Privatisation

Items

• Mexico has another go

  24 April 2007 Hits: 575

  One of the most eyecatching elements in Mexico's budget was the announcement that the government would try to get rid of 16 state-owned companies next year. The companies range from the national film company, which owns historic film studios, to a salt processer, which is a mainstay of the finances of the otherwise poor state of Baja California Sur.
  
  Ideally, the government would like to sell the 16 companies, but the ultimate goal is to get shot of them. President Vicente Fox said that some could be merged or reshaped. Others would be liquidated. The government's priority is to choose the least expensive option.
  
  The move is interesting because privatisation ground to halt under President Ernesto Zedillo (1994 to 2000). The process reached its apogee in 1992 when President Carlos Salinas sold the nationalised banks, mostly back to their original shareholders. So opaque and riddled with inconsistencies was the process that there is no clear figure for how much the government received for the banks. It had, anyway, to bail them out again in 1994/5 when the Salinas economic experiment unravelled.  
  
  The disastrous privatisation of the banks gave the process a poor name. Indeed, in Fox's first year, another of the misguided Salinas privatisations collapsed. The government expropriated 27 sugar mills, which it now expects to privatise again.  
  
  The list of companies the government wants to get rid of is eclectic. It is likely that some of the ministers responsible for them did not know that the companies were being considered for privatisation until the list was published. Probably the most attractive assets slated for privatisation are the state's gaming companies. The Loterí­a Nacional is likely to be merged with the national sports gambling organisation Pronósticos Deportivos. The lottery used to be a lucrative business and politicians would appoint clients to run the hugely profitable local agencies. That role has diminished. The sports gambling business has prospered thanks to the massive televising of football. Pronósticos makes around M$700m a year.  
  
  Cinema companies  
  The most controversial aspect of the government's plans is what it wants to do to the cinema companies. It wants, apparently to merge the Instituto Mexicano de Cinematografí­a (Imcine) with the historic Churubusco Azteca studios and the Centro de Capitación Cinematografí­a (CCC), which trains people for the industry. The Churubusco studios were bought by the state under President Luis Echeverrí­a and the Imcine, which was set up to promote the financing of films in Mexico 10 years ago. The CCC was part of the Echeverrí­a expansion.  
  
  Imcine is the big money eater in the industry. Its budget for this year is M$219m compared with M$24m for CCC and a mere M$19m for Churubusco.  
  
  Another potentially controversial privatisation is that of the national bookshop company and distributor, Educal. The company was set up in 1982 and now runs 60 bookshops in 24 states across the country. Its future looks the most uncertain as its budget for 2004 has been slashed from M$119m this year to just M$12m.  
  
  The government can also expect opposition from a range of groups, from environmentalists to the rural lobby, over its plans to sell off six agricultural research companies. The forestry research company, for example, has 81 research stations and 1,000 researchers, a quarter of whom have doctorates. Equally strong in lobbying terms will be the postgraduate college, which has more than 7,000 researchers and teachers of modern agronomy.  
  
  On top of this the government also wants to sell the national news agency, Notimex. It is up for sale for M$98m, less than its book value of M$120m.  
  
  

• Uruguay's anti-privatisation vote solid, but not a majority

  24 April 2007 Hits: 556

  The vote on whether the law which ended the state-owned Administración Nacional de Combustible, Alcohol y Portland's monopoly on oil refining, importing and exporting should be overturned takes place on 7 December. The latest opinion poll, on 18 November, shows that the `Yes' vote (ie, the anti-privatisation vote) is holding firm at around 46%. Yet to overturn the law, a simple majority of the votes cast (50% plus one vote) is needed. The 'No' vote is just ahead of the undecideds (28% to 27%). The vote is a big test of political opinion before the presidential elections next year. By law, voters have to vote in the referendum. This is likely to lead to a large number of spoilt ballots, which may complicate the calculation of the result. 
  
  The worry for the privatisers is that their support (the 'No' votes) has been sliding since the referendum was announced in June. There are signs that the privatisers are beginning to panic. A former president, Julio Marí­a Sanguinetti, laid into the leftwing Encuentro Progresista-Frente Amplio for stirring up fears over the future of pensions and other liabilities if Ancap loses its monopoly. The left, which looks as though it will sweep to victory in the presidential election next year, argues that the change could both lead to a backdoor privatisation and allow the company to reduce pensions and other liabilities.
  
  For political commentators, one of the oddities about the referendum is that the percentage of undecideds has increased as the vote has drawn closer. Usually, the opposite happens as people make up their minds as the issues are debated. When the referendum was announced the undecideds stood, according to the opinion polls, at 22%. What seems to be happening is that the 'No' camp has been losing ground. 
  
  Sanguinetti claimed that the leftwing parties, which are likely to win next year's presidential elections, are behaving in an alarmist way. The left is calling for a 'Yes' vote in the referendum to repeal the law that was passed by congress in 2001.
  
  Trains
  Despite the anti-privatisation tone of the referendum, the government is trying to attract foreign companies to bid for three railway lines. The country no longer runs long-distance passenger services, only goods trains. 
  
  The three lines on which it is offering track-maintenance concessions all go north to the Brazilian border. They are the Montevideo-Ribera line; the Montevideo-Minas line and the Montevideo-Rí­o Branco route. So far companies from Argentina, Canada, Spain and France have registered an interest. The three routes account for 1,188km of the country's 3,000km of railway lines. 
  
  What the government wants is to get the foreign companies to improve the track so that trains can run faster. It wants to double the average train speed from the current 20 to 30 kilometres per hour, to between 50 and 60kph. The government also wants the load-bearing ability of the track to be improved so that it can cope with loads of 20t. 
  
  The government is offering a deal in which the private operator will not receive any payment for the first two years. After that, the contractor can expect up to US$5m a year over the next 18 years. In addition, the contractor will have to make US$56m in new investment in improving the track and signalling.
  
  Separately, the government itself expects to continue to have to spend US$10m a year on improving the track for the line that links up with the Argentine railway system. This line goes through Chamberlain-Paysandú and Salto.