McDonald’s withdrawal from Bolivia: capitalism in action

BBC World’s Latin America section has provided a sympathetic review of a Bolivian documentary titled ‘¿Por que quebró McDonald’s en Bolivia?’ (Why did McDonald’s fail in Bolivia?), which celebrates the departure of McDonald’s from the country. The review adopts the documentary’s overtone, which interprets the Bolivians’ lack of appetite for lukewarm hamburgers as a victory over global capitalism. ‘Culture has won against a transnational [corporation], against the globalised world’, rejoices the movie’s director Fernando Martínez.

It is a strange topic for a documentary, if you keep in mind what the basic storyline is:

  1. A company offers a product.

  2. Consumers don’t want it.

  3. The company leaves the market. End of story.

Does this sound vaguely familiar? That’s because it is the most ordinary and mundane occurrence in a market economy. While you’re reading this, several pubs in London are closing, even though there won’t be a documentary celebrating the people who brought down the mighty pub.

BBC World seems to believe that that buying an empanada from a local street vendor was somehow ‘less capitalistic’ than buying a burger from McDonald’s and that a country without McDonald’s restaurants is less capitalistic than a country with them. This clearly confuses distinct categories. Is buying a hamburger more capitalistic than buying a cheeseburger? Is a beef empanada more capitalistic than a chicken empanada?

Not quite. Broadly speaking, a country is capitalistic to the extent that its government respects the principle of consumer sovereignty, as in the freedom to choose between the local empanada vendor and McDonald’s. On this account, Venezuela, where the government frequently bullies private companies like McDonald’s, is less capitalistic than Bolivia, despite still being full of McDonald’s branches. Bolivians were never prevented by their government from buying burgers; they simply chose not to do so. This is not a victory over capitalism, it is capitalism.

Presumably, the documentary will be successful on Western campuses, among the anti-globalisation crowd armed with their Naomi Klein books and Tobin Tax flyers. It should not be. If they are smart, they should maintain funereal silence about it. Far from supporting their case, it undermines it.

Since the late 1990s, the anti-globalisation movement has been telling us that Western corporations were like alien invaders, who march into helpless poor countries to stamp out fragile indigenous cultures. The Bolivian case exposes that imagery for the nonsense that it is. If people don’t want to buy hamburgers (or any other foreign product), there is nothing McDonald’s (or any other foreign corporation) can do about it. Nobody has ever been forced into a McDonald’s at gunpoint.

Hence, Western corporations retreating from developing countries is an everyday phenomenon. Just a year ago, the French supermarket chain Carrefour decided to pull out of Thailand and Malaysia, where it had opened 67 stores. Their Asian stores were largely clones of the French ones, an expansion strategy that worked well within Europe, but not beyond. Tesco, in contrast, took a more sensitive approach, teaming up with local suppliers to build up local knowledge step by step. It worked.

It is ridiculous to assume that Western corporations can force people to buy products which are an affront to their cultural identity. Anti-globalisation campaigners, who call upon governments in developing countries to insulate their citizens from foreign influence, are imperialists with reverse signs. Traditional imperialists wanted to force Western norms upon other peoples. Today’s imperialists want to stop other peoples from adopting Western consumption norms. It would spoil the authenticity of their backpacker trips.

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

16 thoughts on “McDonald’s withdrawal from Bolivia: capitalism in action”

  1. Posted 22/11/2011 at 13:39 | Permalink

    I agree that celebrating the withdrawal of McDonald’s from a country is simply nonsense – many people enjoy the service McDonald’s offers, so to deny them that service is a loss of utility even if it makes business sense. Moreover, what about those employees of McDonald’s – no doubt they are hardly celebrating having been thrown out of a job! What this shows us is that Bolivia (the poorest country in South America) is too poor to afford McDonald’s.
    I would also point out that the decision to withdraw may not be ‘capitalism’. Bolivia has very high levels of bureaucracy and corruption etc ranking 147th here! Given the expanding level of state intervention via the socialist Morales administration I don’t these factors may well have had something to do with the decision. A business that is marginally profitable could quickly be made unprofitable by government. To my mind, this sort of decision to reduce overseas investment suggests that the economy will be ever more dependent on hydrocarbon sales and government redistribution (viz. Venezuela) – hardly a sustainable path!
    In short, what is being celebrated here is i) loss of utility ii) loss of jobs iii) loss of foreign investment iv) loss of economic diversity. No wonder Bolivia is so poor!

  2. Posted 22/11/2011 at 14:42 | Permalink

    It always irritates me that some commentators purport to compare the annual sales turnover of multi-national companies with the gross national product of small countries. But the former represents sales revenues, the latter (more or less) value added: they are apples and oranges. (The reason for this ‘mistake is to exaggerate the size and power of multinationals.)

