The Foreign-Policy Meaning of Walmart’s Lawsuits

Walmart has launched no less than six lawsuits against the Chilean state. The multi-billion dollar family business demands more police protection under a legal instrument called ‘protection recourse.’ Reasons for the suits remain obscure but more such actions could follow – which should prompt a rethinking of ‘the model.’

A proud ruling class, left, right and center, has not tired to invite multinationals to Chile. They have done so to get foreign investment going and force ‘the insertion of the local into the global economy.’ Moreover, forming a Latin American country safe for capital (foreign or domestic) has set Chile apart from its regional peers. They are often seen as unpredictable and hostile to foreign investments, which the state might take anytime. Not so Chile. Its Constitution still guarantees property rights and public security, and the right to develop a business.

But ‘the model’ that guided economic management also planted the seeds of the recent social uprising. And contrary to right-wing memes, the Constitution poses a problem. But it also lives – for now – and spells out rights and duties. Walmart understands this well. In six suits it launched in cities whose courts are most likely to admit them, the corporation accuses the state of abdicating its duty to “guarantee order and public security.” Daily Diario Financiero wrote, Walmart argues “this arbitrary and illegal omission infringes gravely on the right to property.”

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Walmart’s Business

Walmart seems to want to force the state to provide extra security to its markets, but the demand is also so vague that other motives could play a role too. The firm could have launched the suit in preparation of insurance claims. Or, since corporations are accountable to investors over anybody else, the suits could show investors that management is doing everything possible to minimize losses.

Further, Walmart has been caught tax cheating. Investigative portal CIPER reviewed Walmart’s ‘Paradise Papers.’ In 2017 a massive batch of documents was released that showed how corporations and rich individuals attack social order and societal wellbeing through tax schemes under which they avoid their social obligations. Walmart Chile figures prominently in the leak. CIPER reported tax authorities who reviewed the papers have a strong case against Walmart. The papers show that the company built a scheme to pull profit out of the country and declare it as loss. This way, authorities estimate the company stole at least US$ 126 million from the public. A couple lawsuits from the company would build leverage over the state to force negotiations and get the tax authorities back off.

Noting the demand did probably not chime well with the public, Walmart later clarified it doesn’t hold the state responsible for the looting of its stores. But no matter Walmart’s motives – security, activism, or tax – the company has flexed its muscles.

And that’s ok. A rule-of-law state cannot be exempt from accountability. But as the government correctly understands, Walmart has opened the gates for more demands from other players. And that’s the problem: Investment activism coupled with naive patriotism have led policymakers to believe companies come to the country to help it progress. That belief has informed special regulations to give corporations some leeway. And, of course, money rules. Somebody with US$ 1 billion has automatically more influence than somebody with US$ 10, because the higher amount moves more things.

Contrary to politicians, corporations, especially foreign ones, understand that they aren’t helping the country; they’re helping their bottom line when coming to Chile. If that aligns with the public interest – fine. But as tax theft demonstrates, that is not the default.

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Constitutional Chance

The current process to set up a new Constitution presents a tremendous chance to rectify the injustice that comes out of these unequal power relations. It could determine that only ‘clean’ companies could demand the state and have full rights to property and legal standing. That’s not far-fetched. Foreign individuals that are caught in funny business – or challenge the government in a protest – could be easily stripped of their rights without having the chance to bring their case before a judge.

The new Constitution should determine that (foreign) corporations don’t just have the same rights as individuals but also the same duties, even threatening prison for executives whose companies steal or commit other crimes.

Basing the rights of corporations on good behavior would send a signal that Chile’s not to be messed with. It also would improve working conditions without the public having to subsidize wages. Shady business would decrease. And it would induce some realism into foreign economic policy, forcing change in how foreign investment comes to Chile. ‘The model’ has to go. As a self-respecting country, Chile cannot afford it any longer.

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