M I N E R A L S STRATEGIES AND D E V E L O P M E N T : INTERNATIONAL POLITICAL ECONOMY, STATE, CLASS AND T H E ROLE OF T H E B A U X I T E / A L U M I N U M AND C O P P E R I N D U S T R I E S IN JAMAICA AND P E R U

EVELYNE HUBER STEPHENS Northwestern University

n recent years, scholarly concerns with explaining the role of non-oil minerals industries in Third World development have mirrored practical concerns of Third World governments. Various studies have focused on the efforts of state elites to strike a better bargain with the transnationai corporations (TNCs) active in the minerals industries. They have also looked at the development of nationalized industries and their contributions to the national economy. Finally, they have examined the effects of the industry on domestic class formation, on the relationship of domestic classes or class segments to the TNCs, and on overall patterns of development. Reviewing a sampe of these studies, I one is struck by the quite divergent conclusions drawn concerning the results of Third World minerals policies. Becket (1983), studying the copper industry in Peru, concludes that there are no substantial barriers for Third World countries to increase their control and returns. 2 Moran (1974), in his study of the copper industry in Chile, agrees that increased control over the local industry is possible but has doubts concerning the long-run possibility for increased returns) Girvan's (1976) study of the Caribbean bauxite industry 4 and Shafer's (1983) research on the copper industry in Zambia and Zaire, 5 for different reasons, arrive at very pessimistic assessments of the chances for host countries to increase their revenue and control and to modify the pattern of dependent development in the long run. Sklar (1975), studying the copper industry in Zambia, does not ask the question in this way, but the implication of his discussion of the managerial bourgeoisie with a national and an international wing is that chances for a significant modification of the distribution of control and revenue in favor of the host country are slim. 6 Similarly, the authors have widely different views of the conflict of interests between transnational corporations and host countries. Becker (1983) and Sklar (1975) see no fundamental conflict of interests between them. Moran (1974) does see such a conflict but also the

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possibility for accommodation. Shafer (1983) sees some conflict and some common interests, but also an inability on the part of host countries to pursue these common interests. Girvan (1976), in contrast, emphasizes the fundamental contradiction between national and TNC interests and the failure of local elites to pursue the national interest. 7 In short, there is little consistency among the assessments in the existing literature. Partly, these discrepancies are a result of the country-, commodity-or industry-, and time-specific focus of these authors. Some are looking at bauxite, others at copper; some are looking at Latin America and the Caribbean, others at Africa; the time periods on which they concentrate range from the sixties to the early eighties. Partly, the discrepancies are a result of the authors' theoretical approaches. Becker (1983), like Sklar (1975), focuses on class formation and behavior. Moran (1974) uses a pure bargaining framework. Shafer (1983) uses a combination of structural and institutional analysis centering on the relationship of the national minerals industry to the international political economy and to the state. Girvan (1976) focuses on the structure of the international minerals industry and its impact on less developed economies, stressing the structures of dependence created in the latter. In order to arrive at more solid and generalizable conclusions, we need a theoretical framework that integrates the major variables considered by these different theoretical approaches and which can provide assessments that are consistent across a range of countries and commodities. Given the number of structural and conjunctural variables involved, the interaction between them, and the limited number of cases available, it would not be possible to arrive at a grand theory in the form of a coherent set of testable propositions about the role of minerals in Third World development, even if all the major mineral producing Third World countries were considered, which is way beyond the scope of this paper. 8 However, it is possbile to develop a theoreticalframework in the form of a set of variables and some hypotheses about their interaction and effects as a heuristic tool for studying different cases and interpreting the evidence. Such a framework is suggested here. It is explicitly comparative and integrates: (1) analysis of linkages between the international political economy and host country political economies--general structures as well as particular conjunctures; (2) analysis of class forces and alliances within the host country; (3) analysis of the structure of the state apparatus and the relationship between the state and class forces; (4) analysis of shifting

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power relations between the state and the TNCs within a bargaining framework. In what follows, this framework is used in a comparative analysis of Jamaica and Peru to show how these factors interact to explain the achievement by host governments of greater revenue from and control of their minerals industries. After a brief description of the efforts undertaken by the two governments the analysis of the impact of these variables on the outcome of their effort is presented, and then the implications of this analysis are drawn out to set the contending conclusions in the literature into perspective and to suggest some general hypotheses. GOALS AND STRATEGIES IN MINERALS POLICY OF STATE ELITES IN JAMAICA AND PERU The origins of the efforts to redefine the role of the minerals industry and minerals TNCs in national development in Jamaica and Peru lie in the concern of the elites holding state power with the deficiencies of their dependent economies and the wider social order. 9 In both cases, these elites (or at least their leading members) had developed an analysis and critique of the impact of the international political economy on the national economy and society and of their consequent vulnerability. Since they intended to modify the established dependent development pattern with its undesirable distributional consequences, they perceived an urgent need to gain greater control over their economies, particularly the crucial sectors such as minerals production. After coming to power in 1972, the People's National Party (PNP) government led by Michael Manley initiated a whole series of policies to expand the state's role in the economy, to increase self-reliance and diversify trade relationships, to decrease inequality through employment creation, land reform, labor legislation, social inclusion policies and promotion of popular political organization and participation, and to promote non-alignment and Third World solidarity. ~~The concerns which motivated the Revolutionary Government of the Armed Forces under General Velasco to seize power in 1968 centered around two major goals, national integration and independent, self-sustained, permanent development. The government sought national integration via a modification of the economic and political bases for class struggle through land reform, workers' participation in profits, ownership and management of private and public enterprises, and the incorporation of popular forces into state-sponsored organizations. Independent, self-

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sustained development was pursued through the construction of a mixed economy with state control over its commanding heights and state regulation of the rest of the economy, particularly of the role of foreign capital, as well as diversification of trade and financial relationships. 11 The nature of the two governments' efforts in the mining industry was shaped by the similarity of their goals resulting from the common subordinate position in the world political economy on the one hand and by differences in the nature of the regime and in the particular structure of the bauxite and copper industries on the other hand. Both governments sought to gain greater state control in order to influence the rate of extraction and promote forward and backward integration and market diversification, and to gain greater revenue as a source for investment in order to strengthen the productive capacity of the public sector, to finance reform projects in other areas, and to expand employment opportunities. Both pursued a mixture of negotiation and of legislation, the latter to strengthen their bargaining position or as a last resort in cases of deadlocked negotiations. Both also promoted international economic collaboration, being important producers of the respective minerals on a world scale. Jamaica accounted for some 22% of total nonsocialist world bauxite production in 1974 (Stephens and Stephens 1985:39); the other major producers were Australia, Guinea, and Guyana, and major production was being developed in Brazil. Peru had a somewhat less prominent position in the world copper industry, accounting for roughly 3.5 percent of total market economy production in 1974 (Mikesell, 1979:10). Both the U.S. and Canada are major producers, mainly for domestic consumption. The other major producers in 1974 were Chile, Zambia, and Zaire, followed by Australia, the Philippines, and Peru. Chile, Zambia, and Peru accounted for less than 40 percent of world production, but between 50 percent and 60 percent of copper traded in the Western world (Mezger, 1975:78; Mikesell, 1979:10). When the PNP government started its bauxite offensive in 1973, Jamaica had just been surpassed by Australia as the world's largest producer of bauxite. Five TNCs operated the whole industry in Jamaica: Alcan, Alcoa, Kaiser, Reynolds, and Revere. Slightly under half of the bauxite was processed locally into alumina by Alcan, Alcoa, Revere, and Alpart (a joint venture between Kaiser, Reynolds, and Anaconda). 12 In 1973, the government opened negotiations with the TNCs on acquisition of 51 percent equity in their bauxite mining operations (which for Alcan and Alcoa meant 6-7 percent in their corn-

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bined bauxite and alumina operations), acquisition of all the land owned by the companies in order to gain control over the bauxite reserves, and a bauxite levy tied to the price of aluminum ingot in the U.S. market. The companies were offered guaranteed supplies for 40 years and a management contract for a renewable 7 year period. The government also passed legislation requiring the TNCs to furnish any information on their operations demanded by the relevant authorities. The oil price increases of 1973 and Jamaica's consequent severe balance of payments difficulties brought the revenue question to the forefront of the negotiations. Since no agreement on the levy could be reached, the government unilaterally imposed a levy of 7.5 percent of the price of aluminum ingot divided by the amount of bauxite needed to produce one ton (about 4.3 tons). The companies strongly objected and launched complaints with the International Center for the Settlement of Investment Disputes (ICSID), but negotiations on the other aspects continued, resulting in a first preliminary agreement with Kaiser in November 1974. The agreement, which came to serve as a model for those with the other companies, provided for acquisition of the land and 51 percent of the mining operations at book value and low interest rates, a management contract and guaranteed supplies for the TNCs, and a levy limit at 7.5 percent instead of the increase to 8 percent and 8.5 percent announced for the following years. After concluding the agreements, the TNCs withdrew their complaints from the ICSID. While negotiating with the companies, the government was also pursuing other essential elements of its strategy, primary among them the formation of the International Bauxite Association (IBA). The IBA, officially formed by Australia, Guinea, Guyana, Jamaica, Sierra Leone, Surinam, and Yugoslavia in February 1974 in Conakry, Guinea, and soon joined by Ghana, Haiti, the Dominican Republic, and later Indonesia, strengthened the government's hand in the negotiations with the companies. It enabled the government to counter the threat of non-competitiveness of Jamaican bauxite with the argument that the other IBA countries were also going to revise their tax regimes. In fact, Jamaica was able to catapult the other IBA members, with the exception of Australia, into action on such a revision. At the same time, the government made efforts to strengthen state capacity in the area by creating the Jamaica Bauxite Institute (JBI), incorporated as a public sector company, in charge of performing research in technological, financial, and marketing aspects of the industry at the national and international level, and acting as partner in joint ventures on behalf of the government. Since Jamaica as an energy-poor country

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could not aspire to a fully integrated industry on its o w n , 13 joint ventures for forward integration were negotiated with Trinidad and Tobago and Guyana (for aluminum smelters in Guyana and in Trinidad) and with Venezuela and Mexico (for an alumina plant in Jamaica and an aluminum smelter in Veracruz). These negotiations were accompanied by an intensive search for new markets, to reduce dependence on the markets controlled by the TNCs. Finally, the government did much political work to strengthen its position vis-a-vis the TNCs, generating a cross-class support base at home through numerous meetings, briefings, etc. of various interest groups, and alleviating fears and potential pressures from abroad through personal contacts with Trudeau and Kissinger (Manley, 1982:99-101). The Peruvian copper industry in 1968 was dominated by two TNCs, the Cerro Corporation and the Southern Peru Copper Corporation (SPCC), a joint venture between Asarco, Cerro, Newmont, and Phelps Dodge. In addition, there was a significant domestically owned medium copper mining sector. ~4 In contrast to the other members of CIPEC (the Organization of Copper Exporting Countries which had been formed by Chile, Peru, Zambia, and Zaire in 1967), Peru had a low degree of forward integration, with only 20 percent of production being refined locally (Seidman, 1975:5). The government set up a new Ministry of Energy and Mining, to be in charge of monitoring the whole mining sector, and the state enterprises Mineroperu, in charge of research and new mining and refining ventures, and Minpeco, in charge of marketing all the minerals produced in the country under the newly introduced state monopoly on metals trading, t5 At the same time, the government was negotiating with SPCC about the development of a large new deposit, Cuajone, and it used a whole series of decree laws to expand the regulatory role of the state in the minerals industry. Most important among them were the requirement that the companies submit concrete development plans for all the deposits under their control, with failure to do so meaning that the concession would revert to the state, and the stipulation that all future mining ventures would have to include at least 25 percent of state ownership. The negotiations with SPCC, though difficult, were essentially concluded in December 1969, before these laws were decreed. Accordingly, the Cuajone contract remained exempt from any state participation in ownership. The main sticking points in the negotiations were the tax regime, the construction of a new refinery, and the marketing of Cuajone's output (Becker, 1983:99-110). On taxation and marketing the state was able to gain significant concessions from SPCC, partly with

