Aldo Musacchio
Associate Professor of Business Administration
Aldo Musacchio has been in the faculty of HBS since 2004. He is currently an associate professor in the Business, Government, and International Economy Unit (BGIE) and a Faculty Research Fellow at the National Bureau of Economic Research (NBER).
Professor Musacchio’s first research projects focused on how companies can adopt corporate governance practices that protect investors in relatively adverse legal and institutional environments. His book, Experiments in Financial Democracy (Cambridge University Press, 2009) studies the mechanisms Brazilian firms used to follow high corporate governance standards before 1950, when the legal protections for investors were relatively weak. He argues that companies are not trapped in the legal systems in which they operate. They can overcome their institutional environments through better practices and by designing bylaws that compensate for the weak legal environment.
Professor Musacchio’s current research project with Professor Sergio Lazzarini, of Insper in Brazil, looks at the new ways in which states intervene in the economy. They are writing a book manuscript, tentatively entitled Leviathan in Business, that examines the new forms of state capitalism. Among other things, the book contains chapters on the effects of having the state as a minority shareholder, the role of development banks in capital formation, the importance of selecting well CEOs of state-owned enterprises (SOEs), and analyzing whether listing SOEs is enough to tie the governments hands, among others.
Finally, Professor Musacchio is also developing a series of cases and articles looking at best practices in state-owned enterprises. The objective of this research project is to provide lessons to improve the performance of large state-owned companies, especially in contexts where governments face political constraints to privatize such companies in full or in part, or where managers of state-owned enterprises cannot freely hire and fire workers or charge market rates for their services or products.
Aldo Musacchio has a B.A. in economics (with highest honors) from ITAM, in Mexico, and a Ph. D. in Economic History of Latin America from Stanford University. He is a faculty associate at the Weatherhead Center for International Affairs and a member of the Brazil Studies Committee and the Mexican Studies Committee, all at Harvard University. In 2012, he won the First Prize of the Manuel Espinosa Yglesias Prize for his research on foreign banks in Mexico (together with Stephen Haber) and was awarded the 2012 Prize for Professiona/Academic Meirt by the Alumni Association of ITAM (EX-ITAM). In 2007 he was selected as one of the “30 most promising professionals in their thirties (30 promesas en los treintas)” by Mexican business magazine Expansion. Musacchio is a member of the board of trustees of LASPAU: Academic and Professional Programs for the Americas, a nonprofit organization dedicated to advancing higher education in the Americas. Aldo Musacchio obtained a B.A. in Economics with highest honors from ITAM in Mexico City. He lives with his wife in the South End, Boston, Massachusetts.
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Book
| Forthcoming
Leviathan Evolving: New Varieties of State Capitalism in Brazil and Beyond
Aldo Musacchio and Sergio G. Lazzarini
In this book we describe the transformation of state capitalism from a model in which governments owned and ran corporations and broadly controlled the allocation of financial resources into two new varieties of state capitalism: Leviathan as a majority and as a minority investor. In this book we study the implications of such transformation using detailed data from Brazil between 1976 and 2009. In the Leviathan as a majority investor governments have started to list state-owned enterprises, have selected professional managers to run them, and have given them more financial autonomy. We argue that the transformation from owner and manager to majority shareholder has reduced many agency problems commonly faced by SOEs, but has not reduced the temptation governments face to intervene in the operation of large strategic enterprises. In the Leviathan as a minority shareholder mode, governments have small equity ownership in corporations and in general do not intervene in management. We find evidence that such equity investments allow firms to alleviate capital constraints and increase capital expenditures. Yet we also find instances in which governments use their minority positions to intervene in the management of firms, especially in natural resource industries.
Keywords: State capitalism;
state-owned enterprises;
industrial policy;
development banks;
Capitalism;
Financial Markets;
corporate governance;
corporate governance theory;
CEO effects;
Public Sector;
Economic Systems;
Financial Institutions;
Corporate Governance;
Business and Government Relations;
Governing and Advisory Boards;
State Ownership;
Privatization;
Public Ownership;
Emerging Markets;
Banking Industry;
Mining Industry;
Energy Industry;
Citation: Musacchio, Aldo, and Sergio G. Lazzarini. Leviathan Evolving: New Varieties of State Capitalism in Brazil and Beyond. under review, forthcoming.
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Book
| 2009
Experiments in Financial Democracy: Corporate Governance and Financial Development in Brazil, 1882-1950
Aldo Musacchio
In Experiments in Financial Democracy, I challenge the idea that it was colonial institutions that sent Brazil, a civil law country, down a particular path of corporate governance and finance. Detailed archival research reveals significantly different patterns of corporate governance and finance between the beginning of the twentieth century and the 1990s. In order to attract investors, the founders of companies organized before 1910 often included in the statutes stronger protections for small shareholders than what was mandated by law. The most important of these protections were maximum vote provisions that capped the number of votes a single shareholder (and sometimes even a single proxy voter) could exercise during a shareholder meeting. An analysis of the shareholder lists of nearly 100 Brazilian companies revealed a correlation between corporate statutes that protected small shareholders and less concentrated ownership and control. I maintain that the corporate governance rules in the past help to explain the peak in equity market development observed between 1890 and 1914 (by some measures, equity markets were more developed then than they are today).
Keywords: Private Equity;
Investment;
Corporate Governance;
Governing Rules, Regulations, and Reforms;
Business History;
Business and Shareholder Relations;
Brazil;
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Article
| Academy of Management Journal
| Forthcoming
Leviathan as a Minority Shareholder: Firm-level Implications of Equity Purchases by the State
Carlos F. K. V. Inoue, Sergio G. Lazzarini and Aldo Musacchio
In many countries, firms face institutional voids that raise the costs of doing business and thwart entrepreneurial activity. We examine a particular mechanism to address those voids: minority state ownership. Due to their minority nature, such stakes are less affected by the agency distortions commonly found in full-fledged state-owned firms. Using panel data from publicly traded firms in Brazil, where the government holds minority stakes through its development bank (BNDES), we find a positive effect of those stakes on firms' return on assets and on the capital expenditures of financially-constrained firms with investment opportunities. However, these positive effects are substantially reduced when minority stakes are allocated to business group affiliates and when local institutions develop. Therefore, we shed light on the firm-level implications of minority state ownership, a topic that has received scant attention in the strategy literature.
Keywords: State ownership;
Performance;
business groups;
development banks;
State capitalism;
Citation: Inoue, Carlos F. K. V., Sergio G. Lazzarini, and Aldo Musacchio. "Leviathan as a Minority Shareholder: Firm-level Implications of Equity Purchases by the State." Academy of Management Journal (forthcoming).
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Article
| Cornell International Law Review
| Forthcoming
In Strange Company: The Puzzle of Private Investment in State-Controlled Firms
Mariana Pargendler, Aldo Musacchio and Sergio G. Lazzarini
A large legal and economic literature describes how state-owned enterprises (SOEs) suffer from a variety of agency and political problems. Less theory and evidence, however, have been generated about the reasons why state-owned enterprises listed in stock markets manage to attract investors to buy their shares (and bonds). In this Article, we examine this apparent puzzle and develop a theory of how legal and extralegal constraints allow mixed enterprises to solve some of these problems. We then use three detailed case studies of state-owned oil companies—Brazil’s Petrobras, Norway's Statoil, and Mexico's Pemex—to examine how our theory fares in practice. Overall, we show how mixed enterprises have made progress to solve some of their agency problems, even as government intervention persists as the biggest threat to private minority shareholders in these firms.
Keywords: corporate governance;
state-owned enterprises;
oil companies;
Corporate Governance;
Business and Shareholder Relations;
Energy Industry;
Brazil;
Mexico;
Norway;
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Article
| Business History
| Forthcoming
Does the Law and Finance Hypothesis Pass the Test of History?
Aldo Musacchio and John D. Turner
For the body of work known as the law and finance literature, the development of
financial markets and the concentration of ownership across countries is to a large
extent the consequence of the legal system nations created or inherited decades or
hundreds of years ago. Despite the seemingly historical nature of this explanation, most
of the body of work supporting the law and finance hypothesis has been ahistorical. This paper summarises the business history literature and provides evidence on investor
protection and financial development over the long run that challenges the main tenets
of the law and finance literature.
