The regional trends
- Rise of ‘new left’ governments across the region: suspension of privatization (Brazil), nationalization (Venezuela) and strengthening of SOEs (Uruguay, Bolivia, Ecuador, Paraguay, Argentina)
- Electricity shortages in several countries, caused by the convergence of environmental problems and bad planning
- Until 2009, significant growth of LAC economies, after a period of stagnation or limited growth under neoliberal policies
- Persistence of high socio-economic inequality, despite improvements of poverty indicators.
- Significant moves towards regional integration in power generation and distribution, though in favour of big players
The regional context
- Lack of research “on the linkage between access to energy services and attainment of national goals for development, poverty reduction and environmental protection” (UNDP-ECLAC-CM), nor on alternatives
- Despite the high rates of urbanization, almost 30 million people still do not have electricity, of whom 21.4 million (73 %) are poor
- Limited and uneven social development: “Efficient and effective access to energy services is a vital requirement for attainment of the MDGs, which in turn are intrinsically linked to the enhancement of human rights and of democracy ” (UNDP-ECLAC-CM)
The processes of reform
- All countries carried out deep reforms throughout the 1990s, adopting diverse models with a wide range of options as regards the degree of market openness and the promotion of private investment
- The pioneer of neoliberal reform in the region was Chile. The military government launched the wave of privatization of electricity and other public services in 1982. Large scale privatization followed in Argentina and Brazil
- Expansion of independent producers (IPPs) with small capacity for power generation and able to sell electricity to large customers, both public and private
- The number of major foreign investors is limited to a handful of European and US corporations (mainly Spanish)
Table 1. Overview of the electricity sector in Latin American countries
(By country, installed capacity, tariffs, degree of privatization, etc)
The scope of research
- The study mapped map tens of experiences that could be defined as non-commercialized alternatives for the delivery of electricity services, based on MSP’s taxonomy and criteria for success
- The most important type of alternative found was the public entity, defined here “as any service delivery agency that is state owned, managed and financed, and subject to political control and oversight”
- The electricity sector in the LAC region includes various forms of public entities, with much heterogeneity in terms of ownership, managerial structures, and diverse degrees of financial and administrative autonomy
- There are public companies owned by national states, by provinces, by municipalities, or by two or more layers of the state. In some cases, several agencies are shareholders of the same company
- Some public entities are governed by private corporate law and therefore operate under the same rules of private sector corporations
- The study focused on a small number of public companies and parastatals, the majority of them being large enterprises owned by the national state
National public companies
- Mexico. Comisión Federal de Electricidad (CFE, Federal Electricity Commission) and Luz y Fuerza del Centro (LFC, Central Region’s Light and Power)
- Costa Rica. Instituto Costarricense de Electricidad (ICE, Costan Rican Electricity Institute)
- Uruguay. Administración Nacional de Usinas y Trasmisiones Eléctricas (UTE, National Administration for Electricity Generation and Transmission)
- Paraguay. Administración Nacional de Electricidad (ANDE, National Electricity Administración)
- Venezuela. Corporación Eléctrica Nacional (CORPOELEC, National Electric Corporation)
Other interesting cases
- Brazil. Eletrobras. A giant corporatized public company
- Colombia. ISAGEN (national), Empresas Públicas de Medellin (EPM, Public Enterprises of Medellin), Empresa de Energía de Bogotá (Energy Entreprise of Bogotá) and the Empresa Municipal de Cali (Cali Municipal Corporation)
- Argentina. Distribution (municipal) cooperatives and provincial utilities
- Bolivia and Ecuador. Efforts to re-strengthen the public sector
- Across the region. Many small-scale projects, such as micro hydroelectric and wind generation initiatives run by local communities, users cooperatives and foundations
The Mexican case
- The privatization of energy has been in the agenda of all governments of the past two decades, first under the tight control of the PRI, and since the year 2000 under the PAN
