Phone-Deprived Brazil Hears Hope in Privatization

Last week's sale of phone monopoly may improve service - the worst in Latin America.

Here's a desperate act in a nation longing for better phone service:

A businessman in Rio de Janeiro, fed up with Brazil's telephone monopoly, recently ran an obituary in a local newspaper to mourn the unexplained demise of his two phone lines. One line was eventually revived.

Even the mere act of making a call in Brazil is more art than science. Some 30 percent of calls don't go through, service can be cut without notice, and crossed lines make a mess of conversations. Dialing 104 for assistance usually gets a busy signal.

A single "big ear," as pay phones are called for their bean shape, often serve 20-some poor families. Only 9 of every 100 Brazilians have their own phone line, a rate comparable to some African countries.

But if officials are right, all that will change with last week's $19 billion sale of Brazil's telecommunications giant, Telebras. In one of the largest sales ever of a state monopoly, the company was divided among mostly foreign bidders, including Spain's Banco Bilbao Vizcaya SA and Portugal Telecom SA. MCI Telecommunications Corp. beat out Sprint for Embratel, Brazil's long-distance carrier.

Funds from the sale are earmarked to plug the government budget deficit and keep inflation down.

With just 15 million phone lines for a population of 160 million, Brazil has the lowest rate of phone hookups in the Western Hemisphere. The waiting time for hookup is two years, and the cost, as much as $9,000.

This has opened up a vast black market. Speculators sell and rent phones lines at a fraction of the official cost. Ordinary people who buy on the black market rent their phone line to make back the money they borrowed to buy the line.

And then there are the middlemen who fix people up with semi-legal phone systems. Maria Alves Felizado Silva and a dozen of her neighbors in a low-income section of S-o Paulo paid one of these "boys" $5,000 for a phone line. He split the line and installed a digital switchboard to give them their own extensions. All 13 of them now have phones, which they let neighbors use for a small charge.

"The first time I tried to set this up was with another boy, and he ran off with our deposits, but the system works just fine now," Ms. Silva says.

The rich and middle class have on average two phones per household. The poor, on the other hand, have one phone per 100 households.

Shantytown residents occasionally try to upgrade the "big-ear" service, says Maria Elisabete Mota, dubbed the unofficial telephone operator because the pay phone is in front of her home in S-o Paulo. "The guys in the favela [slum] next door have rigged the pay phone so it takes long-distance collect calls," she says. "We're trying to get that here."

Under the rules set by Anatel, the new government regulating agency, companies will be required to create 33 million new fixed phone lines in the next three years, boosting the hookups to 22 lines for every 100 citizens. That number should increase to 30 to 40 phones per 100 people by 2004.

Analysts point to the country's huge pent-up demand. About 20 million people are already in line for a phone under the old system.

Critics claim the sale simply replaces a national monopoly with a foreign-owned one that would serve primarily the rich and middle classes. Demonstrators from the Landless Peasant Movement clashed with authorities in front of the Rio de Janeiro stock exchange protesting this issue last Wednesday.

The Communications Ministry says that these worries are unwarranted. The contract stipulates that the companies open up to competitors in 2002. As more companies come in, phone prices will drop dramatically, making them accessible to all but the poorest Brazilians.

Economists say the high cost of doing business in Brazil - the so-called "custo Brasil" - will be diminished as the new phone companies lay down better infrastructure, bringing Brazil up-to-date with its European competitors. Worker efficiency will go up as a result, increasing productivity and attracting investment. Brazil may look - and sound - more like Spain than Uganda.

"In four years, we will be up to the European standards," asserts Herondo Carmo, an economist at the University of S-o Paulo. However, he says, this will mostly be in the rich south, where the incentives are greater.

"Poorer, rural regions like the northeast will be left behind for a while," he says. "In S-o Paulo, the problem is the long wait. But there are regions of the country where people don't know what a phone really is."

Though it may take a few years, bringing the poor into the telecommunications age may well bring about dramatic cultural changes, Mr. Carmo says. A better phone system will give them greater access to political life.

"It won't be like the Philippines," where the people-power movement used the new phone system to organize protests that brought down Ferdinand Marcos's dictatorship in 1986, Carmo says. "Political participation in Brazil is just beginning. But it should pick up. It's easier to organize if you have access to the Internet and can phone the government [and] consumer advocates."

SOCIOLOGISTS have gone as far as to predict a drop in the crime rate in Brazil - one of the worst in the world - as more private phones show up in poor neighborhoods.

People will be able to vent their emotions indoors talking on the phone rather than getting into fights on the street, theorizes Sedi Hirano, head of the sociology department at the University of S-o Paulo. He adds that cheaper phones would democratize related services like Internet access, increasing the level of education in low-income neighborhoods.

Telephone speculators and con artists will have to find another line of work.

"It's an important step," Mr. Hirano says. "The lower classes will have a minimum of civilization. Instruments of communication always improve society."

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