Keywords: law;
finance;
business history;
Financial Markets;
Financial History;
Business and Shareholder Relations;
Law;
Financial Services Industry;
United States;
United Kingdom;
Brazil;
Citation: Musacchio, Aldo, and John D. Turner. "Does the Law and Finance Hypothesis Pass the Test of History?" Business History (forthcoming).
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Article
| Economía
|
Foreign Entry and the Mexican Banking System, 1997-2007
Stephen Haber and Aldo Musacchio
What is the impact of foreign bank entry on the pricing and availability of credit in developing economies? The Mexican banking system provides a quasi-experiment to address this question because in 1997 the Mexican government radically changed the laws governing the foreign ownership of banks: the foreign market share therefore increased five-fold between 1997 and 2007. We construct and analyze a panel of Mexican bank financial data covering this period and find no evidence that foreign entry increases the availability of credit. We also find that switching from domestic to foreign ownership is associated with a decrease in non-performing loans and an increase in interest rate spreads, suggesting that foreign concerns bought domestic banks that had been making loans with low interest rates to parties that had a low probability of repayment.
Keywords: Banks and Banking;
Ownership;
Foreign Direct Investment;
Laws and Statutes;
Developing Countries and Economies;
Banking Industry;
Mexico;
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Article
| Explorations in Economic History
|
Big BRICs, Weak Foundations: The Beginning of Public Elementary Education in Brazil, Russia, India, and China
Latika Chaudhary, Aldo Musacchio, Steven Nafziger and Se Yan
Our paper provides a comparative perspective on the development of public primary education in four of the largest developing economies circa 1910: Brazil, Russia, India, and China (BRIC). These four countries encompassed more than 50% of the world's population in 1910, but remarkably few of their citizens attended any school by the early 20th century. We present new, comparable data on school inputs and outputs for BRIC drawn from contemporary surveys and government documents. Recent studies emphasize the importance of political decentralization and relatively broad political voice for the early spread of public primary education in developed economies. We identify the former and the lack of the latter to be important in the context of BRIC, but we also outline how other factors such as factor endowments, colonialism, serfdom, and, especially, the characteristics of the political and economic elite help explain the low achievement levels of these four countries and the incredible amount of heterogeneity within each of them.
Keywords: Perspective;
Growth and Development;
Middle School Education;
Developing Countries and Economies;
Data and Data Sets;
Geographic Location;
Public Administration Industry;
Brazil;
Russia;
India;
China;
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Article
| Financial History Review
|
Endowments, Fiscal Federalism, and the Cost of Capital for States: Evidence from Brazil, 1891-1930
Andre C. Martinez Fritscher and Aldo Musacchio
There is a large literature looking at the determinants of country risk (defined as the difference between the yield of a sovereign's bonds and the risk-free rate). In this paper, we contribute to the discussion by arguing that an important explanatory factor is the impact that commodities have on the government's capacity to pay. We use a newly created database with state-level fiscal and risk premium data for Brazil states between 1891 and 1930 to show that in Brazilian states that exported commodities that were in high in demand (e.g., rubber and coffee) the state governments ended up having higher tax revenues per capita and, thus, lower cost of capital. We also explain that the variation in revenues per capita was both a product of the variation in natural endowments and a commodity boom that had asymmetric effects among states. These two effects generated variation in revenues per capita at the state level thanks to the extreme form of fiscal decentralization that the Brazilian government adopted in the Constitution of 1891, which gave states the sole right to tax exports. We also use indices of export prices for each state as instruments for revenues per capita. Our instrumental variable estimates confirm our results that states with commodities that had higher price increases had lower risk premia.
Keywords: Bonds;
Performance Capacity;
Taxation;
Revenue;
Governance;
Geographic Location;
Trade;
Price;
Cost of Capital;
Risk and Uncertainty;
Public Administration Industry;
Brazil;
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Article
| Entreprises et histoire
|
Drawing Links Between Corporate Governance and Networks: Bankers in the Corporate Networks of Brazil, Mexico, and The United States Circa 1910
Aldo Musacchio
Keywords: Corporate Governance;
Networks;
Banks and Banking;
Business History;
Brazil;
Mexico;
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Article
| Harvard International Review
|
The Return of State-Owned Enterprises: Should We Be Afraid?
Aldo Musacchio and Francisco Flores-Macias
The global financial crisis of 2008-2009 has prompted many industrialized states worldwide to increase their stakes in private corporations. This wave of partial nationalizations has come amidst full-scale expropriations in developing countries such as Venezuela, Bolivia, and Ecuador. Does this signal a return of "state capitalism?" If so, what should we expect of the state-owned enterprises (SOEs) that spring back into economic life? Should we be afraid that this return to state capitalism will bring back the practices of the large, inefficient SOEs that countries privatized during the 1980s and 1990s? From a look at the popular press, one certainly gets the impression that there is a return of "state capitalism," as if state intervention in industrial activity actually went away for a significant period of time. Moreover, many observers of the recent wave of nationalizations and government-backed bank capitalizations are afraid that a return to the wasteful state-owned enterprises of the past is imminent. In this essay we propose two alternative views. First, we stress the resilience of state-owned enterprises, which have been around for more than one hundred years in the world's capitalist economies. In fact, state interventions similar to those of today were seen in the pre-World War I period, an era known by some economic historians as "the first big wave of globalization." Second, we argue that there is no reason to believe that the SOEs of the twenty-first century will be as inefficient as those of the 1970s and 1980s. The world has changed much since former British Prime Minister Margaret Thatcher first began implementing large-scale privatizations. In fact, we document some cases of present-day competitive SOEs and explain some of the conditions that made them efficient, even in comparison to their private counterparts. We do not argue that all SOEs are efficient or that it is optimal to have government ownership of banks and other companies. What we aim to show is that the return of state capitalism is likely to be different this time since, we believe, the environment is different and many SOEs have learned the lessons of the past.
Keywords: History;
Private Ownership;
State Ownership;
Financial Crisis;
Business and Government Relations;
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Article
| Business History Review
|
Laws versus Contracts: Legal Origins, Shareholder Protections, and Ownership Concentration in Brazil, 1890–1950
Aldo Musacchio
This article examines some of the institutional conditions that facilitated the development of equity markets in Brazil. A critical factor was the addition of protections for investors to corporate bylaws, which enabled relatively large corporations in Brazil to attract investors in large numbers. By availing themselves of this strategy, the firms generated a relatively low concentration of ownership before 1910. Archival evidence, such as company statutes and shareholder lists, reveals that the addition of voting rights to their bylaws, particularly maximum vote provisions and graduated voting scales (which stipulated that less-than-proportional votes increase in parallel with shareholdings), allowed many Brazilian corporations to balance the relative voting power of their small and large investors. In companies that made such arrangements, the concentration of ownership and control was sharply lower than in the average company. Judging by the Brazilian companies examined for this article, it also appears that the concentration of control was significantly lower before 1910 than it is today.
Keywords: Voting;
Equity;
Financial Markets;
Investment;
Governance Controls;
Business History;
Ownership Stake;
Brazil;
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Journal Article
| Journal of Economic History
|
Can Civil Law Countries Get Good Institutions? Lessons from the History of Creditor Rights and Bond Markets in Brazil
Aldo Musacchio
Does a legal tradition adopted in the distant past constrain a country’s ability to provide the protection that investors need for financial markets to develop? This paper contributes to the literature that studies the connection between law and finance by looking at the relationship between legal origin and the development of bond markets. The paper shows that there is too much variation over time in terms of bond market size, creditor protections, and court enforcement of bond contracts to assume that the adoption of a legal system can constrain future financial development. The paper examines in detail the evolution of bond markets in Brazil, a French civil law country, and provides preliminary results of similar variation for a small cross-section of countries.
