ECONOMY-GUATEMALA: Privatisation Process Set to Take Off

By Fabiana Frayssinet Reprint | | Print |

Fabiana Frayssinet

GUATEMALA CITY, Nov 11 1994 (IPS) - Guatemala’s controversial privatisation process is set to take off, fueled by President Ramiro de Leon’s government which aims to break up state monopolies.

Despite protests by unions, there is no turning back according to De Leon, who promised the process would be “fair” and “without privileges” and open to all national and foreign petitioners.

The head of the National Privatisation Commission Manuel Ayau – a successful businessman who is one of Guatemala’s most diehard advocates of liberal economic policies – is in charge of the privatisation process.

Although the necessary studies have not yet been carried out, Ayau estimates that the state will take in some 100 million quetzals (17 million dollars) from the sales of public companies.

“All the money which is taken in will go exclusively to investment and not to operation costs. It will be used to build schools, roads, hospitals and other works. Thus the people will simply change one asset for another,” Ayau stated.

To those who claim that privatisation aims to restrict unions’ freedom to organise and that it will worsen conditions for the 85 percent of the Guatemalan population currently living below the poverty line, Ayau has responded that the process will not generate lay-offs but rather will improve workers’ conditions.

According to the government, the process has two basic objectives. In the first place, state monopolies – such as the National Institute of Electrical Energy, which had shown a total deficit of 3.3 million dollars by October – are to be broken up.

The second step will be to sell state commercial, industrial and service sector businesses by means of public auction, with the exception of the areas of education and health.

The first firm earmarked for sale – after Congress approves a law to guide the process – is the Guatemalan Railway company which has recently shown 500,000 dollars worth of losses a year, and 90 percent of which functions with obsolete equipment.

The rest of the “four horsemen of privatisation” – so dubbed by the local press – are the Guatemalan Communications Company (GUATEL), which generates a surplus, and the Guatemalan Electric Service Company.

The privatisation process, which has sparked a heated debate in recent weeks, is seen by political analysts as a clear attempt by De Leon to improve his relationship with the private sector, whose feathers were ruffled by his intention to raise taxes.

A document of the Committee of Trade, Agricultural, Financial and Industrial Associations (CACIF) – which represents private sector leadership – stresses the necessity of privatisation and the breaking up of inefficient state monopolies.

But the enthusiastic applause of the private sector and the majority of Guatemala’s political parties has been met with angry reactions by popular organisations.

“(It) will generate massive lay-offs and bring unemployment, poverty and price hikes in basic services,” the GUATEL worker’s union stated.

A majority of the country’s unions agree with the position of the GUATEL workers’ union, and have protested the move toward privatisation with strikes and demonstrations.

De Leon, appointed President by Congress in June 1993 after the removal of Jorge Serrano, based his support on a popular movement which backed him for his prior performance as Human Rights Ombudsman.

The President’s new alliance with the CACIF signals a distancing from popular movements, from which he has already received harsh criticism for other economic measures branded “anti-popular”.

“When union leaders supported De Leon’s candidacy, they certainly weren’t thinking he would privatise,” said Gabriel Aguilera, a sociologist with the Latin American School of Social Sciences.

Aguilera, who is an active member of the Democratic Socialist Party, recommended that the privatisation process be based on a rigorous analysis of the functions of each state company in relation to the needs of the population.

He thus coincided with a United Nations Development Programme’s (UNDP) 1993 report on human development which points to the “seven sins of privatisation”, including pushing the process in “the wrong climate,” alluding to the need of selling state companies in an economic environment which permits them to be efficient and competitive.

“When the market is functioning poorly and companies continue to be vulnerable to arbitrary government decisions, it is improbable that the transfer of public property to the private sector will be a solution,” the UNDP report stated.