|  GUATEMALA
merges with globalisation |  |
 Introduction - Economy - Government program - Commerce & Trade - Tourism
Telecommunications - Modernization - Public Sector - Privatization - Central America ... Integration
Infrastructure - Reforms - Peace Process 
 OPENING UP THE PUBLIC SECTOR |
| Changes in the legal framework: sector laws |
Another key feature of the Modernization Program is the policy of privatization, de-concentration and deregulation, giving priority to reforms related to companies that provide public services or physical infrastructure (telecommunications, electricity, airports, ports and railways). "From my point of view the private sector is one of the key players on getting the economy forward but there has to be an agreement between the private sector, the government and the labor organization to do that," remarked Gregory Giagnocavo, President of Compra Direct.com In each of these areas, reforms include in the majority of the cases, de-monopolization of the market by changing the legal framework, the establishment of a regulatory entity and the privatization of state assets, using different methods, like sale, concession, administrative contract, etc. "Guatemala is a country with a lot of opportunities. The government is new and needs to restructure much of its policy in order to make the country investor friendly. Once the changes have been implemented, there is no reason for the country to prosper," explained Banco Occidente Finance vice- President, Mr Raymond Puccini.
The box shows for every sector the changes in the normative framework, and its consequences. Most of these reforms were realized with support of international organizations like the Agency for International Development (USAID), the Inter- American Development Bank and the World Bank, with participation of international experts, local think tanks and national consultants.
| Changes in the legal framework and its consequences |
see table
The changes in the sector laws were made to open the door to private investment. Progress in this area is briefly described for each sector in the next part.
| Electricity |
The participation of the private sector in electricity generation started at the beginning of the nineties with power production by some sugar refineries, and later with ENRON in 1993. In the years that followed, several private companies entered the generation market. In August 1997, the public Electricity Company of Guatemala (EEGSA) , sold its two electricity plants to the private company Guatemalan Generating Group (GGG), for an amount of US$ 30 million. In July 1998, the auction for 80% of EEGSA´s shares was carried out. The international consortium IBERDROLA - T.P.S. - Electricidad de Portugal won the auction with a bid of US$ 520 million (Q 3,230 million), while the government expected to receive US$ 250 million for the shares. At the end of 1998, 80% of the shares of the two distribution companies of the National Electrification Institute (INDE) was sold for US$ 101 million to UNIÓN FENOSA
| Telecommunications |
In October 1998 95% of the shares of the state company TELGUA were sold for US$ 700 million 156 thousand to LUCA S.A., a Guatemalan and Honduran company. The international operator was TELMEX, which also owns 49% of the share. The rest of the shares (5%) went to TELGUA employees. The private company COMCEL has been offering cellular telephone services through a 20-year concession since 1989. In 1999 private participation appeared in other areas: 14 private companies have interconnection contracts with TELGUA. Moreover, the Spanish company TELEFÓNICA acquired a PCS frequency (an advanced wireless telephone system) and is expecting to begin operations in September of this year.
| | Postal Services |
No limitations for private participation exist in the postal services sector, and since a couple of years there are several private companies operating. In local postal services for example, there are more than thirty companies, and in the international market competition is also heavy. However, in 1998 the government transferred the administration and operation of public postal services from the General Directorate for Post and Telegraph (Dirección General de Correos y Telégrafos) to International Postal Services, a Canadian private company, in order to achieve more efficiency in these services.
| Railways |
At the end of 1997 the separation of the railroad company FEGUA from the state was finalized. Railroad operations were given to Corporación de Desarrollo Ferroviario S.A. through a 50-year ´onerous usufruct contract´. The government kept ownership of the railroad infrastructure and the real state; the private company has the right to operate de railroad. The government also sold its cars and locomotives. The re-initiation of activities, which have remained paralyzed for several years, were delayed until April 1999, due to the effects caused by Hurricane Mitch.
| Roads |
The first road constructed by a private company under concession was opened in 1998. This road, between Palín and Escuintla, will be operated as a toll road for 25 years.
The Maintenance by Contract Program started to operate in 1994. Through this mechanism, the government contracted private companies to maintain the road system. The program was extended in the following years, to allow all the phases of the process (design, supervision, maintenance and construction) to be carried out by private companies. The role of the General Directorate of Roads (Dirección General de Caminos, DGC) of the Ministry of Communications and Infrastructure is only in planning and regulation.
| Airports |
The operations of the international airports La Aurora and Tikal will be given in concession, starting in the year 2,000. The winning company will be required to invest US$ 112 million (Q 727 million) in La Aurora. This investment will be used to improve the runway, to expand the taxiway and to construct an additional twelve access gates. Tikal Airport will be given in concession for 25 years as well. However, the latest statements of the authorities on this topic were not clear, because plans were changed several times. This caused uncertainty around the situation of La Aurora Airport, the concession process and government role in the possible construction of a new airport on a different location.
| Ports |
Compared to other sectors, ports showed no significant changes. In April of this year, the Minister of Communications and Infrastructure invited the private sector to present proposals to build, operate and manage ports on bordering terrains to the existing ports of Santo Tomás de Castilla and Puerto Quetzal. The ports will be built, operated and administrated through a concession granted for a determinate period, and at the end of the term the ports will be transferred to the government. As for port services, some competition already exists among providers of stowage services in Puerto Quetzal. |
| Sector | Previous
Legal Framework
| New Legal Framework | Regulatory Authority | Privatization | Opening up of Market | | Electricity | Organic Law of INDE (Decree 1287) | Decree 64-94 and Decree 93 -96 | National Electricity Commission (CNEE) | Sale of EEGSA and INDE-Distribution
| Yes | | Telecom-munications | Organic Law of GUATEL (Decree 14-71)
| Decree 94-96 (Modifications, Decree 115-97) | Superintendency of Telecommunications | Phone Company (TELGUA) | Yes | | Postal Services | No reforms | Administrative Contract | Ministry of Communications | Administrative Contract | Yes | | Airports | Civil Aviation Law (Decree 563) | Decree
100-97 | Bureau of Civil Aeronautics (DGAC) | Pending: Airports
| Yes | | Ports | Organic Laws of the ports and various other laws | No reforms | - | Land leasing, Concession for port operating and administrating | Yes, but legal frame-work is unclear | | Railways | Organic Law of FEGUA | Administrative Contract | FEGUA | 50 years-usufruct contract. Sale of cars and locomotives, but no sale of land or property | Yes | | Roads | No reforms | Decree 134-96 and 123-97;
State Contract Law;
Emergency Laws
| Ministry of Communications | Concession of Palin-Escuintla road. Maintenance and construction of highways contracted to private sector | Yes |
Source: ´Estado en Tiempos de Paz´, CIEN, December of 1998 |
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© World INvestment NEws, 2001.
This is the electronic edition of the special country report on Guatemala published in Forbes Global Magazine.
June 11th, 2001 Issue.
Developed by AgenciaE.Tv |
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