Keywords: Bonds;
Financial Markets;
Investment;
Code Law;
Contracts;
Law Enforcement;
Size;
Brazil;
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Article
| Enterprise & Society
|
Bankers, Industrialists, and Their Cliques: Elite Networks in Mexico and Brazil during Early Industrialization
Aldo Musacchio and Ian Read
The historiographies of Mexico and Brazil have implicitly stated that business networks were crucial for the initial industrialization of these two countries. Recently, differing visions on the importance of business networks have arisen. In the case of Mexico, the literature argues that entrepreneurs relied heavily on an informal institutional structure to obtain necessary resources and information. In contrast, the recent historiography of Brazil suggests that after 1890 the network of corporate relations became less important for entrepreneurs trying to obtain capital and concessions, once the institutions promoted financial markets and easy entry for new businesses. Did entrepreneurs in Brazil and Mexico organize their networks differently to deal with the different institutional settings? We test whether in Mexico businessmen relied more on networks and other informal arrangements to do business than in Brazil. Our hypothesis is confirmed by three related results: 1) the total number of connections (i.e., the density of the network) was higher in Mexico than Brazil; 2) In Mexico there was one dense core network, while in Brazil we find fairly dispersed clusters of corporate board interlocks; and most importantly, 3) politicians played a more important role in the Mexican network of corporate directors than their counterparts in Brazil. Interestingly, even though Brazil and Mexico relied on very different institutional structures, both countries grew at similar rates of growth between 1890 and 1913. However, the dense and exclusive Mexican network might have ended up increasing the social and political tensions that led to the Mexican Revolution (1910–1920).
Keywords: Economic Growth;
Entrepreneurship;
Financial Markets;
Business History;
Market Entry and Exit;
Business and Government Relations;
Social and Collaborative Networks;
Mexico;
Brazil;
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Article
| Journal of Economic History
|
Law and Finance in Historical Perspective: Politics, Bankruptcy Law, and Corporate Governance in Brazil, 1850-2002
Aldo Musacchio
Keywords: Law;
Finance;
History;
Perspective;
Government and Politics;
Insolvency and Bankruptcy;
Corporate Governance;
Brazil;
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Journal Article
| Trimestre económico
|
NORMAS CONTABLES BANCARIAS EN MÉXICO. Una guía de los cambios para legos diez años después de la crisis bancaria de 1995
Gustavo Del Angel, Stephen Haber and Aldo Musacchio
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Article
| Trimestre económico
|
Un nuevo índice de precios para México, 1886-1929 [A New Price Index for Mexico, 1886-1929]
Aurora Gómez-Galvarriato and Aldo Musacchio
We present new price indices for the period 1886-1929. These indices have several advantages with respect to the previous ones: i) they cover the whole period with the same methodology, and by reaching 1929 these series can be joined with contemporary price indices, ii) they include more products, iii) they use price data more homogeneous and reliable, iv) they are monthly price indices, v) their methodology is explicit, it follows clear and precise rules, and vi) they obey the basic consistency criteria that economic theory predicts, both from a theoretical and from an statistical point of view.
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Chapter
| The Politics of Financial Development
| 2007
Legal Origin vs. the Politics of Creditor Rights: Bond Markets in Brazil, 1850-2002
Aldo Musacchio
This paper explores the question: Do institutions persist over time and determine current economic outcomes? Specifically, does the adoption or inheritance of a legal tradition in the past determine the subsequent course of institutional and financial development? This paper attempts to answer this question by examining the history of bond markets and creditor rights in Brazil as well as evidence of creditor rights protections in a cross-section of common and civil law countries. The tested hypotheses are from the law and finance literature, which argues that legal origin determines both the extent of investor protections and level of financial market development (La Porta, Lopez de Silanes, Shleifer and Vishny, 1997, 1998, 2000). I test three hypotheses. First, I test whether the idea that legal origin exerts a persistent effect on financial market size can be defended. The significant variation I find in bond market size and creditor protections over 150 years does not support the notion of persistent effects of legal origin. Second, I test whether a path-dependent effect of legal origin can explain the level of creditor protections in Brazil. Finding, following the methodology of La Porta et al. (1998), that creditor rights vary too much over time to be determined by legal origin. I propose that the time-variance of investor protections is better explained by the existence of a political economy channel. Finally, I test whether the relationship posited by the law and finance literature between legal origin and creditor rights holds for a (small) cross-section of countries in the past. I present evidence that in 1910 legal origin did not explain the differences we observe across countries today. In fact, for the few countries I study, French civil law countries had, on average, stronger creditor rights that common law countries.
Keywords: History;
Common Law;
Rights;
Code Law;
Financial Markets;
Government and Politics;
Financial Services Industry;
Brazil;
Citation: Musacchio, Aldo. "Legal Origin vs. the Politics of Creditor Rights: Bond Markets in Brazil, 1850-2002." Chap. 2 in The Politics of Financial Development, edited by Stephen Haber, Douglass C. North, and Barry Weingast, 259–286. Stanford, CA: Stanford University Press, 2007.
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Chapter
| From Silver to Cocaine: Latin American Commodity Chains and the Building of the World Economy, 1500-2000
| 2006
The International Rubber Market, 1870-1930
Zephyr Frank and Aldo Musacchio
Keywords: History;
Goods and Commodities;
Rubber Industry;
Citation: Frank, Zephyr, and Aldo Musacchio. " The International Rubber Market, 1870-1930." Chap. 10 in From Silver to Cocaine: Latin American Commodity Chains and the Building of the World Economy, 1500-2000, edited by Steven Topik, Carlos Marichal, and Zephyr Frank, 271–299. Durham: Duke University Press, 2006.
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Working Paper
| HBS Working Paper Series
| 2013
These Are the Good Old Days: Foreign Entry and the Mexican Banking System
Stephen Haber and Aldo Musacchio
In 1997, the Mexican government reversed long-standing policies and allowed foreign banks to purchase Mexico's largest commercial banks and relaxed restrictions on the founding of new, foreign-owned banks. The result has been a dramatic shift in the ownership structure of Mexico's banks. For instance, while in 1991 only 1% of bank assets in Mexico were foreign owned, today they control 74% of assets. In no other country in the world has the penetration of foreign banks been as rapid or as far-reaching as in Mexico. In this work we examine some of the important implications of foreign bank entry for social welfare in Mexico. Did liberalization lead to an increase (or decrease) in the supply of credit? Did liberalization lead to an increase (or decrease) in the cost of credit? Did liberalization lead to an increase (or decrease) in the stability of the banking system? In order to answer these questions, we must first ask, "increase (or decrease), measured on what basis?" There are, in fact, two distinct conceptual frameworks through which one can assess the impact of foreign bank entry. One is concerned with measuring the short-run impacts of foreign entry on credit abundance, pricing, and observable stability using reduced form regressions. The other is an institutional economics conception of how to measure performance. It is focused on understanding whether foreign entry gave rise to difficult-to-reverse changes in the political economy of bank regulation, which will affect competition and stability in the long-term, outside the period that may be observed empirically. We employ both conceptions in this paper.
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Working Paper
| HBS Working Paper Series
| 2012
Leviathan in Business: Varieties of State Capitalism and Their Implications for Economic Performance
Aldo Musacchio and Sergio G. Lazzarini
In this paper we document the extent and reach of state capitalism around the world and explore its economic implications. We focus on governmental provision of capital to corporations—either equity or debt—as a defining feature of state capitalism. We present a stylized distinction between two broad, general varieties of state capitalism: one through majority control of publicly traded companies (e.g., state-controlled SOEs) and a hybrid form that relies on minority investments in companies by development banks, pension funds, sovereign wealth funds, and the government itself. We label these two alternative modes Leviathan as a majority investor and Leviathan as a minority investor, respectively. Next we differentiate between these two modes by describing their key fundamental traits and the conditions that should make each mode more conducive to development and superior economic performance.
Keywords: State capitalism;
state-owned enterprises;
development banks;
sovereign wealth funds;
Economic Systems;
State Ownership;
Sovereign Finance;
Business and Government Relations;
Investment;
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Working Paper
| HBS Working Paper Series
| 2012
Mexico's Financial Crisis of 1994-1995
Aldo Musacchio
This paper explains the causes leading to the Mexican crisis of 1994-1995 (known as "The Tequila Crisis"), and its short- and long-term consequences. It argues that excessive enthusiasm on the part of foreign investors, not based on Mexico's fundamentals, and weak regulation of the banking system built the vulnerabilities that left Mexico exposed to a sudden change in investor appetite for Mexican securities in 1994. Political violence in Mexico and changes in monetary policy in the United States then led to radical changes in investor perceptions of the future of the country and to a balance of payments and banking crisis. The paper then explains how the crisis unraveled and describes the US bailout of the Mexican government in 1995. Since the exchange rate crisis of December of 1994 then translated into a banking crisis in 1995, the chapter ends examining the subsequent development of the Mexican banking system.
