PUERTO RICO-POLITICS: Wide Rejection of Govt’s Privatisation Plan

By IPS Correspondents Reprint | | Print |

Carmelo Ruiz

SAN JUAN, Jun 17 1997 (IPS) - Governor Pedro Rossells’s announcement that the Puerto Rico Telephone Company will be sold to the private sector has unleashed a fierce controversy in the Caribbean island.

The ruling New Progressive Party (NPP) and various private sector experts argue that the privatisation of the Telephone Company (PRTC) will result in increased government revenues, reduced costs for consumers, expanded telephone coverage and an improvement in labour productivity.

NPP senator Kenneth McClintock, one of those heading the privatisation drive, says the sale will also enhance the consumers’ right to choose the provider of their telephone services.

He says if the PRTC’s managers had adopted a more entrepreneurial and competitive attitude three years ago, when talk about the need for opening markets and embracing competitiveness was popular, “the sale would not have been necessary”.

Some members of the legislature and leaders of the business class fear that the company might not be able to compete after the 1996 US federal telecommunications law and the signing of the World Trade Organisation’s (WTO) Information Technology Agreement, both of which are aimed at liberalising the telecommunications market.

But far from being a money-losing, state-subsidised corporation, the PRTC makes more than one billion dollars a year. Most of this money is used to finance government programmes, including public broadcasting, municipal infrastructure, public education and more recently, a pay increase for the police in the U.S. territory.

After these expenses the PRTC is still left with 125 million dollars in profits. These profits have passed the 100 million- dollar mark for the fifth consecutive year.

Unlike most state-owned telephone companies in Latin America, the PRTC is a high-technology telecommunications company that provides long distance calls, cellular telephone and pager service and Internet access, and has a completely digital infrastructure worth several billion dollars, and an island-wide network of optical fibers. In less than five years it has reinvested more than one billion dollars in maintaining and upgrading its infrastructure.

Puerto Rico currently has no fewer than 200,000 cellular telephone users, and according to a recent survey by the public relations firm of Badillo Nazca Saatchi and Saatchi, there are 210,000 internet users. That means one in every 14 Puerto Ricans is a user. By the year 2000, the island’s Internet users are expected to number 500,000.

The PRTC, however, is also immersed in what some would call a consumer service crisis. In his report for the 1995-96 fiscal year, the Puerto Rico Ombudsman announced that customer complaints against the telephone company had quadrupled during the last four years, making it the public agency against which the highest number of complaints have been filed.

Privatisation advocates capitalise on these complaints to boost their arguments that it is time for a change of ownership. They say that the Puerto Rican telecommunication market is not sufficiently liberalised because of the intruding presence of the state-owned PRTC, and have repeatedly made it clear that what the company needs to improve customer service is a good dose of private sector competition.

But the fact is that a number of private companies are currently in the island, penetrating the cellular, pager, long distance, and internet access markets, and are barely able to compete with the PRTC. Ironically, these private sector competitors prefer to rent the PRTC’s infrastructure rather than build their own.

Among the concerns of those opposing the sale of the PRTC is the job security of the company’s 8,000 employees. According to Mario Roche, ombudsman at the Puerto Rico labour department, the new owner will have no contractual obligation to the PRTC’s employees, who had been collectively bargaining with the government for more than 20 years for better wages and working conditions. Roche foresees massive layoffs under the rubric of corporate reorganisation.

As they are moved into the private sector, the company’s employees will come under the jurisdiction of the Taft-Hartley labour law, which will require them to disband their unions and organise all over again, says Roche.

PRTC workers are represented by the Independent Union of Telephone Workers (UIET) and the Independent Brotherhood of Telephone Workers (HIETEL). The latter represents the professional and technical employees. Both unions oppose the sale and have announced their willingness to go on strike to prevent it.

Various labour leaders from different sectors and their allies in the left and the independence movement are considering calling for an island-wide strike if the government persists in its efforts to sell.

Some privatisation opponents believe that the PRTC sale is fuelled by ulterior motives, which have everything to do with politics and nothing to do with sound economics. Chief among these alleged motives is the NPP’s goal of turning Puerto Rico into the 51st state of the U.S. union. According to Roche, “the sale of public enterprises in Puerto Rico is being done in the service of removing cultural and economic obstacles from the road to statehood”.

“The current (NPP) government wants to be like the United States, where the state sector is much smaller,” says Alfonso Benmtez, president of UIET.

However, McClintock has categorically denied any connection between the telephone company sale and the push for statehood.

But he admits that the possibility of the PRTC being sold to a non-American company is barred by US Federal Communications Commission (FCC) rules that prohibit non-Americans from acquiring majority ownership in American telecommunications companies, so they can only enter the Puerto Rican market as minority partners of American corporations.

McClintock says if non-Americans bid for the PRTC they will probably do so as members of global conglomerates like Concert, which brings together British Telecom and the United States’ MCI, and Global One, which is composed of Deutsche Telekom, France Telecom and the American company Sprint.

However, the FCC rules contradict the WTO’s Information Technology Agreement and the Multilateral Agreement on Investment of the Organisation for Economic Cooperation and Development, the latter being currently under negotiation. Both agreements will require the United States to open its telecommunications market to unrestrained foreign participation.

Meanwhile, Puerto Rican public opinion is divided on the issue, with 63 percent of the population against the government’s privatisation policy as a whole, according to a poll conducted one week ago by El Nuevo Dma, the island’s leading daily.

“The phone company is almost exclusively the only public corporation that provides money to the government”, says Josi R. Rivera, a public administration student at the University of Puerto Rico who opposes the PRTC sale.

Walmarie Soler, a computer trainer in the city of San Juan, is somewhat ambivalent about the sale. “Something has to be done about the awful and deficient service provided by the phone company. Its employees are getting incredible job benefits for doing nothing, as is the case in all public agencies,” he says.