= mimeo (2001) p.2.
86
Reinhard Liehr & Mariano Torres >From Free-standing Company to Public Enterprise: the Mexican Light
& Power Company, and the Mexican Tramways Company, 1902-1965= mimeo. (2002) pp.12-13. See
also, Christopher Armstrong & Vivien H. Nelles >La empresa corporative en el sector de servicios
púplicos: el desempeño de las compañías canadienses en México y en Brasil, 1896-1930= in Carlos
Marichal (ed.) Las inversiones extranjeras en América Latina, 1850-1930: nuevos debates y problemas
en historia económica comparada (Mexico: El Colegio de México/Fondo de Cultura Económica 1995)
pp.132-3.
87
Christopher Armstrong & Vivien H. Nelles >La empresa corporative en el sector de servicios púplicos: el
33
company and authorities was far less cordial from the 1920s onwards than they had been
during the pre-1911 profirian regime - at federal and municipal levels. As with the Anglo,
Mexico Tramways managers were irked by what they regarded as petty regulation, though the
space created by the Revolution for organised labour presented the company with even greater
difficulties. In the 1920s Light & Power administrators in Mexico complained that labour
relations(disputes in part provoked by an inter-union struggle for dominance in the sector) was
the principal factor preventing an improvement in company financial performance, and the
conglomerate found that labour costs in Mexico were rising considerably faster than in
Brazil88.
While rising labour costs drove up operating costs, growing competition from taxibuses prevented fare hikes (assuming that the municipality would have agreed to a rise in
ticket prices) and pressed further on profits. The political economy of operations meant that
the company failed to extend the system - which reached its maximum extent of 213 miles in
1917 - during the inter-war decades. This failure further undermined the competitive position
of the company and occasioned complains about unresponsiveness to consumers needs. While
the tramway was plagued by labour problems and service disruption, taxi-buses creamed-off
passengers in central districts while monopolising new passenger growth in residential
colonias beyond the tramway network. Debilitated by problems of the 1920s, the company
was devastat by events of the 1930s. Labour conflict intensified and there was an accelerated
drift of passengers from tram to taxi-buses. There was little public acknowledgement - or
sympathy - for the predicament of the company. On the contrary, stock exchanges between
the power and tramway branches of Light & Power operations, and deals with SOFINA fed
the perception that the interests of labour and passenger were being sacrificed to protect
foreign capitalists. The relationship between the two branches of Light & Power business in
Mexico, and engagements with SOFINA became a matter of public debate and scrutiny89.
How much >water= was being introduced into the capital account?
Parallelling to course of events in Buenos Aires, management lost control of labour
relations, operating costs, and pricing policy. While transport co-ordination has served as the
Trojan Horse for government intervention in the case of the Anglo, for Mexico Tramways, it
was failure to agree a new contract with labour. On the one side faced by government
demanding network extension and broad improvements in services, and on the other labour
desempeño de las compañías canadienses en México y en Brasil, 1896-1930= in Carlos Marichal (ed.)
Las inversiones extranjeras en América Latina, 1850-1930: nuevos debates y problemas en historia
económica comparada (Mexico: El Colegio de México/Fondo de Cultura Económica 1995) p.139.
88
Georg Leidenberger >The Mexico Tramways Company: business performance and public positioning,
1900-1945= mimeo (2001) pp.9-10, 12-13; Christopher Armstrong & Vivien H. Nelles >La empresa
corporative en el sector de servicios púplicos: el desempeño de las compañías canadienses en México y en
Brasil, 1896-1930= in Carlos Marichal (ed.) Las inversiones extranjeras en América Latina, 1850-1930:
nuevos debates y problemas en historia económica comparada (Mexico: El Colegio de México/Fondo de
Cultura Económica 1995) pp.138-42.
89
Georg Leidenberger >The Mexico Tramways Company: business performance and public positioning,
1900-1945= mimeo (2001) pp.18-22; Reinhard Liehr & Mariano Torres >From Free-standing Company
to Public Enterprise: the Mexican Light & Power Company, and the Mexican Tramways Company, 19021965= mimeo. (2002) pp.13-15.
34
demanding wage hikes and substantially improved social benefits, it was almost a relief when
government intervened and took over the company - at a stroke denying Light & Power
managers access to their offices and sequestrating company assets90.
