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REPORTS: ARGENTINA |
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Reviewing
Ten Years of Privatisations
Viviana
Alonso
BUENOS AIRES (IPS) - The Argentine
government's decision to review the
contracts under which public
enterprises and utilities were
privatised in the 1990s amounts to
opening a Pandora's box: all kinds of
irregularities could come to light,
according to analysts.
Argentina's privatisation process
began in 1989. In just 10 years, the
state had transferred the country's
oil, gas, telecommunications, power
and water companies to the private
sector, as well as railways, subways,
airports, ports and some health
services.
In that decade, privatisation of
public enterprises brought the state
coffers 23.8 billion dollars,
including 19.4 billion dollars (81
percent) in revenues for the national
government and 4.4 billion (19
percent) for the provinces, according
to Economy Ministry figures.
In that same period, Mexico took in
fiscal revenues of 31.7 billion
dollars and Brazil 71.1 billion
dollars through sales of public
companies and utilities, according to
the World Bank's Global Development
Finance 2001 report.
Between 1990 and 1999, the
privatisation of public enterprises
brought the nations of Latin America
and the Caribbean a combined total of
177.8 billion dollars in revenues.
In Argentina, most sales of public
companies took place between 1990 and
1994, which indicates the speed with
which the privatisations were carried
out.
In the midst of an economic crisis
marked by runaway inflation, the
Argentine public witnessed a frantic
sell-off of public enterprises, most
of which were widely recognised to be
inefficient or poorly-administered.
The decision taken by the new
government of President Néstor
Kirchner reflects repeated demands
from consumers and opposition
political leaders for the state to
review the contracts and carry out
stricter controls of the services
provided by the privatised companies.
''Once the results of the reviews of
the contracts and the conclusions of
the 'renegotiating commission' are
divulged, Argentines will have a more
accurate view of the economic and
social effects of the privatisation
process,'' Néstor Litter, a member of
the Consumers' Forum, told IPS.
The commission, made up of
representatives of the ministries of
the Economy and Planning, the agencies
that regulate the privatised
companies, and the Forum, which groups
consumers' associations, ''has not met
since December 2002,'' said Litter, an
adviser to the Argentines for a
Republic of Equals (ARI) opposition
party.
''It's a good idea to take stock of
the incompliance by concessionaires
and the owners of companies that were
state-owned, and to decide on what
should happen with them in the
future,'' Claudio Lozano, an economist
with the Argentine Workers Central
union's (CTA) Institute of Studies and
Training, said in an interview.
''There are many irregularities and
illegalities in those processes, and
in the performance of the privatised
companies,'' he added.
Although many public utilities
provided poor services, Argentines
reacted with mistrust to the
privatisations, and accused the Menem
administration of ''selling off
grandmother's jewels,'' which became a
common way of describing the
privatisation process in the 1990s.
By the late 1980s, Argentina was in
the grip of an economic crisis that
began during the 1976-1983 military
dictatorship and became acute in 1988,
when the country stopped payments on
its foreign debt.
In 1989, the government of Raúl
Alfonsín was forced to step down
early, amidst heavy pressure by
foreign and local creditors,
hyperinflation, and social convulsion.
Alfonsín's successor, Carlos Menem
(1989-1999), sought the support of
national economic elites and
international lenders interested in
capitalising the debt through the
sales of public enterprises.
Privatisations were part of the
formula pushed on developing countries
by the World Bank and International
Monetary Fund (IMF), which provided
technical and financial assistance to
that end.
To overcome the crisis, the government
obtained special powers and tools from
Congress, which enacted new
legislation authorising the sale or
concession of state companies and the
capitalisation of debt, as a form of
payment.
An ''economic emergency'' law enabled
the executive branch to legislate by
decree, without having to first submit
its proposed laws to parliament.
But before the public companies were
transferred to private hands, the
government considerably increased
utility rates and transferred the
companies' debt, amounting to around
20 billion dollars, to the state.
According to a study by the Latin
American Faculty of Social Sciences (FLACSO),
the privatisations in Argentina
benefited the same elites whose
economic power was consolidated during
the dictatorship, although foreign
banks and transnational corporations
now appeared as partners and
associates.
FLACSO also pointed out that the
executive branch was granted special
powers by the legislature and courts,
which made the privatisation process
possible.
The large increases in the rates of
public services, added to weak
regulatory frameworks and constant
renegotiations of concession
contracts, favoured the privatised
companies, said FLACSO.
''The reviews should include a close
look at the fees charged by privatised
companies, as well as the use they
make of natural resources,
particularly non-renewable
resources,'' said Lozano.
Between 1993 and 2000, the 200 largest
companies in Argentina racked up 28.4
billion dollars in profits, 56.8
percent of which were earned by
privatised companies, 26.3 percent by
firms that had ties to those
companies, and 16.9 percent percent by
other companies.
In the 1990s, inflation virtually
disappeared in Argentina. But utility
fees rose in line with the U.S.
inflation rate, constituting an
additional source of earnings for the
newly privatised companies.
The linking of public services fees
charged in Argentina to the U.S.
inflation rate ''enabled the
privatised companies to pocket nine
billion dollars by late 2000,'' stated
a study by ARI.
In addition, ''the privatised firms
sent 70 percent of their earnings
abroad,'' while failing to pay the
annual concession fees (canon) and to
make all of the investments stipulated
by the contracts, the study added.
The companies also imported large
quantities of inputs and goods
produced by associated firms,
contracting heavy debts in dollars
while violating the law that required
them to give priority to Argentine
products when making purchases.
Shortly after he took office on May
25, Kirchner announced that he would
not renew the contracts with the
concessionaires operating national
highway toll booths, because they had
failed to comply with 65 percent of
the works and investments to which
they had committed themselves.
He also decided to cancel the
renegotiation that his predecessor
Eduardo Duhalde had recently agreed
with the group Aeropuertos Argentina
2000 (AA2000).
The owners of AA2000 are Argentine
businessman Eduardo Eurnekian,
Corporación América Sudamericana, a
Panamanian company, and the Italian
government, which holds a 28 percent
share through the SEA-Aeropuerto in
Milan.
After winning a competitive tender in
February 1998, AA2000 agreed to pay an
annual concession fee of 171 million
dollars, and to invest 562 million
dollars in the first four years.
Last year, Duhalde decreed that the
airport fees paid by passengers and
airlines were to be in dollars. That
measure was loudly opposed by
consumers' rights groups and oversight
bodies, and a final decision is
pending a court ruling to be handed
down on the matter.
As of late last year, AA2000 owed the
state 102 million dollars, having only
paid the annual concession fee for the
first year. It had also failed to make
good on the promised investments.
Nevertheless, Duhalde decided to lower
the annual canon to 23.5 million
dollars, and to exempt the group from
the obligation to move the Jorge
Newberry airport to a site outside the
Buenos Aires city limits -- a
requirement that had been included in
the contract based on safety reasons.
In August 1999, 15 months after AA2000
began to operate the air terminals, a
plane rolled off the Jorge Newberry
airport's short runway, which is
located in a densely populated area,
onto a sports field full of players,
killing 67 people and destroying roads
and a number of cars.
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