Bankers, Industrialists, and their Cliques: Elite Networks in Mexico and Brazil during Early Industrialization

The historiographies of Mexico and Brazil have implicitly stated that business networks were crucial for the initial industrialization of these two countries. Recently, differing visions on the importance of business networks have arisen. In the case of Mexico, the literature argues that entrepreneurs relied heavily on an informal institutional structure to obtain necessary resources and information. In contrast, the recent historiography of Brazil suggests that after 1890 the network of corporate relations became less important for entrepreneurs trying to obtain capital and concessions, once the institutions promoted financial markets and easy entry for new businesses. Did entrepreneurs in Brazil and Mexico organize their networks differently to deal with the different institutional settings? How can we compare the impact of the institutional structure of Mexico and Brazil on the networks of entrepreneurs and entrepreneurial finance in general? We explore these questions by looking at the networks of interlocking boards of directors of major joint stock companies in Brazil and Mexico in 1909. We test whether in Mexico businessmen relied more on networks and other informal arrangements to do business than in Brazil. In Brazil, we expect to find less reliance of businesses on networks given that there was a more sophisticated system of formal institutions to mediate transactions and obtain capital and information. Our hypothesis is confirmed by three related results: 1) the total number of connections (i.e., the density of the network) was higher in Mexico than Brazil; 2) In Mexico there was one dense core network, while in Brazil we find fairly dispersed clusters of corporate board interlocks; and most importantly, 3) politicians played a more important role in the Mexican network of corporate directors than their counterparts in Brazil. Interestingly, even though Brazil and Mexico relied on very different institutional structures, both countries grew at similar rates of growth between 1890 and 1913. However, the dense and exclusive Mexican network might have ended up increasing the social and political tensions that led to the Mexican Revolution (1910–1920). * Aldo Musacchio is an assistant professor at Harvard Business School. Ian Read is a graduate student of history at Stanford University. The authors are indebted to a number of people and groups who gave their time and criticisms: Zephyr Frank, Steve Haber, Mark Granovetter’s Economic Sociology Workshop, the Social Science History Workshop at Stanford, the First Meeting of the Asociación Mexicana de Historia Económica in Mexico City, John Padgett and the University of Chicago’s Workshop on Organizations and State Building, and the panel of discussants at the American Historical Association’s 2002 conference in San Francisco. A modified version of this paper was presented at the Business History Conference, in Le Creusot, France. All errors are the responsibility of the authors. Bankers, Industrialists, and their Cliques... 2