Review – Jorge Schvarzer. Bunge & Born: Crecimiento y diversificación de un grupo económico. Buenos Aires: CISEA/Grupo Editor Latinoamericano, 1989.

“A largo plazo, las fallas de esos sistemas se hicieron sentir en el desarrollo económico del país, pero a principios de siglo quedaban disimuladas por el rápido crecimiento de la producción que parecía ofrecer un horizonte sin límites para el futuro. Mucho más tarde se comenzaría a apreciar que algunas actividades ‘industriales’ habían colaborado en mantener el atraso porque sus intereses concretos apuntaban a mantener el statu quo antes que a impulsar el progreso tecnológico y el cambio social. La Compañía Industrial de Bolsas parece haber sido una de ellas durante muchas décadas, hasta que el progreso técnico la llevó a su eclipse definitivo en los setenta.”

(“In the long run, these system failures negatively impacted the country’s economic development, but at the turn of the century their effects were obscured by the rapid growth of production which seemed to promise a future of limitless horizons. Much later, it would become evident that certain ‘industrial’ ventures had conspired to halt progress, since their business interests benefited more from the status quo than they would have from pushing for technological and social change. The Compañía Industrial de Bolsas appears to have been one of these ventures for many decades, until it was itself rendered obsolete in the 1970s by the very technological advancements it had sought to impede.”)

Jorge Schvarzer

Jorge Schvarzer’s Bunge & Born hit the presses in March 1989. Argentina was one month into the hyperinflationary crisis that would drive President Raúl Alfonsín from office six months before the end of his elected term. On July 8, Carlos Menem assumed the presidency, and as part of his recovery plan (the so-called Plan B&B), he recruited his first two ministers of the economy–Miguel Roig and Néstor Mario Rapanelli–directly from the executive ranks of Bunge & Born, one of the oldest, largest, and most diversified corporations in Argentina. This marriage between state and industry was at the time hailed as unprecedented in the history of economic policy worldwide. Whether or not this assessment is accurate, under the circumstances it isn’t difficult to detect a muted urgency to the author’s statement, that he wrote this book in order to “fill a gap in the literature,” so that the mammoth and highly secretive multinational corporation might become “a topic of open discussion in a society that wants and must come to know itself better” (page 11; my translation). While he does not mention explicitly this burgeoning political relationship, it must have been uppermost in Schvarzer’s mind at the time of publication.

Viewed through this interpretive lens, the book takes on a depth of meaning belied by its somewhat clinical brevity. On the surface, it is more technical report than anything else. It is divided into three chapters: the first offers a brief historical synopsis of the company’s founding and development over its first hundred years; the second, a more detailed description of Bunge & Born’s various subsidiary ventures and their place in the history of Argentine industrial development; and the third, a rather misleadingly named conclusion, in which few conclusions are drawn and fewer concrete opinions voiced. Schvarzer’s is, in fact, a work strikingly devoid of analysis or interpretation, which forces one to read between the lines. It quickly becomes clear that the author’s most pressing points are the ones he never quite makes.

Ernesto Bunge arrived in Argentina in 1880 from Antwerp, home of his family’s import-export business, Bunge & Co., since 1859. In Argentina, where prosperity depends almost entirely on the ability to move large amounts of money in and out of the country–often at a moment’s notice–this transatlantic connection would be key to his future success. Bunge’s brother-in-law, Jorge Born, followed soon afterwards. The corporation which came to be known as Bunge & Born was founded in 1884, just as the nascent Argentine agro-export model began to hit its stride. Originally centered around the grain export trade, the company expanded quickly and by the end of the century had added first manufacturing then processing to their repertory. Finance came next, in 1905, with the formation of the Banco Hipotecario Franco Argentino which, given its founding members, didn’t really merit the national adjective. This was, as the author points out, “one of the least known aspects of the company’s little known activities” (p. 17; my translation), and one which, in Argentina, truly meant standing with one foot on either side of the fence. At the very least, these international linkages would have enabled Bunge & Born to weather with a little more aplomb the multiplicity of financial crises that dogged the country throughout the 20th century. At worst, it would have allowed them to perpetrate a number of technically legal but socially detrimental acts related to the movement and accumulation of wealth in a nation where far too few people are able to participate in either process.

In 1905, the corporation built its first flour mill in Brazil, thus beginning its expansion within the Latin American continent. Peru and Uruguay soon followed. In the 1920s, they entered the cotton trade, again in Brazil, another step in their expansion within Latin America. Throughout the 20th century, Bunge & Born and its subsidiaries grew steadily, with the exception of the war years and the global depression in the 1930s–both of which forced the corporation back into a domestic mindset, if only momentarily. Then, in 1975, two of the Born brothers, including Jorge Born III, future president of Bunge & Born, were kidnapped by the Montoneros, a leftist paramilitary organization, and ransomed for 60 million dollars. After their release, both relocated to Brazil, taking “effective control of the group” with them. After nearly a century, “the largest multinational of Argentine extraction” was suddenly no longer strictly Argentine.