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the support of the international lenders financing the project whose interests in long-term contracts with a diversity of customers coincided with Peru's interests. On the refinery issue, SPCC remained firm, but Peru was able to circumvent its opposition, construct a refinery with Japanese technology, and insist on having two thirds of Cuajone's output refined there (Becker, 1983:118-21). A further remarkable element of the contract was that all disputes arising under it would be dealt with in Peruvian courts only. Though the contract was signed in 1969, negotiations with an international consortium led by Chase Manhattan on financing the project, then estimated at $550m, were not concluded until 1974 j6 and the mine did not come on stream until October 1976. The government's relationship to Cerro took a very different course, ending in nationalization and compensation at less than 40 percent of what the company asked for (Becker, 1983:151-3). Cerro had cash-flow problems and no significant investment plans, despite controlling large deposits. Perceiving its vulnerability under the new policies of the military government, Cerro first attempted to maximize short-term profits and then in January 1972 offered to sell all or 51 percent of its assets to the government. When Cerro abruptly withdrew this offer a year later, the government decided to nationalize the company and prepared the way with legislation on mandatory housing standards in mining camps, an area where Cerro was known to be highly deficient, and on valuation of mining businesses on the basis of discounted future cash flow (Becker, 1983:149-50). Both of these measures reduced the estimated value of Cerro's assets. Shortly after the signing of the Cuajone financing agreement, the government nationalized Cerro and managed to have the price included in the negotiations of the lump-sum agreement with the U.S. government for compensation of all expropriated assets of U.S. companies in Peru. Cerro's installations were then brought under the management of the newly established state enterprise Centromin Peru. Finally, Mineroperu engaged in a major new fully stateowned mining venture, Cerro Verde, which involved the use of a new, environmentally more beneficial refining process. The efforts of both governments were relatively successful as far as the achievement of their goals for the minerals industry proper is concerned, but not so as far as a reduction of dependence and vulnerability of the national economy is concerned. Jamaica obtained increased control and markedly greater revenue despite the decline in bauxite production after the mid-seventies. In 1974, bauxite production reached 15.1m long tons, but in 1975 it declined to ll.4m tons and to 10.2m tons in 1976; from 1977 on it recovered slowly but never reached

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more than 11.9m tons; in 1982, it suffered a renewed drastic decline, and in 1983 it fell to a 20 year low of less than 8m tons. Also, the industry has received virtually no new investment since the early seventies. Nevertheless, Jamaica received $181m in revenue from the industry in 1974, a sevenfold increase over the preceding years, and from 1975 to 1981 annual revenues between $153m and $205m (Stephens and Stephens, 1985:53). The two key reasons for the decline in Jamaican production were unrelated to the government's initiatives, namely the recession in 1975-76 which caused a drastic contraction in demand for primary aluminum (the sole determinant of demand for bauxite) and the restructuring of the bauxite/aluminum industry at the world level. This restructuring had started as a defensive source diversification strategy of the TNCs in the 1960s and was then reinforced by the energy price increases in the 1970s. '7 In the early 1970s, i.e., before the Jamaican bauxite initiative started, all the TNCs were engaged in various new ventures, particularly in Australia, Guinea, and Brazil, many of them joint ventures and some of them with take-or-pay clauses. Clearly, in the situation of oversupply prevailing from the mid-1970s on, the latter were the ventures whose production was used first. Given the high energy requirements for aluminum production, the oil price increases made Australia and Brazil even more attractive because of their cheap energy sources, and they made the refineries and smelters in the U.S. Gulf Coast states which were based on oil or natural gas and specialized on Jamaican bauxite very high cost producers. '8 Partly in response to this situation and partly in response to pressures from the companies and, indirectly through its insistence on a "favorable investment climate," from the IMF, the government revised the levy in 1979, ~9but the world recession of the early 1980s brought a new drastic decline for Jamaican production. The combination of oversupply of alumina at the world level and the high production costs of alumina in Jamaica (on the basis of imported oil) induced Alcoa and Alpart to close down their Jamaican alumina plants in February and August 1985, respectively. Despite this decline, and despite a decline of foreign investment in other areas, the Jamaican economy was still better off than it would have been if the 1972-74 bauxite production levels and foreign investment inflows had been maintained and if the government had settled for a negotiated 3.5 percent levy30 Jamaican efforts to put together joint ventures for forward integration failed, which meant that the productive capacity of the industry did not increase, but the successful

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opening of new markets moderated the impact of the declining demand in traditional markets. This, for instance, enabled the government to resume production in the Alcoa alumina plant after only a few months' closure (Jamaican WeeklyGleaner, July 29, 1985). In Peru, the mining industry at the national level by and large prospered under the government's new policies, though it was of course affected by the industry's difficulties at the world level in the form of depressed demand and prices, particularly as a result of the 1975-76 and 1981-82 recessions. Cuajone's output generated net sales of $36 lm in 1979, amounting to 50 percent of the total value of Peru's copper production (Becker, 1983:124). Centromin's performance after nationalization was better than before; profits were higher, mining and refining capacity was expanded, the metal recuperation rate was increased, and investments in environmental protection were improved (Becket, 1983"158). Mineroperu's refining operations were showing profits also, but its mining ventures were less successful. The Cerro Verde venture was an ambitious one because of the new technology to be used. Since the technology and the financing for the project were expensive, copper prices of $0.80 per pound would have been necessary for the venture to make a profit (Becker, 1985), whereas price levels in the late 1970s remained around $0.70 per pound only. Minpeco was suffering losses because of insufficient experience in international marketing, particularly speculating in silver. On the other hand, Peru was successful in opening new markets in China, India, the Eastern bloc, and other Third World countries. Finally, the new state owned refinery increased the productive capacity of the state sector and facilitated market diversification. 2t Overall, the picture was a positive one. According to Becker's (1983:156,158,214) figures, the government received a total of approximately $920m in taxes from Centromin and SPCC between 1974 and 1980 and $150m in profits from the refinery between 1975 and 1978. State investments in Centromin, Cerro Verde and the refinery in this period amounted to roughly $750m, mostly borrowed, and the compensation for the nationalization of Cerro cost the state $67m. In both countries, the minerals policies had some positive effects on the national economies, but the increase in revenue from the mining industries was insufficient to counterbalance other negative trends and decisively alleviate the foreign exchange shortage. In Jamaica, the sevenfold increase in revenue in 1974-75 did not prevent the government from having to face an acute balance of payments crisis in 1976. The crisis was partly the result of long term trends such as the trade deficit

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and foreign borrowing, and it was precipitated by the simultaneous decline in bauxite production, sugar prices, and tourism, and increase in investment outflows.22 The balance of payments crisis forced the government to enter negotiations with the IMF and to accept, under consecutive agreements, ever more stringent austerity policies. This deprived the government of options for the further development of the state sector in general and the bauxite industry in particular. Difficulties in financing, for instance, prevented the finalizing of a project for an alumina plant to be built with Hungarian technology in Jamaica. In the pursuit of its mining policies, the Peruvian government managed to strengthen the productive capacity of the national economy (in the public and private sectors), but the increased revenue from the mining industry did not prevent the emergence of a severe balance of payments crisis in early 1976 either. On the contrary, one can argue that the ambitious industrialization policies of which mining was one part contributed to the crisis because the government borrowed very heavily from international banks for its ventures not only in the mining but also in the petrochemical, paper, and automotive industries. These industries, unlike mining, were not major foreign exchange earners. In 1976, the decline in export earnings due to the North American/European recession, the fall in sugar prices and the disappearance of anchovy, together with the drop in Peru's credit rating due to erroneous projections of commercial oil deposits, precipitated a severe foreign exchange shortage. Peru first adopted austerity policies under the supervision of its international private lenders, and after a year without a marked improvement in its foreign exchange situation, the banks insisted that Peru enter inte an IMF agreement. 23 Successive austerity packages pushed Peru deeper and deeper into recession, destroying productive capacity as well as depressing consumption levels of the population, to the point that the first half of the 1980s, saw Peru in the worst economic crisis since the Depression. LINKAGES BETWEEN THE NATIONAL AND THE INTERNATIONAL POLITICAL ECONOMY

The similarities and differences in the relative strength of the two governments to bargain with the TNCs and to pursue their goals despite TNC resistance were shaped by structures and conjunctures of the countries' positions in the world political economy, by the particular structures of the bauxite and copper industries, by the configuration of

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domestic social classes and by the nature of the state apparatus. These same factors also shaped the governments' capacity to modify the larger pattern of national development and the role of their minerals industries in it.

Position in the International Political Economy Two trends in the international political economy strengthened the position of both governments, namely the decline in concentration in both industries and the increase in joint ventures in the world minerals industries. The share of the six largest TNCs in the non-socialist world's bauxite production declined from 57 percent in 1971 to 47 percent in 1977 and in aluminum from 85 percent in 1956 to 58 percent in 197524 and the share of the seven largest TNCs in world copper production declined from 70 percent in 1948 to 54 percent in 1969 (Seidman, 1975:10). The increasing frequency of joint ventures in minerals industries among TNCs as well as between TNCs and host countries has been a result of two factors, namely the high risk implied in the large investment requirements for new projects, and virtually universal host country demands for local public or private participation. Thus, by the early seventies, TNCs were more flexible towards such demands than they had been a decade earlier. The growing role of international banks in financing mining ventures had an ambiguous impact on the governments' positions. On the one hand, the banks were able to insist on conditions contrary to the governments' wishes, such as unencumbered managerial control by SPCC over Cuajone, or even to kill a project by refusing financing, such as the alumina refinery in Jamaica35 On the other hand, the banks' interests in insulating the ventures from weaknesses of particular markets or TNCs coincided with the governments' interest in market diversification and thus supported such efforts. Other features of their position in the world political economy have significantly weakened the position of both governments. The continued primacy of core markets, despite strong diversification efforts, kept Peru and Jamaica very vulnerable to the recessions of 1975 and after. Furthermore, unless new markets are developed, possibilities for forward integration into manufacturing for end use will remain restricted because the tariff structure of core countries discriminates against final products. For Jamaica, the restructuring of the world bauxite/aluminum industry further aggravated the effects of the recessions. Investment plan-

