 Thesis Appendices
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A study of the relative power and influence of domestic interest groups in government decision-making means little independent of the organization and openness of the state to these pressures. By adding a model of the state, it becomes possible to analyze interest group demands and effects on state privatization decisions. Chapter 2’s theoretical discussion about plural participation and corporatism provide a strong backing to the possible impact domestic forces—primarily labor unions—may have played in the privatization process in Mexico and Argentina. For instance, Ben Petrazzini attributes the failed 1987 attempt to privatize Argentina’s ENTel (Empresa Nacional de Telecomunicaciones) to "the growth and consolidation of opposition forces after 1987, and the lack of state autonomy from interest groups opposed to privatization." (Petrazzini 1995: 50) Labor unions, in conjunction with the Peronist party, played a decisive role in forcing the Argentine state to back off from its plans—though it later succeeded after Menem’s election. This chapter focuses primarily on the strength of labor unions and their impact on government privatization decisions as explained by variation in privatization record from traditional debt and modernization explanations of divestiture. Though government relationships with labor unions went far beyond numerical considerations of strength and power in Argentina and Mexico, this analysis does provide insight to the impact—explicit or implicit—that labor union strength played in the privatization process and helps explain why Teléfonos de México was privatized while Luz y Fuerza was not. (Teichman 138) Though a variety of interest groups opposed privatization in Mexico and Argentina, the powerful labor unions in each country are generally considered to comprise the main brunt of domestic opposition to the privatization process. (Teichman 151) Subsidies to domestic groups from the operation of state enterprises came predominantly through employment and work-related benefits—centered primarily around the labor force. Political parties were a powerful agent of change, but generally operated in conjunction with labor unions in their protests. Finally, state bureaucrats within the PRI (in Mexico) and the Mexican and Argentine governments were also key players in opposing privatization. However, of these three main sources of opposition, pressure from political parties and bureaucrats within the government can be considered a secondary response to the powerful and traditional clientele of government support—union opposition. Chapter 4 explores the impact of these other domestic groups at greater length, but this thesis will consider labor unions as the primary means of opposition to government reform efforts in the privatization process in the 1980’s and 1990’s. Within Mexico and Argentina, labor unions have played a predominant role in establishing the institutional framework of each state. Both the Mexican Revolution and the advent of the Peronist party in Argentina both grounded labor unions as the central constituency of government services and policy. However, the fiscal crises of the 1980’s and 1990’s have forced a re-evaluation by leaders in both countries of the practical nature of this relationship, and as a result the tight network of corporatism so useful to the ruling PRI party in Mexico and to Argentine Peronism began to decay. The outward signs of this change can be seen in the rise in strikes throughout the 1980’s, often as a response to austerity plans designed to thwart inflation and improve economic conditions. Yet strike levels in themselves do little as a measure of union strength; the increase in strikes could correlate with the declining employment and unionization levels through out the state-owned enterprise sector—in effect be seen as an indication of the weakening of labor unions. A better way to measure the strength of labor unions is through union density, defined by Golden and Wallerstein (1995) as simply the "proportion of eligible employees who become union members." Taken with centralization, which helps measure internal unity and the degree to which single organizations of workers organize potential constituents, these measures provides a powerful tool for estimating the potential impact that labor unions may have had vis-à-vis government privatization decisions. This chapter certainly does not argue that a cut-off point exists in union concentration levels in a given corporatist system above which the firm in question will not be privatized. However, it does claim that labor union strength does ‘matter’ in government privatization decisions—that the government is less likely to privatize sectors with strong unions. Differences in the privatization record may also reflect union bargaining strategy, special relationships between union leadership and the government, and variations on the debt