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Issue No.04 - October-December (2008 vol.30)
pp: 26-41
Eden Medina , Indiana University
ABSTRACT
In examining the history of IBM in Chile, this article asks how IBM came to dominate Chile's computer market and, to address this question, emphasizes the importance of studying both IBM corporate strategy and Chilean national history. The article also examines how IBM reproduced its corporate culture in Latin America and used it to accommodate the region's political and economic changes.
INDEX TERMS
IBM, Chile, technology transfer, Latin America, organization, culture, industry, globalization, market, international
CITATION
Eden Medina, "Big Blue in the Bottomless Pit: The Early Years of IBM Chile", IEEE Annals of the History of Computing, vol.30, no. 4, pp. 26-41, October-December 2008, doi:10.1109/MAHC.2008.62
REFERENCES
 1. T.J. Watson, Father, Son, &Co.: My Life at IBM and Beyond, Bantam Books, 1990, p. 175, Watson Jr. made this comment after learning his father's plan to carve out IBM World Trade for his younger brother, Arthur K. Watson. Thomas Watson Jr. was angered by this decision, and we must view his comment in this context, although it does not diminish the fact that he viewed the Latin American market as a boondoggle. 2. IBM Archives, Frequently Asked Questions, June 2004, http://www-1.ibm.com/ibm/history/documents/ pdffaq.pdf; "Buenas Ideas, Pilares de IBM" [Good Ideas: Pillars of IBM], Diálogo IBM Chile, Sept.-Oct. 1977. 3. Among the most cited works are those of Emerson W. Pugh, a former IBM employee who wrote several detailed histories of the company's organization and product line. An overview of company history can be found in E.W. Pugh, Building IBM: Shaping an Industry and its Technology, MIT Press, 1995. The memoir by Thomas Watson Jr. provides an insider view of the company as seen from the top. The recent biography of Thomas J. Watson Sr. by the journalist Kevin Maney is the first to use Watson père's papers to tell the IBM story. See K. Maney, The Maverick and His Machine: Thomas Watson, Sr., and the Making of IBM, J. Wiley &Sons, 2003, and T.J. Watson Jr., Father, Son, &Co.: My Life at IBM and Beyond, Bantam Books, 1990. 4. The article by Corinna Schlombs in this issue of the IEEE Annals of the History of Computing is one example. Others include the controversial E. Black, IBM and the Holocaust: The Strategic Alliance between Nazi Germany and America's Most Powerful Corporation, Crown Publishers, 2001; J. Vernay, "IBM France," Annals of the History of Computing, vol. 11, no. 4, 1989; R. Sobel, IBM vs. Japan: the Struggle for the Future, Stein and Day, 1986; S. Usselman, "IBM and Its Imitators: Organizational Capabilities and the Emergence of the International Computer Industry," Business and Economic History, vol. 22, no. 2, 1993. The literature on IBM World Trade is small but useful and includes work by the journalist Nancy Foy, The Sun Never Sets on IBM, Morrow, 1975, and a memoir by the former president of IBM World Trade, Jacques Maisonrouge, Inside IBM: A Personal Story, McGraw-Hill, 1989. The journalist Rex Malik uses documents released in connection with the antitrust suit brought by the US Department of Justice against IBM. Those documents paint a more negative picture of corporate strategies for international expansion. See Rex Malik, And Tomorrow ... the World? Inside IBM, Millington, 1975. 5. The memoir published by Luis Lamassone is a notable exception. In addition, IBM Chile has produced several short company histories by company employees. These histories are cited throughout the article. Studies of computing in Brazil and Argentina have addressed IBM's activities during the 1970s and 1980s, but have not documented the early history of the company in these regions. L.A. Lamassonne, My Life with IBM, Protea, 2000, and E. Adler, The Power of Ideology: The Quest for Technological Autonomy in Argentina and Brazil, Univ. of California Press, 1987. 6. The firm of Buchanan, Jones, &Co. acted as the agent for CTR machines in Chile from 1921 to 1929. In addition to tabulating machines, Chileans could purchase scales, time clocks, mechanical punches, reproducing punches, and vertical sorters. IBM Chile, "Edición Especial de Aniversario, IBM 70 años en Chile," [Santiago de Chile: IBM Chile, 1999]; "Hablan los precursores" [The Predecessors Speak], IBM Diálogo, July 1987. 