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ning in the industry had been based on projections of an average annual growth rate in demand of 6 percent in the 1970s; in reality the rate achieved was only about half that. Since it takes 6-8 years for a bauxite project from the planning stage to the start of production, and 10-15 years for an integrated bauxite/aluminum complex, the industry was faced with considerable excess capacity from the mid-1970s on. In this situation, the take or pay clauses in some of the newer ventures and the adverse impact of the oil price increases on production costs of alumina and aluminum from Jamaican bauxite, constituted significant counterweights to the advantages of Jamaican bauxite (known deposits, close to the surface, established transport facilities, proximity to specialized refineries on the U.S. mainland). 26 The ultimate point of weakness vis-a-vis core institutions in both cases, of course, was reached when the governments had to accept IMF austerity policies as a precondition for IMF emergency loans and for the "green light" to the world financial community for rescheduling old and extending new loans. The IMF's insistence on a favorable business climate forced the governments to make concessions in their dealings with TNCs, on issues such as the levy in Jamaica and legislation on workers' rights in Peru. 27 Since Jamaica's joint venture agreements for forward integration with regional partners were eventually cancelled by these partners 28 and new market outlets were quite slow to develop, Jamaica remained heavily dependent on the TNCs for its production levels and thus susceptible to their pressures (reinforced by the IMF) for a reduction of the levy. Despite the resulting levy reductions of 1979 and 1984, however, Jamaican production did not make a significant recovery; nor did new investment flow in. This supports the argument that, contrary to the TNCs' public position, the levy was by no means the decisive factor making Jamaican bauxite competitive or not but rather that soft markets and energy-related production costs have been decisive. 29 In both cases, acceptance of the IMF prescriptions was highly controversial within the government, as the economic and political costs of their disproportionate constraints on lower class consumption and on the state budget were predictable. However, in neither case could the left-wing opponents of the program convince their colleagues of the economic and political viability of an alternative course of action. Too little progress had been made in promoting self-reliance and diversifying aid and trade partners to avoid major dislocations in the short run in the wake of the cut-off of virtually all foreign loans and trade credits which had to be expected in the absence of an IMF agreement. The

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acceptance of IMF-imposed policies, then, not only closed off options for the two governments for independent action in the minerals industry but it also sealed the fate of the efforts to modify the development pattern as a whole. The imposition of such policies from the outside constitutes an extreme instance of dependence in itself Moreover, the policies have a regressive impact on income distribution and an antistatist bent, thus obstructing the pursuit of a less inegalitarian distributional pattern and self-reliance.

Features of the National Political Economy Apart from these common weaknesses resulting from a dependent status in the world political economy, there were important differences between Jamaica and Peru which put Peru in many ways in a stronger position. In part, this was due to differences between the Peruvian and Jamaican national economies, in part due to structural differences between the bauxite and the copper industry, and in part it was conjunctural. The structure of the national political economy put Peru in a stronger position for the achievement of greater control over and forward integration of its minerals industry than Jamaica. Jamaica approximated the ideal type of an enclave economy to a greater extent than Peru which had a higher level of industrialization and a more diversified export base. Mining accounted for 65-75 percent of exports and 14 percent of GDP in Jamaica, as opposed to 45-55 percent (20-25 percent from copper) and 6.5 percent in Peru, respectively. 3~ In contrast, manufacturing accounted for 23 percent of GDP in Peru in 1970, compared to only 13 percent in Jamaica (Furtado, 1976:133; Stephens and Stephens, 1986:23). Though the overall level of development measured in income per capita was higher in Jamaica, with $721 in 1970 compared to $400 in Peru (Statistical Abstract of Latin America, 1974:433), the total productive capacity of the Peruvian economy was greater and more diversified; total GDP in 1977 was $19,708m (in 1980 dollars) compared to $3,382m for Jamaica (IDB, 1982). These structural characteristics provided greater latitude of action to the Peruvian government for forward integration and independent ventures because of the greater borrowing capacity of the state in international financial markets and because of the larger pool of qualified personnel available to perform managerial and technocratic roles in new state agencies and enterprises. The latter asset was further enhanced by the existence of a medium mining sector under heavily

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domestic ownership and with mobility of personnel to and from the TNCs (Becket, 1983:252-3). Thus, the Peruvian government could mobilize resources outside the copper TNCs with which to expand the output of the industry and national control over it. The Jamaican government, on the other hand, was more dependent on resources from the bauxite TNCs themselves to expand national control and production of the industry. The levy was to provide the funds for forward integration and Jamaican personnel were to acquire experience in running the industry while the TNCs still had management contracts. At the same time, high dependence on bauxite exports kept the Jamaican economy much more susceptible to recession due to falling bauxite demand and prices than the Peruvian economy was to fluctuations in copper markets. Consequently, the Peruvian government was in a considerably stronger position vis-a-vis the TNCs than the Jamaican; it was able to simply nationalize Cerro and to forward integrate despite the resistance of SPCC. In contrast, despite strong efforts, resource constraints contributed to the Jamaican government's inability to put together a new venture for forward integration after Trinidad and Mexico had shelved the plans for joint ventures with Jamaica. In one respect, though, the nature of the national political economy imposed greater constraints on the Peruvian government. Foreign investment played a very important role in many sectors of the Peruvian economy and the government wanted it to continue to do so, albeit under the rules of the game imposed by decision 24 of the Andean Pact (see e.g. Hunt, 1975; Grosse, 1980). This gave the SPCC leverage in the negotiations because foreign banks and corporations attributed strong symbolic significance to the conclusion of the Cuajone contract. In Jamaica, foreign capital did not play an important role outside of the bauxite industry, tourism, the utilities, and banking and insurance; nor could it be expected to start doing so. The utilities were taken over by the government in the mid-1970s, and efforts were made to bring the banking sector under greater national control. The tourist industry had undergone considerable expansion in the 1960s and had excess capacity by the early 1970s, given the competitive Caribbean market; therefore, no significant new investment could be expected in the industry. Thus, the demonstration effect of the Jamaican government's actions towards the bauxite TNCs on other potential foreign investors was not nearly as consequential as in the Peruvian case.

Structure of the Bauxite and Copper Industries Peru was more successful than Jamaica in forward integration and in market diversification, largely due to the structural differences between

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the bauxite and copper industries, though Jamaica had important successes in opening markets in the Eastern bloc too. The structures of the world bauxite and copper industries differ in that the copper industry is less concentrated and less vertically integrated. In copper, a considerable number of custom smelters and refineries exist, which can process concentrates and blister copper from a variety of sources and thus from non-affiliated firms. Consequently, vertical integration and concentration are not as high as in bauxite/aluminum; for instance, 21 private companies had majority interests in 44 percent of total market economy copper production in the mid-1970s (Mikesell, 1979). This had made marketing by independent producers at the world level possible. In Peru, the availability of custom smelting and refining has permitted the emergence of the medium mining sector, and it means that the state-owned refinery constructed by Peru can draw on production in the medium mining sector as well as SPCC and the state owned mines. This facilitates the maintenance of a high volume of production, which is important because of high fixed costs in refining operations. In bauxite/aluminum, in contrast, the specialization of refineries and smelters on particular types of ore and alumina gives rise to a situation resembling a "bilateral oligopoly" which in turn promotes vertical integration. 31 As a result, the percentage of world alumina capacity that could potentially be supplied by intracorporate transfers of bauxite (i.e., if all bauxite mines and alumina refineries operated at equivalent rates) ranged between 70 percent and 80 percent in the 1970s. The same figure for primary aluminum capacity was 85-90 percent, and the actual figures were very close to these potential ones. 32 Thus, the options for Third World producers to market bauxite and alumina from fully state owned ventures are obviously very restricted, much more so than for blister copper in particular. Furthermore, in the fabricating stage of copper the buyers' market is quite competitive; significantly less than half of the copper fabricating facilities are affiliated with copper producers (Bosson and Varon, 1977:42). In the U.S, there has been considerable tension between independent fabricators and producers of refined copper over the producers' tendency to favor affiliated fabricators (Gedicks, 1975:96); this provides openings for Third World producers of refined copper to establish market links with long-range contracts. Though new technological developments in the copper industry, such as the continuous casting process, integrate the refining and fabricating stages and thus promote stronger vertical integration, the mar-

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ket for refined copper has remained more open than the market for aluminum ingot. In the aluminum fabricating stage vertical integration remains high (Bosson and Varon, 1977:42). In the United States, producers of primary aluminum were responsible for 70-80 percent of wrought products (the first stage of fabrication from primary aluminum, such as sheets, foils, tubing, plates, rods, etc.) in the 1970s. If two major integrated producers are taken into account which import their primary aluminum for fabrication in the United States, the figure rises to 80-88 percent (Stuckey, 1983:213-4). 33 It is only in the final product manufacturing stage that integration is much less important. As a result of these differences in market structure, partial forward integration for bauxite producers (into alumina) is not nearly as useful as for copper producers (into blister copper). Furthermore, forward integration into aluminum and alumina is more difficult than into blister and refined copper, because the barriers to entry in copper are at the mining stage, whereas in bauxite they are at the refining and smelting stage, and because aluminum production requires twice the amount of energy that copper production does (Arthur, 1980:39-48). The costs for mine development in copper are higher than in bauxite, but smelting and refining technology is simpler and more widely available. Thus, a Third World producer which manages to acquire control over copper mining has more options for forward integration and marketing than a producer controlling bauxite mining. Capital investment requirements for mining and processing facilities in copper are significantly higher than in bauxite (Bosson and Varon, 1977:47), but when the costs resulting from the high energy requirements in aluminum production are taken into account, the comparative advantage in capital costs does not change the overall weaker position of bauxite producers. Particularly energy-poor bauxite producers like Jamaica have very limited options for forward integration and marketing on their own.

