COMMUNICATIONS: Privatisation Scramble in Central America

By Silvio Hernandez

PANAMA CITY, Oct 18 (IPS) - The privatisation scramble among Central American countries looking for foreign buyers of state-run telecommunications systems could prove harmful for the sellers, according to industry leaders.

Although the Central American market is relatively small, most of the telephone companies have returned high profits while enjoying state monopolies. But now companies from countries in Brazil, Venezuela and Mexico - also undergoing the privatisation process - are eyeing opportunities throughout Latin America.

In the meantime, Bolivia has sold 50 percent of shares in its state-owned ENTEL company to a branch of the Italian company STET and Ecuador hopes to profit from the sale of 35 percent of its telephone company, EMETEC.

Honduras, Nicaragua, El Salvador, Guatemala and Panama also are are among the 10 Latin American countries who hope to sell substantial portions of their shares to foreign operators, and more are expected to join the trend toward privatisation.

Panamanian Minister of Economic Policy and Planning, Guillermo Chapman, however, warns state sellers they could be making bad deals unless they proceed with caution. In his opinion, Panama and the other Central American countries have come to the privatization process four years too late.

"Before, it was a seller's market, which meant that whoever was selling had the upper hand; but today, it's a buyer's market, which affects the prices of the shares," he explained.

Four years ago, Chapman said, the National Institute of Telecommunications (INTEL) in Panama "would have been an attractive company for the market." Now, he is trying to convince the government to establish a minimum price so that the state company is not sold too cheaply.

"If the price is not right, then we shouldn't sell. Personally, I favour that position," the Panamanian minister said.

In selling 49 percent of INTEL shares - which services more than 315,000 users and brings in 140 million in profits a year - the government expects to collect one billion dollars. Guatemala is looking at 200 million dollars for the sale to a private operator of 30 percent of shares of the state company GUATEL, which brought in close to 88 million dollars in profits in 1995.

Honduras also expected to get between 700 and 800 million for the sale of 46 and 49 percent of shares at HONDUTEL, whose profits are about 27 million dollars a year, according to market analysts. Nicaragua and El Salvador are also in the race to privatize telecommunications.

Chapman believed that, when compared to countries like Brazil, whose market supersedes that of Central America by five, the Central American companies will face tough competition.

Brazil plans to privatize 17 regional state telephone companies which currently service some 13 million users.

Brazil's goal is to have 40 million fixed lines, 17 million cellular phones, and some 16 million users in systems of data transmission, which would make it the most important market in the Americas after the United States.

Despite Chapman's pessimism, other Panamanian officials say that it is premature to speculate on the future of privatization.

Alfredo Macia, executive director of the Coordinating Unit for the Privatization Process in Panama, said that even though it is true that there is more competition in the sale of telecommunications shares, the result cannot be predicted until they enter the values market. (END/IPS/ea/mk/96)


[c] 1996, InterPress Third World News Agency (IPS) All rights reserved.

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