Keywords: Financial Crisis;
Foreign Direct Investment;
Banks and Banking;
Government and Politics;
Currency Exchange Rate;
Banking Industry;
Mexico;
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Working Paper
| 2012
Big BRICs, Weak Foundations: The Beginning of Public Elementary Education in Brazil, Russia, India, and China
Latika Chaudhary, Aldo Musacchio, Steven Nafziger and Se Yan
Our paper provides a comparative perspective on the development of public primary education in four of the largest developing economies circa 1910: Brazil, Russia, India and China (BRIC). These four countries encompassed more than 50% of the world's population in 1910, but remarkably few of their citizens attended any school by the early 20th century. We present new, comparable data on school inputs and outputs for BRIC drawn from contemporary surveys and government documents. Recent studies emphasize the importance of political decentralization and relatively broad political voice for the early spread of public primary education in developed economies. We identify the former and the lack of the latter to be important in the context of BRIC, but we also outline how other factors such as factor endowments, colonialism, serfdom, and, especially, the characteristics of the political and economic elite help explain the low achievement levels of these four countries and the incredible amount of heterogeneity within each of them.
Keywords: History;
Middle School Education;
Data and Data Sets;
Residency Characteristics;
Integration;
Perspective;
Surveys;
Geographic Location;
Welfare or Wellbeing;
Government and Politics;
Developing Countries and Economies;
Growth and Development;
China;
India;
Brazil;
Russia;
Citation: Chaudhary, Latika, Aldo Musacchio, Steven Nafziger, and Se Yan. " Big BRICs, Weak Foundations: The Beginning of Public Elementary Education in Brazil, Russia, India, and China." NBER Working Paper Series, No. 17852, February 2012.
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Working Paper
| HBS Working Paper Series
| 2011
What Do Development Banks Do? Evidence from Brazil, 2002-2009
Sergio G. Lazzarini, Aldo Musacchio, Rodrigo Bandeira-de-Mello and Rosilene Marcon
While some authors view development banks as an important tool to alleviate capital constraints in scarce credit markets and unlock productive investments, others see those banks as conduits of cheap loans to politically connected firms that could obtain capital elsewhere. We test these contrasting views using data on loans and equity allocations in the period 2002-2009 by the Brazilian National Development Bank (BNDES), one of the largest development banks in the world. In our fixed effect regressions, we find that BNDES' allocations do not seem to affect firm-level operational performance and investment decisions, although they do reduce firm-level cost of capital due to the governmental subsidies accompanying loans. Next, examining the selection process through which BNDES' capital is allocated to firms, we find that BNDES apparently selects firms with good operational performance but also provides more capital to firms with political connections (measured as campaign donations to politicians who won an election). Yet, we do not find evidence that BNDES is systematically bailing out firms. In general, BNDES appears to be generally selecting firms with capacity to repay their loans, as regular commercial banks would do.
Keywords: Cost of Capital;
Credit;
Equity;
Banks and Banking;
Financing and Loans;
Investment;
Government and Politics;
Data and Data Sets;
Resource Allocation;
Markets;
Performance;
Banking Industry;
Brazil;
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Working Paper
| HBS Working Paper Series
| 2011
Leviathan as a Minority Shareholder: A Study of Equity Purchases by the Brazilian National Development Bank (BNDES), 1995-2003
Sergio G. Lazzarini and Aldo Musacchio
There is a growing literature comparing the performance of private vs. state-owned companies. Yet, there is little work examining the effects of having the government as a minority shareholder of private companies. We conduct such a study using data for 296 publicly traded corporations in Brazil, looking at the effects of equity purchases by the National Bank for Economic and Social Development (BNDES) on firm performance between 1995 and 2003. Our fixed-effects regressions show that BNDES's purchases of equity lead to increases in return on assets and investment in fixed assets. Finally, we find that the positive effect of BNDES's equity purchases is reduced when the target firms belong to state-owned and private pyramidal groups. Therefore, we argue that having development banks owning minority stakes can have a positive effect on performance as long as they promote long-term investments and are shielded from governmental interference and potential minority shareholder expropriation.
Keywords: Investment;
Ownership Stake;
State Ownership;
Private Ownership;
Performance Evaluation;
Business and Government Relations;
Business and Shareholder Relations;
Banking Industry;
Brazil;
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Working Paper
| 2010
Law and Finance c. 1900
Aldo Musacchio
How persistent are the effects of legal institutions adopted or inherited in the distant past? A substantial literature argues that legal origins have persistent effects that explain clear differences in investor protections and financial development around the world today (La Porta et al., 1998, 1999 and passim). This paper examines the persistence of the effects of legal origins by examining new estimates of different indicators of financial development in more than 20 countries in 1900 and 1913. The evidence presented does not yield robust results that can sustain the hypothesis of persistence effects of legal origin, but it is not powerful enough to reject it either. Then the paper examines whether there were systematic differences in the extent of investor protections across countries, since that is the main channel through which legal origin affects financial development, and shows that all the evidence supports the idea of relative convergence in corporate governance practices across legal families circa 1900. The paper concludes that, if the evidence presented is representative, the variation observed in financial development around the world today is likely a product of events of the twentieth century rather than a consequence of long-term (and persistent) differences occasioned by legal traditions.
Keywords: Law;
Finance;
Corporate Governance;
Practice;
Growth and Development;
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Working Paper
| HBS Working Paper Series
| 2010
Foreign Entry and the Mexican Banking System, 1997-2007
Stephen Haber and Aldo Musacchio
What is the impact of foreign bank entry on the pricing and availability of credit in developing economies? The Mexican banking system provides a quasi-experiment to address this question because in 1997 the Mexican government radically changed the laws governing the foreign ownership of banks: the foreign market share therefore increased five-fold between 1997 and 2007. We construct and analyze a panel of Mexican bank financial data covering this period and find no evidence that foreign entry increases the availability of credit. We also find that switching from domestic to foreign ownership is associated with a decrease in non-performing loans and an increase in interest rate spreads, suggesting that foreign concerns bought domestic banks that had been making loans with low interest rates to parties that had a low probability of repayment.
Keywords: Developing Countries and Economies;
Credit;
Banks and Banking;
Financing and Loans;
Foreign Direct Investment;
Market Entry and Exit;
Business and Government Relations;
Banking Industry;
Mexico;
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Working Paper
| HBS Working Paper Series
| 2012
Colonial Institutions, Trade Shocks, and the Diffusion of Elementary Education in Brazil, 1889–1930
Aldo Musacchio, Andre Martinez-Fritscher and Martina Viarengo
In this paper, we examine the role of trade shocks in promoting the diffusion of elementary education in subnational units in Brazil during a period (1889–1930) in which they had relative financial autonomy to collect export taxes and spend on public goods. The argument is that trade shocks affect asymmetrically the tax revenues of state governments and, thus, their expenditures on elementary education per capita according to what crop mix they had. We then show that states with more egalitarian and democratic institutions use positive trade shocks to invest in education, while the opposite takes place in states with less democratic institutions (e.g., in states that had more slaves). We also show using OLS and instrumental variables that positive trade shocks increased expenditures on education per capita and led to higher literacy rates and to more schools per children. The resulting distribution of human capital across states persists until today.
Keywords: Voting;
Literacy Characteristics;
Education;
Spending;
Government and Politics;
History;
Performance Improvement;
Brazil;
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Working Paper
| HBS Working Paper Series
| 2008
Bank Accounting Standards in Mexico. A Layman's Guide to Changes 10 Years after the 1995 Bank Crisis
Gustavo A. Del Angel, Stephen Haber and Aldo Musacchio
After the 1995 crisis, the Mexican banking system experienced significant changes in bank accounting standards. Most of these changes took place between 1996 and 2001, and had a significant impact in the structure and interpretation of financial information of banks. This document explains the major changes on bank accounting, their purpose and structure, and discusses their impact on financial information reported by Mexican banks. It also provides the English equivalent of the major accounting terms used by Mexican banks. The main purpose of this document is to provide a standardized guide to better understand financial information produced before and after the crisis, within the current context of internationalization of Mexican banks’ ownership.
