Capitalization and Privatization
in Bolivia: An Approximation
to an evaluation
6%
5%
4%
3%
2%
1%
0%
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
GDP growth rate
0%
25%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
-1%
20%
-2%
15%
-3%
10%
-4%
-5%
5%
-6%
0%
1991
1992
1993
1994
1995
1996
1997
1998
Gross capital change as % GDP
04/08/2005
1999
2000
2001
-7%
Fiscal Deficit as % GDP
1
The big picture
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04/08/2005
Transition from a State-led to a
market driven economy since the
1982-85 crisis
Prior to privatization, the State
continued to be the main investor
in the economy and remained
highly dependent on foreign debt.
Economic growth occurred at rates
that would not lower poverty
significantly
2
The big picture
The 1993-97 period became the most aggressive in
structural reform in two fronts:
(1) Definition of a new State-market frontier, where
government firms were replaced by privatization and
regulation.
(2) Definition of a new central-local frontier within the state,
where local governments are given greater participation.
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„
Development vision: The private sector (particularly
foreign) would lead investment and growth. The State
would regulate markets and increase its efficiency in the
provision of public/quasi-public goods.
04/08/2005
3
Capitalization
„
Privatization versus Capitalization.
Main objectives:
(1) Attract foreign investment.
(2) Lead economic growth.
„
Two periods:
(1) 1994-98. Reform implementation and initial results in an
environment of stability and growth.
(2) 1999-today. Reform consolidation in an environment of
economic recession.
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04/08/2005
4
Investment
F irm s created b y th e
reform
O il and gas
C haco S .A .
A ndina S .A .
Transredes S .A .
E B R S .A .
C L H B S .A .
A irport Service Stations
E lectricity
C orani S .A .
G uaracachi S .A .
V alle H erm oso S .A .
T D E S .A .
E lfec S .A .
T elecom m u nication s
E N T E L S .A .
T ransportation
L A B S .A .
F C O S .A .
F C A S .A .
T otal
Y ear
P rivatization
value
(M illion s of
$us)
1997
1997
1997
2000
2000
2000
1995
1995
1995
1997
1995
C apitalization
value
(M illion s of
$ u s)
In vestm en t as
of 2001
(as % of
com m itm en t)
306.66
264.77
263.50
131.6
130.0
84.1
C haco S .A .
A ndina S .A .
T ransredes S .A .
T G N -Investm ent
T G N -Investm ent
T G N -Investm ent
58.79
47.13
33.92
85.1
154.3
110.9
C orani S.A .
G uaracachi S .A .
V alle H erm oso S .A .
E N D E R esidual
T G N -Investm ent
102.00
12.05
11.10
39.90
50.30
1995
610.00
1997
1996
1996
47.47
25.85
13.25
1,671.34
215.35
(1)
76.9
(1)
95.5
129.1
108.6
C om pan y /
in stitu tion in
charge of
investm en t
E N T E L S .A .
L A B S .A .
FC O S.A .
F C A S.A .
(1 ) In vestm en t as of 2 0 00 as % of com m itm en t.
04/08/2005
5
Investment
Porce ntaje de l PIB
20%
Por ce ntaje de l PIB
25%
20%
15%
10%
15%
10%
5%
0%
90
91
92
93
94
95
96
97
98
99
00
01
-5%
5%
Inversión extranjera
Inversión privada dom éstica
0%
90
91
92 93
94
95 96
Inversión pública
97
98 99
00
01
Inversión privada
Po r ce ntaje de l PIB
20%
15%
10%
5%
0%
90
04/08/2005
91
92
93 94
95
Capitalizadas
96
97 98
99
00
01
Inversión extranjera
6
Effect on government investment
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
90
91
92
Extractivos
04/08/2005
93
94
95
Producción
96
97
98
Infraestructura
99
00
01
Sector social
7
Employment
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Employment by firm has decreased in the transition, which
was expected.
As production expanded, employment has remained the
same or has decreased as recession advanced.
Unemployment generation not significant compared to
economy unemployment levels.
Lack of information regarding indirect employment effects.
04/08/2005
8
Regulatory effects
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Competition in telecommunications, particularly cellular
and later long distance. Information technologies have
evolved poorly. Cases of anticompetitive practices.
NIS: Excess capacity in the electricity market since 1999.
Increase in natural gas reserves from 5.7 TCF to 52.3 TCF
in the hydrocarbons sector. Exports to Brazil. Gas
intensive projects including LNG, GTL, Petroquimica and
electricity generation. Other scenarios.