7. IBM Chile, "Edición Especial de Aniversario, IBM 70 años en Chile." The Chilean experience with tabulating machines parallels that of the US. In the US the heavy data processing needs of government agencies and railroad companies made them among the first purchasers of Herman Hollerith's early tabulating machines. Hollerith's background at the US Census Bureau and his involvement with the US censuses of 1890 and 1900 have been well documented. The importance of information technology to the railroad industry may appear less obvious. The economic historian Alfred Chandler cites the US railroad industry, which depended heavily on new innovations in information technology, as the prototype for modern business organization. Hollerith actively sought the railroad companies as his first clients after he left the census bureau. He also dedicated a number of years to reforming railway administration methods to incorporate the benefits of tabulating machines. 8. "Hablan los precursores," IBM Diálogo, July 1987, Sydney Wharin also served as the general manager of IBM Argentina. 9. "Hablan los precursores," IBM Diálogo, July 1987, p. 4. 10. However, Thomas J. Watson Sr. himself called Santiago in 1930 to inaugurate the new radio telephone service between New York and Santiago and to congratulate the branch office on its successful year. Watson also sent a letter to the Santiago office on the inaugural flight of Pan-American Grace Airlines (Panagra). The plane was piloted by Charles Lindbergh. IBM Chile, "Edición Especial de Aniversario, IBM 70 años en Chile." 11. "Máquinas especiales se emplearán en el escrutinio del censo general [Special Machines Will Be Used in the Counting of the General Census]," El Mercurio, 6 Mar. 1930. 12. Tabulating machinery was not the only office machinery shipped to Chile in 1930. Judging from the advertisements of the period, Burroughs calculating machines, National Cash Register's cash registers, and Remington typewriters all managed to secure a client base within Chile. Burroughs, for example, claimed that with 42 years of experience, it could offer a "Burroughs machine for any business." In 1929 alone Chile imported 282 calculating machines, 786 adding machines, 390 cash registers, and 4,368 typewriters from the US, sales totaling approximately $560,000. "Hay una maquina Burroughs para cualquier negocio" [There Is A Burroughs Machine for Any Business], El Mercurio, 12 Oct. 1930; US Dept. of Commerce, Foreign Commerce and Navigation of the US, US Government Printing Office, 1929. 13. B. Loveman, Chile: The Legacy of Hispanic Capitalism, 3rd ed., Oxford Univ. Press, 2001, p. 183. 14. However, he also dealt aggressively with his political opponents and oppressed dissenting voices. 15. The General Statistics Office expanded to become the General Statistics Bureau in August 1930 and welcomed additional labor and technical resources, such as Hollerith machines, to complete the population census in a timely fashion. The results of the 1920 census were published in one volume five years after the census was conducted. In contrast, the results of the 1930 census occupied three volumes, published in 1931, 1933, and 1935, respectively. Hollerith machines generated the various configurations of data that comprised the second and third volumes. 16. Within this new labor force engineers gained considerable respect and influence and ascended to key posts in the administration. For example, the treasury minister, Pablo Ramirez, assembled a group of talented engineers from the State Railroad Company (Ferrocarriles del Estado) and placed them in a number of high-ranking positions throughout the government, including director of the Budget Office, director of the General Accounting Office, superintendent of customs, and director of the Internal Revenue Service, as well as in several crucial positions within the Ministry of Development. For more on science, engineering, and the growth of state administration during the Ibañez period, see M. Góngora, Ensayo histórico sobre la noción de estado en Chile en los siglos XIX y XX [Historic Essay on the Notion of State in Chile in the 19th and 20th Centuries], 2nd ed., Editorial Universitaria, S.A., 1986; A. Ibañez Santa Maria, "Los 'ismos' y la redefinición del Estado: tecnicismo, planificación y estatismo en Chile, 1920–1940" [The "isms" and the Redefinition of the State: Technicism, Planning and Statism in Chile, 1920–1940], Atenea, no. 474, 1996; and A. Ibañez Santa Maria, Herido en el ala: estado, oligarquías y subdesarrollo [Wounded on the Wing: State, Oligarchy and Underdevelopment], Universidad de Andres Bello, Santiago, 2003. 17. "Loveman," Chile, p. 188, 98. 