Conclusions
The story of tramways in Latin America offers much to the historian of business, the student
of the continent=s place in an increasingly globalised economy, and the cultural historian. A
field of initial, substantial local investment, tramways across Latin America were rapidly
absorbed by international conglomerates around 1900. Horizontal and vertical integration
entailed both >denationalisation= and corporate reorganisation - from the free-standing
company to the global holding. In their hay day, tramway companies epitomised technological
and organisational modernity. Tramways also transformed cities. First conceived as part of
the project of elite urban modernisation in Latin America, trams rapidly assumed a popular
dimension, becoming the first method of mass rapid urban transit. In sum, tramways were
both >large technical systems= and a mechanism for the social transformation of the urban
space. Economic and cultural attributes of tramways, and the cityscape that they engineered,
allowed Mexico City and Buenos Aires to aspire, respectively, to the title of the Paris of
Iberoamérica and South America91.
Porteños, it was stated, were positively addicted to riding electric trams, even for very
short distances92. In Mexico, the tram was the acne of modernity - symbolising comfort,
style, and >Europeaness=93. In these and other cities, the tram became an integral part of
everyday social life, much more than simply an economic necessity - the main means of getting
to and from work and, when tram car-burning became convenient means of popular protest, of
political life. Indeed, the tram also became increasingly democratic. At the outset, some
companies envisaged a clientele composed mainly of the emergent urban professional middle
class, but as a means of mass urban transport, tram-riding was speedily popularised.
90
Georg Leidenberger >The Mexico Tramways Company: business performance and public positioning,
1900-1945= mimeo (2001) pp.22-23.
91
Mauricio Tenorio Trillo >1910 Mexico City: space, and nation in the ACity of the Centenario@= Journal
of Latin American Studies XXVIII 1 (1996) pp.83-4.
92
José C. Moya Cousins and Strangers: Spanish immigrants in Buenos Aires, 1850-1930 (Berkeley:
University of California Press 1998) pp.153-4.
93
Mauricio Tenorio Trillo >1910 Mexico City: space, and nation in the ACity of the Centenario@= Journal
of Latin American Studies XXVIII 1 (1996) p.83.
35
Along with other foreign-owned enterprises and innovations associated with the cycle
of export-led growth, proponents of dependency were inclined to view tramways as another
mechanism of exploitation, and/or and an expression of the crowding out of local interests.
The displacement of local capital and consolidation of international holdings bent on securing
monopoly franchises appeared to validate this interpretation. Research by business historians,
however, offer alternative views. While dependistas are mainly concerned with outcome
rather than motive, Leidenberger is probably correct when arguing that the quest for
monopoly was less driven by an imperialistic objective than the capital-intensive, >immobile=
nature of the business94. In this sense a focus on the >imperialism versus anti-imperialism=
aspect of the story has generated much noise though little light as it ignores limits on any
wouldbe imperialistic behaviour, namely the rise of strong labour movements in the urban
service sector and a tendency towards municipal and state regulation. Greenhill and the
Joneses would concur. Although writing generally about British utilities in Latin America they
are impressed by the vulnerability of companies such as tramways. Utilities had little effective
redress against labour troubles, the non-payment of municipal debts, the imposition of
politically motivated harsh operating condition, a hostile press and organised groups of users
with the ear of government. Once utilities had invested huge sums, they could not suddenly
depart when conditions deteriorated. Even if competition was eliminated, firms had to
modernise, and the range of options open to officials intent on controlling tramways increased
over time95.
Perhaps this re-assessment of the balance of power between utilities and
franchising/regulatory authorities also helps explain the changing influences of distinct foreign
actors within the sector. Increased operating costs - whether due to a cap on fares, municipal
and national taxation, labour pressure or exchange depreciation - reduced operating profits
and funds available for distribution among shareholders and bondholders. On the other hand,
while tram operators continued to invests in electricity supply, network expansion and vital
depreciation, there was still a good return to be made from the sale (usually on commercial
credit) of generating and operating equipment. In this respect, for firms like AEG, Compagnie
Générale, and some financial consortia associated with Light & Power, tramways continued to
represent good business, though without the hassle of day-to-day administration and the
tedium of municipal politics. Irrespective of ownership, once a network was functioning,
operators tended to be committed to a particular supplier. Sales contracts could be sustained
with little more than a nominal stake in an individual tramway company. Hence the
94
Georg Leidenberger >The Mexico Tramways Company: business performance and public positioning,
1900-1945= mimeo (2001) p.26.