Except for AISA, not much to say in the water & sewerage
sector. Lack of sector Law in the transportation sector.
04/08/2005
9
Regulatory effects
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04/08/2005
Significant improvement in information production.
Implementation of a consumer reclamation system.
More needs to be done.
Implementation of an appeals system with important
results, but there are problems.
Regulatory self evaluation system implemented, but
lagging.
10
Firms performance
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Domestic demand constraints further expansion of
infrastructure and reserves.
The hydrocarbons sector is dependent on further expansion
of export markets. It is believed to be the future source of
growth.
Improvement in technology transfer.
Moderate return to capital in average.
Increased internal efficiency.
Increased in labor productivity.
Increased government tax collection?
04/08/2005
11
Dividends recieved by the CCF
Pe r ce ntage of GDP
0.7%
0.6%
0.5%
0.4%
0.3%
0.2%
0.1%
0.0%
1995-96
Transportation
04/08/2005
1997
Electricity
1998
1999
Telecommunications
2000
2001
Hydrocarbons
Global
12
ROE
Electricity
Corani
Valle Hermoso
Cuaracachi
Telecommunications
ENTEL
Hydrocarbons
Andina
Chaco
Transredes
Transportation
LAB
FCA
FCO
Water & Sewerage
AISA
04/08/2005
1997
1998
1999
2000
2001
11.6%
2.5%
3.6%
7.2%
4.8%
5.6%
9.3%
4.7%
4.4%
8.0%
3.7%
3.4%
5.2%
-0.9%
2.7%
5.9%
9.0%
4.9%
4.1%
2.5%
-5.9%
6.9%
0.7%
-2.1%
6.0%
1.9%
6.1%
8.3%
6.1%
9.6%
-4.0%
2.5%
11.4%
20.2%
-5.9%
6.8%
22.2%
0.5%
8.0%
13.5%
-14.0%
7.5%
13.2%
0.9%
15.0%
18.4%
4.9%
0.0%
8.5%
2.5%
-4.9%
13
Access
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04/08/2005
Improvement in access to communications,
electricity and water & sewerage.
Large differences between urban and rural
areas.
In urban areas improvements did not bypass
the poor.
Little improvement in natural gas distribution.
An important area of future government action.
14
Figure 6
Department capitals: Percentage of households with access to electricity,
by income quantile: 1989-1999
100.0
98.0
96.0
94.0
Highest income
92.0
90.0
88.0
86.0
84.0
Lowest income
82.0
80.0
1989
1994
1999
Figure 7
Department capitals: percentage of households that have access to telephone
services, by income quintile: 1989-1999
Year
80.0
70.0
Highest income
60.0
50.0
40.0
30.0
Lowest income
20.0
10.0
0.0
04/08/2005
1989
1994
Year
1999
15
Figure 8
Departmental capitals: percentage of households with access to water services
by income quintile: 1989-1999
100
95
90
85
Highest income
80
75
70
Lowest income
65
60
55
50
1989
Figure 9
Departmental capitals: percentage of households with access to sewerage
by income quintiles: 1989-1999
1994
1999
Year
85.0
80.0
75.0
70.0
1 (Lowest income)
5 Highest income
4
65.0
3
2
60.0
55.0
50.0
04/08/2005
1989
1994
Year
1999
16
Prices
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04/08/2005
Real price increases in electricity and
water & sewerage services, but not
significant.
Real price drops in communications
services.
Real price increases in oil derivatives,
but later price controls, including bottled
gas.
17
Quality
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04/08/2005
Quality goals in communications
were reached.
Quality goals in electricity
transportation and distribution were
reached.
Not much to say about quality
goals in other services.
18
Why is capitalization not popular?
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Was Capitalization/Regulation oversold?
Negative employment effects, although not significant
compared to economy wide unemployment levels.
Underperformance in profitability and dividends paid to the
FCC by capitalized firms. Insufficient control in investment,
profitability, dividend payments and tax issues?
Will the potential wealth from the hydrocarbon sector ever
reach Bolivians, particularly the poor?
High profile cases: LAB and Aguas del Tunari
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04/08/2005
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Conclusions
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FDI flows are exhausted, except maybe in the hydrocarbons
sector. Perception of legal and regulatory risks.
Private sector investment does not lead growth. Future
growth depends on access of government to foreign debt.
Capitalized firms profitability may not change very much,
except maybe in the hydrocarbons sector.
Access and quality effects greater then price effects in urban
areas: a hypothesis.
Reaching the poor in urban and particularly rural areas
depends on government subsidies.
04/08/2005
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