The Political Economy of Telecommunications Reform in Developing Countries: Privatization and Liberalization in Comparative Perspective

By Ben A. Petrazzini | Go to book overview

power assigned to these officials endowed them with the power not only to privatize the national carrier but also to completely restructure the telecom sector.

Nevertheless, there were important differences. While ENTel's privatization was carried out from "within" the company by the appointed head of the firm, TELMEX's sale was managed through the Finance Secretariat. And while in Argentina the last stages of the sale suffered from bureaucratic struggles between the Minister of Public Works and Services, the Minister of Economy, and the privatization team, TELMEX's sale was a smooth event in which other sectors of the state never challenged the privatization team. Finally, by concentrating responsibility for the sale of all state enterprises in one state agency, the Mexican government benefited from the specialization and experience gained by the few actors involved. In contrast, Argentina's privatization team was dismantled once the task was accomplished and no "body of knowledge" was ever amassed as a result of the experience.

There is a more substantive and crucial difference in the outcomes of the attempted liberalization of the domestic telecom markets of Mexico and Argentina. While the Salinas government has opened most services to competition and reserved the right to do so with those to which a temporary monopoly was granted, the Menem administration conceded a monopoly over all services--with the exception of the least profitable ones or the ones that were already liberalized.

This study argues that the answer to this intriguing divergence in policy outcome results from the attractiveness of the local market. In Argentina, where the economic and political environment was risky for private investment, liberalization goals were sacrificed in order to attract enough capital for a successful privatization of ENTel. Although the Mexican government granted minor concessions--such as the delay of competition in long-distance services-- the country's stable economic and political environment and its potentially large telecom market gave the Salinas administration enough leverage to protect and implement market liberalization.

In sum, the Salinas and Menem governments enjoyed considerable state autonomy vis-a-vis domestic pressures. Both presidents had a tight rein on the administrative and political process within the state apparatus, and both pushed through the sale of the SOTES, overcoming various obstacles along the way. However, Mexico's market outlook allowed the Salinas government to "protect" its planned liberalization, while Argentina's market prospects led the administration to relinquish its intention to introduce competition in order to achieve successful privatization.


NOTES
1.
For the section on Mexican politics, I rely largely on the work of Cornelius and Craig.
2.
On average a municipal government depends on the federal administration and state governments for approximately 80 percent of its income.

-127-

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The Political Economy of Telecommunications Reform in Developing Countries: Privatization and Liberalization in Comparative Perspective
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Figures vii
  • Abbreviations ix
  • Glossary xiii
  • Introduction 1
  • Notes 9
  • 1 - Restructuring Telecommunications: A Transformation Without Boundaries 11
  • Notes 23
  • 2 - Explaining Divergent Policy Outcomes 27
  • 3 - Argentina 1980-1989: The Rocky Road to Reform 49
  • 4 - Argentina 1989-1991: Full Privatization, Limited Liberalization 77
  • 5 - Mexico 1988-1991: a Sweeping Reform 103
  • Notes 127
  • 6 - Generalizing the Argument 135
  • 7 - The Socioeconomic Impact of Reform 165
  • Conclusion 182
  • Conclusion 191
  • References 199
  • Index 221
  • About the Author 229
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