1. TWO PATHS TO DEVELOPMENT: POLICY CHANNELING AND LISTED STATE-OWNED ENTERPRISE MANAGEMENT IN PERU AND COLOMBIA.
- Author
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Shaver, Evan B.
- Subjects
GOVERNMENT business enterprises ,INDIVIDUAL investors ,COAL sales & prices ,PORTFOLIO management (Investments) ,CORPORATE governance - Abstract
As Latin America becomes an increasingly significant global economic presence, the governance of its corporations has been more closely scrutinized. In part due to the region's history, many of its largest corporations have been state-owned. 1 As state-held corporations across the region have been privatized, however, many states across the region have been reluctant to fully relinquish control. 2 This has created a system in which many large state-owned enterprises (SOEs) are partially owned by sovereign states and partially by private investors. As a result, states are confronted with inherent conflicts as they navigate the roles of governmental administrator and majority shareholder. This paper builds upon the foundational work of Curtis J. Milhaupt and Mariana Pargendler in RPTs in SOEs: Tunneling, Propping, and Policy Channeling. In their paper, Milhaupt and Pargendler name the state's conflicted roles in mixed-ownership enterprises as "policy channeling." 3 Policy channeling occurs when a state retains majority ownership of a formerly entirely state-owned enterprise and continues to use the corporation to achieve policy aims that hurt private investors. This has been seen across the developing world as governments pursue strategies that reduce SOE profits and, as a result, investor returns. 4 For example, in 2012 the Children's Investment Fund Management threatened legal action against the Indian government for allegedly artificially deflating coal prices and "robbing the company of billions of dollars in potential revenue and hurting shareholders." 5 As developing countries seek to attract more capital, particularly from foreign investors, it is imperative that they address policy channeling through improved corporate governance standards. In examining this phenomenon in Latin America, Peru and Colombia provide two distinct models for the management of mixed-ownership companies and the mitigation of policy channeling. By considering and comparing the countries' strategies, Peru and Colombia--and Latin America more broadly--can devise more sustainable, efficient, and beneficial paths to economic development and SOE management. Simultaneously, they can structure their partially state-owned enterprises such that private stakeholders are confident that their investments will be protected. [ABSTRACT FROM AUTHOR]
- Published
- 2019