EOpriv: privatization problems in El Salvador

[Dan Bell <dbell@kent.edu>]

Dear participants in the discussion on employee ownership and privatization:

Here is some information on privatization-related matters in El Salvador.

Dan

ELECTRICAL SECTOR UNION (STSEL) UNDER ATTACK AS PART OF  PRIVATIZATION PLAN

Centro de Intercambio y Solidaridad (CIS)                                       
May 22, 2002



>From 19 March to 9 May, the State-run Hydroelectric Executive  Commission
of the River Lempa (CEL) fired 12 workers as part of a larger
privatization campaign.  Three of those fired have leadership roles in the
union STSEL (translated into English as Electrical Workers Union).
According to STSEL, the workers were fired without any justification,  thus
violating labor laws.  On Tuesday, 14 May union leaders met with  the
Office for the Defense of Human Rights and the Work Commission of  the
Legislative Assembly in an attempt to open dialogue with CEL  president
(and ARENA member) Guillermo Sol Bang – who to this point  has refused to
negotiate with the union or justify the firings.  Sol Bang  was expected to
arrive at the Work Commission of the Legislative  Assembly on 14 May but
did not make himself present.   

These firings come during a period of corporate and executive scandal.
The guilty parties are not facing justice and meanwhile, union members  are
being fired as part of larger privatization plans.  The ARENA  government’s
desire to privatize the electrical sector is well publized and  its
privitaztion plan is under way.  On 26 February, La Prensa Grafica
reported “The Technical Secretary to the President and the Minister of
Finance (US Treasury), Juan José Daboub, confirmed that the  government has
programmed to inject private investment in the  management of ETESAL and
GESAL (generation plants).”  In reference  to the privatization plan, the
Minister stated, “Personally, I would like to  see things move faster.”
The National Association of Private Enterprise  has also publically stated
its desire to privatize, “It is necessary to finish  the chapter of the
privatization of electric energy.”11 Ramos, Karla, “ANEP: ‘Es necesario
terminar el capítulo’”, La Prensa Grafica, 27 Feb. 2002: 24.

The involvment of  private hands in the electrical sector has caused
serious hardships for the majority of Salvadorans.  In the electric energy
process there are three primary phases: generation; transmission; and
distribution.  Energy distribution has already been privatized, which has
had seriously negative impacts.  Electric bills have increased sevenfold,
which has forced the rural population, particularly women, to search for
alternative energy sources.  This has resulted in a 20-30% increase in
domestic work.22 "Las políticas de ajuste estuctural en las raizes de la
crisis económica y la pobreza", SAPRIN, November 2001.  Furthermore, the
first experience between the ARENA-  managed CEL and the private sector,
regarding electricty generation  (which is now one of the two phases to be
privatized), demonstrated the  real interests of the private sector and
ARENA: private profit at public  expense.  In 1994, CEL, facing presumed
generation shortages, entered  into a contract of a fradulent nature with
the U.S. Coastal energy  company (now El Paso).  The onerous agreements in
the contract  included paying Coastal double what Guatemala currently pays
for  electricity generation.  CEL, no longer able to afford such corporate
welfare, will have to pay $95 million to break the contract.  All in all,
the  contrat has cost the people of El Salvador $235 million dollars
(losses  plus contract annulment fine) while making the corporate energy
giant  that much richer.  US $235 million is a significant amount of money
for El  Salvador - to give an idea, the government will spend less money on
 health care during the entire year.  Shamelessly, in 2000, CEL entered
into  another agreement, this time with U.S.-based Duke Energy.  This
agreement stipulated buying energy at US $100 dollars per  megawatt/hour
when the current market price is between US $60-$80  dollars.  By
deliberately mismanaging CEL,  the ARENA administration,  along with its
corporate partners, intends to throw CEL into both  bankrupcy (while
pleasing private interests) and into a state of  disfunction, thus forcing
the privatization of this profitable sector.   The  public has overwhelming
rejected such privatization plans.  Even in a poll  conducted by the
right-wing La Prensa Grafica, all the participants  rejected the idea of
privatizing the generation of electricity.33 “El pais no está preparado
para esas políticas”,  La Pensa Grafica, 27 Feb. 2002: 28.  

The goal of privatization is to transfer (then maintain) wealth to private
hands through a new unprecedented style of interventionism.  Clauses in
loans from the Inter-American Development Bank and the World Bank  assure
that privatization is carried out – such has been the case in El  Salvador
with the health, education, water, and electricity sectors, among  others.
The idea is to create a world where private capital owns the most
profitable sectors of the economy and where the corporations  themselves
make the laws and rules to the global game (superceding  national and local
laws) through institutions such as the World Trade  Organization and the
international financial institutions as well as  through the use of “free
trade agreements”.

The ARENA strategy is to privatize, as soon as possible, the remaining
public services in order to assure private control of profitable sectors in
 case of an FMLN victory in 2003/2004.  Similarly, the Flores
administration is looking for an accelerated free trade agreement with the
United States so as to lock the country into neoliberalism (for the benefit
 of the elite) through international agreements. Consequently, if a new
government were not to hold to such agreements, it would face a severe
economic stranglehold.

The problem is the neoliberal economic system, with privatization as a
principal base, does not work.   Regressive tax systems, public debt,  mass
firings, freezing salaries, dollarization, "free" trade, and
privatization, all of which are prevalent in El Salvador, all form the
neoliberal recipe followed by Argentina,  which caused the great crisis of
that country.  Such crises have been documented in growing  unemployment,
poverty, starvation, etc.  The next Salvadoran  government will inheret a
debt that will equal more than a third of the  budget, in addition to being
stuck without any State sectors with which  to generate income.
Furthermore, this reality will be locked in by  international agreements
that, given the current global economic order,  will largely supercede
national laws.  Thus if they are broken, the country  will be subject to
severe retaliations.  

Due to the devastating immediate and long term affects of this
privatiztaion plan,, it extremely urgent to take preventative action  now.
This historic juncture requires the participation of all those  sympathetic
to democracy and social justice.

The neoliberal logic is: in order to continue with privatization plans in
the  electrical sector, STCEL must be broke.  That is the reason for
firings.   The workers, who make low wages, are forced into a desperate
situation  in which they will accept severance pay, thus justifying the
firings and  destroying the union.  Therefore STCEL is asking raising funds
to supply the fired workers with basic food goods so they  will not be
forced to accept the severance pay, thus keeping the anti- privatization
struggle alive and consequently, the future possibility of  new, more just
social-economic model as well.

For more information, contact cis@netcomsa.com
--
Dan Bell
International Program Coordinator
Ohio Employee Ownership Center
Kent State University
Kent, OH 44242
(330) 672-0333 << Direct number!
(330) 672-3028 general office number
(330) 672-4063 fax
dbell@kent.edu
http://www.kent.edu/oeoc/
http://cog.kent.edu