Unions Oppose Privatisations, State Reforms

By Carlos Montero, 4 August 1999

ASUNCION, Aug 4 (IPS)—A government plan aimed at reactivating the economy and curbing unemployment in Paraguay by slashing public expenditure and launching a broad privatisation programme has drawn fire from the unions.

Minister of Justice and Labour Silvio Ferreira reported last week that the number of unemployed had soared to 14 percent of the economically active population (EAP)—equivalent to around 360,000 people in this land-locked South American country of roughly 5.1 million.

In Paraguay, the EAP is calculated on the basis of all those over the age of 10 who are either working or looking for a job.

And according to official figures, another 19 percent of the EAP—approximately 435,000 people—work less than eight hours a day, or are employed below their skill level, due to the shortage of jobs.

The cold statistics reveal a situation of stagnation and crisis that cannot be concealed, President Luis Gonzalez Macchi told parliament a month ago, promising a short-term programme to reactivate the economy and a long-term development plan.

The short-term plan, backed by a 400 million dollar loan from Taiwan and the first flotation of foreign bonds, will include public works, support for farmers and industrialists, and indemnification for savings account-holders left out in the cold.

Another 700 million dollars provided by international lending institutions, along with 50 million dollars in local funds, will go toward beefing up the quality of basic services—water, sewage, electricity and telephones.

The government has also decided to begin outsourcing public services and eliminate the state's monopoly, with the aim of reducing the deficit plaguing loss-making public enterprises.

The Finance Ministry estimates that tax revenues next year should cover only 76 percent of state expenditure, which would mean a deficit of approximately 400 million dollars—mainly the result of a drop in customs duties, which have long been the state's principal source of revenues.

Paraguay was one of the few Latin American countries yet to undertake a bold programme to denationalise public enterprises. A limited plan to privatise five public companies was implemented with scant success from 1991 to 1998.

Only the airlines were successfully transferred to the private sector, while the plan failed in its attempts at privatising the steelworks, sugar mill, railway system and merchant marine.

The Colorado Party has governed the country for over 50 years, including 35 years of dictatorship under General Alfredo Stroessner (1954-89). One of the mechanisms through which it consolidated its hold on power was the distribution of public jobs.

The state currently employs 191,000 people. A full 95 percent of public spending goes towards wages, and 20 percent of the budget goes uncovered.

This week, a coordinating body of leaders of three of Paraguay's four central unions and Minister of Justice and Labour Ferreira will begin to debate the plan to deflate the overbloated state, which the unions oppose due to their fear of massive layoffs.

Ferreira announced a programme of incentives to encourage public employees to retire, available to civil servants close to the age of retirement and those who decide to go into the private sector.

But trade unionists are not satisfied with the government's pledges of economic compensation for public employees who voluntarily retire, and vocational training for those left without a job.

Reinaldo Barreto Medina, the leader of Paraguay's public employees and a member of the ruling Colorado Party like most of his fellow civil servants, said the unions would not boycott government attempts at dialogue, but warned that they would take to the streets if it attempted to implement the reforms without their consent.

The public employees are planning a general strike for later this week.

Employees of Antelco, the state telephone company, met with Colorado Party leaders in an effort to convince them not to privatise the company or put an end to its monopoly.

Gonzalez Macchi obtained the critical support of the Colorado Party after ensuring that his plan would not entail savage privatisations. He also explained his proposed reforms to the commanders of the three branches of the armed forces, declaring afterwards that the path (towards reform) is irreversible.

Which is precisely what International Monetary Fund and World Bank officials, who had demanded clear signals of local authorities' will to privatise, were hoping to hear.

The World Bank had suspended a 46 million dollar loan for Corposana, the state water company, for having failed to advance in the process of deregulating sewage and water services.

The president of the Colorado Party, Senator Bader Rachid Lichi, said the plan to restructure the state should go ahead, although he stressed the need for measures to minimise the social costs.

The government plans to earmark 21 million dollars from the Inter-American Development Bank (IDB) for the creation of a new body—comprised of representatives of public enterprises, unions and business associations—to coordinate changes in the labour market linked to the privatisations.

Manuel Ferreira Brusquetti, a consultant who participated up to last year in a Ministry of Justice and Labour vocational training project backed by international institutions, told IPS that vocational rehabilitation was a gargantuan task in the public as well as the private sector.

According to official figures, 57 percent of Paraguayans are functionally illiterate—a category that not only includes people who have never learned to read or write, but also those whose abilities have fallen prey to disuse.

Brusquetti said that made the task of vocational training virtually impossible within the three-month timeframe provided, which meant the functionally illiterate—basically found in the lowest income sectors—could find themselves left out of the labour market due to the coming privatisations.