Military Entrepreneurs: Patterns in Latin America

Despite the recent shift to democratic regimes and market-based economies, in many Latin American countries the military retains important economic roles as owner, manager, and stakeholder in economic enterprises. Such military entrepreneurship poses a challenge to the development of democratic civil-military relations and, by extension, to the development of liberal democracy in the region. While scholars have noted this situation with concern, they have given little attention to distinguishing the different types of military entrepreneurship, which reflect distinct historical patterns and implications. This article identifies two major types of military entrepreneurs in Latin America: industrializers, determined to build national defense capabilities and compete for international prestige; and nation builders, seeking to promote economic development that can foster social development and cohesion. Case studies of Argentina, Brazil, Cuba, and Ecuador demonstrate important differences between these two types in their origins, paths, and political consequences. Militaries in Latin America are not strangers to economic enterprise. In many countries, the military has long managed firms in the national defense industry, but its economic reach is often much broader. In Argentina and Brazil, the military pioneered the development of national oil and steel companies. In Ecuador, it runs and profits from its own business enterprises, many of which are not related to the defense sector. In Cuba, it manages state-owned enterprises in key economic sectors like tourism and agriculture, while in Honduras it is called in as the apparent manager of last resort to run public companies or build national infrastructure. In El Salvador, Guatemala, Honduras, and Nicaragua, armed forces pension funds are key stakeholders in enterprises ranging from construction to finance. In only a handful of cases have militaries been divested of substantial economic holdings, notably in Argentina in the 1990s. In Latin America during the long half-century between the 1930s and 1980s, military rule was common, and military entrepreneurship— essentially the military’s ownership, management, or stakeholding of economic enterprises—frequently accompanied it. The transitions of the 1980s to electoral democracy and the market-based economy returned © 2011 University of Miami civilians to power and gradually diminished the political prerogatives the armed forces had long held. In the overwhelming majority of the region’s countries, defense ministries are now managed by civilians, national military budgets rank among the lowest in the world, the armed forces train for participation in U.N. peacekeeping missions, and trials of military officers for past human rights violations have resurged even in countries where amnesties had sealed the doors on the past. Yet despite the advances that have removed Latin American militaries from positions of overt political power, in many countries the armed forces have retained economic interests as owners, managers, and stakeholders in commercial, industrial, and financial enterprises. Economic interests can empower the military in ways that undermine the achievement of democratic civilian control.1 In particular, they can enable the armed forces to secure revenue independent of government allocation, to gain favorable access to state resources, and to maintain a tradition of nondefense roles that make the military a first-choice provider in lieu of civilian personnel. Such distortions constitute important challenges in civil-military relations and, by extension, an important challenge to strengthening and deepening democracy in the region. Concern over the consequences of military economic activities has grown in recent years, particularly in the wake of the boom in world markets during the decade 2000–2010 for commodities from whose export the militaries in a number of Latin American countries benefit (Centeno 2007; Donadio 2007). Still, little effort has been made to distinguish different types of military entrepreneurship, along with their historical roots and contemporary implications. Latin American militaries have undertaken a variety of economic activities in a range of contexts, from Central America and the Caribbean to Brazil and the Southern Cone, in economies large and small, semi-industrialized and agriculturebased, democratic-representative, military-authoritarian, and communist-totalitarian. How can we sort them out? This is a task scholars need to undertake in order to advance the discussion of contemporary policy responses. This article begins such a process by identifying two types of military entrepreneurs in the region: industrializers, who are determined to lessen dependence on foreign investment and build a national infrastructure for arms production; and nation builders, who seek to promote social development to advance economic redistribution and social cohesion. This article traces the development of industrializer militaries in Argentina and Brazil back to their origins in the interwar period, and the development of nation builder militaries in Cuba and Ecuador to the tumultuous last decades of the Cold War. To explain these developments, this study offers a historical-institutionalist argument that hinges on three factors: the opening of a critical economic juncture, which trig26 LATIN AMERICAN POLITICS AND SOCIETY 53: 3