Keywords: Accounting;
Financial Crisis;
Banks and Banking;
Standards;
Banking Industry;
Mexico;
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Working Paper
| HBS Working Paper Series
| 2008
Political Instability and Untimely Dissolution: Partnerships, Corporations, and the Mexican Revolution, 1910-1929
Aldo Musacchio, Aurora Gomez-Galvarriato and Rodrigo Parral
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Working Paper
| HBS Working Paper Series
| 2004
Organizational Choice in a French Civil Law Underdeveloped Economy: Partnerships, Corporations and the Chartering of Business in Mexico, 1886-1910
Aurora Gómez-Galvarriato and Aldo Musacchio
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Supplement
| HBS Case Collection
|
2013
The IPO of Agricultural Bank of China Exhibits (CW)
Aldo Musacchio
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Teaching Note
| HBS Case Collection
|
2013
The IPO of Agricultural Bank of China (ABC) (A) and (B) (TN)
Aldo Musacchio
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Teaching Note
| HBS Case Collection
|
2013
Silver Lake and Private Equity in Brazil: Carnaval or Calamity? (TN)
Aldo Musacchio
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Module Note
|
2013
State Capitalism and State-Owned Enterprise Reform Instructors Note
Aldo Musacchio
Keywords: State capitalism;
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Teaching Note
| HBS Case Collection
|
2013
Sovereign Wealth Funds: Barbarians at the Gate or White Knights of Globalization? (TN)
Aldo Musacchio
Keywords: sovereign wealth funds;
Sovereign Finance;
Globalization;
Emerging Markets;
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Teaching Note
| HBS Case Collection
|
2013
Pemex (TN) (A) and (B)
Aldo Musacchio
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Teaching Note
| HBS Case Collection
|
2012
Angola and the Resource Curse (TN)
Aldo Musacchio, Eric Werker and Ian Cornell
Keywords: Resource management;
African history;
angola;
dutch disease;
least developed countries;
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Technical Note
| HBS Case Collection
|
2012
(Revised from original 2012 version)
GEM 15: Country Development Strategies in 15 Statistics
Aldo Musacchio and Eric Werker
Keywords: country analysis;
country development strategies;
macroeconomics;
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Teaching Note
| HBS Case Collection
|
2012
Indian Railways: Building a Permanent Legacy? (TN)
Tarun Khanna and Aldo Musacchio
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Teaching Note
| HBS Case Collection
|
2013
Banco Ciudad (TN) (A) and (B)
Aldo Musacchio
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Teaching Note
| HBS Case Collection
|
2013
Vale: Global Expansion in the Challenging World of Mining (TN) (A) and (B)
Tarun Khanna and Aldo Musacchio
Keywords: globalization;
mining;
Brazil;
emerging markets;
Mining;
Mining Industry;
Brazil;
South America;
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Supplement
| HBS Case Collection
|
2013
(Revised from original 2012 version)
Pemex (B): The Rebound?
Aldo Musacchio, Noel Maurer and Regina Garcia-Cuellar
Keywords: turnarounds;
oil prices;
energy;
Energy Industry;
oil companies;
state-owned enterprises;
corporate governance;
Energy;
Corporate Governance;
Energy Industry;
Mexico;
North America;
Citation: Musacchio, Aldo, Noel Maurer, and Regina Garcia-Cuellar. " Pemex (B): The Rebound?" Harvard Business School Supplement 713-052, March 2013. (Revised from original December 2012 version.)
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Case
| HBS Case Collection
|
2013
(Revised from original 2012 version)
Pemex (A): In a Free Fall?
Noel Maurer and Aldo Musacchio
Keywords: turnarounds;
oil prices;
energy;
state-owned enterprises;
oil companies;
national oil companies;
Energy;
Privatization;
State Ownership;
Corporate Governance;
Energy Industry;
Mexico;
North America;
Citation: Maurer, Noel, and Aldo Musacchio. " Pemex (A): In a Free Fall?" Harvard Business School Case 713-051, January 2013. (Revised from original December 2012 version.)
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Case
| HBS Case Collection
|
2012
(Revised from original 2012 version)
The Korean Model of Shared Growth, 1960-1990
Aldo Musacchio, Rafael Di Tella and Jonathan Schlefer
Keywords: History;
Equality and Inequality;
Policy;
Economic Growth;
Economy;
Income Characteristics;
South Korea;
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Course Overview Note
|
2013
(Revised from original 2010 version)
Introduction to Business, Government, and the International Economy (BGIE)
Catherine S. M. Duggan, Aldo Musacchio and Matthew C. Weinzierl
Keywords: Business and Government Relations;
International Relations;
Trade;
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Teaching Note
| HBS Case Collection
|
2012
Dubai: Debt, Development, and Crisis (TN) (A), (B), and (C)
Aldo Musacchio
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Module Note
|
2013
(Revised from original 2012 version)
State Capitalism and State-Owned Enterprise Reform
Aldo Musacchio
The note examines state capitalism in the twenty-first century. It introduces a series of topics and cases related to state capitalism, such as the debate about the causes of inefficiency in state owned enterprises, possible ways of turning them around, as well as a short discussion of sovereign wealth funds (SWFS), national champions, development banks, etc. The note explicitly links some of these topics to HBS cases designed to dive deeper into each subject.
Keywords: State capitalism;
state-owned enterprises;
business government relations;
political economy;
turnarounds;
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Case
| HBS Case Collection
|
2012
(Revised from original 2011 version)
The IPO of Agricultural Bank of China (ABC) (A)
Li Jin, Aldo Musacchio and Hania Dawood
Keywords: Banks and Banking;
Initial Public Offering;
Agriculture and Agribusiness Industry;
Banking Industry;
China;
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Case
| HBS Case Collection
|
2012
(Revised from original 2011 version)
Pakistan: Is Foreign Aid Helping or Hindering Development?
Aldo Musacchio, Ada Chu, Shahnawaz Nawabi, Jonathan Schlefer and Emil Staykov
Keywords: Finance;
Growth and Development;
Pakistan;
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Case
| HBS Case Collection
|
2012
(Revised from original 2011 version)
Banco Ciudad (A): Who is the Owner?
Aldo Musacchio, Gustavo Herrero and Cintra Scott
Keywords: Ownership;
Banking Industry;
Citation: Musacchio, Aldo, Gustavo Herrero, and Cintra Scott. " Banco Ciudad (A): Who is the Owner?" Harvard Business School Case 712-029, February 2012. (Revised from original November 2011 version.)
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Case
| HBS Case Collection
|
2012
(Revised from original 2011 version)
Silver Lake and Private Equity in Brazil: Carnaval or Calamity?
Aldo Musacchio and Stephen J. Goldstein
Keywords: Equity;
Brazil;
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Other Teaching and Training Material
| 2011
Immersion Experience Program Note: Brazil
Aldo Musacchio, Thales S. Teixeira, Stephanie Galloway, Cassie Bordeau and Felix Oberholzer-Gee
Companies visited: Allied Advanced Technologies, BrasilAgro, Clearsale, Dafiti.com.br, Globo, Groupon Brazil, Insper, JGP Investimentos, LIGHT, Maracana Stadium, Petrobras S.A., Vale S.A.
Keywords: Brazil;
Citation: Musacchio, Aldo, Thales S. Teixeira, Stephanie Galloway, Cassie Bordeau, and Felix Oberholzer-Gee. "Immersion Experience Program Note: Brazil." Harvard Business School Publishing, 2011.
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Supplement
| HBS Case Collection
|
2011
Banco Ciudad (B): Transformation at Work
Aldo Musacchio, Gustavo Herrero and Cintra Scott
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Supplement
| HBS Case Collection
|
2011
The IPO of Agricultural Bank of China (ABC) (B)
Li Jin, Aldo Musacchio and Huw Edwards
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Case
| HBS Case Collection
|
2011
Veracity Worldwide in Syria: Assessing Political Risk in a Volatile Environment
Aldo Musacchio
Keywords: Risk and Uncertainty;
Government and Politics;
Business and Government Relations;
Syria;
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Case
| HBS Case Collection
|
2011
Sovereign Wealth Funds: Barbarians at the Gate or White Knights of Globalization?