- Strong opposition to privatization, led by the SME (Mexican Electricity Workers Union). The Constitution guarantees federal ownership of electricity services (IPPs must sell to CFE)
- Heavy reliance on thermal sources (75%)
- Two public companies controlled the electricity sector: CFE (national) and LFC (metropolitan region). In October 2009 the government liquidated LFC arguing “proven financial and operational inefficiency”
- ‘Real’ reason for liquidation: open new business opportunities for ‘friends’ of the government, based on the utilization of the optical fibre network for telecoms. Telmex (Carlos Slim) as precedent
The Costa Rican case
- The ICE Conglomerate (Electricity and Telecoms) is one of the emblematic institutions of the Costa Rican ‘welfare state’ created in the 1940-50s (Jose Figueres). Continuous political stability and high human development indicators
- 98% coverage of electricity services, including rural areas. Strong national pride on ICE’s achievements
- Nobel Peace Laureate Oscar Arias (1986-1990) sought the privatization of ICE, followed by other presidents. Strong multi-actor successful opposition (Combo mass demonstration) in 2000. “ICE is not for sale”
- The DR-CAFTA imposed new pressures towards liberalization of public services. ICE’s telecom sector was opened up in 2009
- “The breaking up of the ICE would symbolize the definitive destruction of the solidarity state that all Costa Ricans have built. The ICE is ours”
The Uruguayan case
- Despite the (limited) liberalization of electricity services in 2008, the sector is still hegemonized by a single public company: UTE, the National Administration for Electricity Generation and Transmission, created in 1912
- Strong opposition to privatization led by the workers’ confederation (PIT_CNT), with support from a wide range of social movements and the left coalition Broad Front. National referendum in 1993 and constitutional amendment (water) in 2004
- Since the left accessed national office in 2005, the government has promoted the strengthening and modernization of SOEs
- Strong public ethos among the company’s workers and managers, backed by positive public opinion ratings
- The system relies on hydroelectric and thermal energy. Positive experiences in wind generation. Nuclearization in the agenda of the new left government (opposed by environmental movements)
The Venezuelan case
- In the context of the Bolivarian Revolution, Hugo Chavez’s government has promoted since 2000 the nationalization and strengthening of public services. CORPOELEC was created in 2007 after the nationalization of Electricidad de Caracas
- CORPOELEC merged 14 electricity companies into a single entity. New Ministry of Electricity created in October 2009
- Acute water and electricity crisis since late 2008, caused by El Niño, increased demand and inability to manage the centralized grid (bureaucratization). 70% of power generated by a single dam (Guri)
- Attempts to convert public utilities into ‘socialist enterprises’. Marked improvement of working conditions and encouragement of workers’ participation in planning and management
- Active promotion of citizen participation, mostly among the urban and rural poor. Mesas Técnicas de Energía, in the context of a much broader institutional architecture for participatory democracy
In short...
- The countries that did not privatize exhibit clearly better indicators than those which implemented market-driven reforms. SOEs have proven that the public sector still constitutes the better choice
- Increasing risks of corporatization, including both the introduction of NPM criteria for policy planning and implementation and the promotion of greater institutional and financial autonomy of public companies. Strong trade unions defend public ethos
- Limited progress towards greater environmental sustainability.
- 57% of the region’s electricity is generated by hydroelectric power, 43% by thermal energy, and 1% by nuclear plants
- Strong social opposition to the privatization of public services: only 16% of Latin American are happy with privatized services
- Innovative experiences of citizen participation and co-responsibility in planning and management of electricity and other public services: Mesas Técnicas in Venezuela and PB in Brazil and other Latin American countries
SOURCE:
Alternatives to the commercialization of electricity in Latin America
Daniel Chavez (TNI), MSP Steering Committee Meeting - Delhi, March 2009
http://www.municipalservicesproject.org/sites/default/files/Daniel%20Chavez%20Electricity.pdf