Producer Associations

The Manley government was clearly the driving force behind the IBA, whereas Peru was only one of four, sometimes lukewarm, participants in CIPEC. One of the key differences was the greater relative importance of bauxite production in the Jamaican economy than copper in the Peruvian economy. Jamaica's main preoccupation was to extract greater revenue in the short run in order to be able to forward integrate, step up the rate of extraction, and thus increase revenue in

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the long run. To accomplish this without making its bauxite non-competitive, Jamaica needed coordinated revision of the tax regimes of other major producer countries and it needed partners, particularly energy-rich ones, for joint ventures in refineries and smelters. Peru with a more diversified economy in general and export base and mining industry in particular had other equally if not more important concerns, which made active participation in the Andean Pact, for instance, much more important than CIPEC. Furthermore, a central goal for the copper industry was the exploitation of large new deposits to increase revenue in the longer run, which required huge new investments and therefore made attraction of these investments more important than the achievement of a common tax regime or pricing policy among producer countries in the short run. The formation of the IBA, so shortly after OPEC, caused considerable concern at first among industry members and observers (see e.g. Bergsten, 1976:13-20). However, the IBA had only a slight, if any, advantage over CIPEC which had existed for several years without profoundly affecting the industry. On the one hand, CIPEC members' control over mining implies control over a more crucial stage of production and they have achieved a higher degree of forward integration than IBA members. Also, copper seems to be the scarcer resource than bauxite; known world reserves of copper are estimated to last for less than 30 years, compared to 30-60 years for bauxite (Bosson and Varon, 1977:58-9). On the other hand, IBA members control a larger share of non-socialist world exports than CIPEC members, the former amounting to 80-90 percent in the 1970s (OECD, 1976), the latter to 50-60 percent (Mezger, 1975:78; Mikesell, 1979:10). Moreover, scrap recovery in aluminum is only about half as important as in copper; for instance, in the United States an estimated 45 percent of copper consumption was covered by scrap recovery in the late 1960s as compared to some 20 percent of primary aluminum consumption (Bosson and Varon, 1977:74-5). More fundamental than the relative differences in the strength of the IBA and CIPEC, however, are their common weaknesses resulting from the following factors. First, the emergence of new producers outside the cartel or with limited membership rights and duties (Brazil in bauxite; Australia, Papua New Guinea, and the Philippines in copper), and policy changes of members vis-a-vis the cartel (Australia in the IBA; Chile in CIPEC) severely restrict the capacity for coordinated action. 34 CIPEC's first major decision on collective action was an agreement to reduce shipments for 1975 to 90 percent of their 1974 average level in

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the face of the downward trend in prices starting in 1974, but the agreement was not fully implemented and had a limited impact on prices (Mikesell, 1979:106). The IBA never reached a collective production decision. Second, both metals are subject to substitutability in end use, in part through other materials and in part through each other. Collective action between the two cartels might improve their situation by reducing the effect of the mutual substitutability of the two metals. However, it would do nothing to reduce the constraints resulting from the third limiting factor, the availability of alternative sources for the metals, namely scrap and seabed deposits. If cartel action were to increase prices for the ores, scrap recovery could be stepped up and seabed mining could become profitable despite the large investment outlays required. Mezger ( 1975:87-8) quotes estimates of 10-20 percent of world copper production to be supplied by ocean mining. Fourth, CIPEC as well as IBA members (with the exception of Australia) have a very limited ability to withstand even a temporary contraction of foreign exchange receipts, which makes decisions on production cutbacks designed to stem a fall in prices very difficult to enforce. As a result of these factors, possibilities for effective cartel action in both industries have remained limited and are likely to remain so, which is more detrimental to Jamaica's position than to Peru's because of Jamaica's more limited options for independent action.

Conjunctural Factors Conjunctural factors made it easier for the Peruvian government to pursue its goals than for the Jamaican in so far as Peru's most important initiatives in copper, the Cuajone project and the nationalization of Cerro, were launched in the late 1960s and early 1970s, whereas Jamaica's important initiatives for forward integration were not planned until 1973. The financing package for Cuajone was finalized between 1972 and 1974, when supplies on the world copper market were low, which kept SPCC interested in developing new production and made it relatively easy to find a variety of customers for long-range contracts for the project. Similarly, the risks associated with nationalizing Cerro at that time were lowered because the government would have little difficulty in finding alternative customers in case of an attempt by Cerro to organize a boycott among its customers. Also, the high liquidity on the Eurodollar market enabled Peru to borrow the capital for independent ventures even during the U.S.-imposed informal financial blockade, and borrowing became even easier after the

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achievement of the settlement with the United States. Financing packages for major investments in new ventures, such as the refinery that SPCC resisted constructing, and in upgrading the Cerro facilities were arranged before the balance of payments crisis of 1976 depressed Peru's access to loans and forced austerity on the government. Jamaica, in contrast, was hit by the recession-induced decline in bauxite demand and by the balance of payments crisis before the government was able to finalize agreements and financing for its crucial forward integration plans. It is also worth noting how particular conjunctures in geopolitics affected the position of both governments. Peru enjoyed greater distance from and less dependence on the United States than Jamaica. 35 Despite a clearly hostile U.S. reaction to the military government's first major action, the expropriation without compensation of IPC, which led to the unofficial financial blockade against Peru, relations between the two countries did not deteriorate to a crisis level and Peru was not significantly hurt by U.S. actions. The copper initiatives in particular did not cause any major concerns and repercussions in the United States; copper imports are strategically less important than bauxite/ alumina imports because the United States is 90 percent self-sufficient in copper (Mikesell, 1979:32-3), whereas 90 percent of U.S. bauxite requirements are supplied by IBA countries (Woods, 1979:211). Furthermore, the U.S. foreign policy establishment dealing with Latin America in the early 1970s was much more concerned with the Allende government in Chile and did not want to unnecessarily antagonize the nationalistic but clearly not socialist military government in Peru. In the Jamaican case, when the government made its major moves vis-avis the TNCs in 1974, the post-Watergate and post-Chile revelations were shifting the odds against U.S. government intervention on behalf of the bauxite companies, though two of the TNCs did approach the State Department and subsequently lobbied for assistance through conservatives in Congress. 36 ROLE OF DOMESTIC CLASS FORCES The configuration of social classes shaped the reformist orientation of the two governments and it affected their capacity for action both in the mining industry and in the pursuit of their wider developmental goals. In both countries, economic and social developments in the 1950s and 1960s led to a situation where the economically dominant classes did not enjoy a socially and politically hegemonic position, and

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where occasional violent manifestations of popular unrest (land invasions and a guerrilla movement in Peru, urban riots in Jamaica) presented an open threat to the social fabric. 37In Peru, these developments in society gave rise to the military's concern with integral security. They also reinforced the military leaders' perception, fostered by the curriculum in the military academy and underlying the coup, that they would be better suited than a civilian government for the task of effecting reforms to strengthen and stabilize economy and society.38 In Jamaica, these social developments caused an erosion of electoral support for the incumbent Jamaica Labour Party (JLP) government and created the basis for the effectiveness of the PNP's populist appeals and victory in the 1972 elections. Similarly, they facilitated the subsequent revival by Michael Manley of the party's original democratic socialist ideological orientation, which it had held in its early years in the 1940s. Action in the mining industry was facilitated in both cases by the inability of the TNCs to mobilize influential local allies to oppose state action. In Peru, the disarray of the dominant classes and the resulting relatively high autonomy of the government between 1968 and 1974 meant that even economically important groups had little influence on most areas of policy, including industrial policy. 39 Furthermore, SPCC did not have any issues, so to say, around which to mobilize local allies. There was no question of violation of contracts, as the whole venture was a newly negotiated one, unlike in the cases of Cerro and of the TNCs in Jamaica. Cerro, having been well connected politically before 1968, was weakened because its local allies lost political influence with the coup. Moreover, it was a symbol of foreign domination as it owned and ruled a rather large area, and it had incurred much resentment through its poor labor relations and social policies, and particularly through the arrogance and the decapitalization strategy of the new management in the early 1970s.4~ In Jamaica, only the unilateral imposition of the levy was an issue which was openly controversial and on which the TNCs attempted to appeal to the local capitalists' interests in the inviolability of contracts. However, given the high import dependence of the Jamaican economy and the severe pressures on the balance of payments from import price inflation between 1972 and 1974, the local capitalists' concerns with greater availability of foreign exchange outweighed their concerns about the breach of contract vis-a-vis the TNCs, particularly since the government took great pains to reassure them that bauxite was a very special case.4n Furthermore, the government's popular mobilization policies and redistributive programs were strengthening its support

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base. Thus, in this period the government was able to implement many policies to which the capitalist class was strongly opposed, and it is most unlikely that it would have yielded even if some local capitalists had been opposed to its bauxite policy and had attempted to exert pressures on behalf of the TNCs. Whereas the two governments enjoyed relatively high autonomy from the economically dominant classes in the period before the balance of payments crisis, the constellation of class forces was inimical to the pursuit of a non-IMF path when the crisis hit. The predictable dislocations resulting from a drastic reduction of imports in the wake of a cut-off of foreign loans and trade credits would have affected not only the upper but also the middle classes and the upper layers of the working class. This meant that virtually all the organized sectors of society would be opposed to such policies. As a result, the left wing in both governments simply lacked the political support base needed to push government policy towards a self-reliant, more egalitarian response to the balance of payments crisis. In Jamaica, a non-IMF People's Production Plan was elaborated in three months of intense work in early 1977, but the plan was rejected by Manley and the Cabinet, mainly on political grounds. 42 In Peru, the decline of the left had started with the ouster of President Velasco and the succession of President Morales Bermudez in 1975. The decision on the 1976 austerity package brought internal disagreements to a head and ended in the ouster of those left-wing officers who had still remained in high governmental positions. 43 ROLE OF THE STATE Both governments realized that they needed to strengthen their positions through the acquisition of greater expertise in the national and international operations of the mining industry and of greater overall monitoring, regulatory, and managerial capacity in the economy by the state apparatus. Jamaica's task was more difficult than Peru's, because the overall administrative, managerial, and technical capacity of the state, only I0 years after independence, was rather weak. Since the Jamaican economy was closer to the enclave type than the Peruvian economy, one would expect a weaker state apparatus, with an economic function by and large restricted to collecting revenue from the export industry. However, the Peruvian governments before 1968 had essentially pursued laissez-faire economic policies and thus the state's role in the economy was highly restricted as well. Nevertheless, the

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military junta of 1962-63 had already laid the groundwork for the planning apparatus (Lowenthal, 1975:29), and Peru had a greater pool of qualified personnel available. The relative weakness of state capacity was one of the reasons why the Jamaicans so readily conceded management contracts to the TNCs. The other reason, of course, was that continued managerial control was a key concern of the TNCs and made them more willing to accept the joint ventures. The Peruvians, in contrast, managed Cerro after its nationalization themselves, along with the various state enterprises mentioned. The initial advantage of Peru in the area of overal state capacity was reinforced by the difference between a regime dominated by military technocrats and one dominated by civilian politicians. The leaders of the Peruvian government had a greater appreciation for and put more consistent efforts into planning and rationalization of the administrative apparatus to establish clear lines of command than did the Jamaican leaders. ~ This was particularly true for state agencies in charge of the high priority mining industry which also benefited from the availability of qualified personnel. Thus, the Peruvian state apparatus could take on broader monitoring, managerial and entrepreneurial functions in the mining industry than the Jamaican. 4~ The main experience of the Jamaican leaders was as practical politicians and their main concerns were to mobilize popular support, mediate between the demands of different groups, and administer the day to day work of government. 46 Manley himself had developed and put forward a challenging vision of social transformation, and under his leadership a whole series of important policies were initiated which contributed to this transformation. Efforts to improve the administration and managerial capacity of the state apparatus were part of these policies, but planning, administration, and detailed follow-up were not Manley's forte either. But in fact, the bauxite commission and the JBI were exceptionally competent and efficient in the performance of their functions, mainly because they were small and newly established and bec a u s e t h e a p p o i n t e d l e a d e r s h i p was h i g h l y c o m p e t e n t in entrepreneurial and technical matters. 47 SHIFTS IN JAMAICA'S AND PERU'S BARGAINING STRENGTH The Jamaican government's ability to impose the levy and to obtain the agreement of the TNCs to its purchase of equity and land can be explained with the temporary strength of its bargaining position. The TNCs had considerable sunken investment in Jamaica, 48 and no plans