    Thinking in terms of ‘national’ markets may not be the most useful way of looking at things. For example, Tesco has for a few years now been trying to establish itself in California, not — or at least not yet — in the whole of the United States. And, like McDonalds in Bolivia, Tesco may yet decide to withdraw from (part of) the United States — as other British retailers have done in the past.

    Still less, in many respects, does it make sense to think of the European Union as if it were a separate country — for example, talking about its (present) population of around 500 million as if they were homogeneous. The fact is very few inhabitants of ‘Europe’ think of themselves as ‘Europeans’: many of them even prefer allegiances to units more local than the nation-state. Sobering, too, to realise that if the EU were a separate country it would definitely not be eligible to become a member (of the EU), due to its anti-democratic arrangements!

  3. Posted 22/11/2011 at 19:48 | Permalink

    Indeed, this comparison between the size of a company and an economy is one of the most irritating arguments presented by the anti-globalisation front. I’d like to see how they’d answer a question like this:
    Suppose Tesco’s revenues were identical to the GDP of Swaziland. In the next year, an improvement in logistics permits Tesco to enter new markets, say in Eastern Europe, and raise its revenue. Meanwhile, the government of Swaziland starts randomly confiscating private property, leading to a decrease in GDP. Is it a failure of global capitalism if Tesco and now bigger than Swaziland? Would it be good if an international body prevented it (by increasing transfers to Swaziland and regulatory burdens on Tesco)?

  4. Posted 19/12/2011 at 02:04 | Permalink

    I must say ignorance is the source of all evil and for sure the most dangerous one comes from the fact of not knowing that one does not know. Reading 3, 4 or 5 articles related to the subject don’t make you an expert in the subject!. My name is Michael Gonzales, I’m bolivian and lived my whole life in my country. I study engineering and languages in parallel because I like to know cultures and how they develop.
    Relating to what was said by Whig and with a sense of national indignation I must say BOLIVIA IS NOT POOR!
    McDonald’s withdrawal was because they simply were not match for everyday food and gastronomy in Bolivia. As a subject of interest when the company was working they used to import meat for hamburger from the USA regardless that there was high quality and cheap meat produced in Bolivia.
    I also heard once, but I’m not sure of that, that they used to import potatoes, also without minding that the source of all kind of potatoes is from a frontier between Bolivia and Peru, from the ancient Inca empire. Neverminding the last part, you can buy fried potatoes in Bolivia at any block that are tastier than McDonald’s ones.
    McDonald’s products used to go from prices between 10 and 60 Bs (1.30$us to 9$us), in a country where you can buy any hamburger by 7 to 10 Bs, and that has more taste than the tasteless McDonald’s ones.
    It was used to happen that during one term was trendy to go to eat to McDonald’s because it was northa merican and expensive, so that related to the high class. But, when time passed interests moved to our daily meal because it was simply better.
    People in Bolivia aren’t in a hurry from work to eat fast food or to eat on the street, most people go home at noon and has a family lunch.
    McDonald’s prices weren’t also the problem, bolivian people are used to eat well thank to our fertile ground and variety of goods. We go to spend from 10 Bs to 55 Bs for a lunch almost every day, it depends on one’s mood and what one wants to eat. Specially in Cochabamba my city it’s used to say that “Cochabambinean people don’t eat to live, they live to eat”. Eating at a McDonald is something affordable that almost any person can do.
    McDonalds didn’t withdraw Bolivia because of political swings, in fact the company established when there was a really pro north american and liberal government and they left long time before Evo Morales came to power.
    What is not celebrated here is:
    i) loss of utility, McDonalds revenues were not and important source of taxes for our country ii) loss of jobs, the 100 or 250 people contracted by them could easily find jobs in other places or business, plus McDonalds used to pay really bad their employes iii) loss of foreign investment, USA is not the only foreign country interested in investment and McDonalds is not USA iv) loss of economic diversity, we have many other sources: China, Europe, Brazil, Japan, etc.
    Bolivia is not a poor counrty and is not the poorest country in South America, yes we have high levels of bureaucracy and corruption regarding to this web page but who doesn’t have it? France goes from strike to strike always, Germany has delays with its train system, Spain lacks investment, UK has its own financial problems as any big country, and finally there are places in USA which are uglier than any place in Irak or Afghanistan.
    We have bureaucracy and corruption problems but at least we can see them and they are not hidden to common people to live everyday’s life, what can you tell people from “developed countries” when you don’t know where the state foreign money investment goes , when there are reserved expenses that your country omits, and when people call development to the use of new electronic gadgets, economic stability to your coin, when the sugar you use in your breakfast depends of someone working hard in South America or Africa, financial independence when you make war for oil and cheap gas(related to the USA European coalition in Afganisthan).
    Yes Bolivia is a poor country, if we consider the FMI and the World Bank as the only valid parameters, we may not have too much money and don’t make too much investment to be considered rich, our pace of live and way of taking decisions can be considered simple and improvised, quite latin american, right?. But think about this, do we live better than you…? 😀

  5. Posted 19/12/2011 at 21:10 | Permalink

    “do we live better than you…?”

