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Economy & Trade

Macro Privatisations Bring Micro Benefits to Guatemalans

GUATEMALA CITY, Aug 22 2012 (IPS) - The suspension of the privatisation of a port company unleashed debate in Guatemala about the countless concessions granted to foreign companies in areas like oil, mining, railways and energy, where corporate interests are seen as prevailing over the common good.

“Instead of taking into account the benefits for the communities and the public as a whole, governments make decisions that are harmful to the interests of the state, to benefit transnational oil and mining companies and others,” Ramón Cadena, a lawyer with the International Commission of Jurists, told IPS.

To illustrate, he cited the case of the former executive secretary of the government’s National Council on Protected Areas, Sergio Veliz, who was sentenced on Jul. 31 to three years in prison for modifying the master plan for the Laguna del Tigre national park, a protected area of 334,000 hectares, to facilitate oil drilling.

The government of Álvaro Colom (2008-2012) also violated the country’s laws on hydrocarbons and protected areas when it decided in August 2010 to extend for 15 years the contract granted to the Anglo-French oil and gas company Perenco to operate in the park, which forms part of the Maya Biosphere Reserve in the northern province of Petén.

“Rural communities are hit the hardest because they live near mining and oil projects that cause severe damage to the environment,” which compounds the poverty in which they live, said Cadena.

He also denounced that the government of President Otto Pérez Molina, in office since January, is stepping up the military presence in areas where corporations have invested, to protect the companies.

According to last year’s National Survey on Living conditions, 54 percent of Guatemala’s 15 million people are poor and 13 percent are destitute. Poverty is especially high in indigenous territories, which are often encroached on by mining and oil projects.

The debate on what real benefits are left to the country by concessions granted to foreign firms was sparked when the government temporarily suspended, on Aug. 10, a concession for leasing 350,000 square metres in a port on the country’s southern Pacific coast belonging to the Empresa Portuaria Quetzal, a state-run port company, to a Spanish firm, Terminales de Contenedores de Barcelona (TCB).

President Pérez Molina was forced to suspend the usufruct lease agreement with TCB in the face of accusations of corruption voiced by opposition politicians, trade unionists and businesspersons.

“The concession was granted in order for Guatemalans to have an opportunity to have a modern, efficient and competitive port,” said the president, a retired general, who is seeking the support of local mayors, trade unions and other sectors to ratify the contract.

The opposition right-wing Líder party, which filed three lawsuits against government officials in relation to the case, said that under the contract, the state would only take in four dollars for each container, compared to 400 dollars received by governments in other countries.

In 2011, the Empresa Portuaria Quetzal reported earnings of 11.6 million dollars.

Cadena said that, before granting a concession, the government should make sure that it will not be harmful to the public or the environment, and should determine precisely what benefits the state will receive.

Up to now, that has not been done.

José Pinzón with the Central General de Trabajadores, the country’s main trade union confederation, told IPS that services like telecoms, electrical power, and railways have been granted in concession to foreign companies, “which take in millions in earnings, leaving the country only crumbs.”

As an example, he cited the concession to the Palín-Escuintla freeway in the south of the country, awarded in 1998 to a Mexican firm, Marhnos. The concessionaire is allowed to increase the tolls every six months, and only has to pay one percent royalties.

“The concessions have never been granted in accordance with national interests,” he said.

Marhnos will have earned some 650 million dollars by 2023, when the contract expires, according to estimates by the local press.

In other commercial operations, the government of Álvaro Arzú (1996-2000) privatised the state-owned electricity, telecoms and railways companies – Empresa Eléctrica de Guatemala, GUATEL, and Empresa de Ferrocarriles – in operations lacking in transparency, which were rejected by broad segments of society.

Anthropologist Irma Alicia Velásquez told IPS that “the history of concessions in banana republics like ours is long: railways, postal services, ports, electricity and others; and the opinions of the local population have not been respected.

“The aim has been profits for investors, while the country has been left with very little,” said the academic, a member of the Quiche indigenous community.

One example, she said, is the Marlin gold and silver mine in the southwestern province of San Marcos, whose earnings climbed from 269 million dollars in 2010 to 607 million dollars in 2011, according to the company that holds the concession, Canada’s Goldcorp.

But Montana Exploradora, Goldcorp’s subsidiary in Guatemala, paid the state just 16 million dollars in royalties between 2005 and 2010, according to the company’s records. That is equivalent to a mere one percent – the proportion required by the company’s mining laws.

Velásquez said the biggest problem with these investments is that the human rights of local communities are violated.

In May 2010, the Inter-American Commission on Human Rights ordered the Guatemalan government to suspend work at the Marlin mine, in compliance with its precautionary measures for 18 indigenous communities.

But Montana Exploradora, accused of polluting several rivers, continues to operate the mine.

“There needs to be careful consideration of what should and should not be granted in concession. There is an idea to privatise hospitals and basic services, which is dangerous for poor countries like ours, where minimum services are already inaccessible, and become completely out-of-reach when concessions are granted” to private companies, Velásquez said.

According to Luis Linares with the Association for Social Research and Studies (ASIES), an independent research centre and think tank in Guatemala, “there has not been a single concession granted in the history of this country in which the common interests of the citizens have prevailed.”

He also told IPS that all of the privatisations have been characterised by a lack of transparency.

The expert said legislation was needed to regulate concessions, to ensure that they served the common good.

Privatisation “is an instrument that could be used in certain cases, in which it is a good thing for the enterprise to be run by private owners. But it should be done through a public tendering process, to guarantee that the interested parties offer the best conditions for the country,” he argued.

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