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PUERTO RICO REPORT
Populares Set Their Sights On Puerto Rico's Privatized Enterprises
by Robert Becker
May 18, 2001
The new Popular Democratic Party government seems hell bent on rolling back everything their pro-statehood predecessors accomplished, especially the privatization of Puerto Rico's bloated and inefficient public corporations. They don't seem to get that they're bucking a worldwide trend taken for granted among forward-looking governments.
Privatization became a standard political buzzword in the the early 1990s. It was a new trend in governmental policy that had its philosophical roots in the conservative revolutions of Ronald Reagan in the United States and Margaret Thatcher in the United Kingdom.
David Osborne's "Reinventing Government" became the privatizers' Bible, and former Gov. Pedro Rosselló became Puerto Rico's leading apostle of the new creed. Privatization everywhere became a cornerstone of public policy debate. The concept was readily understood, and made sense. Inefficient government-owned utilities and public corporations should be sold to the private sector, where they would run on market principles.
The quasi-socialist public enterprises were borne in the 1920s and 1930s of altruistic motives but had become, as the 20th century staggered to a close, inefficient money-losers, bloated on patronage, all under the benevolent umbrella of government monopoly protection. Taxpayers were the big losers, and they had to bear the burden of high costs, padded payrolls, intransigent unions, poor service, and low productivity.
The privatization steamroller caught on, and in the 1990s rolled through Argentina, Brazil, Southeast Asia, the former Soviet Union and its satellites and Western Europe. International capital took notice and invested in those nations and regions.
Puerto Rico has been an example of government intrusion in the marketplace run amok, with state ownership of hotels, shipping companies, sugar farms and refineries, the telephone company, and water and electric utilities. The Rosselló administration made modest gains in privatizing some of the state enterprises, but current Popular Democratic Party officials, paternalistic visions of Big government dancing in their heads, seem determined to roll it all back.
The hotbed of de-privatization is the Puerto Rico Legislature. One scheme is Senate President Antonio Fas Alzamora's idea to purchase more shares of Puerto Rico Telephone, now owned by Verizon Corp., so the government could regain control of the utility. That idea, weighed against contemporary economic and social realities, makes as much sense as trying to teach monkeys to play chess. After the bitter, hard-fought battle that Rosselló fought to reverse decades of ineptness at PRT, the privatized phone company is awakening from its slumber, cutting rates, investing in new technologies and improving service. Fas's actions would take PRT back to the bad old days, with its atrocious service, sky-high costs to consumers and sullen culture of union protectionism and the-public-be-damned.
Gov. Calderón, to her credit, wisely has thrown cold water on Fas. The independence-leaning Fas, though, won't give up. He came right back, in a radio interview, with an equally bad idea: to put the Puerto Rico Water Company, now in the early stages of privatization, back under government control.
Another backward-looking idea is proposed in a bill by PDP Reps. José Méndez González, José Ruiz Morales and Ramón Luis Nieves. They want the government to reacquire the Mercedita sugar refinery in Ponce, which was privatized in 1996 through its sale to sugar farmers. The legislators' argument for a government takeover of the refinery is that its farmer-owners don't have the money to operate the refinery. The collapse of the refinery would lead to a shortage of sugar in Puerto Rico, they aver.
That is precisely what Puerto Rico doesn't need -- another money-losing public corporation. The PDP legislators would like the refinery to be immune from market forces, which is as realistic as holding back sunrise tomorrow morning. But hey! The legislators aren't playing with their money to bail out a losing operation -- they're playing with taxpayers' money. It's no more real than Monopoly money to them.
The Calderón administration doesn't want to sell any more of the government-owned Diagnostic and Treatment Centers, which are scattered in communities across the island. Before Rosselló set the health care privatization in motion, the CDT's were known for poor service and run-down facilities. Rosselló began selling off the CDT's to private companies as part of the health reform's philosophical commitment to getting the government out of the health provider business. Rosselló believed, correctly, that the private sector could deliver better quality services at an affordable price.
Rosselló's health reform was flawed in that it lacked controls over health costs, particular in its failure to properly screen eligible clients. Notwithstanding, to hold on to the CDTs now is to keep a sizable industry in the hands of those least able to manage it -- the government. Like the rest of Puerto Rico's government-owned White Elephants, they should be dumped as fast as buyers can be found.
Robert Becker, Managing Editor of The San Juan Star, writes the weekly Puerto Rico Report column for the Puerto Rico Herald. He can be reached directly at: firstname.lastname@example.org