18. Ibañez resigned on 26 July 1931 and temporarily sought exile in Argentina. After he resigned, Chile slid into political disarray. For all the dictator's attempts to create an administration that imposed order and abhorred chaos, six different governments came to power in 1932, including Chile's first "Socialist Republic," headed by Marmaduque Grove. It lasted only 12 days. By the end of 1932 members of the military were calling for civilian elections, which initiated a period of uninterrupted democratic rule that lasted until 1973. 19. B. Loveman writes, "These developments provided a basis for the consolidation of a bureaucratic 'middle class' associated with an interventionist state Loveman," Chile, pp. 199-200, See also K.A. Rosemblatt, Gendered Compromises: Political Cultures and the State in Chile, 1920–1950, Univ. of North Carolina Press, 2000. 20. Loveman, Chile, p. 200. 21. "Hablan los precursores," IBM Diálogo. 22. IBM Chile, "Edición Especial de Aniversario, IBM 70 años en Chile [Special Anniversary Edition, IBM 70 Years in Chile]; Cartulina para tarjetas de IBM [Cardboard for IBM Cards]," Diálogo IBM Chile, Nov.-Dec. 1976, In 1966 the card factory produced 25 million cards per month. 23. T.J. Watson Sr. wrote editorials on Theodore Roosevelt's Good Neighbor policy (1940) and "world peace through world trade" (1953). These were later reprinted in T.J. Watson Sr., "As a Man Thinks": Thomas J. Watson, the Man and His Philosophy of Life as Expressed in His Editorials, IBM, 1954. 24. The company also named Carlos Vidal as the special representative for Latin America. Vidal worked for IBM Peru, but took on the responsibility of promoting the company throughout the region. 25. Lamassonne, My Life with IBM, p. 77. 26. Maney, The Maverick and his Machine: Thomas Watson, Sr., and the Making of IBM, p. 371, Watson Sr. met the Chilean president again in April 1950 at a black tie dinner held in González Videla's honor in New York. The friendship between the González Videla family and the Watson family continued in the next generation. Watson Jr. stayed in contact with González Videla's daughter and her husband, the wealthy businessman JoséClaro Vial. I thank Cristóbal Joannon of IBM Chile for sharing a 2005 interview he conducted with Claro Vial that contains many details of this friendship. 27. The details of the family drama surrounding the formation of IBM World Trade appear in Watson Jr., Father, Son, &Co.: My Life at IBM and Beyond, and Maney, The Maverick and His Machine: Thomas Watson, Sr., and the Making of IBM. 28. Maney, The Maverick and His Machine: Thomas Watson, Sr., and the Making of IBM, p. 377, Maney describes Arthur Watson as having a weak character and an uncontrollable temper. IBM banned alcohol, but Arthur Watson reportedly developed a drinking habit that embarrassed his father on numerous occasions. 29. However, Arthur Watson later went on two US government missions to Latin America, including a 1964 trip to Lima, Peru, where he started an investment group that funded local Latin American businesses. IBM Archives, Arthur K. Watson, IBM Builders Reference Room, 2008, http://www-03.ibm.com/ibm/history/exhibits/ buildersbuilders_watson.html. 30. Foy, The Sun Never Sets on IBM, p. 42. 31. IBM Archives, IBM Highlights, 1885–1969, IBM Archives Documents, 2004, http://www-03.ibm.com/ibm/history/documents/ pdf1885-1969.pdf; IBM Archives, IBM Highlights, 1970–1984, IBM Archives Documents, 2004, http://www-03.ibm.com/ibm/history/documents/ pdf1970-1984.pdf. 32. Watson, Father, Son, &Co., p. 344. 33. Foy compares World Trade to a "dumping ground," "a place to send people who didn't quite fit." Later on, "good World Traders were wooed to Domestic for choice positions." Foy, The Sun Never Sets on IBM, p. 41. 34. Arthur Watson served as the director of IBM World Trade from 1949 to 1954, the president of IBM World Trade from 1954 to 1963, and the chairman of IBM World Trade from 1963 to 1970. Details on how Arthur Watson managed the System/360 project are in EW. Pugh, L.R. Johnson, and J.H. Palmer, IBM's 360 and Early 370 Systems, MIT Press, 1991. 35. Lamassonne added, "In spite of [these coordinated translation efforts], I was never able to get people in Spain to use the word 'computer.' To this day they still say 'ordenador' in Spanish, rather than 'computador.'" Lamassonne, My Life with IBM, pp. 86-87. 36. By 1985 IBM had expanded its operations to fill eight floors of the building, plus six other offices in Santiago. "Recuerdos de cambios de morada" [Memories of Changing Homes], IBM Diálogo, July 1987. 