Privatization Law Overturned in El Salvador

"Theft of the Century" Held Up

June 1997
Number 60
Produced by CISPES,
the Committee in Solidarity with
the People of El Salvador,
P.O. Box 1801, New York, NY 10159
(212) 229-1290, cispesnatl@igc. org

On May 29, the newly-elected Legislative Assembly temporarily halted the privatization of ANTEL, the national telecommunications agency, until a new commission it appoints can revise the law permitting the sale.

In March, the voters emphatically rejected the governing party's structural adjustment policies at the polls. That has now translated into the Assembly's rejection of the centerpiece of ARENA's privatization strategy.

Stopping the privatization of basic services is high on the FMLN's legislative agenda.

The governing ARENA party - under the tutelage of the World Bank, IMF, Inter-American Development Bank, and the US Embassy - has been pushing to transfer state resources into private hands since it first came to power nearly a decade ago.

The sale of the strategic telecommunications industry is supposed to be the showcase of current President Calderon Sol's term, marking El Salvador's debut on the global economic stage.

However ASTTEL, the telecommunications workers union, has led a hard-fought battle against the sale of ANTEL since it was first proposed.

All vs. ARENA

The outcome provided dramatic evidence of the new balance of power in the Assembly - and of the breadth of the dissatisfaction with ARENA's economic program.

The vote reads more like the final score of a lopsided football game: 56 - 0.

The ARENA contingent abstained, powerless to keep its program on track. They could only watch in consternation as every deputy from the eight other parties voted to repeal their precious privatization law.

Deputies from the PCN, PDC, and the smaller parties who were unhappy with the secrecy with which ARENA has handled the privatization process joined the FMLN, which opposes the sale of ANTEL altogether.

The unanimity of the opposition - comprising exactly two-thirds of the Assembly - made the vote veto-proof.

The Assembly's action came in the wake of a firestorm of criticism leveled against the Calderon administration. Documents leaked by US banking sources exposed a secret deal with the International Monetary Fund (IMF) to redirect the proceeds from the scheduled sale of ANTEL.

A number of outraged deputies vigorously protested this back-room deal and are now demanding a full accounting of this and other troubling aspects of the privatization process thus far.

Because of these troubled waters, FMLN leader Schafik Handal has compared the sale to "a boat that has been taking on water ever since leaving port."

The boat has not yet sunk, however.

Contemplating Alternatives

The recent vote does not guarantee that ANTEL will remain in public hands, but at a minimum the terms of its privatization will be revised.

The legislation annulling the Law to Privatize ANTEL clarified the Assembly's intent: The action was taken "with the objective of submitting [the law] to a total revision that guarantees the interests of the people."

When it suspended ANTEL's sale, the Assembly designated a special multi-party commission to investigate the process to date, and to renegotiate terms for a new law to be brought to the full Assembly within six months.

From ASTTEL's perspective, the commission's search for a resolution should lead it to consider the union's long-standing (and long ignored) proposal to modernize ANTEL without privatizing it. The day after the vote, ASTTEL published an open letter praising the Assembly's action, and urging them to consult all sectors, in particular the workers at ANTEL, when developing any new law.

One possible outcome of the commission's deliberating is mixed public-private ownership of the utility, a formulation supported by several of the smaller parties. 49% of the shares would be sold, with the state retaining majority control.

Dictator No More

Only now that ARENA can no longer impose its will unilaterally does it demand that the new law be elaborated by consensus (or "concertacion," acting in concert).

Though this be hypocrisy, ARENA has been forced to accept as negotiable some of the terms it had previously insisted upon.

(While it could, it had refused all real input from the workers at ANTEL and from other political parties.)

The Presidential Commissioner for "Modernization", Alfredo Mena Lagos, now concedes there is "room to improve the old law: the destination of proceeds from the sale was a valid concern, one that I share. Furthermore, the participation of the workers [i.e. the percentage of shares allotted to ANTEL employees] can be improved, and they ought to carry out audits of what's been done... There is space to negotiate."

He won't be the one doing the negotiating, however. A disillusioned Mena Lagos resigned a week after the Assembly rescinded the privatization law.

Mena Lagos had been responsible for overseeing the privatization of ANTEL, as well as the electric and water companies, pensions and all other public utilities and services slated to be auctioned off. He had held this post since 1995.

Fear of Flight

ARENA deputy Rene Figueroa lambasted his colleagues in the Assembly, echoing the fears of the business sector that their "vulgar irresponsibility" would hurt the country's international image.

Financiers from El Salvador and the US alike joined in the condemnation.

The head of the Salvadoran Association of Private Enterprise complained that the "abrupt change of rules" creates uncertainty for international investors.

In New York, a representative of financial giant Morgan Stanley (which ANTEL contracted last year to prepare the agency for privatization) agreed: "A setback of six months is damaging for El Salvador's image. It damages confidence in the modernization process." The possibility that investors will lose interest is "a risk the country is running." US-based GTE and BellSouth are among the companies that have expressed an interest in bidding for ANTEL.

"Theft of the Century"

Quoting popular graffiti and slogans of the 30,000 workers who marched on May Day, Francisco Merino of the PCN termed the privatization of ANTEL "the biggest theft of the century."

His scathing description is especially notable: Merino, who defected from ARENA six months ago, was Alfredo Cristiani's Vice-President when the government launched its privatization drive by selling off El Salvador's banking system. Control of virtually every bank wound up in the hands of one of four families, including Cristiani's.

A discrepancy in the asking price for ANTEL would add to the theft.

Whereas ANTEL president Juan Jose Daboub puts the agency's value at $475 million, the opposition estimates its worth to be upwards of $1 billion.

ANTEL's own records show it generated a profit of $125 million last year alone. A good portion of this was contributed to the national budget for rural health and education.

"In the final analysis," says Proceso (the publication of the Jesuit University of Central America), "the assets to be sold belong to all citizens, not only to the ARENA government." Its profits should continue to be used for social spending, not put into the pockets of a few wealthy investors.

Behind Closed Doors

On the eve of the new Assembly's inauguration, the right-wing El Diario de Hoy added to the controversy over privatization. It divulged the existence of confidential papers signed by the President of the Central Reserve Bank, Roberto Orellana, and Treasury Minister Manuel Enrique Hinds. They promised the IMF that 75% of the proceeds of ANTEL's sale would go to pay El Salvador's debt.

In an attempt to win public support for the sale, the government had repeatedly said that the profits would be used to improve social services and infrastructure.

The same document promised the IMF that the government would freeze wages for its employees and eliminate 1200 public sector jobs by attrition.

Orellana's justification illustrates well how governments adopt policies designed not necessarily in the best interests of the people, but which earn global capital's seal of approval:

"The support of the IMF gives the country more credibility in our management of macro-economic policies, it also generates more confidence for the market and for investors." The IMF wields such influence that governments skew their priorities so that the "confidence of investors" is placed above the well-being of the workers.

Revelations of this secret deal infuriated members of the Assembly.

"These are irresponsible decisions taken by the Executive power without informing us, Jorge Villacorta of the Democratic Convergence charged. "We expect a thorough explanation."

"The questions raised along the way show that privatization actually has deep ideological roots and [in the case of El Salvador, the process has been handled in a way that] is clearly biased towards the interests of private business, both domestic and foreign." - Proceso, May 28, 1997.

The considerable dismay with which the Assembly greeted the actions of the Calderon administration led to its determination to rein in ARENA.

As FMLN deputy Schafik Handal vowed: "This is the time for the current Assembly to make the opinions of the Salvadorans prevail, regardless of agreements made by the Executive power."

That opportunity arose on May 29.

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