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for significant new investments which they could have used as bargaining chips. A loss of access to Jamaican bauxite would have been costly for the TNCs in the short run because of its ready accessibility and because of the specialization of refineries on Jamaican ore. This was particularly true for those companies whose bauxite supplies came predominantly from Jamaica; for instance, over two thirds of Kaiser's bauxite came from Jamaica in 1974. Furthermore, the revision by other IBA members of their tax regimes and the resulting perception of the potential of the IBA by the industry strengthened Jamaica's position. Finally, the Jamaican negotiating team was very well prepared, the government firm in its purpose and strong politically, and the TNCs unable to enlist influential local allies. In the longer run, however, the Jamaican position was weakened by other factors as well as by changes in some of the factors which had made it strong initially. Most important, of course, were the excess capacity of the bauxite/aluminum industry after the mid-1970s, the changes in energy prices, and the take-or-pay clauses in the newer ventures of the TNCs. The IBA also lost much of its threat potential as it became clear that the IBA was unable to agree on a significant common pricing strategy (not to mention a production strategy) and that Australia, the world's largest producer, did not impose a levy and would not be willing to participate in any meaningful cartel action. Moreover, the cancellation of the joint venture agreements for forward integration and the limited development of new markets meant that Jamaica remained very heavily dependent on the TNCs. Finally, the balance of payments crisis and the ensuing austerity policies weakened the PNP government's position economically and politically and forced it to yield to external pressures and revise the levy. In this situation, the IMF came to function as some sort of a substitute for local allies of the TNCs insofar as it strongly pressured the government to cultivate business confidence and make concessions on the levy as a sign of good will. Peru's bargaining position was strengthened by the considerable degree of state capacity which allowed effective supervision of and a credible challenge to the TNCs. Relatively easy access to foreign financing for independent ventures further added strength. And the relatively closed policy-making process along with the initially high autonomy of the government kept the TNCs from influencing the government's decision-making via local capitalist or bureaucratic allies. Cerro was in a particularly weak bargaining position because it had significant sunken investment in Petal but not a strong enough

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financial base to come up with major new investment proposals as incentives with which to wrest concessions from the government. SPCC, in contrast, was stronger because the Cuajone project required such large new investments that the Peruvian government would clearly not be able to raise them on its own, and it was obvious that the project was very high on the government's list of priorities. In addition, the Cuajone contract was attributed great symbolic significance by the international business community, and since the military government's ambitious industrialization plans kept it dependent on international loans and TNC technology, it had to send the appropriate signals by coming to an agreement with SPCC. Whereas Peru's position was strengthened by the above mentioned conjunctural factors in the early 1970s, it was weakened overall after 1975 by the balance of payments crisis, the drop in copper demand and prices, and CIPEC's inability to arrive at an effective production and pricing strategy. IMPLICATIONS FOR CONTENDING PERSPECTIVES IN THE LITERATURE On the basis of the preceding analysis, it is now possible to identify to what extent the conflicting conclusions of the authors mentioned initially are a result of the commodities, countries, and time periods they are looking at, to what extent they are a result of the authors' theoretical approaches, and to what extent they are due to the authors overlooking certain factors even within their frame of reference. Becker's (1983) optimistic conclusions about the options open to Third World governments to gain a strong position in the minerals industry and to promote "bonanza development" are first of all a result of his generalizing from the relatively strong position of the Peruvian government in terms of capacity of the state apparatus, access to international financing, options for market diversification, and strength of the regime. These in turn were conditioned by country-, commodity-, and time-specific factors, namely the level of development of the economy, the relatively diversified export base, the availability of skilled personnel, the structure of the national and international copper industry, and the pre-1975 national and international economic and political conjuncture. Secondly, by basing his theoretical argument heavily on the formation .of the "new national bourgeoisie" of technocrats and managers with experience in both the private and public mining sectors (Becker, 1983:325) and its interest in national accumulation, and by further

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postulating that this bourgeoisie is integrated "on a somewhat equal basis" into the international bourgeoisie (Becker, 1983:91), he underestimates the constraints on the ability of this class to promote development resulting from the country's position in the world political economy. For instance, he does not deal with the problem of exploration, where the TNCs have a tremendous advantage in terms of access to expertise and finance and where dependency starkly manifests itself.49 Moreover, he does not really address the problem of tensions between the "new bourgeoisie" with its exclusive interest in national accumulation and state elites (or factions of state elites) with an additional interest in self-reliance, national integration, and some degree of equity as essential elements of development. Similarly, he omits a discussion of the balance of class forces facilitating or obstructing the pursuit of these goals. Thirdly, Becker overstates his case because he relegates some factors which are clearly relevant within his own frame of reference to secondary importance. He postulates that there is "no necessary inconsistency" between the interests of the TNCs and the interests of the new national bourgeoisie. However, in Peru's relations to Cerro and to SPCC there were certainly many fundamental conflicts of interest which cast serious doubt on this assertion and conclusion. Prominent among these conflicts was SPCC's resistance to the construction of a smelter which Peru was only able to circumvent with the help of Japanese technology and finance. Finally, he does not discuss the implications of the balance of payments crisis and the IMF policies for the loss of room of maneuver and control by the Peruvian government. In a related fashion, country- and commodity-specific factors lead Girvan (1976) to quite opposite pessimistic conclusions concerning possible modifications of relationships to the TNCs and of development patterns. In the Caribbean bauxite industry, weak states conf r o n t e d a highly vertically integrated i n t e r n a t i o n a l industry. Furthermore, energy requirements constituted a significant barrier to forward integration for several countries. By emphasizing the way in which economic and social structures are conditioned by these countries' dependent position in the world economy, his approach induces him to overestimate the determining power of these structures. He focuses on one class segment, the bureau-political managers of Third World states, and assumes that they depend on the TNCs for the resources to maintain their positions. Consequently, he argues that their interests lie in an alliance with the TNCs and that they cannot be expected to promote a modification of the dependent

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development model. Thus, he overlooks that the state apparatus and therefore these bureau-political managers can play different roles, depending on the class constellation as a whole in a given society and on the nature of the regime. Certainly, his assessment did not turn out to be accurate for the Jamaican case where no such alliance developed. On the contrary, under the PNP government many of these bureaupolitical managers participated very actively in the attempt to modify the established development model. Moran's (1974) rather dim view of host countries' prospects for significantly increasing their revenue from the minerals industry in the long run, despite the governments' ability to achieve greater national control, is in part a result of his focus on the copper industry. He argues that producer countries are likely to become suppliers of last resort because of their propensity to engage in aggressive pricing behavior and their neglect of long-range contracts with stipulated price levels. Such behavior is more easily possible in a less vertically integrated industry and a more open commodity market. In copper there are greater opportunities for independent marketing and aggressive pricing behavior than in bauxite. His theoretical approach also leads him to assume that aggressive pricing behavior will be the norm for Third World governments. He extends the bargaining framework to his analysis of the domestic political process, arguing that rival political groups will tend to outbid one another on the basis of economic nationalism. What he does not take into account is that the occurrence of such outbidding depends on the nature of the political system, the relationship between state and society, and the orientation of the state elite. It is certainly much less likely in an authoritarian system or in a situation where the state elite enjoys considerable autonomy. Even in a highly competitive democratic system like Jamaica, state elites have a choice as to the issues on which to outbid their opponents. Learning processes from the experience of other countries can be expected to affect this choice and steer it away from counterproductive elements of economic nationalism. Sklar's (1975) study, like Becker's, utilizes a class analysis framework; in fact, it is the source of Becker's conceptualization and theoretical approach (Becker, 1983:12-14). Sklar's central argument is that institutional analysis does not give a clear answer to the question of the balance of power between the copper TNCs and the Zambian state, but that "from the standpoint of class analysis, however, power may be said to lie with the managerial bourgeoisie" (Sklar, 1975:209). The "managerial bourgeoisie" consists of a local (state bureaucrats, managers,

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politicians, businessmen, professionals) and an international wing (TNC managers). Sklar argues that tensions between these two wings are to be expected, but that they will be outweighed by their common interest in survival, the local wing wanting to preserve its access to external support and the international wing its base of operations in the country. This appeared to be the case in the period before 1973, at which point the government decided on full nationalization. Since Sklar's study ends in 1973, he does not discuss the reactions of the international bourgeoisie to the loss of its base of operations after full nationalization. Nor does he consider the implications of the nationalization and the development of the industry thereafter for the question of the power balance between Zambia and the TNCs. But the limited time frame is only a partial explanation for Sklar's conclusions. His theoretical approach, like Becker's, does not make room for differences in the goals of various factions of the national managerial bourgeoisie. Thus, he does not explain why at least a faction of the local wing, namely the state elite, decided to end the partnership by full nationalization in 1973. And since he treats Kaunda's "humanism" as an "ideological shell" (Sklar, 1975:210-11), he does not deal with the question of conflicts between the factions whose sole concerns are accumulation and other factions whose concerns include questions of distribution. Accordingly, he does not consider the relative power of these factions rooted in the class constellation and in the degree of organization of different social forces. Nor does he address the implications of a dependent position in the world economy for the room of maneuver available to the state elite. The importance of these implications is obvious, however, in his whole discussion of the conflicts between the government and the TNCs over taxation before nationalization, the costly management contracts, and veto power over all major decisions granted to the TNCs under the partial nationalization agreements, the alliance of interest of some local factions of the managerial bourgeoisie with the international bourgeoisie, and the reliance of the national bourgeoisie and the state on foreign financial and technical resources. Sklar's discussion brings out some points which fit neatly into the framework proposed here. The step-wise nationalization of the Zambian copper industry (acquisition of 51 percent ownership by the state under an agreement reached in 1969 with management contracts for the TNCs, and full nationalization in 1973) could be effected by the government because of (1) the popularity and relatively high autonomy of the regime as leading force in the nationalist movement, (2) the

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deliberate promotion of institution building and local expertise to increase state capacity, (3)) access to external loans to finance compensation of the TNCs in 1973, 50 and (4) the large sunken investment of the TNCs at the crucial mining stage. Shafer's (1983) study covers the period after nationalization, and he emphasizes the negative effects of the loss of insulation of the copper industries in both Zambia and Zaire from market fluctuations, negative credit ratings of the country in international financial markets, and pressures from domestic interest groups due to nationalization. He issues a general warning that the political weakness of Third World states is likely to lead to decline in minerals industries after nationalization and to limit the benefits accruing to the national economy. Clearly, his pessimistic conclusions are due to his generalizing from the relative weakness of the state apparatus in Zambia and Zaire, country-specific factors which can largely be attributed to the recent history of decolonization and the consequent weak institutionalization of public sector agencies and enterprises, to the high scarcity of qualified personnel in all areas, and to pervasive patrimonialism. Certainly, the contrast to the Peruvian experience clearly demonstrates the limits of generalizability of the case of Zambia and Zaire. Furthermore, even Jamaica, with a similarly short history of independence and similar problems in terms of overall weakness of the state apparatus and scarcity of skilled personnel was able to overcome some of these limitations in the case of the bauxite industry because the state elite concentrated efforts in this area, created new agencies, drew on experienced persons in the public and private sector, and granted management contracts to the TNCs. Shafer (1983:119) allows for the possibility that certain countries might be able to control the negative impact of the loss of insulation of the minerals industry brought about by nationalization, but he argues that "for most Third World producers, political weakness makes necessary damage control measures impossible" His analytical framework takes the weakness of Third World states more or less as given. As the contrast to Peru shows, this is not necessarily accurate. His framework further leads him to overlook that the overall strength of the state is not the only variable making damage control measures possible, but rather that the overall level of development and the structure of the domestic economy, the relationship between state and society, the composition of the state elite and deliberate political action are important as well. For instance, in a stronger and more diversified economy like the Peruvian, the mining industry is not as intimately linked to the government