imperative and modernization imperative arguments considered in later chapters. Argentina and Mexico are ideal in this regard in that two of their primary state infrastructure industries—telecommunications and electricity—are comparable in employment and other financial indicators, yet in Mexico alone did the electricity (Luz y Fuerza) industry escape privatization. The Argentine program, on the other hand, effectively privatized all state-owned sectors under Menem. Given these limiting characteristics on the union density model, this thesis argues that union strength as measured by density and centralization played a considerable role in the Mexican privatization record and a somewhat lesser role in Argentina under the Menem government due primarily to a somewhat different corporatist framework. These claims are tested by first comparing the union strength argument within Mexico between the STRM (Sindicato de Telefonistaas de la República Mexicana) and the SME (Sindicato Mexicano de Electricistas), and secondly with another similar comparison for Argentina between FOETRA (Federacion de Obreros y Empleadeos Telefonicos de la Republica Argentina) and Luz y Fuerza (Argentine electricity company union). Finally, this labor-strength argument is extended across the variable of different corporatist and union-state relations to determine how Luz y Fuerza (Mexican electricity company) alone among the telecommunication and electricity sectors in Mexico and Argentina was able to escape the privatization process. An Analysis of Labor Strength Kevin J. Middlebrook cites two primary means by which the pact between the Mexican labor movement and the political leadership of the Mexican state institutionalizes major weaknesses inherent in labor’s bargaining position. (Middlebrook 9) The first is through labor’s structural weaknesses in the system, identified as small and declining worker concentrations per firm and low overall unionization levels (though this varies greatly across sectors). Secondly, labor suffers multiple organizational weaknesses, including poorly developed representational structures and frequent factional divisions. According to Middlebrook, these two factors must compete with the PRI’s ‘well-developed administrative capacity’ and ‘unchallenged control over coercive force’ in defining the terms of its alliance. Yet using Middlebrook’s two criteria for labor weakness¾ structural and organizational factors¾ as a basis for Golden and Wallerstein’s 1995 density/concentration model, an argument for labor strength with enormous potential for explaining variation in the privatization record emerges. A government facing privatization decisions has two basic options concerning labor strength and concentration: begin with industries where labor is weak and little opposition is likely to be found, or to privatize industries with strong and even militant labor in order to defuse their power over the government. Theorists and especially government elites are quite divided as to the viability of these two methods. Mexican privatization has involved a combination of these two strategies; the non-traded sectors of the economy including the railroad, telecommunications, mining, electrical power, and petroleum industries) have born the brunt of Mexican privatization, while traded and export sectors with low unionization rates have often been overlooked. Within the non-traded sector, Telmex—even with a quite vocal labor union—had density rates of approximately 64% and still encountered privatization, while within PEMEX the union density rate exceeds 90% and recently forced the Mexican government to retreat on its four year program to privatize parts of the petroleum industry. However, considering PEMEX’s role as the symbol of Mexican nationalism, a better comparison might be with Luz and Fuerza, the metropolitan Mexico Light and Power company. Luz y Fuerza had employment levels of 35,000—somewhat smaller than the 49,995 of Teléfonos de México. However, the SME (the primary labor union within Luz y Fuerza) had an almost dominant hold on labor representation within the metropolitan area, representing about 34,650 workers. Luz y Fuerza not only escaped privatization, but the 4% share previously held by Canadian owners was nationalized in 1994. This dichotomy provides an interesting framework for analyzing the impact that union density and centralization—both indicators of potential strength—may have played in government privatization decisions. This pattern supports a theory such that the Mexican government did take labor union density and strength into account in deciding the pattern and variation behind its privatization program. Once larger and more powerful labor organizations were the target of reform, the government was forced to play a much more delicate role and take into account the interests as well as the density and level of fragmentation of the most powerful union organizations. Argentina, on the other hand, also possesses