Aldo Musacchio and Emil Staykov
Keywords: Finance;
Globalization;
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Case
| HBS Case Collection
|
2011
Veracity Worldwide: Evaluating FCPA-Related Risks in West Africa
Aldo Musacchio
Keywords: Risk and Uncertainty;
Business and Government Relations;
Crime and Corruption;
Emerging Markets;
Africa;
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Background Note
| HBS Case Collection
|
2011
(Revised from original 2011 version)
China and the Yuan-Dollar Exchange Rate
Aldo Musacchio
This note explains how the People's Bank of China (PBOC) manages (some say manipulate) the dollar-yuan exchange rate. It discusses briefly the process of sterilization in China and the possible costs for the PBOC. Therefore, the note summarizes some of the main challenges the PBOC faces to contain inflation in China and to keep Chinese exports competitive.
Keywords: Currency Exchange Rate;
China;
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Case
| HBS Case Collection
|
2011
(Revised from original 2010 version)
Mexico: Crisis and Competitiveness
Aldo Musacchio, Richard H.K. Vietor and Regina Garcia-Cuellar
In 2010, the bicentennial anniversary of Mexico's revolution against Spain, President Felipe Calderon hoped he could orchestrate several crucial reforms that Mexico needed. Mexico had not grown much over the course of the last decade, losing competitiveness to China and other Asian countries. Several of its institutions, including labor, education, healthcare, energy, and antitrust seemed uncompetitive. But with a weaker peso and greater governmental attention to infrastructure, Calderon hoped that Mexico's higher-tech exports could recapture U.S. market share and make headway in Europe and Latin America.
Keywords: Economic Growth;
Trade;
Governing Rules, Regulations, and Reforms;
Competitive Strategy;
Competitive Advantage;
Mexico;
Citation: Musacchio, Aldo, Richard H.K. Vietor, and Regina Garcia-Cuellar. " Mexico: Crisis and Competitiveness." Harvard Business School Case 710-058, August 2011. (Revised from original April 2010 version.)
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Supplement
| HBS Case Collection
|
2011
Indian Railways: Building a Permanent Legacy (B)?
Aldo Musacchio, Tarun Khanna and Rachna Tahilyani
Supplement to case 710008.
Keywords: Transportation Industry;
India;
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Teaching Note
| HBS Case Collection
|
2012
(Revised from original 2011 version)
Brazil: Leading the BRICs? (TN)
Arthur A. Daemmrich and Aldo Musacchio
Teaching Note for 711024.
Keywords: Brazil;
Citation: Daemmrich, Arthur A., and Aldo Musacchio. " Brazil: Leading the BRICs? (TN)." Harvard Business School Teaching Note 711-025, June 2012. (Revised from original March 2011 version.)
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Case
| HBS Case Collection
|
2011
(Revised from original 2011 version)
Inequality in Brazil
Aldo Musacchio
This case examines the evolution of inequality in Brazil in the last few years and generates two debates. First, the case discusses inequality and whether it is a problem or not for capitalist societies, in this case Brazil. Second, the case discusses some of the policies the Brazilian government has used to attack poverty and inequality.
Keywords: Economic Growth;
Economic Systems;
Policy;
Government and Politics;
Business and Government Relations;
Poverty;
Equality and Inequality;
Brazil;
Citation: Musacchio, Aldo. " Inequality in Brazil." Harvard Business School Case 711-086, May 2011. (Revised from original March 2011 version.)
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Case
| HBS Case Collection
|
2011
(Revised from original 2010 version)
Sherritt Goes to Cuba (A): Political Risk in Unchartered Territory
Aldo Musacchio and Jonathan Schlefer
Ian Delaney, CEO of Sherritt, a primarily a mining company, visited Cuba in the early 1990s to negotiate a deal to export nickel for their Canadian refineries. The case describes the difficulties of doing business in Cuba and the challenges Delaney overcame to turn Sherritt into a large diversified holding company that operates in mining, oil, utilities, telecomm, hotels, and others. Delaney did this while managing a relationship with an authoritarian regime with an anti-capitalist discourse.
Keywords: Business Conglomerates;
Joint Ventures;
Multinational Firms and Management;
Growth and Development Strategy;
Risk Management;
Emerging Markets;
Business and Government Relations;
Mining Industry;
Canada;
Cuba;
United States;
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Teaching Note
| HBS Case Collection
|
2010
Mexico: Crisis and Competitiveness (TN)
Richard H.K. Vietor and Aldo Musacchio
Teaching Note for 710058.
Keywords: Governing Rules, Regulations, and Reforms;
Currency;
Government and Politics;
Trade;
Infrastructure;
Mexico;
China;
Europe;
Latin America;
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Case
| HBS Case Collection
|
2010
(Revised from original 2010 version)
Colombia: Strong Fundamentals, Global Risk
Aldo Musacchio, Richard H. K. Vietor, Jonathan Schlefer and Carolina Camacho
By mid-2009 Colombian President Alvaro Uribe had ended decades of virtual civil war and strengthened the business climate, but he faced tough economic challenges. Though he had instituted prominent market reforms and brought inflation down sharply, Colombia seemed stuck in a middle ground, industrially behind Brazil or Chile but ahead of poorer Latin American countries. Traditional exports—coal, coffee, oil—still comprised more than half the total, while manufactured exports comprised only a fifth. Public investment in transport and other infrastructure—a perpetual obstacle to growth in mountainous Colombia—remained too low. A major ambition of Uribe or his possible like-minded successor was to secure U.S. Congressional approval of a free trade agreement signed in 2006. But would it really help Colombia diversify its economy? Colombia already had access to the U.S. market but still had a relatively closed economy compared with neighbors such as Mexico or Chile.
Keywords: Developing Countries and Economies;
Economic Growth;
Macroeconomics;
Trade;
Global Strategy;
Infrastructure;
Business and Government Relations;
Colombia;
Citation: Musacchio, Aldo, Richard H. K. Vietor, Jonathan Schlefer, and Carolina Camacho. " Colombia: Strong Fundamentals, Global Risk." Harvard Business School Case 710-012, October 2010. (Revised from original January 2010 version.)
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Case
| HBS Case Collection
|
2010
(Revised from original 2008 version)
Iceland (A)
Aldo Musacchio
In May of 2008, a team of sovereign debt analysts at Moody's had to decide whether to downgrade the country's sovereign long-term debt from Aaa to Aa1 or lower. Investor sentiment toward Iceland had changed radically in March, and the Moody's team was fearful that the situation could spiral out of control. The Moody's team knew that carry traders increased Iceland's vulnerability to a confidence crisis because they were quick to liquidate their holdings at the first sign of distress. The plunge in the Icelandic Krona since the beginning of 2008 also forced the Icelandic people to confront a decision: would joining the European Union (EU) protect Iceland from capricious swings in investor sentiment? What, if anything, should Iceland do to avoid a future crisis?
Keywords: Decision Choices and Conditions;
Financial Crisis;
Borrowing and Debt;
Currency;
Financial Condition;
Sovereign Finance;
European Union;
Iceland;
Citation: Musacchio, Aldo. " Iceland (A)." Harvard Business School Case 709-011, October 2010. (Revised from original August 2008 version.)
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Case
| HBS Case Collection
|
2010
(Revised from original 2010 version)
Vale: Global Expansion in the Challenging World of Mining
Tarun Khanna, Aldo Musacchio and Ricardo Reisen de Pinho
In 2009 the management of Vale, a Brazilian diversified mining company and the largest iron ore producer in the world, was under pressure from at least two fronts. First, the emergence of China as the most important consumer of iron ore in the last few years had changed the pricing system for iron ore from long-term contracts based on negotiated "benchmark prices" to contracts based on spot prices, usually forcing mining companies to pay for shipping. Second, for Brazil's charismatic president, Lula, a former union leader, Vale's layoffs during the global financial crisis and its perceived move away from Brazil (as Vale increased its exports to China and purchased Chinese vessels to ship iron ore to Asia) were reasons to start an open campaign to pressure Vale and Roger Agnelli to invest in integrated steel mills in Brazil. In October of 2009, the CEO of Vale, Agnelli was going to meet with Lula and had to decide what to do to attenuate these political pressures. What could Agnelli do to deal with political pressures at home? Was the purchase of large vessels to ship iron ore to Asia a good decision at a time when the shipping industry had spare capacity?