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budget as in Zambia and Zaire. Or, governments can reduce or compensate for the loss of insulation by reestablishing forms of informal vertical integration, such as by raising financing on the basis of long term sales contracts, and by protecting the autonomy of state enterprises in the mining sector. And the commitment of state elites to a modification of the dependent development model as opposed to their interest in self-enrichment certainly makes a crucial difference for the role played by the nationalized minerals industry at any given level of state capacity. The contrast between Mobutu's Zaire and Manley's Jamaica is instructive here. 5' This discussion of contending points of view in the literature has demonstrated that whereas the authors can be criticized at some points within their own frame of reference for overlooking certain factors, the main weaknesses and discrepancies in their conclusions stem on the one hand from their focus on particular countries, commodities, and time periods, and on the other hand from their limited theoretical approaches and assumptions. Thus, in order to recognize the reasons for and reconcile these discrepancies, we need comparative-historical analyses rooted in a theoretical framework which integrates the variables of national and international political economy, constellation of class forces, nature of the state elite, state capacity, and conjunctural determinants of bargaining strength. CONCLUSIONS Based on the preceding comparative analysis with the proposed theoretical framework, we can draw the following conclusions and suggest the following hypotheses about the ability of Third World governments to gain greater revenue from and control over their minerals industries. Neither explanations based on changing international conditions alone nor others based on national factors alone are sufficient. Rather, success of such attempts on the part of producer countries depends on the unity and strength of the state elite, the internal balance of class forces; state capacity, the structure of the particular industry, availability of financial resources, world economic and political conjunctures, and the potential for collective action with other producers. 52 An essential condition for such attempts is incumbency of a state elite with a strong shared commitment to a modification of the traditional dependent development model. The greater the planned deviations from the model, the more important the availability of resources to the state and the amount of control over the economy become. Of

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course, state elites without such a commitment may try to take advantage of favorable conjunctures to capture a greater share of revenue from the industry, but they are much less likely to take the risk of confronting the TNCs over control issues or to take the initiative ahead of other producer countries or in less favorable circumstances. The contrast between Jamaica and, for instance, the Dominican Republic and Haiti underlines this point. In response to the Jamaican levy, Parliament in the Dominican Republic voted through a revision of the TNC tax legislation, but this first attempt was stymied by a presidential veto (Girvan, 1976:139). The government in Haiti, clearly not interested in modifying the dependent development model, followed the other Caribbean bauxite producers in increasing its taxes but never raised the control issue) 3 The likelihood of success of the state elite's attempts further depends on the weakness of the economically dominant classes relative to the strength of the organized popular support base for a modification of the development pattern. The greater the internal political strength of the state elite and the weaker potential local allies of TNCs, the greater the credibility and force of the threat to TNC interests and thus the incentive for them to make concessions. Conversely, the weaker a government's position internally, the less likely it is to withstand coordinated outside pressures on behalf of the TNCs and pursue its goals against TNC resistance. Given the commitment and the political strength to mount a credible challenge to the TNCs, the elite's ability to successfully follow through on it depends on state capacity and the availability of financial resouces. The government needs a state apparatus capable of performing monitoring, administrative, managerial, entrepreneurial and planning functions, which in t u r n requires qualified personnel and appropriate institutional infrastructures. The availability of financial resources depends on the state's capacity to extract domestic savings and to attract foreign loans. Both state capacity and availability of resources are shaped by historical and structural factors. In general, state capacity tends to be greater in countries with longer periods of existence as independent nations and, within the Third World context, higher levels of economic development. The former is not a necessary relationship, though; as the case of Zaire demonstrates, post-colonial states may disintegrate rather than successfully consolidate and increase their capacity to make authoritative decisions and implement them. The second relationship can be explained within the world system framework. In order to be successful, efforts on the part

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of peripheral countries to achieve semi-peripheral status necessitate state intervention into markets (Wallerstein, 1974) and this in turn generates the formation of new state agencies and personnel with proficiency in performing administrative and extractive functions. Among peripheral nations, state capacity is also affected directly and indirectly by government policy. Where successive governments pursued laissezfaire economic policies, state capacity is likely to be lower than where the dominant economic policy orientation was an interventionist one. Furthermore, as the example of the Jamaica Bauxite Institute shows, governments may be able to increase the sectoral capacity of the state on short order through deliberate policies. Thus, whereas one can hypothesize that governments in semi-peripheral countries, as well as in peripheral countries with a longer history of independence and a legacy of more interventionist economic policies, have a more effective state apparatus at their disposal to strengthen their position in the minerals industry, purposeful action, such as institution building, training programs, and enlistment of support from international organizations can make for considerable variation in this relationship. Similar qualifications apply to general hypotheses about the availability of resources for governments to achieve forward integration and trade diversification in the minerals industry. The higher the level of development of the economy and the more diversified its export base, the greater the borrowing capacity of a government on international financial markets. Accordingly, one might hypothesize that the closer a country's economy is to the enclave type, the smaller its borrowing capacity. However, this capacity is heavily subject to conjunctural variation. For instance, between 1973 and 1980 the recycling of the petrodollars increased the borrowing capacity of all countries; and certainly in this period the oil enclave economies had an extremely high borrowing capacity. Furthermore, conjunctural factors may turn the relationship upside down, in so far as high borrowing capacity may lead to the accumulation of a heavy foreign debt burden which under conditions of world recession and increasing interest rates may greatly reduce the resources available to a government at a later point. In the Peruvian case, the failure of the expected oil reserves to materialize changed the country's credit ratings radically in 1975-76, and the high accumulated debt forced the Peruvian government to accept successive austerity programs and thus greatly reduced the government's resource base. The structure of the minerals industry in question and of the corresponding commodity market greatly affect the options for host coun-

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tries to increase their control and achieve forward integration. The crucial structural elements are the location of barriers to entry and the degree of concentration and vertical integration at various stages of the production process. Where the barriers to entry are at the mining stage, host countries are in a stronger position to gain control and to forward integrate than where the barriers are further downstream. Their position is further strengthened where the industry is less vertically integrated and markets for the semi-processed commodity are more open, offering possibilities for independent marketing. Energy requirements of the production process can significantly affect a host country's position also, in so far as high energy requirements constitute a major obstacle to forward integration for energy-poor Third World countries. In terms of all these structural factors, for instance, copper producers are in a stronger position than bauxite producers. World economic and political conjunctures further influence the range of options available to host governments. Expansionary conjunctures in the world economy are clearly more favorable than stagnant or recessionary ones for independent action of governments in the minerals industry. They provide more options not only for independent marketing but also for raising financing for independent ventures for forward integration. World recessions, in contrast, depress earnings and restrict these options, as evidenced by the cases of Jamaica and Peru after 1975. Similarly, a geopolitical situation which minimizes the risk of direct and indirect U.S. pressures is more favorable for such types of action, that is, a country's peripheral location in the U.S. sphere of interest, low strategic importance of the particular mineral for the U.S. economy, and an internal political conjuncture in the U.S. inimical to overt and covert foreign intervention. Finally, a simultaneous pursuit of a variety of national and international, individualistic and collective strategies is more likely to be successful in enabling Third World governments to redefine the role of their minerals industries in national development than reliance on any one of them alone. Collective action of producer countries vis-a-vis the TNCs is important in the short and medium run for depriving the TNCs of a credible threat with an international boycott of the country's mineral production, and of playing one Third World country against others. In the longer run, however, the effectiveness of traditional cartel action is limited by substitutability and availability of new sources. Thus, new forms of international action have to be developed. The key is the construction of a new international network of production and marketing through Third World cooperation. This new network, paral-

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lel to the TNC network, can be built while producer countries still maintain participation in the TNC network. Virtually none of the major Third World mineral producers could find sufficient market outlets outside of the TNC networks at present, and thus none of them could afford a total and immediate break with the TNCs. However, sole reliance on TNC networks and on core markets is unviable not only because of high vulnerability to business cycles but even more so because of a systematic shift of TNC investment in production facilities and in exploration since the 1960s to "secure areas", i.e., Australia, the core countries themselves and, somewhat ironically, South Africa. 54 Breaking into core markets in competition with the TNCs is very difficult for Third World producers because the TNCs maintain an interlocked marketing network25 Furthermore, in the particular case of bauxite, the continuing situation of oversupply of alumina in core markets makes the development of alternatives mandatory for producer countries. Joint ventures with other Third World nations and the opening of new markets in the Eastern bloc and the Third World are essential elements of such a new network. Given the precarious foreign exchange situation in which most Third World countries find themselves, such marketing networks may well include significant elements of barter.S6 Ultimately, success in minerals policy at the international and national level is closely linked to success in modifying the pattern of dependent development as a whole. The examples of Jamaica and Peru demonstrate exceedingly clearly how heavy dependence of the entire economy, not just the minerals industry, on foreign financing weakens host countries vis-a-vis TNCs and closes off options for independent action when a balance of payments crisis forces acceptance of an IMF program. Reducing overall dependence on core financing requires the pursuit of national and international, or collective Third World selfreliance27 At the national level, this implies a reorientation of national production and consumption patterns towards greater use of local raw materials, emphasis on agriculture, and the development of labor absorbing methods of production. At the international level, it implies Third World cooperation in research, production, and trade of basic and advanced goods adapted to the resource endowments of these economies. The just discussed network for the minerals industries is a case in point; it could be oriented, for instance, towards basic construction materials for housing, mass transport, agricultural implements, etc. A reorientation of production and consumption patterns of this sort

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has an essentially redistributive character and thus profound political implications. This leads fight back to the argument about the importance of elite commitment and the balance of class forces. Where the privileged classes in the society confront a state elite without an organized support base among the lower classes, they are likely to be able to obstruct the pursuit of a more self-reliant development model. In this case, and/or where the commitment of the state elite to such a model is or becomes weak, particularly where the state elite becomes a privileged class itself, failure in other areas tends to spell failure in the minerals i n d u s t r y as well. M o b u t u ' s Zaire illustrates how patrimonialism and rampant corruption can lead to a general failure in development policy and a situation where the minerals policy proper is destroyed because the returns from the nationalized industry are squandered by a parasitic state apparatus. To return to the main theoretical argument and draw out a final analytical point, it is important to reiterate that all the factors just discussed are variable. Some countries rank low on state capacity (Zambia, Zaire), others rank higher (Peru); some economies and thus the governments' resource bases are stronger (Peru), others are weaker (Jamaica, Zambia, Zaire); some state elites have a stronger commitment to reducing dependence and inequality than others (Jamaica versus Zaire); some structures of minerals industries allow for easier forward integration and independent action than others (copper versus bauxite), etc. Furthermore, the interaction and effects of these variables are strongly affected by conjunctural influences. Such variability should arouse skepticism towards attempts of case studies of host count r y - - T N C relationships to draw general conclusions concerning the importance of dependency. Dependency itself is not a uniform condition of all Third World countries. It is an important factor which limits the options available to governments for redefining the role of their minerals industries in national development, but the severity of these limitations is variable. Again, comparative-historical analysis is needed to arrive at an accurate assessment of the extent to which dependency prevents such a redefinition or can be overcome by appropriate political action. NOTES This article grew out of a larger project on the viability of the type of development path pursued by the Manley government in Jamaica. Field research in Jamaica in 1981-82 was supported by a Fulbdght Research Award and a fellowship from the Social Science Research Council; the Institute for Social and Economic Research at the University of the West Indies