very powerful labor organizations but successfully privatized nearly all vital state sectors—suggesting that this labor strength hypothesis did not play as strong a role as it did in Mexico, possibly due to a weaker corporatist system than that which exists in Mexico. This analysis certainly does not discount the relevance of modernization and debt criteria in privatization decisions; these will be considered separately in chapters 5 and 6. However, the role of labor strength—defined as union density, concentration, and strategies regarding privatization—can be an enormous factor, and is demonstrated primarily in Tables 7.1 and 7.2 below. Case Studies The primary case study industries in the telecommunications and electricity sectors in Mexico and Argentina certainly reflect the most vital and most unionized state industries, with both surpassing 70% unionization rates in Mexico and 60% in Argentina. This can be compared to rates averaging 12% to 25% of unionization in the overall economy. (Dobbs interview: 12 Feb 1997) Though virtually all infrastructure industries were privatized in Argentina, in Mexico the electricity (Luz y Fuerza) and oil (PEMEX) industries escaped this fate. Except for electricity, all of the infrastructure cases discussed cover a nationally based industry/labor union; for SEGBA (Argentina) and Luz y Fuerza (Mexico), the study concentrates on the utility and labor union serving the greater Buenos Aires and Mexico City metropolitan areas, respectively. The electricity and telecommunications sectors provide the best contrast of large infrastructure sectors; PEMEX falls into a special case status through its position as a symbol of nationalism, while airline employees in both nations were highly fragmented across three competing union structures. The STRM and SME, however, represent two very strong union organizations with high density and considerable political force that experienced dramatically different outcomes in the privatization record in Mexico. Equally, the Argentine electricity and telecommunications industries show promise in advancing this argument, but additionally YPF escapes from the PEMEX special status clause and gives an broader perspective of the relevance or irrelevance of labor strength in the privatization record. Though the labor density and concentration from the broader privatization record will be analyzed later in this chapter, the following case industries provide a broad spectrum look at the interaction and role that labor played in the privatization decision-making process of the Mexican and Argentine government. Mexican Labor Union Strength and Privatization Strategy
Mexico’s Telephone Workers’ Union, the STRM, in coordination with the larger Mexican Workers Confederation (CTM), played a vital role in determining the development of Mexican industrial policy toward privatization. Mexican telephone workers were certainly not at the forefront of support for the harsh privatization and austerity policies; STRM members helped found the independent FESEBES after the CTM showed only lackluster support for 1984 and 1987 strikes by the union. (Burgess 19) However, the strategy of the STRM leaders was considerably different than that of most other public enterprise unions—especially those with a strong presence in FESEBES. Francisco Hernández Juárez, the STRM leader, successfully pushed for the adoption of at least tacit support of the Telmex privatization after Salinas become personally involved in negotiations and offered job guarantees to all current workers. (Ramamurti 1996: 79) Unlike the SME, the STRM adopted a strategy of support for government reforms, given the promise that this option would be much more favorable than the alternative. Despite the STRM’s union density of approximately 64%, the change in leadership strategy by Juárez and other leaders in fact spurred on privatization on terms as least vaguely favorable to the union. The labor union strength equation shifted once the STRM moderated its demands, possibly a statement of the power relationship in effect, but equally an acknowledgment of the need for the union to throw its clout toward winnable battles. The STRM certainly did not enthusiastically support the aims of privatization. Its negotiations with the Salinas regime—dating as far back as the mid-1980’s when de la Madrid was President and Salinas served as Secretary of Planning and Budget—involved considerable inducement along with promises of certain safeguards. The standard for this inducement mechanism was established with the 1988 Aeroméxico privatization, when the company was declared bankrupt and many workers left out of a job after a union strike. Whether the bargain between the Mexican government and the STRM involved mutual compromise, the end result was a public support of privatization by the leaders of the STRM. The bargain offered included a ‘promise that no existing worker would lose his or her job as a result of privatization, and that workers would receive a stake in the privatized firm.’ This stake turned out to include stock options at 4% of volume, providing some demonstration that the STRM’s bargaining power consisted not solely of accepting Mexican government decrees. (Perez 11) However, at this point, the CTM still was not offering its support behind the STRM’s anti-privatization aims, so that the Salinas deal may have been the most effective response available. Organizationally, the STRM represents about 84% of workers within Telmex proper—the firm handling the actual operation of the telephone system. However, ‘La Corporación Telmex’ consists of nineteen subsidiaries, of which only two—Telmex (operation) and Compañia de Teléfonos de Bienes y Raíces—are defined by STRM representation of nearly 80% of firm employees. (Vásquez 3) The other subsidiaries are represented primarily by a variety of CTM affiliates and independent unions. Factoring in these subsidiary firms, the total density of union representation for Teléfonos de México falls to 64%, the figure used in this thesis. Admittedly, some of the more powerful of these—Radiomóvil-Dipsa (TELCEL) among others—did not really become dominant forces within the market until 1988 or 1989. Accordingly, only the STRM participated in negotiations surrounding privatization with the government. However, these subsidiaries and the independent and CTM-affiliated unions associated with these firms do considerably weaken the STRM’s concentration and representation over the entire telecommunications industry. (Vasquez 2) The Sindicato Mexicano de Electricistas began to assert its independence from the Mexican government as early as 1937, when it left the CTM to help create an independent labor movement. (Greenfield 536) The SME leadership fought quite harshly against privatization, and in 1984 along with the STRM led the way for the formation of an independent labor organization that would represent public enterprise workers—the Federation of Unions of Goods and Services Enterprises (FESEBES). (Teichman 166) All in all, the SME ranks quite highly among state enterprise unions in its level resolution against privatization of the electricity industry and degree of independence from the Mexican state. In 1989 Salinas’ had declared in public announcements that those sectors not specifically named in the constitution as strategic would be privatized: Pemex (petroleum), CFE (electrical energy, which includes Luz y Fuerza), Ferronales (railways), and the Central Bank. (Teichman 136) Even with this level of reassurance, after the arrest of Joaquín Hernández Galicia, head of the STPRM (Mexican Petroleum Workers’ Union) by Salinas, the SME took a slightly different approach to privatization. From a speech by Horacion Romo, an executive committee member of the SME, it becomes clear how SME strategy differed from that of the STRM. (Romo, Address: 28 May 1994) "The only strategy (in 1989) was that Luz y Fuerza would survive the privatization process as a regional state enterprise." It was accepted that this would entail a more decentralized industrial structure and improvements in productivity, but the SME did not accept an offer like that offered to the STRM which entailed accepting privatization of the industry. According to Romo, the Mexican government attempted to concentrate on productivity improvements as its main set of negotiations with the SME up until nearly September of 1993—implicitly promising that the firm would remain public as long as certain productivity standards were met. The SME leadership decided that year that in essence these negotiations weren’t about productivity at all but rather the "character of the business that we wanted,"—namely whether it would remain public or private. "The intention of the government was not to maintain the company as publicly owned, but rather to privatize it, if not totally, then at least partially." The SME leadership denounced the government’s negotiations up to that point, harking back to the 1989 compromise which promised that Luz y Fuerza would remain public, fully state-owned, and under the control of the SME. Several months later, Salinas announced that Luz y Fuerza would remain almost wholly public. In exchange for guarantees against job loss and bilateral negotiations around future restructuring, the SME did agree to improve its productivity on several indicators. However, these agreements did not differ considerably from those offered the STRM even after it agreed to privatization—and Luz y Fuerza remained a wholly public firm. As their strategies—and results—differed vis-à-vis government privatization policy, the STRM and SME equally faced different structural constraints to their concentration and power structure. Luz y Fuerza is somewhat more concentrated than the STRM, with approximately 35,000 total employees—and all but about 440 of them belong to the SME. The STRM was the sole telecommunications union in privatization negotiations with the government, but