Privatisation in Latin America and Eastern Europe

Abstract

Privatisation has become a key part of Latin America’s drive for modernisation and revived growth in the last decade of the twentieth century. Latin American governments have come to realise that they have had too large a role in the production of goods and services (Glade, 1991). With the exception of Chile, Latin American governments began the privatisation process slowly and selectively, with relatively minor enterprises targeted for transfer to the private sector. These governments, however, have become increasingly committed to accelerating and broadening privatisation, both as a matter of preference and as a response to fiscal realities. Among the elements that played a part in the intensification of government efforts to privatise are:

• Labour conflicts in state-owned enterprises.

• The inability to gain more substantial relief from the external debt service burden.

• The need to reduce inflationary government deficits by eliminating subsidies to unprofitable state-owned enterprises.

• The need to generate significant new resources to attack the massive ‘social deficit’ resulting from nearly a decade of economic crisis and austerity budgets.

• The huge capital investment needs of even profitable state-owned enterprises that are urgently in need of technological modernisation.