37. The transition from tabulating machinery to computing machinery is actually more gradual than this sentence implies. During the 1950s IBM began introducing electronics and electronic programmability into its electromechanical tabulating equipment. For this reason Usselman writes that "computers ... called for many of the same qualities as the older technology." Usselman, "IBM and its Imitators: Organizational Capabilities and the Emergence of the International Computer Industry," pp. 8-9. IBM announced the 1401 model in 1959. There was a three-year lag before the machine arrived in Chile. 38. IBM Archives, IBM 360 Announcement, http://www-03.ibm.com/ibm/history/exhibits/ mainframemainframe_PR360.html. 39. IBM helped prepare the voter registration lists. 40. President John F. Kennedy introduced the Alliance for Progress in 1961 with the outward goal of improving economic and social conditions for Latin Americans and the unstated goal of curbing the spread of communism in the region. From 1961 to 1970 Chile received$720 million in aid money from the Alliance for Progress. See AL. Michaels, "The Alliance for Progress and Chile's 'Revolution in Liberty,' 1964–1970," J. Interamerican Studies and World Affairs, vol. 18, no. 1, 1976. 41. For example, Frei's finance minister, Sergio Molina, theorized that "the science of informatics with its technological element the electronic computer has come to revolutionize administrative techniques." S Molina Silva, El proceso de cambio en Chile: la experiencia 1965-1970 [The Process of Change in Chile, the 1965–1970 Experience], Editorial Universitaria, Santiago, Chile, 1972, p. 177. 42. The System/360 was a new family of computers with compatible software and peripheral components. 43. Despite IBM's dominant position in the Chilean market, the first electronic computer at the University of Chile was not an IBM machine. The Department of Mathematics purchased a German-made Standard Electric ER-Lorenz in 1959. 44. This was logical since France provided technical support and foreign aid to modernize Chilean public administration. France was also the center for IBM World Trade operations outside New York. 45. E. Frei Montalva, Discurso del Presidente Frei en inauguración computador electrónico [Address of President Frei in Inauguration of Electronic Computer], Oficina de Difusión y Cultura de la Presidencia de la República, Archive of the Fundación Eduardo Frei, Santiago, Chile, 1969. 46. A. Acle, interview by E. Medina, 18 Dec. and 23 Dec. 2003, Santiago, Chile. 47. Other IBM offices referred to the company as "Mother IBM." See Foy, The Sun Never Sets on IBM, p. xiv. 48. F. Villanueva, interview by E. Medina, 9 Dec. and 16 Dec. 2003, Santiago, Chile. 49. During Frei's presidency the number of industrial unions doubled and the membership in agricultural unions grew from 2,118 organized workers to 136,984. In 1966 employees in the IBM department of the Yarur Textile Mill staged the first successful white-collar strike in the mill's history. Other Chilean firms also had strong white-collar (empleado) unions. In this context, it is even more significant that IBM Chile never had a unionized workforce. See P. Winn, Weavers of Revolution: The Yarur Workers and Chile's Road to Socialism, Oxford Univ. Press, 1986; A. Valenzuela, The Breakdown of Democratic Regimes: Chile, Johns Hopkins Univ. Press, 1978, p. 29. 50. The IBM training programs raise an important point that is frequently overlooked by historians of computing: training a computer-literate workforce did not entail only the education of programmers, systems analysts, and later computer scientists, positions that were usually held by men, but also the training of card punchers and data entry operators, clerical tasks usually performed by women. The gendered division of labor found in Chilean IBM departments is quite apparent in Figure 4. 51. Some of Chile's first computer scientists studied in the Faculty of Engineering and Mathematics at the University of Chile, then went to Canada on IBM scholarships to train at Waterloo. This institutional connection most likely came about in 1967, when Wes Graham of the University of Waterloo traveled to South America from 30 Mar. to 11 May 1967. He spent 10 days in Brazil, 4 in Uruguay, 4 in Argentina, 3 in Chile, and 2 in Peru under contract with IBM World Trade Corp. to participate "in a university and postsecondary school curriculum program as an independent consultant." I thank Jane Britton, archivist at the University of Waterloo, for locating Wes Graham's travel schedule in the university archives (file 384, Wes Graham Papers). 52. "Valioso aporte de IBM a la 'U' [Valuable Contribution of IBM to the 'U']," La Nación, 23 Mar. 1969, R. Peralta, interview by E. Medina, 12 Jan. 2004. 53. H. Kissinger, White House Years, Little, Brown, 1979, p. 671, Cited in Davis, The Last Two Years of Salvador Allende, p. 6. 