Our Office

Calle 10 A # 34 11 Hotel Diez Categoría, office 4014

WhatsApp

+57 318 5324130

THE ROLE OF MULTINATIONAL COMPANIES IN THE GLOBALIZATION PROCESS

Within the phenomenon of globalization, the idea of integrating the so-called “non-state actors” into economies has been increasingly taking root, an element that undoubtedly has a significant impact on contemporary international relations. And it is clear that in recent years it has become evident that many of these figures act in such a decisive way in the international and internal life of States -both socially and economically- that on many occasions, it is the States themselves who set their public policies based on the actions of these non-governmental entities.
Their form of organization allows them to easily adapt within the international sphere as a dynamic element of the world economy, and they can be an important vehicle for foreign direct investment (FDI), a fact that not only arouses interest not only in developed countries but also in developing countries because, among other things, they generate benefits for them. However, the other facet is that they are constantly being discussed by those who are not entirely in favor of the globalization process, and even by many of those who are, who fear the effects that the inclusion of these companies in local markets and in competition may generate, as well as the controversial issue of liability in relation to the parent company and branches in the host countries and, above all, the effects that their actions generate on the environment and working conditions.
At present, the position of MNEs in the international market is not disputed, and different transnational movements have been developing, which recognize their adaptation to globalization and classify them as an important characteristic of this process. Their importance lies in the fact that they have been an element of great relevance in the expansion of international trade, given that they have added an ‘ease’ component to the exchange of products, thus generating great benefits for the global market, which today is a market for the transfer of labor, products and credits from one country to another, within a framework of manufacturing strategies designed by these companies, which minimize production costs and maximize production capacity.
Before the process of globalization as it is known today, and above all, the phase in which international trade began to develop as an almost necessary element for economic development, a large part of the actions of these companies was based on the creation of projects that implied making investments in their native countries, exporting their own manufactured goods and services; at the same time, they imported raw materials, which helped the country of origin in an important way. Today, they establish industries in other countries with the motivation of finding economic profitability, a fact that at the same time increases competitiveness among the countries receiving the investments. As a result, new opportunities are created, since they not only foster external and internal competition, but also serve as a bridge for the creation of new links between other companies and societies, thus generating greater job opportunities for those who benefit from their industry, and also a wider catalog of goods and services for consumers who constantly demand new products.
Although the intervention of these companies in the international economy generates innumerable benefits, and the aim is to show their relevance for the promotion of globalization, it cannot be ignored that there is a less pleasant side to their inclusion within the States. The financial and social deregulation of their behavior, together with the liberalization of legal schemes and capital flows, are the frameworks that MNCs use to deploy all their social, economic and political power. The economic power of transnationals has generated social impacts that have not been sufficiently addressed, and have been diluted in the effects of exclusion and social inequality ascribed to the general phenomenon of internationalization.
States are in part highly responsible because in their eagerness to compete to attract direct investment, they open the way to a mechanism of incentives, infrastructure construction, tax exemptions, labor deregulation and special legislation, which allows dehumanizing behavior on the part of these actors and shows a lack of transparency and complicity of local authorities in the violation of rights.
In addition, another matter of concern when it comes to multinationals is the internal structures in which each of the dependencies of these non-state actors is divided, since it can be seen that no corporate decision and its results can be attributed to a single individual, and based on this it is possible to more easily exempt individuals from responsibility; in other words, the human capital that works within these is part of the decision-making process of the company, without necessarily being certain that the entire company is aware of its activities and is permeated by the consequences that its actions generate.
Its appearance on the international scene has clearly not been an element that has gone unnoticed, since it has generated an impact at different levels, especially due to its persuasive power in relation to responsible behavior and given that within the different legal systems of the States it has allowed them to obtain maximum profits at a relatively low cost, taking advantage of the existing vacuum in the governmental apparatus.
In spite of the above, and with the constant changes that humanity is undergoing, to which the law is also added, this is called to be a spectrum where conflict resolution mechanisms, such as mediation or arbitration, begin to be privileged, giving them an imposing character; or also granting importance to the great international organizations. Likewise, the law ceases to be then only a conformation of many rules, and acquires a great utility within the international arena, especially in the scenario of trade and the lack of regulation of the new emerging actors, since new structures are beginning to be cultivated where the behavioral conducts of the subjects are highlighted.
MNEs move fluidly, making quick decisions to relocate their operations to other countries, redirect their investment flows, move to operate in countries with more flexible labor legislation, or adjust their activities so that they can be taxed under more favorable conditions. Faced with these assumptions, States in many cases may be confronted with unfavorable situations in many ways, which is why the law must maintain its mission in strengthening or redefining institutions and achieving a just world order.
By: Santiago Torres García

Scroll to Top