Latin Amer Privatization: Selling to the Highest Bidder

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Granma Internacional Digital - June 21, 2002
http://www.granma.cu


Privatization in Latin America:
SELLING TO THE HIGHEST BIDDER

by Maria Victoria Valdes-Rodda

LIKE an octopus that kills with its tentacles, or ivy that chokes the
walls of a house, or an unreal formula: this is how the privatization
of state resources is perceived by many in Latin America. The most
vulnerable property owners and workers, and those who represent the
most progressive Latin American thinking, are the ones who subscribe
to this opinion.

Those in the circles of power or who serve national and foreign
economic interests justify the issue as a healthy remedy for the
regional economy and proclaim the neoliberal prophecy of prosperity,
when the reality is totally different.

Some 3,000 Paraguayan campesinos marched 150 kilometers to the
Congress in the capital city, Asunción, demanding the repeal of Law
1615. Their demonstration was joined by students and workers, given
that the legislation concerns the privatization of the state
telephone company COPACO.

Belarmino Balbuena, coordinator of the National Rural Federation, is
calling for a general strike if Paraguayan President Luis González
Macchi persists in turning over state resources to private and
foreign capital.

Recent popular demands in Paraguay have already led to bloodshed. On
June 4, the police shot and killed a man protesting the sale of
COPACO at the Congress Plaza. Calixto García died from a bullet in
his brain, and a further six people were seriously wounded.

The Industrial Production and Trade Federation (FEPRINCO) deplored
the deadlock over COPACO's privatization, alleging that the case is
threatening other legislation planned by the government. The Civic
Broad Front for the Defense of the Interests of Arequipa, Peru's
second most important city, has warned its members to close ranks
against the sale of four electricity companies in various parts of
southeastern Peru, and asked people to refuse to pay their
electricity bills.

In Cuzco, in the southern Andes, a further 6,000 workers have
mobilized for the same reason, while 12 persons on hunger strike have
stated their willingness to die as a protest at governmental
insistence in pursuing the process, in spite of heavy criticism.

In the logic of transnational capital, the economic model that
formerly prevailed in Latin America began to break down in the 1970s,
and the regional crisis was blamed on what was considered too much
state involvement in the public sector.

In the 1950-1980 period, certain nationalist Latin American
governments attempted to expand employment, reduce the gap in social
inequalities and defend themselves from external crises through
protecting state enterprises, as opposed to leaving everything to
market forces or private institutions.

Specialists maintain that this was possible thanks to the
characteristics of a world where Keynesian or neo-structural currents
prevailed within the bourgeois economy, while socialism's alternative
approach gave another dimension to universal problems.

In applying neoliberal reforms, their defenders attacked what was
referred to as "state inefficiency" and boasted the benefits of
privatization, giving rise in 1998 to an unprecedented episode: close
to
$42 billion USD entered the region from sales of state companies and
resources, and a growing submissiveness to the transnationals. The
private appropriation of Brazilian telecommunications network
TELEBRAS, the sale in Mexico of 360 of its 618 state companies, the
handing over of Argentine Airlines, and the transfer of Nicaragua's
ENITEL telecommunications are all emblematic of the privatization
process in the last 10 years.

According to neoliberals, public enterprises are unprofitable, with
too many commercial and political commitments, and the state can only
weigh down economic interests.

Another argument refers to reducing inflation, which they claim can
only be achieved by reducing public spending. The fewer health,
education and cultural resources for the population, the easier it is
to maintain a fiscal deficit in line with the top limit established
by the International Monetary Fund (IMF), which currently sets it at
3% of the GDP.

However, Argentina has demystified the hallowed recipes and that
South American nation is immersed in a disastrous episode of
unforeseeable consequences. The Argentine government ceded financial
control to the multinational banks, particularly those of the United
States. At the same time, privatization became the "expeditious" way
of resolving "out-of-house" accounts, as the total external debt
increased together with greater commitments to the international
organizations. And, as Latin American finances have not had a surplus
since the 1980s, the sale of national resources became the magic
wand.

In terms of neoliberal interests, privatization also signified a
formula for the payment of an external debt that was in total crisis,
as Latin American governments directed that money into paying their
debts, which had reached a crisis level, rather than addressing the
acute social problems of their peoples. Thus, having already made
payments in excess of the total external debt, today Argentina,
Uruguay, Colombia, Ecuador and other nations are once again
defaulting on payments or coming close to that situation, and for
that reason undertaking fresh negotiations with the IMF.

Social issues have been forgotten and privatization has annulled the
role of the state. Meanwhile, citizens are at the mercy of the law of
supply and demand in the labor market, but under new circumstances.
Trade union strength has been eroded by recent legislation giving
total protection to companies and facilitating firings and closures,
as a consequence of which hundreds of thousands of people are
literally on the street, a reality which has no significance for the
technocrats and politicians.

In accordance with the FTAA

JOSE Angel Perez Garcia, specialist at the Center for Research on the
World Economy (CIEM), confirmed to Granma International that the wave
of privatization in Latin America is functional and coherent with the
implementation of the Free Trade Area of the Americas (FTAA).

Given that their national economies have weakened as a result of
privatization, Latin American negotiators now lack the power to
negotiate a trade agreement.

This softening on the part of regional leaders suits the United
States, as it means that Latin America lacks the capacity to answer
back. Although the concept of the FTAA first appeared in 1994 at the
Americas Summit in Miami, Washington had been preparing the terrain
since 1980.

National economies were gradually dismantled, the working class was
educated in the rules of savage capitalism, and public resources were
privatized, with the consequent weakening of the state's role as
negotiator in a process of international insertion.


(c) 2001 Granma International Digital. All rights reserved.
 
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