    Don’t know, but according to the World Bank, we live 14 years longer than you. Economic development does have a few minor advantages.

  6. Posted 20/12/2011 at 22:53 | Permalink

    You dedicate your comment to demonstrating that the failure of McDonald’s in Bolivia was not a failure of capitalism, which makes sense if you accept the premise that the documentary and the BBC review “interprets the Bolivians’ lack of appetite for lukewarm hamburgers as a victory over global capitalism.” But the quote from the director you share makes a completely different claim: that the McDonald’s experience in Boliva represents a victory of Bolivian culture against a “transnational” and a “globalised world.” Curiously, although you quote the film’s director making this claim, there’s no response to it at all in your commentary. I haven’t seen the documentary in question, but if you want to demonstrate anything except the demolishing of a straw man you’ve created, you need to support your contention that the documentary’s creator and fans have pictured the McDonald’s episode as a triumph over capitalism.

  7. Posted 21/12/2011 at 13:25 | Permalink

    I was going to make the same comment (more or less) as Anonymous, above. I didn’t find any reference in any place about capitalism per se. It seems like the whole premise of the documentary and of the BBC article is about cultural forces (local/global) prevailing over economic forces (small town family businesses/large global corporations). I think you missed the poin here,t since this is not about one economic model vs. another economic model. You have to take into account that McDonald’s has been successful in other countries in Latin America, in spite of local economic and cultural situations. The fact that even with the resources that McDonalds has as a global corporation, it not being able to sell in Bolivia, makes it a really interesting case for inquiry about this country’s local culture, not about their economy, or about the triumph or defeat of economic or political models. Nonsense.

  8. Posted 21/12/2011 at 14:24 | Permalink

    “14 years longer…” and “fatter”. Have you ever heard of overweight and obesity?? That’s the problem with you!! Longer, bigger, faster doesn’t mean BETTER!!

  9. Posted 21/12/2011 at 17:43 | Permalink

    I fully agree with Michael, today all that escapes capitalism is considered poor, backward .. Kris said the World Bank said that they are 14 years older than the Bolivians, funny, it might be the exploitation that capital exerts these people? one would not think about it? you only know how to justify financial arguments, as if money were the only thing that humans can qualify. They are nothing but a neo-liberal garbage, which contributes to injustice, death, the most diverse holdings, will be the first to fall! MERICA Latin alive! Great! growing more and more! LATIN AMERICA LIVE! LONG LIVE THE SLOW DEATH OF AMERICAN EMPIRE! =)

  10. Posted 25/12/2011 at 19:17 | Permalink

    Take that American imperialism!! Keep up your traditional cultural practices Bolivia! Keep feeding your cows grass!

  11. Posted 05/01/2012 at 14:00 | Permalink

    “”14 years longer…” and “fatter”. Have you ever heard of overweight and obesity?? That’s the problem with you!!”

    -With me? I know I’ve put on a few kilos over the Christmas break, but…

  12. Posted 14/01/2012 at 02:19 | Permalink

    The truth is that the person who wrote this article is not bored by this topic, but rather intimately interested or he wouldn’t have wrote it. Buying an empanada from a street vendor or small restaurant is immensely less capitalist than buying from McDonald’s for the simple reason that the street vendor doesn’t have an advertising budget in the hundred’s of millions promoting his supposedly “Big” Empanada, nor the global reach and resources of a company that has been so successful in nearly every other country that it has visited. Carrefour is not on par with McDonald’s. McDonald’s is nearly synonymous with both Capitalism and Globalism, and the writer of this article is well aware of that, much like the people who made the movie are quite aware of the success of McDonald’s and huge multinational corporations worldwide (both American and others) and equally fascinated by the novelty that one of these corporations, as powerful as they are, has failed in Bolivia. And unfortunately in this case they have no scapegoat, (their favorite: the government exercising the will of the people). I will, however, as the writer asks, keep funereal silence of it….for about a minute to mourn the loss of his dearly departed capitalist burger chain…then I will cheer for Bolivia.

