Several years ago Bacha identified three intellectual streams in the burgeoning literature on unequal exchange. For Marxists such as Emmanuel, the problem was analysed as a central feature of the development of capitalism on a world scale which had its source in the existence of higher real wages in the developed Centre than in the underdeveloped Periphery. For neo-Ricardians such as Steedman, the phenomenon arises as a result of extending their critique of standard capital theory to the sphere of international trade. Lastly, there has been a long standing debate in development economics as to the distribution of gains from trade between developed and underdeveloped countries ever since the contributions of Lewis, Prebisch and Singer. This paper, which is concerned with the relationship between transnational corporations (TNCs) and markets in the Latin American food system, is situated within the institutionalist tradition of development economics. More specifically, my aims are twofold. Firstly, a transactional framework is outlined for identifying and explaining the presence of asymmetries in national and international food chains where TNCs may be present. Different types of asymmetry are distinguished in the context of a world economy increasingly integrated by means of both markets and hierarchies. Secondly, this general framework is used to analyse a specific transactional form which appears to be of increasing importance as a link between TNCs and agricultural producers in the region, namely production contracting. The analysis complements my earlier work on the determinants of foreign investment in the Latin American food industry, and on comparative advantage versus food security as agricultural development criteria for the region (Scott, 1981, and forthcoming).