HOW LATIN AMERICAN FAMILY BUSINESS CAN ESCAPE THE TOCQUEVILLE PARADOX

WHY FAMILY BUSINESS: Family businesses have arguably long been the backbone of Latin American economies. From agribusinesses in Argentina to manufacturing dynasties in Mexico and retail empires in Brazil, family enterprises not only provided employment and stability but also tended to carry deep cultural and social ties within their communities.

However, the region’s persistent development gap, coupled with the volatility of global commodity prices and recurring waves of populism, poses unique threats to long-term economic and social cohesion of those communities – and, ultimately, as it may be seen with Venezuela’s fortunes, those businesses themselves.

Latin America’s well-documented development gap — summarized by high levels of inequality, inconsistent access to quality education (Latin American students’ scores average 373 compared to a OECD average of 475), underdeveloped infrastructure (taking in 2.8% of GDP compared to 7.8 in East Asia), and somewhat limited social mobility — creates fertile ground for populist movements. These movements often rise on the promise of redistributing wealth and dismantling entrenched power structures, including those held by longstanding business families. In countries with weak institutions and uneven economic growth, populism may find a willing audience among citizens disillusioned by decades of unfulfilled — or, crucially, partially-fulfilled — promises. The results need not be inherently negative but, as with Venezuela, they may also prove disastrous.

Family businesses, by virtue of their inter-generational nature and local roots, are ideally positioned to counter this cycle. To build broad-based consensus against the dangers of populism, these businesses must at least partially reimagine their role—not just as economic agents, but as civic leaders.

WHY NOW

Trade-related regionalisation and the volatility of commodity prices — still very much a defining feature of many Latin American economies — have in turn increased economic volatility and, with it, the volatility of public frustration. Countries heavily reliant on exports like copper, soy, or crude oil often find themselves in economic and fiscal cycles of boom and bust, leading to fiscal instability, cuts in public services, and rising unemployment during downturns. For communities dependent on these commodities, economic hardship can quickly lead to social unrest and political radicalization. Populist leaders seize on this instability, blaming external forces or elite actors, including business owners, for domestic woes.

The tragic example of Venezuela offers a stark warning. In the early 2000s, populist policies under Hugo Chávez promised wealth redistribution, the nationalization of industries and state-led prosperity. Many family-owned businesses were vilified, expropriated or driven into collapse. What followed was economic freefall, hyperinflation and mass migration. While Venezuela’s collapse is extreme, it illustrates how unchecked populism, born from otherwise legitimate social grievances, can devastate economies and dismantle generations of entrepreneurial effort.

WHAT CAN BE DONE

Latin American family businesses must build trust within their communities. This means going beyond philanthropy or corporate social responsibility in name only. Business leaders must integrate local concerns into business strategies — creating jobs, investing in education, supporting small suppliers, and ensuring that the benefits of growth are widely shared. When communities feel invested in the success of a local business, they are more likely to defend it against the simplistic narratives of populist leaders.

Furthermore, because of the localized nature of many businesses, policy advocacy, done collaboratively and transparently, is another area where family businesses can have an outsized impact. By organizing into sectoral or regional associations, they can work with governments to craft policies that promote inclusive growth while avoiding populist overreach. I would add that these efforts are best clearly communicated to the public to avoid perceptions of backroom influence and double-dealing. Advocacy should ideally be tied to clear social outcomes — such as job creation, education access, or environmental protection — to earn legitimacy.

Finally, businesses may wish to support civic education and democratic institutions – as many individual businesses do but not as structurally as needed. Populism often flourishes where civic understanding is low and where institutions – both state and non-state – are weak. Partnering with schools, universities, and official charities to promote critical thinking, democratic values and entrepreneurial skills can help build a more informed and engaged citizenry. While this may seem beyond the traditional scope of business, a stable and participatory society is ultimately in every firm’s long-term interest.

By engaging deeply with their communities, embracing transparency, empowering younger generations, and defending democratic values, they can help close the region’s development gap and build political shock resistance as the main drivers of the economy continue to be volatile. The stakes are high, but so too is the potential for meaningful, long-lasting impact.

Written by Radu Magdin, PhD

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The Citizenship by Investment (CBI) Index evaluates the performance of the 11 nations currently offering operational Citizenship By Investment (CBI) programs: St Kitts and Nevis (Saint Kitts and Nevis), Dominica, Grenada, Saint Lucia (St. Lucia), Antigua & Barbuda, Nauru, Vanuatu, Türkiye (Turkey), São Tomé and Príncipe, Jordan, and Egypt.