The perils of privatization

...More recently, the World Bank stepped in to temporarily rescue SIDOR but highly recommended privatization of certain operations...

...In the first four months of this year alone, IMF-imposed austerity in the form of budget slashing and plans for privatization have produced strikes among dock workers, court clerks, public health workers, doctors in state hospitals, grade school teachers, and university employees...

...Those Latin American leaders who may have been reluctant to accept these examples had privatization forced down their throats by the international banking community, headed by the International Monetary Fund (IMF), which insisted on it as a condition for rescheduling their foreign debt...

...For such an operation to be successful, however, it must be managed by the government and not the private sector, which has little reason to concern itself with the problem of worker dislocation...

...REPORT FROM VENEZUELA THE PERILS OF PRIVATIZATION AND WHY ELITES ELOPE In the last decade, privatization whereby public owned companies are sold to the private sector became a catchword in Latin America and was widely viewed as a panacea for the continent's economic woes...

...One ailing company in basic industry that may be privatized is the Orinoco Steel (SIDOR...

...During his first term in office at the time of the oil-induced boom of the 1970s, Porez nationalized the iron and oil industries and declared "evolutionary socialism" a long-range goal...

...Of the 250 state-run enterprises in Venezuela, many are in areas which are not considered strategic...

...Now that the situation of economic crisis is compounded by political uncertainty (as a result of popular mobilizations and leftist advances in gubernatorial and municipal elections in December), there is all the more reason to be skeptical about their participation in developmental plans...

...STEVE ELLNER Steve Ellner's articles on Latin American politics have appeared in numerous professional journals...

...But recently, as the IMF-imposed policies have begun to take effect, a backlash has set in...

...Under privatization, Venezuelan capital will most likely become a junior partner of foreign interests...

...The Catholic church has also spoken out critically...

...One of the union's elected officials, Ramon Machuca, told me in an interview that steel workers see privatization as tantamount to foreign takeover of one of the nation's most strategic industries...

...Like Argentina, Venezuela's privatization plans go counter to a tradition established by the ruling party, and more specifically by the current president, Carlos Andres Perez...

...No one in Venezuela, except perhaps the most dogmatic socialists, would deny that selective privatization and streamlining are desirable...

...Those who advocate privatization ignore the main reason why the government stepped in in the first place the private sector's reluctance to invest in strategic and basic industries...

...The nation's labor leadership, for instance, has distanced itself from the government, and this year organized marches throughout the nation in opposition to Perez's austerity policies...

...He is the author of From Guerrilla Defeat to Innovative Politics: Venezuela's Movement Toward Socialism (Duke University Press).e University Press...

...With a majority of the working population belonging to the "industrial reserve," privatization will be translated into long-term unemployment for displaced workers whom the economy will not be able to absorb...

...The steel workers' union, seeing the handwriting of mass layoffs on the wall, has adamantly opposed privatization...

...The riots and the killings had a chilling effect on different sectors of public opinion...

...When the economic situation was more promising, the government bought out dozens of companies and banks that were going bankrupt...

...SIDOR was the pride and joy of Porez's first administration which was determined to transform Venezuela into the continent's largest steel producer...

...The upset victory by SIDOR's former president, Andres Valasquez, in the December gubernatorial elections in the state where SIDOR is located represents a popular mandate to fight against privatization...

...The main objective of privatization is "industrial reconversion" and "rationalization" of production flashy euphemisms for reduction of the work force and elimination of all but the most profitable operations...

...Those who exercise public power have to be the first to set an example of austerity and honesty...

...In contrast to SIDOR, labor relations in the rest of the nation have up until recently not been characterized by acute conflict...

...Unless state companies are put up for sale at bargain prices (which may well happen in some cases), they cannot be expected to repatriate most of their dollars...

...The IMF's "shock treatment" strategy envisions the sudden overhaul of these businesses, including mass layoffs...

...For a while privatization did not have any vocal detractors in Latin America...

...An episcopal declaration drafted in the city of Los Teques strongly urged the government to reconsider its austerity measures, particularly the increase of prices of regulated goods...

...The unwillingness of Venezuelan businessmen to assume risks was clearly demonstrated in the early 1980s when, at the first ever-so-faint signs of trouble resulting from declining oil prices, they transferred their local investments to banks and real estate in Florida and elsewhere...

...Rapid expansion, however, saddled the company with heavy debts in the form of short-term loans...

...The economic policies of the Reagan and Thatcher administrations in the conservative camp, and Felipe Gonzalez in the social democratic one, sanctified privatization, while perestroika opened the hitherto unheard of possibility that private economic interests would play a central role in Communist bloc nations...

...Certain key public companies and agencies have also been run into the ground by poor management and featherbedding as is recognized even by the labor unions...

...Historically, capitalists in the third world have not played the catalytic role in economic development that their counterparts in the developed countries have...

...The riots, in which a thousand people are said to have died, were a shocking experience for a country that has long been touted as Latin America's most stable democracy...

...In the lean years of his second term, however, Perez has backtracked and now argues that Venezuela has no alternative but to accept privatization and other IMF-endorsed austerity measures...

...The main business organization, Fedecamaras, however, argues in favor of privatization of companies which are in key areas, even when they are not in the red...

...More worrisome than labor strife is the possibility that privatization schemes and resultant unemployment will contribute to a repetition of the violent disturbances which broke out during the week of February 27,1989...

...It is our patriotic duty," he said, "to make sure that privatization does not go through...

...In a recent statement, Fedecamaras asserted: "The privatization strategy proposed by business is directed in a fundamental way toward companies in basic industry, independently of whether their financial balance at the present" is favorable...

...Privatization cannot be considered a new strategy for Venezuela, much less "progressive," since it is a throwback to the period when business activity was off limits to the state...

...Now, however, workers in the public sector have taken the lead in protesting against deteriorating living standards...

...But like so many other intellectual and material fads in these countries, the privatization model was imported lock, stock, and barrel from the North...

...A more gradual approach, based on worker retraining and relocation, would be both more humanitarian and beneficial to the economy in the long run...

...the public sector accounts for as much as 30 percent of the nation's GNP...

...Most important, the defenders of privatization mechanically utilize arguments which are plausible for developed nations, without stopping to examine the twin dangers of privatization for underdeveloped economies: chronic unemployment and multinational domination...

...In this struggle we accept support even from SIDOR's current administration...

...In past months, railroad workers in Argentina have taken to the streets in opposition to the plans of peronista president Carlos Menem to dismantle and privatize various train lines, which will undo one of Juan Domingo Peron's most important legacies: the nationalization of the English-owned railroads in 1947...

...While brusque and thorough streamlining of this sort may be viable for developed nations, it will have disastrous consequences in a country like Venezuela...

...The statement added: "In the wake of all the squandering of immense wealth, we find ourselves in a situation of bankruptcy, government propaganda to the contrary...