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offered an intellectually supportive environment. Field research in Peru in 1975-76 was also supported by a fellowship from the Latin American Program of the Social Science Research Council and the American Council of Learned Societies. Further research on the bauxite/ aluminum industry was carried out during the author's stay as a Fellow at the Woodrow Wilson Center for International Scholars in Washington, D.C. in 1983. The author would also like to thank Peter Evans and John D. Stephens for comments on earlier dratts. 1. The reasons for choosing this particular sample, namely Moran (1974), Girvan (1976). Becker (1983)` Sklar ( 1975), and Shafer (1983), are that ( 1) all of them deal with the copper and bauxite/aluminum industries, (2) Becker, Girvan and Moran are attempting to draw conclusions about the options for redefining the role of the minerals industry in the wider pattern of national development, and (3) they are good pieces of scholarship in terms of research and argument. Other studies include Mikesell (1979)` Smith and Wells (1975)` Bosson and Varon (1977), and the collection of conference papers in Seidman (1975). 2. Becker (1983:64-5, 228-31,238) sees the "new bourgeoisie" of state bureaucrats, managers and technocrats, and private entrepreneurs, in alliance with the international bourgeoisie (the TNC managers) as the prime promoters of national development. He postulates that the returns from the minerals industry provide the basis for "bonanza development", i.e. the resources for national industrialization. 3. Moran (1974:241-6) points to shifts in the relative bargaining power of host countries, but doubts that these countries are likely to derive maximum benefits from their strengthened position by imitating the TNCs and adopting the necessary behavior of"good oligopolists" 4. Girvan ( 1976:152-6, 195-6) sees the dominant role of TNCs in all stages of the international industry and the alliance between the "bureau-political managers" of Third World states and the TNCs as prime obstacles to a significant increase in returns to the national economies and even more so to the pursuit of a development model improving the conditions of the mass of the population. Accordingly, he sees no solution to the power imbalance between TNCs and Third World states and to the persistence of dependent and highly inegalitarian development patterns short of disengagement from the international capitalist system. 5. Shafer (1983) concentrates on the detrimental effects of nationalization on the minerals industry, arguing that the loss of insulation of the industry from foreign and domestic pressures and demands causes its decline. The main reason for the inability of producer countries to avoid this loss of insulation is their political weakness. 6. Sklar (1975:209-I 1) emphasizes the importance of the alliance between TNC managers and the national managerial bourgeoisie for an understanding of TNC-host country relations. The international and national wings of the managerial bourgeoisie together hold power and exercise control over the industry, and they have a common interest in the survival of their alliance and the prospering of the industry. 7. The authors' views on the conflict of interests between host countries and TNCs are closely related to their views on the usefulness of dependency as a concept and as a framework for analysis. Becker (1983:341) postulates that "dependency is not the general condition of the Third World (for, it is not the condition of Peru . . . . ), it cannot be a systemic product of world capitalism as presently constituted." Moran, Sklar and Shafer do not directly address the issue and thus do not explicitly reject the dependency perspective, but it has no place in their analyses. Moran (1974) uses a pure bargaining framework and even extends its use to the analysis o f domestic political dynamics. Sklar (1975) emphasizes class analysis; and Shafer (1983) uses a combination of institutional and structural analysis concentrating on the weakness of the state and the dilution of the international oligopoly. Girvan (1976), in contrast, firmly roots his analysis in the dependency ~rspective, being one of the leading members of the Caribbean dependency school. 8. See Ragin (1987) for an elucidating discussion of the problems with cross-national variableoriented analysis, given the limited number of cases and the large number of variables involved, and the frequency of conjunctural causation and of multiple paths to the same outcome. 9. The analysis of the Jamaican ease is based on primary research in Jamaica in 1981-82 and interviews with TNC executives in the U.S. and Canada in 1983. For the Peruvian case, the bulk of the information on the copper industry proper is drawn from secondary sources which are referred to in the text; the discussion of the domestic and international context is also based on primary research carried out in 1975-76.

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10. A detailed analysis of the nature of the democratic socialist development path and of the PNP's experience with its pursuit is given in Stephens and Stephens (1986). I I, Velasco (1972) and Mercado (1974) articulate the government's concerns and goals. Stepan ( 1973; 1978) discusses the development of the military's role perception and the nature of its political project. Lowenthal (1975) gives an overview of the major reform policies of the First Phase (1968-75) of the Peruvian Revolution. McClintock ( 1981 ) focuses on the land reform, and Stephens (1980) on the workers' participation reforms. 12. Davis (1980; 1981) discusses the development of the Jamaican bauxite/alumina industry; Chambers (1980) traces the development of mining legislation. 13. Aluminum production is a three-stage process~ mining the ore, drying and refining it into alumina, and then smelting it with an electrolytic process into aluminum. The refining and smelting processes are highly energy intensive. Refining alone requires the equivalent of two to three barrels ofoil per ton; of this, 0.7 of a barrel needs to be oil or gas, the remainder can be substituted by other sources. Aluminum is the most energy intensive of the major metals; for instance, it requires more than twice the amount of energy that copper does. For a comparison of figures on energy requirements, see Banks (1979:139). 14. In addition, a variety ofother minerals were being mined, such as iron, lead, zinc, and silver. For the structure of the Peruvian mining industry, see Becket (1983) and Ballantyne (1976). 15. The military government's first major action upon assuming power was to expropriate the International Petroleum Company (IPC) which had been involved in a long dispute with the previous government over subsoil rights and taxation, but the full contours of its policy towards the mining industry only took shape subsequently. 16. The main reason for these financing difficulties was the informal financial blockade imposed by the U.S. in retaliation against Peru's expropriation of IPC. The private lenders insisted on having an Ex-IM-Bank loan included in the package because of its "political insurance" value. Such a loan was granted only after a global settlement between the Peruvian and U.S. governments was arrived at, in the form of a lump sum payment by Peru to the U.S. government for the claims of all expropriated U.S. companies; see Hunt (1975:326-31). 17. The left in Jamaica explained the decline in production with politically motivated retaliation of the companies against the government, and the companies claimed that the levy had made Jamaican bauxite uncompetitive. The real reasons are the two mentioned in the text; for a more extensive discussion of the weaknesses of these other arguments, see Stephens and Stephens (1985). 18. Refining technology is adapted to special types of ore, and switching to other types involved considerable costs in the seventies; newer technological innovations are to make such switching easier and more economical. Smelting is also specialized on particular types of alumina, though alumina types are not as diverse as bauxite. 19. The 1979 revision established a sliding scale for the levy, taking volume of production and aluminum prices into account (Ministry of Energy and Mines, 1979). This formula brought the average levy down to 6 percent at that time. 20. If bauxite production had been maintained at 15m tons per year, the small amount of new bauxite investment that was planned had come in, and in addition $20m per year in nonbauxite foreign investment had come into the country, but the government had accepted the 3,5 percent levy that the TNCs were willing to offer in 1974, revenues still would have been lower by about $25m per year. It has been argued that foreign investment in other areas, which amounted to roughly $20m per year in the late sixties and early seventies, also declined because of the bauxite levy. This is very unlikely, because most of the non-bauxite foreign investment in the sixties had come into tourism. Tourism had reached a situation of excess capacity by the early seventies and thus little if any investment could be expected there. On the contrary, the government had to take over a number of hotels that went bankrupt. 21. There were only some 60 major customers for unrefined "blister" copper in the world in the early seventies, as opposed to thousands of potential customers for refined copper (see Becker, 1983:100). 22. See Girvan et. al. (1980:113-55) for an analysis of the economic reasons for the balance of payments crisis. Stephens and Stephens (1986:111-47, 270-319) discuss the importance of the government's policies in addition to the structural economic factors. 23. A good collection of analyses of the economic and political weaknesses of the military

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24. 25.

26.

27.

28.

29.

30.

31.

32.

33. 34.

Studies in Comparative International Development / Fall 1987 government's reforms, among them analyses of the reasons for the balance of payments crisis, is offered in McClintock and Lowenthal (1983). Stallings (1979) discusses Peru's relationship to the U.S. banks and the IME These figures are given by Rodrik (1980). The same trend can also be observed in other major commodities (see Vernon, 1977). Cobbe (1979:62) quotes Mikesell (1975:6 I) to the effect that the World Bank does not make loans for mining projects to a producer country that "simply proposes to hire foreign technicians and managerial personnel along with local labor to put together a complex mining enterprise", and private banks attribute considerable importance to World Bank participation because of its "'insurance value". The information on growth projections and corresponding investment planning in the industry, as well as on the importance of the take or pay clauses was obtained in interviews with executives of TNCs. It is important to note that these take or pay clauses were adopted on the insistence of the banks which financed the projects. It is doubtful whether the host countries alone would have had the necessary leverage. Of course, such concessions are never part of the formal IMF agreements, but they are an important informal part in the negotiations of the agreements as more than symbolic gestures that the governments are prepared to restore business confidence and respect corporate interests. In the Peruvian case, legislation that had granted workers participation in profits, ownership and management of enterprises was significantly weakened, and legislation protecting workers from arbitrary firings was suspended. In Jamaica, ongoing efforts to introduce workers' participation were dropped. In June 1975, Prime Minister Eric Williams of Trinidad expressed misgivings about anticipated competition from Jamaica's joint ventures with Venezuela and Mexico, and subsequently he cancelled the plans for two joint venture aluminum smelters with Jamaica and Guyana. In May 1978, it was clear that the Mexicans' priorities had changed as they announced their intention to shelve the joint venture smelter project, and by April 1979 plans for the related joint venture alumina plant in Jamaica were buried. The TNC executives themselves, when asked pointedly in our interviews exactly how much too high the Jamaican levy was, and what type of reduction would result in how much more production and potential new investments, did not have the answers. Various sources, such as IBRD (1977), CEPAL (1979), UNCTAD (1978) come to the conclusion that Jamaican bauxite, before the levy reduction, was roughly competitive for U.S. alumina/aluminum producers with bauxite from other IBA members, with the possible exception of Guinea, or that the differences were marginal. Peru's other major exports were sugar, fishmeal, cotton, iron ore, silver, lead, zinc. For a discussion of the role of exports in the Peruvian economy under the military government, see Thorp (1983); also see Thorp and Bertram (1978). Stuckey (1983:64) argues that "the bauxite market, and to some extent the alumina market, would, in the absence of vertical integration, consist of a number of bilateral monopolies and oligopolies", because of economies of scale, specialization of refineries and smelters, and incentives for back-to-back location of mines and refineries. These figures are given by Stuckey (1983:35-7); the discrepancy between them and those given by Rodrik (1980) seems to stem from the fact that Stuckey uses minority participation in a venture as criterion for classifiying a transfer as "'intracorporate". Five major producers accounted for 69 percent of primary aluminum capacity in the U.S. in 1979, namaely Alcoa, Reynolds, Kaiser, Conalco, and Acaconda (Stuckey, 1983:229). The IBA did not come up with common pricing recommendations until December 1977, and then only with a minimum price for base grade bauxite in the North American market, with adjustments for other grades and other markets to be made under consideration of traditional market differentials; yet, none of these adjustments were specified. Brazil, a producer of growing importance, did not join the IBA, and Australia never imposed a levy and by the end of the seventies stated officially that it was no longer willing to follow IBA guidelines. C1PEC did not arrive at any specific production agreements until 1974 (and none on pricing). See Mingst (1976:263-87) for the development of CIPEC. Indonesia joined as a full member in 1975 and Mauritania a few years later, whereas Australia and Papua New Guinea only chose to become associate members, without full rights and duties in terms of compliance with CIPEC decisions.