Keywords: Financial Crisis;
Investment;
Global Strategy;
Risk Management;
Market Entry and Exit;
Business and Government Relations;
Competitive Strategy;
Mining Industry;
Brazil;
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Supplement
| HBS Case Collection
|
2010
Sherritt Goes to Cuba (B): Dealing with Political Risk Under Raul Castro
Aldo Musacchio and Jonathan Schlefer
Keywords: Risk Management;
Government and Politics;
International Relations;
Cuba;
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Supplement
| HBS Case Collection
|
2010
Sherritt Goes to Cuba (C): Cuba country data
Aldo Musacchio and Jonathan Schlefer
Keywords: Data and Data Sets;
Cuba;
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Case
| HBS Case Collection
|
2010
Angola and the Resource Curse
Aldo Musacchio, Eric D. Werker and Jonathan Schlefer
Since emerging from decades of conflict in 2002, Angola has been growing at a scorching double-digit rate, led by its oil industry. But the nation remains beset with seemingly intractable problems: immense inequality, low life expectancy, a non-diversified economy, and constant grumblings of corruption. The global financial crisis and subsequent fall in state oil revenue drives a loan-seeking Angola towards either the IMF, who demand extensive reforms, or the Chinese, who seek to take a direct stake in the nation's recovery. The case explores the dynamics of post-conflict recovery as well as the challenges associated with a reliance on oil wealth, including the resource curse and Dutch disease.
Keywords: Crime and Corruption;
Developing Countries and Economies;
Financial Crisis;
Borrowing and Debt;
Financial Institutions;
Globalized Economies and Regions;
Policy;
Government Administration;
Emerging Markets;
Natural Environment;
Angola;
Citation: Musacchio, Aldo, Eric D. Werker, and Jonathan Schlefer. " Angola and the Resource Curse." Harvard Business School Case 711-016, September 2010.
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Teaching Note
| HBS Case Collection
|
2010
Petrobras in Ecuador (TN) (A), (B) and (C)
Aldo Musacchio and Lena G. Goldberg
Teaching Note for 309107.
Keywords: Brazil;
Ecuador;
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Supplement
| HBS Case Collection
|
2012
(Revised from original 2010 version)
Dubai: Debt, Development, and Crisis (B)
Aldo Musacchio, Andrew Christopher Goodman and Claire K. Qureshi
On November 25, 2009, the city state of Dubai stunned markets by announcing that Dubai World, its flagship state holding company, would seek a six month "standstill" on at least $4 billion U.S. dollars of its $26 billion in debt obligations. This case describes Dubai's development strategy in detail and narrates how, as part of that strategy, a series of state-owned holding companies accumulated billions of dollars in debt. The A case ends as Sheikh Ahmed bin Saeed, chairman of Dubai's Fiscal Committee, has to decide what to do about the financial troubles of Dubai World and other state-owned holding companies. The case presents Sheikh Ahmed bin Saeed having to decide among three options: The Dubai government can guarantee the debt, they can renegotiate the debt, or walk away (i.e., default). The B case describes the decision and the reactions to this decision around the world and presents a new decision on the part of bond holders of Dubai's state-owned holding companies. The C case briefly analyzes the advantages and disadvantages of Dubai's bankruptcy procedures, both for investors and for the holding companies of Dubai.
Keywords: Borrowing and Debt;
Development Economics;
Crisis Management;
Dubai;
Citation: Musacchio, Aldo, Andrew Christopher Goodman, and Claire K. Qureshi. " Dubai: Debt, Development, and Crisis (B)." Harvard Business School Supplement 710-070, July 2012. (Revised from original June 2010 version.)
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Case
| HBS Case Collection
|
2012
(Revised from original 2010 version)
Dubai: Debt, Development, and Crisis (A)
Aldo Musacchio, Andrew Christopher Goodman and Claire K. Qureshi
On November 25, 2009, the city state of Dubai stunned markets by announcing that Dubai World, its flagship state holding company, would seek a six-month "standstill" on at least $4 billion U.S. dollars of its $26 billion in debt obligations. This case describes Dubai's development strategy in detail and narrates how, as part of that strategy, a series of state-owned holding companies accumulated billions of dollars in debt. The (A) case ends as Sheikh Ahmed bin Saeed, chairman of Dubai's Fiscal Committee, has to decide what to do about the financial troubles of Dubai World and other state-owned holding companies. The case presents Sheikh Ahmed bin Saeed having to decide among three options: the Dubai government can guarantee the debt, they can renegotiate the debt, or they can walk away (i.e., default). The (B) case describes the decision and the reactions to this decision around the world and presents a new decision on the part of bond holders of Dubai's state-owned holding companies. The (C) case briefly analyzes the advantages and disadvantages of Dubai's bankruptcy procedures, both for investors and for the holding companies of Dubai.
Keywords: Accounting;
Decision Choices and Conditions;
Development Economics;
Financial Crisis;
Borrowing and Debt;
Financial Strategy;
State Ownership;
Business and Government Relations;
Dubai;
Citation: Musacchio, Aldo, Andrew Christopher Goodman, and Claire K. Qureshi. " Dubai: Debt, Development, and Crisis (A)." Harvard Business School Case 710-069, July 2012. (Revised from original June 2010 version.)
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Supplement
| HBS Case Collection
|
2012
(Revised from original 2010 version)
Dubai: Debt, Development, and Crisis (C)
Aldo Musacchio, Andrew Christopher Goodman and Claire K. Qureshi
On November 25, 2009, the city state of Dubai stunned markets by announcing that Dubai World, its flagship state holding company, would seek a six month "standstill" on at least $4 billion U.S. dollars of its $26 billion in debt obligations. This case describes Dubai's development strategy in detail and narrates how, as part of that strategy, a series of state-owned holding companies accumulated billions of dollars in debt. The A case ends as Sheikh Ahmed bin Saeed, chairman of Dubai's Fiscal Committee, has to decide what to do about the financial troubles of Dubai World and other state-owned holding companies. The case presents Sheikh Ahmed bin Saeed having to decide among three options: The Dubai government can guarantee the debt, they can renegotiate the debt, or walk away (i.e., default). The B case describes the decision and the reactions to this decision around the world and presents a new decision on the part of bond holders of Dubai's state-owned holding companies. The C case briefly analyzes the advantages and disadvantages of Dubai's bankruptcy procedures, both for investors and for the holding companies of Dubai.
Keywords: Finance;
Investment;
Emerging Markets;
Trade;
Insolvency and Bankruptcy;
Development Economics;
Financial Crisis;
State Ownership;
Sovereign Finance;
Business Strategy;
Dubai;
Citation: Musacchio, Aldo, Andrew Christopher Goodman, and Claire K. Qureshi. " Dubai: Debt, Development, and Crisis (C)." Harvard Business School Supplement 710-071, July 2012. (Revised from original June 2010 version.)
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Case
| HBS Case Collection
|
2010
(Revised from original 2009 version)
Necessity and Invention: Monetary Policy Innovation and the Subprime Crisis
Aldo Musacchio and Dante Roscini
This case describes the efforts of Ben Bernanke, Chairman of the Federal Reserve, to improve liquidity in money markets during the subprime crisis. The case explains the four main new tools for monetary policy (or quantitative easing) the Federal Reserve has used between 2007 and 2009: the Term Auction Facility (TAF), the Primary Dealer Credit Facility (PDCF), the Term Securities Lending Facility (TSLF), and the Asset Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF).
Keywords: Financial Crisis;
Money;
Financial Liquidity;
Central Banking;
Policy;
Business and Government Relations;
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Teaching Note
| HBS Case Collection
|
2010
(Revised from original 2010 version)
Iceland (TN) (A) and (B)
Aldo Musacchio
Teaching Note for [709011] and [709012].
Citation: Musacchio, Aldo. " Iceland (TN) (A) and (B)." Harvard Business School Teaching Note 710-052, February 2010. (Revised from original January 2010 version.)
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Background Note
| HBS Case Collection
|
2010
In the Spotlight: The Market for Iron Ore
Aldo Musacchio, Tarun Khanna and Jenna Bernhardson
This note discusses the structure and functioning of the market for iron ore. This market has traditionally functioned using a benchmark pricing mechanism, in which large steel mills in Japan (now in China) negotiate the benchmark price with the largest of the big three iron ore producers (Vale do Rio Doce). Yet this market is changing rapidly, with the rise of China as the main consumer of iron ore the rules seem to be changing. The note examines the increasing importance of the spot market for iron ore and the advantages and disadvantages of abandoning the benchmark price system for both consumers and miners.
