Report on AID meeting: privatization October 11, 1996

Three CISPES leaders (Executive Director Cherrene Horazuk, Program Director Jennier Mertens, New England Director Mike Prokosch) met with three US AID officials: Mark Schneider, Assistant Administrator for Latin America and the Caribbean (responsable for Latin America) Neil Levine, his deputy for Central America Kathleen Smith, El Salvador desk officer

AID has received over 1500 postcards and phone calls in the preceding five months, so they were eager to meet with CISPES. However, AID was not willing to change its position, which supports privatization fully. They were willing to look at problems in the process of privatization, especially the problem

of corruption.

CISPES set the agenda. We started by saying that like AID, CISPES has been trying to get the Peace Accords implemented since 1992, and like them, we have been frustrated. After four years, we

stepped back to evaluate the reasons for this difficulty. We realized that in El Salvador there is an economic dictatorship blocking the road to full democracy. Two economic programs in particular are making the rich more powerful. One is privatization, which concentrates wealth upward into the hands of very few people who control the government and thus can make sure that privatized state enterprises end up in their hands. The other is the expansion of the light-assembly sector, garments in particular, where the Salvadoran government prevents unions from prospering, and thus keeps the workers from gaining a great share of economic power. In this context, the state becomes a machine for concentrating wealth upward.

CISPES cited some of the outstanding examples of corruption in previous cases of privatization:

• The privatization of banks, which put practically the entire banking system in the hands of four families.
• Rosales Hospital, where privatization of services gave the contract for laundry to the sister of Roberto d'Aubuisson. (In previous communications with AID, they stressed that they were not involved in the privatization of Rosales.)
• IRA. After it was privatized, and the regulation of basic grain prices was removed, two companies captured the market and formed a cartel (Intermarket). So the price of beans practically doubled this summer. The government's lack of an agricultural policy is another cause of this problem, but... The situation of telecommunications is almost exactly analagous to IRA, we argued, because the official plan is to split ANTEL in two parts, and rely on competition between them to guarantee low rates for consumers. But in a country like El Salvador, this is no guarantee; it is almost certain that the two "independent" companies will cooperate to rob consumers. We stressed that the regulatory body being created for all the public entities being privatized, won't even regulate rates! This seemed to concern Schneider.

We also brought up public opposition to the privatization of ANTEL -- 57% in the most recent poll. Schneider dismissed this argument: "There is usually opposition before privatization. People only support it afterward, when they see the benefits." (Profoundly anti-democratic!)

AID asked us if we were opposed to privatization in general, or ifwe saw problems in the way it has been implemented so far. We said, "both." We did not see how privatization could be carried out without corruption in El Salvador, given the domination of the rich.

AID was concerned about two of our points:

• corruption in the process of privatization.
• the possibility that ASTTEL's plan for modernization had not been taken into account when the official privatization plan was developed.

Mark Schneider said that AID is no longer responsible for privatization, or even monitoring it. Now that the process of privatization is moving ahead, it is the responsibility of the US Embassy's commercial attache and political attache to monitor the process. Mark Schneider was about to travel briefly to El Salvador, and said he would raise our concerns with Embassy officials. Kathleen Smith then said, "Yeah, and you know what they'll say." This summed up the real possibilities that either AID or the Embassy will take action to oppose privatization.

After the meeting, Kathleen Smith faxed CISPES the schedule from a 29 October 1996 conference, hosted by the Fundacion Konrad Adenauer, in which the unions have 45 minutes to defend their position. Mary Ott, the Mission Economist of AID's El Salvador office, wrote a note on the first page: "Kathleen -- this is one example (and there are many others) of fora that have allowed the unions to present their case. You might share this with CISPES. Mary"

Return to telecomm page.

Return to the TecsChange home page.