It is said that a Spanish peasant went to visit a convent and was amazed by the row of half-busts that adorned the cloister. While a friar explained to him that it was St. Peter, St. Paul, St. Francis, and so on, the farmer could not help but comment: “From the belt upwards I too am a saint.”
This anecdote is fully valid for the Public Enterprises (PE) in Bolivia that “from the waist up”, that is, ideally, they enjoy sanctity, yet “from the waist down”, that is, in their reality, they show three fundamental defects: they are chronically indebted, they are loss-making and, above all, they are poorly managed. In fact, PEs constitute one of the most frightening legacies of nearly 20 years of populist government.
Nonetheless, a recent poll showed that a large majority of Bolivians are in favor of creating more PEs, due to nationalist mythology that prevents them from seeing reality objectively.
Let’s examine the defects. The fact that a company is in debt should not scandalize us in itself. Many private companies operate on the basis of bank loans that are rolled over and increased as those companies grow and pay interest. The problem with IPs is that their debts to the state are unpayable, because they live in permanent deficit.
Nor is there any need to demonize the deficit: some PEs are genetically in deficit for reasons of community service, based on tax redistribution. For example, a company like “Mi Teleférico” performs a social function that is more important than having a healthy balance sheet. The same could be said of “Pumakatari” buses or some basic services subsidized with national or municipal taxes. The bad thing is that these deficits tend to grow year after year, because there are no adequate tariff adjustments to control them. In many countries, some basic services, such as transport, are subsidized directly (through institutional contributions) or indirectly (through fuel subsidies, as is the case with private transporters in Bolivia).
Finally, as far as maladministration is concerned, we have to recognize that this is the most perverse flaw in our PEs. Generally, the staff called upon to lead (boards of directors) and administer (managers) the PEs are chosen from the pool of militants of the ruling political party, with little or no experience and without guarantees of continuity and independence. That’s why there are so many interim positions.
In short, paraphrasing President Luis Arce, the State has (happily) created, but “has not taken care of” (responsibly) PEs.
Critics of PEs aim to shut them down, sell them, or turn them into mixed capital. However, if they are closed, there is the social conflict of job losses. If they wanted to sell them, I assume that it is not easy to find a private company willing to invest in genetically “diseased” companies. The same could be said of any joint ventures, if the rules on how to share the administration are not well defined.
From the above I deduce that the basic problem of PEs is administration. It is not enough to repeat that “the State is a bad administrator” when it does not even meet the requirements of an administrator.
The fact is that PEs exist, people love them, and making them disappear is a big challenge. Why not think about agreeing on rules for the administration of PEs that allow them to move to more modern forms of governance?
To get out of this mess, in a future article I will present some ideas on the subject, developed while I was as Presidential Delegate, 20 years ago.