State-Business Alliances in Radical Leftist Governments in Latin America: Disclosing the Paradoxical Prosperity of Business Groups in Ecuador

How do business groups prosper in hostile governments? This question is critical for developing countries, especially in Latin America, where since the late 1990s business groups witnessed the arrival of leftist governments promoting policy reforms aimed at reducing their economic and political power. However, in spite of the adverse context, business groups are thriving. Using the government of Rafael Correa (2007-2017) in Ecuador as a case study, this paper presents an empirical analysis that combines Social Network Analysis and Analytic Narratives to provide a preliminary explanation to this contrasting business success. Building on the classical distinction between structural and instrumental power, I examine how the power of the conglomerates shaped the cost–benefit estimations of their interactions with the hostile administration. Specifically, I observe three types of strategies – cooperation, resistance, and moderate opposition – that the businesses crafted based on their sources of power. Each strategy represented costs and benefits not only to the business groups but also to the state. Business tactics likewise show the different levels of success that business groups had in Correa’s administration. Finally, I note how the outcome of the business strategies resulted in an effective change (increase or decrease) in the power of business groups in Ecuador and in a reshape of business-state relations during the leftist government. This paper corresponds to literature on business power, preferences, and resilience in contentious scenarios, and contributes to an influential body of scholarship that seeks to answer the perennial question of how businesses get what they want in the political arena. The results also present a framework to study business and states relations in developing countries.