Uruguay has been a proud exception to the privatizing wave that swept through South America in the 1990s. Its state-owned firms are more efficient than many of their counterparts in Argentina and Brazil ever were. In 1992, Uruguayans voted in a referendum against privatizing telecoms. They rightly observe that some of Argentina’s sales were smashed, creating inefficient private monopolies. And with unemployment at 15%, nobody is enthusiastic about the job cuts privatization would involve.
That leaves President Jorge Batlle with a problem. Uruguay has been in recession for the past two years, mainly because of low prices for its agricultural exports, and because of Argentina’s woes. But public debt is at 45% of GDP, and rising. Some economists argue that privatization would give a boost to the economy, by attracting foreign investment, and by lowering costs. CERES, a think-tank, having compared tariffs for public services in Uruguay and its neighbors, believes liberalization could save businesses and households the equivalent of 4% of GDP annually, raise growth and produce a net 45,000 jobs.
The polls that show continuing support for public ownership also show growing opposition to monopolies. So Mr. Baffle plans to keep the state firms, but let private ones either compete with them or bid to operate their services under contract.
The opposition Broad Front and the trade unions are resisting. They have gathered enough signatures to demand a "public consultation" next month on a new law to allow private operators in the ports and railways—a referendum on whether to hold a referendum on the issue. Alberto Bension, the finance minister, admits the vote will be a crucial indicator of how far the government can push. But he notes that, since 1992, attempts to overturn laws by calling referendums have flopped.
The liberalization of telecoms has already begun. Bell South, an American firm, is the first private cell-phone operator. There are plans to license others, and talk of allowing competition for fixed-line telephones. A new law allows private companies to import gas from Argentina to generate electricity in competition with the state utility. Another plan would strip Ancap, the state oil firm, of its monopoly of imports. It has already been allowed to seek a private partner to modernize its refinery.
Harder tasks lie ahead. The state-owned banks are burdened with problem loans to farmers and home owners. And Mr. Batlle shows no appetite for cutting the bureaucracy.
After a year in office, the president is popular. He has created a cross-party commission to investigate "disappearances" during Uruguay’s military dictatorship of 1976-85 The unions are weakened by unemployment. At CERES. Ernesto Talvi argues that Mr. Baffle should note his own strength, and push ahead more boldly. But that is not the Uruguayan way.
The fifth paragraph suggests that______.