When the Law Does Not Matter: The Rise and Decline of the Mexican Oil Industry

Abstract

Changes in formal institutions do not always affect economic outcomes. When an industry has specific technological features that limit a government's ability to expropriate it, or when the industry is able to call on foreign governments to enforce its de facto property rights, economic agents can easily mitigate changes in formal institutions designed to reduce these property rights. We explore the Mexican oil industry from 1911 to 1929 and demonstrate that informal rather than formal institutions were key, permitting oil companies to coordinate their responses to increases in taxes or the redefinition of their de jure property rights.

Corporate political activity in less developed countries: The Volta River Project in Ghana, 1958–66

“…8;Business International,19.4.63, What I propose is a different explanation, in which the power of individual multinationals is dependent, to some extent, on their capabilities for corporate political activities, but more importantly on the nature of the relationship between host and home economies. Similar arguments have been advanced for North American investment in Central America (Bucheli, 2008(Bucheli, , 2010Haber, Maurer, & Razo, 2003) Individual MNCs become unusually powerful in a very visible way not for accidental reasons, but because they can take the role of an intermediary channel of corporate diplomacy. Forbes Magazine went so far as to describe Edgar Kaiser as "the only link between the US and Ghanaian governments" in 1961, due to his skills in dealing with "prickly foreigners" (cited from Forbes in Graham, 1982, pp.…”

“…Kaisers showed a dynamic response to opportunities created by international and domestic policies that was largely independent of the level of political risk in the host economy (see also Haber, Maurer & Razo 2003). This level of risk could be managed by an individual company with the right networks and the right political skills, but depended on sensitive awareness of dynamic political factors.…”

“…Haber, Maurer & Razo (2003) make a similar argument from a neo-institutional perspective, distinguishing between formal and informal institutions. Here I distinguish between static and dynamic factors, which operate at host as well as at home country level.…”

The Role of Mexico in the First Oil Shortage: 1918-1922, an International Perspective

“…1912-1920: México (1925 On the side of the companies, it seems, increases in taxes had only a minor impact on corporate rates of return. In fact, it has been also claimed by Haber et al (2003), the companies continued to explore and invest well after output began to fall. According to this view, fields were being totally exhausted under private exploitation.…”

“…For instance, Thorp (1989) argued that the potential threat posed by the 1917 Constitution was not taken very seriously in the 1920s. Haber et al (2003) recourse; the companies, it has been argued, could also withhold output and deny the Mexican government crucial tax revenues. Figure 2 shows the importance of petroleum taxes for the Mexican government, at its maximum they accounted for almost 20 per cent of the fiscal income of the government.…”