A photo journal by David Booth
In the evening we met with economist Tania Palencia, who explained how policies of the World Bank, the IMF and privatization affect Guatemala.
Economist Tania Palencia.
Guatemala is one of the last Central American countries to have gone through the policy of structural adjustments. This is because for the past few decades all the resources had to go towards counter-insurgency efforts. The result was a lack of a solid economic structure upon which the current privatization should have been based. For years Guatemala did not comply with the IMF (International Monetary Fund) ideas and principles, and kept instead in a continuous state of insolvency. This caused a continuous increase of debt and the accumulation of economic power in the hands of a few.
In 1995, there was a historic change towards privatization that also started the questioning of privatization itself. The World Bank and the IMF have been trying to apply an economic model that was created in developed countries but that is not sustainable in developing countries. This model implies the privatization of the social and economic rights of the people, which would become a market option and not anymore part of the beneficial role of state-provided social services.
For a developing country with a lot of public debt, this model does not work because it prevents the state from providing the basic social services its people need. It obliges individuals to buy those social and economic rights that should be incorporated in the rights of society. Also for Guatemala, this model does not work because the Peace Accords actually ask for more social investment from the part of the state in order to reduce the causes of the conflict in the first place: poverty, inequality, illiteracy. Therefore, there seems to be a major contradiction between what the Peace Accords and the current Guatemalan economic conditions seem to require and what the World Bank and the IMF seem to require.
Peg, my dad and Lisa listen intently.
The contradictions seem to have caused Guatemala to go about privatizing in a very erratic way, and while the state started to sell out goods and services, the people started paying higher and higher prices for those goods and services, which are now provided by private companies. An example is the privatization of the electricity provision: electricity production was sold to sugar companies and electricity distribution was sold to a Portuguese company; the result has been an increase of electricity cost of about 125%. The same thing has happened to telecommunications, ports and airports services and could happen to health services, social security and education. Some of these services could also be leased, as happened for FREGUA Transportation, which was leased to the International Railroad Corporation, a US company.
Also, I think there is another big problem with privatization. Because of the corruption and the lack of economic and social vigilance, some of the above-mentioned transitions were done illegally and some of the earnings were stolen instead of being reinvested into public funds or used to repay the public debt. In fact, the FRG accused PAN of pocketing all the money from the sale of GUATEL, the telecommunication company.
Currently, there is a lot of controversy surrounding privatization, but there is also a lot of opposition because of the fear that most people will not be able to afford basic services, which should be publicly accessed at little or no cost to Guatemalans.
[End of meeting notes]