Investment in the Latin American Telecommunications Sector: Assessing the Role of Political Institutions

Political economists have argued that the design of political institutions bears important consequences for the quality of public policy, especially in areas like the privatization and regulation of utilities. Our study looks at how variations in key institutional traits of executive and legislative branches (specifically presidents' legislative powers, presidents' prerogatives to designate the director of the regulatory agency, and legislative fragmentation) affect investment in Latin American telecommunications, a critical sector for economic development. Institutional factors influence how easily executives and important political (legislative) parties can alter policies related to the telecommunications sector. We find that resolute institutional designs foster investment in the sector, but only under private ownership. For state-owned firms, decisive institutional designs have better effects on investment. Related Articles: Montes de Oca Barrera, and Laura Beatriz. 2019. “Persistent Exclusion in Mexico: Regulatory Governance as an Imperfect Project of Political Modernization.” Politics & Policy 47 (1): 127-151. https://doi.org/10.1111/polp.12291. Moreno, Erika, and Richard C. Witmer. 2015. “Where Capacity and Incentives Meet: Presidential Decree Authority and Property Rights in Latin America.” Politics & Policy 43 (3): 315-346. https://doi.org/10.1111/polp.12118. Wise, Carol, and Cintia Quiliconi. 2007. “China's Surge in Latin American Markets: Policy Challenges and Responses.” Politics & Policy 35 (3): 410-438. https://doi.org/10.1111/j.1747-1346.2007.00067.x.