- The European Cable Companies in South America before the First World War
After the wars of independence in the first half of the nineteenth century, Latin American countries embarked on a process of insertion into the world economy, opening their doors to foreign investment and specializing in the exportation of raw materials. In free markets and in an alignment with the British imperial economic system, Latin American elites saw a road for economic prosperity and political [End Page 508] stability. Between the 1880s and 1914, Latin America became more integrated into the global economy than in any other period of its history, only comparable to globalization in the 1990s.
Latin America's insertion into the global economy in the late nineteenth and early twentieth centuries has been studied widely. Most of the classic works of social and economic history written between the 1960s and 1980s studied the consequences of globalization in molding Latin American societies. In fact, for many scholars, the political, social, and economic history of Latin America cannot be understood in isolation from the consequences that resulted from the creation of an international labor division and from the arrival of foreign capital. This view was particularly important among dependency scholars, who argued that the continent's poverty and political instability were the product of its unequal insertion in the global capitalist economy. Most of these studies focused on social and political aspects of export production (such as rubber in Brazil, nitrates in Chile, or guano in Peru) but neglected the role of the communication systems that permitted a coordinated flow of goods to international markets. Without access to the newly invented telegraph systems, international trade and foreign investment in the region would have occurred at a much slower pace; some sectors might not have developed at all, and many regions would have remained isolated from global markets.
Jorma Ahvenainen makes a contribution to the literature by filling this gap in his study of the European cable companies in South America between 1862 and 1914. Ahvenainen studies the crucial period in which Latin America consolidated itself as exporter of raw materials and witnessed the arrival of the first foreign investors. The submarine cable system demonstrates a pattern similar to the one found in other economic sectors in which foreign participation has dominated: it began under the control of the British, who later saw their power challenged by the French and Germans, who, in turn, were eventually replaced by the Americans. The first two chapters, covering the 1870s and 1880s, document the unsuccessful attempts by some small French, Spanish, and South American firms to attain concessions to build the cable network. These interests, however, could not compete with the powerful Telegraph Construction Company of London, which got most of the important concessions. This company's power, however, did not remain unchallenged. Chapters 3 to 8 (covering 1880 to 1900) show the fierce competition between the Telegraph Construction Company and a number of new firms that built new lines to the main export regions of Chile, Peru, and Brazil. Ahvenainen's detailed study shows the difficulties these companies faced in terms of civil wars, political intrigue, and lack of [End Page 509] adequate transportation systems within the countries. He also describes the unethical and cutthroat means by which different companies competed against each other at a time when little legislation regulated global business activities.
As long as international trade with Germany, France, and the United States grew, the governments of those countries showed increasing interest in building their own cable lines to South America. Instead of confronting the British companies, newcomers chose diplomacy and lobbied local governments not to renew the British concessions once they expired. The British firms did not have the Foreign Office's support and gradually saw the German and French firms taking over.
Ahvenainen's book has much wider implications than the author acknowledges. The book is written in isolation from Latin American historiography on economic development and foreign investment. The rich body of...