  13. Posted 09/02/2012 at 00:55 | Permalink

    I am Bolivian bue even though McDonald’s closed when i was only 8 or 9 I’m not a part of those who celebrates it. Actually I’ve never heard of this documentary until now and honestly like you, i find it ridicoulous. Most of the people i know long for the days we had McDonalds, we miss it and every chance we get when we are outside Bolivia we eat at least 5 times. I honestly don’t understand what the deal is, why people think that capitalism is bad or just why do people hate most things that come from America. It does not make sense, we have Burguer King(it’s just…not the same) and most people dress in American clothes. I just think, and it’s my country and I love Bolivia, but my society is incredibly two faced and secretly praises America because if they didn’t why would most of the middle upper class go as much as they do. I do not agree with the other Bolivian that posted here. We are poor we are right in front of Haiti, yes there is a small group that lives well and I’m glad to be a part of t because if i wasn’t i would be doomed to mediocrity. We Bolivians must face the fact that we are poor, we are undevelopped, and if you talk to the former owners you will understand why it failed. I think it is a complete lack of education and it highlights ignorance to even think or try to compare Bolivia with America. It’s not the same life style, but why does it work in most countries of Africa… I dont think it has anything to do with rush hour, like i said burguer king is still here. Maybe if the owners would have used othe ways to import their goods McDonalds will most definetly be here now and i would be enjoying a burguer instead of writting here. I am not a fan of this documentary, Mc Donalds was meant for middle to upper class, people who can afford the prices and i see no wrong in that, What did you want, for McDonalds to make chairo instead of nuggets?? It has nothing to do with that it broke because of an administration error, you should stop speculating any other reasons.

  14. Posted 03/07/2012 at 17:40 | Permalink

    Just stumbled upon this article and I guess since I was there at the opening of the first Mc Donalds in La Paz… I’d give y’all the truth. Mc Donald’s was a cool place to be at but the food was tasteless and wayyyy to expensive, trust me on this one since I also lived in the US and had my fair share of big mac’s. See I used to pay about 2 Dollars for a Big Mac in the US and paid the same here. Which is crazy since you can get 2 hamburgers with fries anywhere in town for that same amount of money. Then of course and it was widely known that it was not a hamburger but rather cardboard. We loooove authentic meat flavor and although Burger King is also a huge chain they are still here because their meat actually tastes like meat!.

    Going back to McD’s so, I was in high school and all and and then burger king came up… meaty hamburgers not a huge fan though since they too were expensive.

    So what would I rather do? go to IGLU pay 4 bs. (almost 50 cents of a dollar at the time) and get a nice hamburger and fries. (it’s more expensive now but yet still give’s you more for your money).

    Bottom line, it was tasteless and incredibly expensive. 2 bucks can get you a really nice home made meal, restaurant platter or a couple of burgers so you can’t really miss that….. did I mention that it tasted like cardboard. BTW last big mac I had was in Chile 4 months ago…. that one was different it didn’t taste like cardboard…. I just wonder why.

    Oh and boy did they try…. the Mc Palta which was a patty with what most of you know as guacamole…. not even delicious palta could change that cardboard feel.

  15. Posted 08/08/2012 at 04:45 | Permalink

    FYI (I am Bolivian and live in Bolivia)
    1. McDonalds left Bolivia ten years ago.
    2. Some people cried, some people cheered, most people never even knew it happened.
    3. Most McDonald restaurants (which belonged to a Bolivian group) were bought by a very rich Bolivian dude who owns the Burger King franchise and are still operating today, probably because their management is better than the management of the Bolivian owners of the McDonalds franchise. (considering that a Whopper is only marginally better than BigMac).
    4. Both McDonalds and Burger King function under a franchise model. So neither provide Bolivia, nor any other country, with foreign investment.
    5. It is true that you can find much better food at considerably lower prices in Bolivia. Bolivia probably has the best food (and variety) in Latin America. (NOTE TO PERUVIANS. Perú does not count because Peruvian food is off the chart and quite simply the best food in America) (Removed by moderator)
    6. The only guy with a problem is the The economist newbie that prepares the Big Mac index.
    (Removed by moderator)

  16. Posted 07/11/2015 at 04:01 | Permalink

    Hello! McDonalds reopened a restaurant in Santa Cruz Bolivia on past April. Then it plans to reopen more restaurants in La Paz and other cities.

    Also, it is possible to eat at Taco Bell, KFC, Burger King, Green is Better, Subway among others, in Santa Cruz.

    Fast food is not good for health but Bolivians were not fighting against capitalism when McDonalds closed their restaurants in 2002

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