its many subsidiaries and lack of collective voice over their components may have made the union appear weak in relation to union concentration. While 64% is still a quite large union density number, the discrepancy provided between it and the much higher 84% density within the actual telephone operating company does weaken somewhat the STRM’s argument against privatization. It is true that the STRM did end up supporting the privatization process, but the concessions it received in exchange for this support are not drastically different from those of the SME. The fact that the STRM did concede so much for these guarantees may give tacit support behind the strength argument and its translation into a bargaining power base. Argentine Labor Union Strength and Privatization Strategy On the whole, few would disagree that the labor movement in Argentina constituted the principle political opposition to privatization. (Petrazzini 1996: 120) Yet even with this role of history and two failed telephone privatizations propelling the labor unions forward, declining unionization numbers and nearly a decade of harsh austerity policies had weakened Argentine unions considerably. Moreover, though FOETRA was certainly the largest union, ENTEL’s labor force was scattered somewhat among four different labor unions—all of which played a dominant role in ENTel’s hiring, employee relations, and even technology improvement process. (Petrazzini 1996: 115) President Menem realized the importance of the ENTel privatization from early on, and appointed Julio Guillan, the head of the national FOETRA, as the new secretary of communication. The result of these efforts at co-optation predictably divided the union and furthered fragmentation beyond the standard definition of multiple unions within a given labor force. For example, the Buenos Aires local union—itself a member of FOETRA—opposed privatization harshly at the same time that the leaders of the national union were negotiating workers’ participation in the privatization process. (Murillo 1996: 11) Further, FOETRA did vote one last highly visible means of rebellion to privatization policy; in August 1990 after the privatization announcement but before its actual sale a national strike was called to protest certain aspects of the ongoing negotiations. In this sense, though the FOETRA leadership did support privatization under much the same agreement as with the STRM, it was not nearly as unified in its support and continually had to fight elements within FOETRA itself and among other smaller unions within ENTel. (Petrazzini 1996: 120) According to the Manual de Sindicatos from Argentina, the Federacion de Obreros y Empleados Telefonicos de la Republica Argentina (FOETRA) has approximately 37,000 members out of a total employment level within ENTel of 46,857. (Abellá Blasco 129) However, in a key change from the previous privatization attempt in 1987, the Buenos Aires local union of FOETRA broke from the national leadership and strongly opposed privatization in 1989. (Abdala 61) The Buenos Aires local union comprises 18,278 members, nearly half of the total FOETRA members. Given this fragmentation, it can be argued that the national FOETRA leadership held a union concentration of only 40% (18,751 workers) within ENTel—instead of the more deceiving 78.9% density using overall FOETRA numbers. Further adding to this fragmentation, other unions did exist within ENTel: most prominently the Federacion de Organizaciones Personal Supervision Telefonicos Argentinos (FOPSTA) with 2,500 members and 5% density, and the Union Personal Jerarquico ENTel with 1,373 members and 3% density. (Abellá Blasco 46) These smaller unions and the Buenos Aires local opposition helped fragment the FOETRA negotiating voice with the Argentine government and forced highly divided stands by the national union leadership. Servicios Eléctricos del Gran Buenos Aires (SEGBA) led Menem’s privatization process of the electricity sector, starting in 1991. Beginning in 1989 soon after Menem’s election, a broad spectrum of state labor unions harshly denounced the privatization process. The secretary general of the CGT Azopardo, Saúl Ubaldini, stated in 1989 in an interview with La Prensa that it would be better to "die on our feet than live on our knees" under privatization. (San Martino de Dromi 444) Víctor De Gennaro, an official with the Association of Workers of the State (Asociación de Trabajadores del Estado), went even further in Dec 1989 in saying that state labor organizations would launch a nation-wide campaign against the government privatization plan. (San Martino de Dromi 445) However, once negotiations between these labor unions and the state had begun, the tactic used by labor unions was drastically different. From a 1990 interview with Oscar A. Lescano, one of the leaders of the Sindicato de Luz y Fuerza Capital Federal, it becomes clear that Luz y Fuerza (the union) at least publicly supported the "transformatÿ |