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35. Bitar (1983) shows that trade dependency of Latin American countries on the U.S. varies inversely with geographical distance from the U.S. 36. This is not to say that there was not considerable U.S. hostility against Jamaica, but it was generated by other, more narrowly political issues, such as Manley's policies toward Cuba. Highly adverse press campaigns in the U.S., encouraged by unofficial comments from State Department sources, damaged Jamaican tourism and made U.S. investors and lenders wary of Jamaica, thus contributing to the foreign exchange crisis. For an elaboration and substantiation of the argument about U.S.-Jamaican relations, see Stephens and Stephens ( 1986:234-6, 315-8). 37. For a more fully developed version of this argument for Jamaica, see Stephens and Stephens ( 1986:25-59); for Peru, see Cotler (1983), Stepan (1978:123-36), Stephens (1980:79-84), and Cleaves and Pease (1983). For information on the riots in the sixties in Peru, see Lacey (1977). 38. This role definition and self-perception are characteristic of what Stepan (1973) diagnosed as the "new professionalism': 39. On the policy-making process under the military government, see Cleaves and Scurrah ( 1980), and Cleaves and Pease (1983). They point out that the process varied considerably in different cases and over time, being very closed and secretive, for instance, in the case of the 1969 press law and the law regulating the industrial sector, and much more open and thus subject to civilian influence in the case of the law on social property. Mining policy fit predominantly into the closed pattern. 40. Becker (1983:148-55) discusses the behavior of the new management. Furthermore, it is worth remembering here that even in Chile, where the dominant classes were much stronger and more united against the actions of the Allende government, Kennecott and Anaconda did not receive any significant political support. The expropriation measure was passed unanimously by the Chilean Congress; see Moran (1974:215). Certainly, their stature as giants dominating a crucial sector of the economy and having extracted huge profits through the long years of their operation in a country make prominent mining TNCs easily unpopular and vulnerable. 41. Even the Daily Gleaner, the island's major newspaper, dominated by a conservative section of the capitalist class and strongly opposed to virtually all policies of the Manley government, supported the levy. 42. For a discussion of the plan and the reasons for its rejection, see Stephens and Stephens (1986:148-72). 43, For a discussion of the interaction between factions in the government and social forces, see Pasara (1983), and North ( 1983). 44. This is not to say that these efforts were completely successful. There remained many areas of overlapping responsibility and bureaucratic fighting for turf. But the quality of public administration improved substantially after 1968 (see Fitzgerald, 1976:40). Compared to Jamaica and other Latin American and Caribbean countries, the Peruvian state planning apparatus was well developed and efficient. 45. Of course, greater state capacity was not the only reason for this difference; as was discussed above, borrowing capacity and the structure of the copper industry were also important. 46. This applies particularly to the Cabinet members of the PNP's first period in office. Manley himself, for instance, had been a union organizer and leader before becoming party leader. 47. The commission was set up by Manley to study the whole bauxite-aluminum industry, make policy recommendations and then lead the negotiations with the TNCs. It was chaired by two of the most experienced businessmen on the island and supported by technical staffwho became associated with the JBI. The commission and the JBI were the exception rather than the rule among state agencies and enterprises in their efficiency. 48. Estimates of accumulated investment range from the $525m insured by OPIC, given by Lipton (1978:203), to $700m, given by Girvan (1976:120). 49. In the early seventies, 80 percent of all mineral exploration expenditures were made in the U.S., Canada, Australia and South Africa; see Bosson and Varon (1977:3 I-2). 50. Zambia borrowed $150m from two international banking consortia to settle its compensation debts (see Sklar, 1975:209). 51. On the problem of the state and of corruption in Zaire, see Young and Turner (1985). 52. Stepan (1978:237-48) identifies a similar set of variables as determinants of the capacity of Third World states to control foreign capital in general, i.e. not just in the mining sector. His

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53.

54.

55.

56.

57.

Studies in Comparative International Development / Fall 1987 set does not include the class constellation and the relationship between the state elite and class forces, nor world economic conjunctures. He puts primary emphasis on elite unity, state capacity, and economic and political background variables. Variables that figure in his set but not here are sectoral differences in bargaining strength due to the combination of priority of the sector in the state's development plans and previous existence of foreign capital in the sector. One could go on and cite other examples, such as the reversal of prior policies towards TNCs by the Pinochet government. However, it also has to be reiterated that political commitment does not guarantee success. The case of Guyana demonstrates this clearly. When Alcan resisted Guyana's demands for acquisition of majority ownership, the Burnham government fully nationalized its subsidiary in Guyana. However, the absence of prior efforts to develop independent marketing channels greatly reduced the gains to Guyana from the very beginning. The only area where the nationalized industry performed well was in calcined bauxite, because Guyana has a virtual monopoly on its production and thus few marketing difficulties (see Girvan, 1976:160-87). It is important to note here that this shift was well under way in bauxite and in copper by the early seventies (see Sharer, 1983:103~ Stephens and Stephens, 1985). Therefore, the shift cannot be regarded as a "cost" of the policies pursued by producer countries in the seventies. They are linked to one another through joint ventures, long-term purchase contracts, marketing agreements and mutual holdings in trading companies and sales agencies (see e.g. Mezger, 1975:107-1 l). Barter trade is already becoming more frequent; an example is the barter trade agreement between Jamaica and Yugoslavia which involves the shipping of 450,000 tons of alumina to Yugoslavia over five years (Daily Gleaner, March 11, 1984). On individual and collective strategies for self-reliant industrialization, see Streeten (1984).

REFERENCES ARTHUR, OWEN 1980 "Energy and Mineral Resource Development in the Bauxite/Aluminum Industry: A Jamaican Case Study." JBI Journal l, 1:39-48. BALLANTYNE, JANET CAMPBELL 1976 "The Political Economy of Peruvian Gran Mineria." Ph.D. Dissertation, Cornell University. BANKS, FERDINAND E. 1979 Bauxite and Aluminum: An Introduction to the Economics of Nonfuel Minerals. Lexington, MA: D.C. Heath. BECKER, DAVID 1983 The New Bourgeoisie and the Limits of Dependency. Princeton, NJ: Princeton University Press. 1985 "Nonferrous Metals, Class Formation, and the State in Peru." In Peter Evans et al. (eds.) States versus Markets in the World System. Beverly Hills: Sage Publications. BERGSTEN, C. FRED 1976 "A New OPEC in Bauxite." Challenge. (July/August): 13-20. BITAR, SERTIO 1983 "Latin America and the United States: Changes in Economic Relations during the 1970s." Working Paper No. 127, Latin American Program, Wilson Center, Washington, D.C. BOSSON, REX and BENISON VARON 1977 The Mining lndustry and the Developing Countries. New York: Oxford University Press. CEPAL 1979 "Transnational Corporations in the Bauxite Industry of Caribbean Countries." New York: United Nations Economic and Social Council, Economic Commission for Latin America. CHAMBERS, W. GILLETT 1980 "The Evolution of the Bauxite Mining Laws in Jamaica." JB1 Journal I, I: 29-33.

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CLEAVES, PETER and MARTIN SCURRAH 1980 Agriculture.Bureaucracy and Military Government in Peru. Ithaca, NY: Cornell University Press. CLEAVES, PETER and HENRY PEASE GARCIA 1983 "State Autonomy and Military Policy Making?' In Cynthia McClintock and Abraham E Lowenthal (eds.) The Peruvian Experiment Reconsidered. Princeton, N J: Princeton University Press. COBBE, JAMES H. 1979 Governments and Mining Companies in Developing Countries. Boulder, Co: Westview Press. COTLER, JULIO 1983 "Democracy and National Integration in Peru?' In Cynthia McClintock and Abraham E Lowenthal (eds.) The Peruvian Experiment Reconsidered. Princeton, NJ: Princeton University Press. DAVIS, CARLTON E. 1980 "Jamaica in the World Aluminum Industry I: The Discovery and Commercialization of Jamaican Aluminum?' JBI Journal 1,1: 3-37. 1981 "Jamaica in the World Aluminum Industry II: The Discovery and Commercialization of Jamaican Bauxite ( 1939-1952)." JBI Journal 1,2: 89-134. FITZGERALD, E.V.K. 1976 The State and Economic Development: Peru since 1968. London: Cambridge University Press. FURTADO, CELSO 1976 Economic Development of Latin America. New York: Cambridge University Press. Second Edition. GEDICKS, AL 1975 "Raw Materials Strategies of Multinational Copper Companies Based in the United States." In Ann Seidman (ed.). Natural Resources and National Welfare." The Case of Copper. New York: Praeger Publishers. GIRVAN, NORMAN 1971 ForeignCapital and Economic Underdevelopment in Jamaica. Mona: University of the West Indies, Institute of Social and Economic Research. 1976 CorporateImperialism: Conflict and Expropriation. New York: Monthly Review Press. GIRVAN, NORMAN, RICHARD BERNAL, and WESLEY HUGHES 1980 "The IMF and the Third World: The Case of Jamaica, 1974-80.. Development Dialogue2:113-55. GROSSE, ROBERT 1980 "Foreign Investment Regulation in the Andean Pact: The First Ten Years." InterAmerican Economic Affairs, Vol. 33., No. 4 (Spring): 77-92. HUNT, SHANE 1975 "Direct Foreign Investment in Peru: New Rules for an Old Game." In Abraham E Lowenthal (ed.) The Peruvian Experiment. Princeton, NJ: Princeton University Press. IBRD 1977 "Market Structure of Bauxite/Aumina/Aluminum and Prospects in Developing Countries." Commodities Paper 24 (March). Washington, D.C.: International Bank for Reconstruction and Development-World Bank. IDB 1982 Economic and Social Progress in Latin America: The External Sector. Washington, D.C.: Inter-American Development Bank. JEFFERSON, OWEN 1972 The Post- War Economic Development of Jamaica. Mona: University of the West Indies, Institute of Social and Economic Research. LACEY, TERRY 1977 Violenceand Politics in Jamaica 1960-1970. Manchester: Manchester University Press.

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