RIGHTS-LATAM: Consumers Unhappy with Privatised Public Services

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Mar 20 2002 (IPS) - The lack of influence of consumer rights groups in Latin America over privatised public services is one of the causes of the dissatisfaction of customers, who complain that utility companies “do whatever they want.”

That is one of the most frequently heard complaints from consumers in Argentina, where due to the severe economic crisis of the past few months, 40 percent of customers have fallen behind in paying their utility bills.

Consumers complain that utility rates continued to rise, despite the deflation seen up to the devaluation of the Argentine peso in January.

Overall, the privatisations of public enterprises carried out in the region in the 1990s brought improvements in the provision of basic services, but the cost of the investment was transferred to the users, Claudia Collado, with Consumers International, which groups 264 consumer rights groups worldwide, told IPS.

“Privatised public services only work well if there is strong regulation. Consumers will always be at a disadvantage due to the imbalance of information,” which users receive less of than the utility companies and regulatory agencies, said Collado.

These questions began to be debated Wednesday in Buenos Aires, at the second Regional Conference of Consumers and Public Services, where participants will study Latin America’s privatisation processes, as well as experiments in participation by consumer groups.

Collado, who is coordinating the three-day meeting, explained that privatisation attracts investment but also leads to rate hikes, which often make it impossible for lower-income customers to afford basic services like power, water, gas and telephones.

Consumer groups note that in general, official regulatory agencies created parallel to the privatisation process have failed to effectively defend the rights of customers and enforce the companies’ compliance with their obligations – rights and obligations that many consumers are unaware of.

In Collado’s view, companies must be subject to clearer rules, and public regulatory and oversight bodies must be more independent and transparent, because in most cases they act more in favour of the companies than the citizens.

There are major shortcomings in Latin America with respect to participation and representation of consumer organisations in the official bodies set up to control and oversee privatised public utilities, according to a Consumers International report.

Only in Brazil and Mexico do consumer groups have some degree of direct participation in the government regulatory agencies. In other countries there are merely provisions for participation through public hearings or advisory commissions.

Consumers’ lack of a voice in such matters has been linked to arbitrary hikes in tariffs, which do not always provide for special rates for the unemployed or the lowest-income sectors.

“The worst thing is that consumers have neither voice nor vote in the question of tariffs,” said Collado.

Nor has privatisation helped extend public utilities like power, water and telephones to less populated areas, especially rural zones, according to consumer groups.

Consumer defence groups tend to receive more complaints about utility companies after they are privatised. In Mexico, where inflation grew 360 percent in the decade of the 1990s, the rates charged by the Teléfonos de Mexico phone company climbed 973 percent.

In the case of Argentina, where the market for telephone services has been split between two companies, Telecom and Telefónica, rates rose 700 percent in the 1990s, an inflation-free period, because the companies raised their tariffs in accordance with inflation in the United States, since the peso was pegged to the dollar.

Argentina’s League of Consumer Action says abusively high tariffs or poor provision of public services are the chief source of complaints (30 percent of all cases) filed by consumers.

In addition, over the past few months of crisis in Argentina, more and more cases have cropped up of companies unable to deliver the services they have promised to provide. Some firms have filed for bankruptcy as the profit margin shrank and the complaints began to climb.

Water companies in several provinces have had to be taken back into the hands of the state; the postal service, which was rewarded in concession for 20 years, is on the verge of bankruptcy; and privatised air transport companies and railways are also in trouble.

Aerolíneas Argentinas was rescued several times, and is currently in meeting of creditors. The railways, including both freight and passenger services, have performed unevenly depending on the region, but are all offering severely reduced services at a much higher cost.

In the case of the railways, the cut in public expense which served as an argument for privatisation was only relative, since the government subsidises the railroads – at a high cost – in exchange for keeping tariffs accessible.

The Consumers International conference in Buenos Aires will enable the member organisations to exchange experiences and information, and press for greater participation in regulatory agencies, in defence of consumers.