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Salient. Victoria University Students Newspaper. Vol. 38, No. 2. March 11, 1975

Consequences of the Development of the Multinationals

Consequences of the Development of the Multinationals

The development of the multinational enterprises in recent years has brought with it consequences in all parts of the world, but especially in the underdeveloped countries.

From the commercial point of view, prices and monetary problems, control of international markets and the majority of basic products, belong not to the producing countries, but to the industrialised countries, through a network of financial relations and agreements among dominant groups.= These' groups are the ones that fix the prices according to the varying needs of industry in the developed countries. The tendency that exists in this area is oriented toward lowering prices of unfinished or semi-finished products and increasing prices of manufactured products.

International speculation achieves this on the basis of the monetary crisis and of inflation. The multinational companies have available important 'floating' liquid sums and diverse foreign exchange that they utilise to provoke monetary crisis in their favour.

Within world commerce, the part of the exchange that the branches of the multinationals are responsible for among themselves, is one of the most spectacular proofs of the influence these companies exercise over national economic policies. In 1966, 22% of the value of British exports came from transactions among filial enterprises, that is between a foreign branch and the parent company. Another example is that the sales made between multinational companies with, headquarters in the United States, and their foreign branches, represented something more than 25% of the total of US exports in 1964. Today these figures have risen tremendously.


As for the problem of financial transfers, it is no secret that the multinationals deposit enormous sums of money among their branches in different countries in order to evade control and tax payments. A study made in 1967 revealed that North American enterprises with branches in Europe ordered these branches to send between 90% and 100% of their profits to the parent company. The same method is used in Latin America: between 1955 and 1967, US multinational enterprises invested a total of $4.361 billion on the continent, a sum which brought them a total profit of $12.403 billion, of which $10.839 billion was returned to the parent companies.

Latin America, without doubt, is the region most (saturated' with foreign and especially US capital. At the beginning of 1971, investments by US enterprises in the countries on the continent rose to $14.700 billion, while in the underdeveloped countries of Asia, they totalled $4.100 billion, and in Africa $2.600 billion. This 'saturation' becomes more evident if we consider the population of these regions. In Latin America in 1970, for every inhabitant there was a direct investment by US monopolies of $51, in Africa it was $8 and in Asia still less, close to $3.