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A Special International Report Prepared by
The Washington Times Advertising Department - Published on April 21, 1999
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Advertisers
(1) Bell South
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Conam in charge of privatizing, modernizing and decentralizing
Ecuador is ready for privatization, and this time they are serious. Despite two failed attempts to privatize the telecommunications industry, the government has an ambitious agenda for the selling of state-owned hydrocarbon, energy and telecommunications companies and for the opening of other industries to private concessions. Even in the midst of an economic quagmire, President Mahuad spoke out about the need to continue with the privatization process. Other governments throughout Latin America, from as small as El Salvador to as large as Brazil, have begun to get out of the business of doing business and have sold off all or part of their state-owned companies. El Salvador received over $500 million from the sale of part of its telecommunications industry. Argentina's energy company was bought for $2 billion. These numbers can't be ignored. The National Council on Modernization (Conam) was created in 1994 to modernize the state. This catchy phrase has become all the rage in Latin America. It is a by-product of the re-engineering or restructuring of business and government that is occurring in the United States. In Ecuador, however, it means that Conam will promote decentralization, disinvestment and privatization. In order to promote modernization, the organization doing so must also be modern. Though Conam is an agency of the government, it has set itself up as a private business with a mission, a vision, objectives, priorities and goals. While its mission is to "modernize the state and society through efficiency and transparency," its vision includes decentralizing the government by using clear regulations that "avoid corruption." Alvaro Guerrero, former President of Conam, believes that this time everyone is ready for privatization. "I don't see any major problems. All levels of government are committed to privatizing," he says. However, setbacks have plagued the privatization process. The Electricity Law is in place, but the telecommunications and hydrocarbon industries are awaiting new laws or reforms. According to Guerrero, electricity will be first on the block. He explains that Incell, the state-owned company, has been divided into six generating, one transmission and 17 distribution companies. Conam has worked with the InterAmerican Development Bank to select a major investment bank to manage the privatization process. The bid package has already been bought by many companies including Morgan Stanley, Smith Barney and Dresdner Bank. Electroquil, a privately owned power generation company in Guayaquil is looking forward to privatization. Gustavo Larrea, Executive President, believes that the government is taking the right steps, but will face challenges from the unions, who have been demonstrating against privatization. While the division of Inecell is a necessity, according to Larrea, the government will need to modernize the six newly created companies to make sure they too are not bureaucratic and inefficient. Although Electroquil has plans for the future after privatization, including selling power to private consumers and studying new hydroelectric projects, the company has been forced to reexamine the Ecuadorian market. The Ecuadorian government owes Electroquil over $20 million. This is enough to make Electroquil and its partner, Duke Energy, rethink their strategies. The telecommunications industry is still waiting for the passing of a new telecommunications law (see related story, page six) before it can be privatized. However, Andinatel and Pacifictel are already taking important steps to prepare for privatization, including modernizing the companies' thinking and business practices. International power players, such as Bell South, are keeping an eye on the process; they see many opportunities for international investors. The modernization of the petroleum industry and its preparation for sale will be the greatest challenge for Conam. The industry is still marked with environmental scandal and tarnished with a reputation of mismanagement. It is difficult to penetrate this wary industry and to speak with local and international companies to get a clear idea on what is being done to prepare for the future. Christian Davalos, Executive Director of Asopec, an association of petroleum exporting and exploring companies, is an advocate of privatization. Shortly before the interview, Ecuador had a sudden dearth of gasoline. As an oil exporting country, this was unbelievable. The reality was that Petroecuador, the government petroleum company, had not ordered nafta, a product that is needed to produce gasoline. Davalos believes this shortage emanated from poor planning that could have been avoided if the market was liberalized or privatized. Davalos also admits that the petroleum industry has a bad image and has been accused of destroying the environment. In response, companies are dedicating money toward the protection of the environment to show that exploration is not incompatible with the care of the environment. The hydrocarbon industry has a wide variety of options, says Guerrero. Joint ventures of oil fields and the sale of oil refineries are some possibilities. Ramiro Gordillo, Executive President of Petroecuador also wants many multimillion dollar projects to be advanced, including the sale of all or part of some oil refineries, the expansion of certain sites and the construction of a new heavy crude oil pipeline. Moneys from the sale of the state-owned companies will be sent to the Solidarity Fund and will be targeted for social issues, such as education, health, housing and the rebuilding of vital highways. These funds will help Ecuador develop into the strong nation it has the potential to become. |
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Table of Contents (1) President Mahuad announces new economic plan |
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