Keywords: Industry Structures;
Mining;
Price;
Valuation;
Business Strategy;
Demand and Consumers;
Business and Government Relations;
Mining Industry;
China;
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Case
| HBS Case Collection
|
2009
(Revised from original 2009 version)
Indian Railways: Building a Permanent Legacy?
Tarun Khanna, Aldo Musacchio and Rachna Tahilyani
Keywords: Government and Politics;
Managerial Roles;
Size;
State Ownership;
Performance;
Transportation Industry;
India;
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Supplement
| HBS Case Collection
|
2009
(Revised from original 2009 version)
Petrobras in Ecuador (C): Lula and Political Risk at Home
Aldo Musacchio and Lena G. Goldberg
Keywords: Government and Politics;
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Case
| HBS Case Collection
|
2009
(Revised from original 2009 version)
Petrobras in Ecuador (A)
Aldo Musacchio, Lena G. Goldberg and Ricardo Reisen de Pinho
On October 18, 2007, Ecuador's President Rafael Correa announced his intention to migrate Petrobras' existing participation contracts to exploit oil reserves in Ecuador's Blocks 18 and 31 to servicing agreements under which Petrobras would be paid a production fee and reimbursed for investment costs but all recovered oil would belong to the government. Correa also announced a dramatic increase in corporate taxes and changes to other contracts to which Petrobras was a party. All foreign oil companies operating In Ecuador would be similarly affected and any company refusing to "renegotiate" its contracts would face a 100% tax on profits. How should Petrobras respond to Ecuador's riding roughshod over its contracts? Should Petrobras take the Ecuadorian government to arbitration? Or would it be better to pursue a negotiated solution similar to that reached in Bolivia a year earlier? How should Petrobras balance its fiduciary duties to and the best Interests of its shareholders with the interests of the Brazilian government? How should it communicate with its various constituencies?
Keywords: Metals and Minerals;
Globalized Firms and Management;
Corporate Governance;
Government Administration;
Taxation;
Contracts;
Negotiation Process;
Negotiation Tactics;
Public Ownership;
Business and Government Relations;
Business and Shareholder Relations;
Brazil;
Ecuador;
Citation: Musacchio, Aldo, Lena G. Goldberg, and Ricardo Reisen de Pinho. " Petrobras in Ecuador (A)." Harvard Business School Case 309-107, August 2009. (Revised from original April 2009 version.)
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Supplement
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2009
Petrobras in Ecuador (B)
Aldo Musacchio, Lena G. Goldberg and Ricardo Reisen de Pinho
Keywords: Energy;
Energy Industry;
Ecuador;
Citation: Musacchio, Aldo, Lena G. Goldberg, and Ricardo Reisen de Pinho. " Petrobras in Ecuador (B)." Harvard Business School Supplement 309-108, April 2009.
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Supplement
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2008
Iceland (B): Redefining Aaa-Rated Sovereigns
Aldo Musacchio
In May of 2008, a team of sovereign debt analysts at Moody's had to decide whether to downgrade the country's sovereign long-term debt from Aaa to Aa1 or lower. Investor sentiment toward Iceland had changed radically in March, and the Moody's team was fearful that the situation could spiral out of control. The Moody's team knew that carry traders increased Iceland's vulnerability to a confidence crisis because they were quick to liquidate their holdings at the first sign of distress. The plunge in the Icelandic Krona since the beginning of 2008 also forced the Icelandic people to confront a decision: would joining the European Union (EU) protect Iceland from capricious swings in investor sentiment? What, if anything, should Iceland do to avoid a future crisis?
Keywords: Sovereign Finance;
Financial Crisis;
Borrowing and Debt;
Currency;
Financial Condition;
Decision Choices and Conditions;
Iceland;
European Union;
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Teaching Note
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2008
Brazil Under Lula: Off the Yellow BRIC Road (TN)
Aldo Musacchio
Teaching Note for [707031].
Keywords: Cost Management;
Programs;
Problems and Challenges;
Equality and Inequality;
Poverty;
Growth and Development Strategy;
Brazil;
India;
Russia;
China;
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Case
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2008
(Revised from original 2007 version)
Brazil Under Lula: Off the Yellow BRIC Road
Aldo Musacchio
Covers President Lula's challenges to reduce "Brazil cost" and grow like other BRIC countries (Brazil, Russia, India, and China). Experts agreed that for Brazil to grow like other BRIC countries, the Brazilian government would have to reduce the cost of doing business in the country ("Brazil cost"). At the same time, President Lula's challenge is to develop programs that accelerate growth without undermining the progress achieved in reducing inequality and poverty. Can the Brazilian government reverse inequality and grow at the same time? What development strategy should Lula follow in his second term? Does Brazil belong in BRIC? What do these countries have in common?
Keywords: Developing Countries and Economies;
Cost;
Growth and Development Strategy;
Business and Government Relations;
Poverty;
Equality and Inequality;
China;
India;
Russia;
Brazil;
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Teaching Note
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2007
(Revised from original 2006 version)
The Market and the Mountain Kingdom: Change in Lesotho's Textile Industry (TN)
Rawi E. Abdelal, Regina M. Abrami, Noel Maurer and Aldo Musacchio
Teaching Note to 706043.
Keywords: Markets;
Apparel and Accessories Industry;
Lesotho;
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Teaching Note
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2007
(Revised from original 2006 version)
The Barber of Buenos Aires: Argentina's Debt Renegotiation (TN)
Noel Maurer and Aldo Musacchio
Keywords: Borrowing and Debt;
Argentina;
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Case
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2006
(Revised from original 2006 version)
The Barber of Buenos Aires: Argentina's Debt Renegotiation
Noel Maurer and Aldo Musacchio
Tells the story of Argentina's aggressive strategy for renegotiating its sovereign debt from 2003 to 2005. Most creditors accepted the offer to swap their debt for new securities worth 35 cents on the dollar, with no recognition of all past-due interest. Many holdouts, however, remain outside the deal. Some experts believe that Argentina's stance will have negative consequences for the country's private sector and gives a worrisome signal about public policies; others maintain that circumstances beyond the government's control had placed the country in an unsustainable situation, and the successful renegotiation opens up new opportunities. The case presents the story of Argentina's debt saga from the point of view of the country's creditors (foreign and domestic), its government, and private Argentine companies that had to do business in the post-renegotiation environment. Also, discusses the larger issue of how the international financial community should handle sovereign debt workouts.
Keywords: Private Sector;
Borrowing and Debt;
Insolvency and Bankruptcy;
International Finance;
Foreign Direct Investment;
Sovereign Finance;
Government and Politics;
Negotiation Tactics;
Outcome or Result;
Situation or Environment;
Argentina;
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Case
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2006
(Revised from original 2006 version)
The Market and the Mountain Kingdom: Change in Lesotho's Textile Industry
Rawi E. Abdelal, Regina M. Abrami, Noel Maurer and Aldo Musacchio
In Maseru, the capital of the Kingdom of Lesotho, the stirrings of industrialization and modernization were promising, and more than 50,000 workers, mostly women, were employed in the textile sector; the figure reflected more than a threefold increase in just a few years. Just outside Maseru, however, life was pastoral. Of Lesotho's 1.9 million citizens, 86% were engaged in subsistence agriculture. The country's hopes for progress rested with the jobs created by Taiwanese and Chinese firms. In early 2006, however, the survival of the nascent industry hung in the balance. The appreciation of Lesotho's currency, the loti, made life difficult for the apparel firm, which exported almost all of their production to the United States. Although the firms enjoyed duty-free access to an otherwise protected U.S. clothing market through the African Growth and Opportunity Act, the provisions that most benefited Lesotho would expire in 2007. A few large buyers would be making sourcing decisions that could make or break Lesotho's industry. Local union leaders were upset with the government's handling of the textile boom and its putatively impending bust. Certainly the government would play an important role in formulating a strategy and adjusting the institutional context, but decisions made by the unions, foreign investors, foreign buyers, and the American government would also be critical. How would posterity judge Lesotho's first encounter with world markets--as a triumph or a disaster?
Keywords: History;
Labor Unions;
Trade;
Business and Stakeholder Relations;
Financial Crisis;
Globalized Markets and Industries;
Business and Government Relations;
Decision Choices and Conditions;
Foreign Direct Investment;
Developing Countries and Economies;
Fashion Industry;
Apparel and Accessories Industry;
Lesotho;
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