95
Linda & Charles Jones, & Robert Greenhill >Public Utility Companies= in D.C.M. Platt (ed.) Business
Imperialism: an inquiry based on British experience in Latin America (Oxford: Clarendon 1997) pp.1178.
36
significance of holding groups and financial-industrial complexes such as SOFINA and
Compagnie Générale during the >second= industrial revolution when coal, steam, cotton and
iron were no longer king, supplanted by electricity, oil, modern chemicals and assembly-line
production.
A precocious consolidation of holdings, notably in the utilities sector, and the history
of the Anglo and Mexico Tramways, similarly shed light on larger debates in the literature, and
on trends observed during the period. As indicated, in stressing the >leanness= of freestanding companies, Wilkins acknowledges both the flexibility of the model (though regarding
it as enjoying a limited shelf-life and insufficiently structured) and the importance of London
registration. The free-standing framework minimised risk and maximised funding
opportunities, particularly when The City was the paramount world financial centre, and it was
assumed that British savers would not invest in companies managed by foreigners96.
Promoters such as Pearson recognised the several advantages of London registration. For the
purpose of this paper, these are worth restating. Namely, that London registration provided
access to a plentiful supply of capital - of particular significance to entities contemplating
horizontal and vertical integration - with little threat to a loss of control. As shown above,
London registration of the Mexico Tramways Company did not prevent a Canada-based Light
& Power from retaining effective control, nor prevent the Anglo from slipping into the hands
of European consortium nominally established in Belgium. Of course, there were differences
between Mexico Tramways and the Anglo. While the former was essentially integrated into
the Montreal-Toronto holding from formal inception in 1907, the moved from the status of a
>classic= free-standing company to a that of a holding took longer in the case of the Anglo.
This further points to the flexibility of the free-standing model and, as Jones has suggested, the
futility of attempting to draw sharp distinctions among free-standing companies, holdings, and
investment groups97. Jones would also regard many of these entities as more entrepreneurial
(rather than rentier) than is sometimes allowed.
Returning to the question of technology. The history of tramways in Latin America
and other countries, points to the period specificity of particular forms of technology - as
much as to the shelf-life or specific corporate models. The relatively rapid ascent of tramway
(and power) conglomerates in Latin America was triggered by the technological breakthrough
associated with electricity. This provoked both horizontal and vertical integration, as well as
the displacement of local capital. Yet, the peculiar nature of urban growth in Latin America
after the 1940s, coupled with the provenance of the internal combustion engine, doomed
tramways. While this process, notably the excision of foreign ownership, was assisted by a
new nationalist and populist political climate, the critical factor was the then technological
limit reached by tramway technology which was highlighted by spacial aspects of rapid
urbanisation in Latin America. Tramway technology was too inflexible (and alternatives such
as underground tramways/railways both inflexible and expensive) to compete with the taxi96
Mira Wilkins >The Free-standing Company, 1870-1914: an important type of British foreign direct
investment= Economic History Review LXI 2 (1988) pp.264, 265.
97
Charles A. Jones >Los antecedentes de la moderna corporación transnacional: los grupos de inversión
británicos en América Latina= in Carlos Marichal (ed.) Las inversiones extranjeras en América Latina,
1850-1930: nuevos debates y problemas en historia económica comparada (Mexico: El Colegio de
México/Fondo de Cultura Económica 1995) pp.75-7, 84-90.
37
bus.
While the >life-cycles= of the Anglo and Mexico Tramways confirms the imperative of
monopoly and integration, they offers somewhat different explanation for causality. Probably,
the case of the Anglo points to electricity companies (supply and equipment manufacture)
drawn by the existence of a huge potential market. The Anglo was already large at the onset
of the electrical age. Hence, the prime mover for vertical integration appears to have been the
electricity conglomerates. In the case of Mexico, the incentive for backward integration into and dominance of the power market - power seems to have come from the tramway.
The history of tramways in Latin America is a story involving many players. These
included: the tramway companies themselves - their promoters, shareholders, administrators
and workers; power generators and equipment suppliers - and their stockholders and
financiers; banks and financial consortia; home and host governments - and municipal
authorities; and consumers of mass, rapid urban transport. While some of these players had
more power - or more effective capacity - than others, there was no enduring hegemonic
player. The operation of a reasonably effective tramway system was a game of compromise
but, at certain moments, some players were unwilling or unable to compromise, and at others,
players may have felt that there was little to gain from accommodation - or that they possessed
more power than then in fact held.
38