Economic reform has Mexicans spinning

Mexico City economist Jonathan Heath wanted to watch President Ernesto Zedillo's recent TV address calling for private investment in Mexico's nationalized electrical industry. But he couldn't: A blackout in his neighborhood left him in the dark on the president's plan.

The blackout symbolized why many Mexicans believe the industry needs the investment and upgraded technical help that privatization of various industries has promised - if not always delivered - all over Latin America.

But Mr. Zedillo's electricity proposal also led opponents to stir up the sense of deception and disappointment that many Mexicans feel after 15 years of privatizations.

It's the same ambivalence that reigns across Latin America. After more than a decade of economic reforms heralded by international economists and converted national leaders as the foundation of a brighter economic future, the public remains unconvinced of the benefits.

"There is this mix of feelings, a mix of good and bad opinions on the economic opening and privatizations that leaves people where now they don't know what to think," says Mr. Heath, adding that in Latin America the sense of exhaustion now even has a name: "Reform fatigue syndrome."

In many cases in the region inefficient industries have either changed their ways or closed down, while services have improved and expanded as promised.

But privatizations have also cost once-protected workers hundreds of thousands of jobs and often led to higher prices for consumers. And they have often been carried out with such corruption and favoritism to political leaders' wealthy friends, that the process ended up with a dismal reputation.

As Mexico plans to open up its two nationalized electric power companies to private investors, the nation's 105,000 electrical workers and thousands more retirees are fighting tooth and nail to keep the companies fully in government hands.

There's one problem for them: Most Mexicans are just as tired of the inefficiencies and nationalist discourse of the antimarketers, as they are of the corruption and unfulfilled promises that followed the privatizations of everything from telephones and banks to highways and trains since the mid-1980s.

It is in this climate that Zedillo has proposed to open the country's electrical sector, nationalized in 1960, to private investment.

About $25 billion is needed over the next six years to keep Mexico's electrical supply growing, Zedillo says, as well as to modernize an industry that has failed to keep up with technological advances - a failure admitted even by those opposed to any opening to private investment.

"Before the nationalization of 1960, the profits from electricity sales were sent out of the country to the company owners in the United States, Great Britain, and Canada," says Augusto Yaez Rodrguez, the incoming general secretary of the Mexican Electricians Union's 12,600 retirees.

"We fought to make sure that the benefits would be for the people of Mexico, and we don't want to see that accomplishment reversed." If foreign investors are interested in Mexican electrical generation and distribution, he says, it's because they know they can make money - "money that should stay in the people's pockets."

"We know we have to modernize and bring in new technologies, but it can be done as a national industry and not by paying the high cost in jobs as in Argentina," he says.

According to Luis Gutirrez, a consultant to Mexico's Energy Ministry on restructuring and opening of the electrical industry, all current employees will be "taken care of" under the proposed legislation, whether they keep or lose their jobs.

WITH more than 70 countries having already either privatized electricity or opened it to private investment, Mr. Gutirrez says it is the only viable path for countries with fast-growing energy needs. "Whether we do this now or five years from now," he says, "it is going to happen."

Despite those assurances, Zedillo's proposal has a rough road ahead.

For starters, a constitutional reform must be passed to clear the way for his plan.

Zedillo has already run into trouble in his so-far-unsuccessful efforts to open the country's petrochemical industry to private investment.