Privatization South American Style

By Luigi Manzetti | Go to book overview

Generally, in all three countries, the greatest supporters for privatization were some government technocrats who had reached the conclusion that privatization was necessary to alleviate unecessary state responsibility while, at the same time, enabling the executive to cut the budget deficit thus devoting funds to more urgent needs. International pressure was present but not strong enough to swing the balance in favor of privatization. This can partly be attributed to the fact that the economic crisis had not reached yet its zenith. Policy-makers continued to believe that they could continue to manage the situation with mild policy reforms appeasing powerful domestic lobbies crucial to their electoral support. It must also be emphasized that business support for privatization was lukewarm in many quarters. This was partially a function of private companies' uncertainty about the government's commitment to market reforms. Equally important, however, is the fact that powerful economic groups initially thriving under generous government contracts (both as suppliers or contractors) had much to lose from state divestitutre.

When privatization took place in Argentina, Brazil, and Peru it was carried out incoherently. Little or negligible attention was given to efficiency concerns in terms of possible consequences of market changes. The few PEs privatized on occasion, ended up in the hands of their private competitors, thus increasing monopolistic or oligopolistic conditions. Invariably, the overall concern for policy-makers was to raise cash and cut losses in order to trim the deficit and make better use of government resources. This took precedence over redesigning the state's role according to conservative political and economic principles. Ultimately, in all three cases the fiscal impact of privatization was negligible.


Endnotes
1.
Cited in González Fraga ( 1991: 79).
2.
Statement released by former Secretary for Economic Coordination Adolfo Canitrot ( Noticias, 18 September 1989, p. 16).
3.
Interview with Edgardo Catterberg, Buenos Aires, May 1993.
4.
Law 20.705 prevented the privatization of PEs originally created by the state, as opposed to companies acquired through bankruptcy procedures.
5.
Diarios de Sesiones del Senado de la Nación, 27 April 1988.
6.
Argentine businessmen Menotti Pescarmona and Gilberto Montagna led the consortium supported by Alitalia and Swissair. Their proposal was actually less favorable to the government as it offered to buy out 55 per cent of Aerolíneas ( Blanco 1993: 20).
7.
This was the case also in areas where the government wanted to sell its shares to its private partners in private mixed companies. 'If a sector's survival depends on state regulation of prices and quotas, the private sector will not welcome a

-68-

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Privatization South American Style
Table of contents

Table of contents

  • Title Page iii
  • Contents vii
  • List of Figures viii
  • List of Tables ix
  • List of Abbreviations xi
  • 1 - The Political Economy of Privatization 1
  • Endnotes 30
  • 2 - Privatization in the 1980s: Politics as Usual 32
  • Endnotes 68
  • 3 - Argentina 71
  • Endnotes 141
  • 4 - Brazil 150
  • Endontes 226
  • 5 - Peru 232
  • Endnotes 288
  • 6 - The Theory and Practice of State Divestiture 294
  • Endnotes 331
  • References 333
  • Index 349
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