COSTA RICA MOVES MORE SLOWLY, SEEKING CONSENSUS

Many analysts had predicted in late 1997 that the Central American governments would have second thoughts about privatising their telecommunications companies at the same time as Brazil was embarking upon the sale of the Telebras system. Moreover, there were doubts that governments would be able to overcome the considerable opposition to selling off their telcos. Since the beginning of the year, though, three countries in the region (Panama, El Salvador and Guatemala) have completed their sell-offs. Two others (Nicaragua and Honduras) have secured legislative approval for privatisation, and within the past few days came the news that Costa Rica is to start 'opening up' its telecommunications sector soon.

The 'consensus' path. Costa Rica has chosen to move at a more leisurely pace in order to avoid the political and labour confrontations that have plagued the telecom privatisation processes launched by many of its Central American neighbours. The government of President Miguel Angel Rodriguez, which took office last May, has submitted this and other planned economic reforms to consultation in the Foro de Concertacion Nacional, where political parties, unions and civic organisations can have their say. The idea is that, once consensus has been achieved within the Foro, getting congress to approve the requisite legislation should be pretty straightforward.

The Foro's telecommunications commission has already come up with its recommendation: a phased 'opening up' of the sector will begin now and conclude in 2002 with full de-monopolisation. Instead of privatising the ownership of the state telco, Instituto Costarricense de Electricidad (ICE), the various services will be offered in concession -- and ICE will be one more competitor in the market. This option has been fully endorsed by the organisation grouping the unions of ICE workers and employees, the Frente de Asociaciones Laborales de ICE. One of its leaders, ICE, says this will strengthen the state company.

The proposal to liberalise the sector over four years came from the government, and in the commission gained the support of the business sector and two minority parties. A third, Fuerza Democratica (FD), plumped unsuccessfully for a six-year deadline, arguing that this would soften the impact of higher rates. The liberalisation process will begin with the concession to private operators of one band of cellular telephony and another of personal communications services (PCS). Also to be freed up are value-added services such as data transmission and Internet access.

Elsewhere in Central America. The green light for Costa Rica's liberalisation programme came shortly after two of its neighbours handed over their state telcos to private companies. Guatemala sold a 95% stake of the Compania de Telecommunicaciones de Guatemala (Telgua) to a Central American consortium, Luca SA, for US$ 700m (see Page 466/98) -- in an operation that has attracted much criticism for its lack of transparency. The auction had been originally scheduled for 25 September, but was called off as a result of the turmoil in the world's stockmarkets. Five days later, though, came the surprise announcement that the auction would go ahead on the 31st. Opposition parties have said the government did not publicise the rationale on which the award was made; the Frente Republicano Guatemalteco (FRG) has gone further, claiming that Luca SA is owned by members of President Alvaro Arzu's family and other members of the country's 'superclique'.

On 24 September the government of El Salvador sold off a 51% stake in its fixed-line telephone company, Antel. It had done likewise with its wireless counterpart, Intel, last July. The government got US$ 315m for the two operations. Honduras has already cleared the way for the privatisation of the Empresa Hondurena de Telecomunicaciones (Hondutel): a 50% stake will be offered to private investors within the next eight months. The company is said to be worth between US$ 800m and US$ 1bn. In Nicaragua, the legislature has approved the privatisation of the Empresa Nicaraguense de Telecommunicaciones (Enitel). The government has retained the services of M Rothschild & Sons to advise on the sale of a 40% shareholding. The leader in the field, Panama, sold off a 49% stake in its state telco, Intel, to Cable & Wireless last May for US$ 652m.