This fact is key to a complete appraisal of the developing political situation in 1989. Not only was the Argentine economy in chaos, but the people who had been entrusted with restoring it to health represented a multinational conglomerate with fingers in everybody’s pies and numberless interests in overseas markets that often benefited directly from Argentina’s economic woes. Their sitting president hadn’t resided in the country for over a decade; in fact, when Menem began courting their support, Jorge Born III had to fly in from Brazil, where he was living at the time, to confer with the future president. Moreover, in that conference and others that followed it, the Ministry of the Economy was essentially sold to Bunge & Born for a healthy–and indeterminate–dose of campaign financing, making it clear that the “Plan B&B” had far more to do with winning an election than it ever did with the formulation of substantive economic policy. Given that the corporation’s first nominee to the Ministry, Miguel Roig, died from exhaustion six days into his tenure, according to some due to the intransigence of his employers and their industrialist friends and their systematic attempts to sabotage his efforts to enforce the policies they themselves supposedly created, it is easy to understand the doubts that might have led to the publication of this book. The keys to the henhouse had effectively been auctioned off to the foxes.

The story of Bunge & Born is one of broad and rapid diversification, but it also reveals a relentless campaign to corner markets and capture supply chains throughout the Argentine economy. It is impossible to truly understand the corporation’s staggering and apparently immediate success without taking into account both sides of this coin. For example, from grain exportation the company branched into transport infrastructure with the manufacture of tin containers (Centenera, founded in 1899) and grain sacks (Compañía Industrial de Bolsas, 1900). The latter provides an excellent example of the oligopolic nature of the Argentine industrial complex (then and now). At several points during the first two decades of the 20th century, the government attempted to regulate the import of grain sacks, which tended to represent higher costs for the agricultural sector (and also left local producers of raw materials out of the loop). Some of these failed due to official incompetence, but in some cases–such as the elimination of import tariffs on grain sacks, which companies like Compañía dodged deftly through cynically-timed price gouging–they failed because of the counterthrusts of the industrial leadership, either through market manipulation or the exercise of political influence.

Bunge & Born also branched out into chemicals, textiles, and wall coverings (anyone who has ever painted their home in Argentina will recognize the Alba brand, although the company’s website makes no mention at all of their founding fathers and is now owned by AkzoNobel, a Dutch conglomerate out of Amsterdam). However, by far the most wide-ranging of their ventures was Molinos Río de la Plata, now known simply as Molinos. This began in 1901 essentially as a government contract intended to take advantage of what was assumed to be a burgeoning global flour export market; the first of Bunge & Born’s flour mills went into action one year later in Puerto Madero. It very quickly became evident that this perceived market was more mirage than reality, however, which forced the corporation to focus its attentions on the domestic demand, and again, Bunge & Born went into predatory mode. One by one, they picked off their Argentine competitors all over the country, overpaying grain and underselling the flour until their rivals had no choice but to sell out. Since then, Molinos has expanded into everything from olive oil to yerba mate, and are now, according to their website, responsible for 13 top consumer brands and 23% of the basic household food requirements.

Both the Compañía Industrial de Bolsas and Molinos are excellent examples of a time-tested business model that Schvarzer describes as a feedback loop. Bunge & Born tended to invest in activities that in some way fed back into already established areas of concentration (such as the relevance of grain sacks to a company founded on grain exports). These lateral movements allowed for maximum growth with a minimum of effort, and explains why Bunge & Born’s expansion was so explosive in nature. The lessons they learned from the failure of the flour export trade also taught them to bet on other people’s horses when their own flagged or failed; they began instead to invest directly in those markets they couldn’t access via exportation, thus diverting money that could have gone toward bolstering local Argentine industries. As Schvarzer points out, rather tongue in cheek, “it is possible that certain of their decisions, although understandable from a microeconomic perspective, may have had deleterious effects in terms of national development” (p. 75; my translation). From even a surface reading of the situation, it seems fairly obvious that this was the case.

Schvarzer’s book was first drafted, according to its brief preface, in 1987 for a 1988 workshop at the Institute of Developing Economies in Japan. The present version, he says, is by way of “reaching a wider public” and in light of new information that has emerged on the subject, in the interests of counteracting what he calls “an absence of study and debate” on such matters in Argentina. Again, the timing cannot have been a coincidence; it is difficult to believe that this “new information” is not related or at least relevant to the political ascendance of Bunge & Born and the formulation of Plan B&B. Since the author does not really engage in any evaluative analysis, it is hard to discern his personal feelings (if any) toward the multinational; however, with its influence on the rise, it is not at all difficult to understand why he might wish to shed new light on a somewhat obscure subject. At the time of writing, the author notes that due to marriage alliances between corporate families, in Argentina and in Europe, it was difficult even to determine what interests Bunge & Born encompassed; reading the portfolio of the corporation as it stood resembled trying to decipher a medieval royal genealogy. As they stood to take up the economic reins of the nation, the impossibility of defining their corporate identity or their political–or even national–loyalties, and given the extent to which the conglomerate controlled Argentina’s productive apparatus, one might naturally fear that, rather than swooping in to save the day, Bunge & Born was actually poised to stage a hostile takeover. Or, perhaps, that they already had.

© Vance Woods