54. J.D. Cockcroft ed. Salvador Allende Reader, Ocean Press, 2000, p. 60. 55. Moreover, it would allow the company to maintain the promise of "full-employment," upholding IBM's reputation of providing its employees with lifetime job security. Although this article presents relocation as serving company interests, it is important to remember what job security, benefits, and a stable income meant to IBM's Chilean employees, especially when other foreign-owned companies closed their Chilean offices and government economic policies caused runaway inflation and contributed to massive consumer shortages. 56. The building team used an IBM 360 mainframe that ran Project Control System software. IBM Chile, "Edición Especial de Aniversario, IBM 70 años en Chile." For more on the construction of the UNCTAD III building, see D.F. Maulen de los Reyes, "Proyecto Edificio UNCTAD III: Santiago de Chile (junio 1971-abril 1972)" [Project UNCTAD III Building: Santiago, Chile (June 1971-April 1972)], De Arquitectura: Revista de Arquitectura de la Facultad de Arquitectura y Urbanismo de la Universidad de Chile, no. 13, 2006, pp. 80-92. An IBM 360 mainframe was also used to process the economic data collected through Project Cybersyn, a technological system built to regulate the public sector of the economy in real-time. However, the project did not receive direct support from IBM employees. E. Medina, "Designing Freedom, Regulating a Nation: Socialist Cybernetics in Allende's Chile," J. Latin American Studies, vol. 38, no. 3, 2006. 57. Acle recounted the misfortune of this particular employee, who spent three days holed up in the downtown IBM office eating crackers and other food items he found in the desk drawers of his co-workers. 58. By 1975 Pinochet had decided to back the neoliberal "shock treatments" proposed by the Chicago Boys, a group of economists who had studied either with Milton Friedman at the University of Chicago or with professors at the Catholic University in Santiago who were well versed in Friedman's monetarist economic theories. The plan for the economy called for continuing cuts to public spending, now by an additional 15 percent to 25 percent; freezing wages; privatizing the majority of the firms nationalized by the government; reversing the agrarian reform carried out during the Allende and Frei administrations; raising income taxes by 10 percent; and laying off 80,000 government employees. See J Gabriel Valdés, Pinochet's Economists: The Chicago School of Economics in Chile, Cambridge Univ. Press, 1995. 59. Ministerio de Hacienda, Rebaja derecho ad valorem a bienes de capital que indica, Decreto 1130 [Ministry of Finance, Lower ad valorem Duty to Capital Goods Indicated, Decree 1130], 19 July 1974. 60. Several individuals whom I interviewed put tariffs at 200 percent or 300 percent of purchase price before the junta instituted Law 1130. The 120 percent figure stated in the text comes from a letter sent to Jorge Cauas, minister of finance, describing the effects of Law 1130 and signed by Chile's top computer professionals in government, industry, and academia nearly a year after the law took effect. Regardless of the exact figure, the change to 10 percent was a considerable difference. Letter to Jorge Cauas Lima, 28 May 1975, box 754 08R-0101 SECICO 1973 a 1983, folder "Correspondencia recibida y despachada, memorandos e informes. CECICO 1974-1979," Archive of the Pontificia Universidad Católica de Chile, Santiago. 61. This comment reflects the one-year lag between the time that Chilean customers placed orders for computer machinery (1974) and when these machines actually arrived (1975). 62. S. Prenafeta Jenkin, "IBM, bastante más que computación [IBM: Much More than Computation]," Informática, April 1979, p. 17, On 1 Jan. 1975, the tariffs levied on imported computing machinery returned to 100 percent. However, Law 1130 proved that Chileans wanted to invest in computing technologies and encouraged others to enter the market. Unfortunately, the need to buy machines within the four-month period resulted in hasty purchases of inappropriate machines that businesses were stuck with and created a shortage of those trained to operate the new machines—members of the computer community put the shortage at about 1,500 computer specialists. Letter to J.C. Lima. 63. For example, see Foy, The Sun Never Sets on IBM. 64. Of this total, $6 million resulted from sales to customers in Chile while the remaining$50 million came from sales to clients in other Latin American countries. "Cartulina para tarjetas de IBM."