Congress's approval of the bill, in early July, is one more blow to the government's privatisation plans. It had banked on gaining US$400m in privatisation revenues this year. The finance minister, Javier Silva Ruete, has now revised this figure down to US$180m.
Merino admits. Beatriz Merino, the new prime minister, admitted that privatisation has been unpopular and for this reason the process has stalled. The biggest rejection of privatisation occurred last year. As a result all efforts to privatise the electricity sector were postponed indefinitely in June 2002. This decision followed violent demonstrations in Arequipa.
Merino argued that there are three reasons for the problems with privatisation. The first is that the process has not been transparent; the second is that companies were privatised without a proper regulatory framework. Without this, there was nothing to stop effective monopolies from jacking up their prices to cover their operating problems. The third reason why privatisation has been unpopular, Merino said, is the widespread belief that the whole process was corrupt.
Merino said that the politicians must start to argue more convincingly that privatisation was preferable to the state continuing to run lossmaking companies. She said that her colleagues had to argue that the money that was being spent on loss-making state companies was being taken from health and education budgets.
Unattractive. Petroperú is hardly an attractive asset. It produces approximately 95,000bpd of oil but it is a net importer of crude. Last October, the government announced tax breaks for oil and gas companies in a bid to attract greater investment in exploration. The government agreed to reduce the royalties paid by companies to the state by 30% on average, meaning that some companies would pay just 13%.
The minister of energy and mines, Jaime Quijandría, said that the country aimed to double its current total oil reserves to 700m barrels by 2005. Petroperú has seen production fall progressively in recent years: in 1999 it produced 106,000bpd, down to 99,000bpd in 2000 and 97,000bpd in 2002. Peru imports 60,000bpd, which amounted to a deficit of US$550m last year.
Petroperú has one large refinery in the northern town of Talara and two smaller ones, outside Lima and in the Amazonian city of Iquitos.
State sector: Merino also pointed out that, despite privatisation, since the start of the 1980s, the state payroll had increased by 50%, from 600,000 to 900,000. She said that this bloated payroll prevented the government machine from becoming lean and mean. She claimed that all these bureaucrats wanted was to create more rules and regulations.
Merino railed against the role the customs officers played inside the country. She said that Peru must be one of the rare countries in the world which employed customs officers to check on internal trade. This had to be done, she said, because there are so many different tax rates and tariffs inside the country, which means that there are customs points on highways, not just at the border.
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