Drug firms and dependency in Mexico: the case of the steroid hormone industry

The relationship between foreign control and national development is a central concern of the Latin American “dependency school” of analysis, which focuses on the impact of investment by multinational corporations (MNCs) in the Third World. In the MNC-dominated steroid hormone industry in Mexico, foreign control has led to two major consequences which characterize it as “dependent”: first, there has been an unequal distribution of benefits from its growth, favoring the central capitalist economies and the MNCs more than Mexico; and secondly, at the level of domestic policy formulation, there has been a restriction of choice among local development options, since these conflicted with “global” priorities implied by the dependent situation. As an alternative to MNCs, national firms in Mexico would very likely have performed better in terms of Mexican national welfare (defined as local industry growth) and global consumer welfare (defined as identical products at lower prices). The attempt made by the Mexican State during the last two years of the Echeverria administration (1975–1976) to increase its autonomy vis-à-vis the MNCs by restructuring the industry with a new state-owned firm met with only limited success. Reasons for this include Mexico's declining prominence in the world industry due to the availability of substitutes for its raw material, and the ability of the MNCs to build a strong defense using local political allies. Yet despite the difficulties, Third World countries will need to develop strong states which can deal effectively with multinational corporations if they are to successfully establish their own development priorities.