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Felipe Calderon's power play

Dissolving a state-run electricity utility was either a cynical political move or a financially sound decision.

October 19, 2009

Mexican President Felipe Calderon says his decision to dissolve the state-run utility that supplied electricity to Mexico City and surrounding states was based on simple economics: The government spent more than $3 billion a year to subsidize the company, yet consumers put up with regular blackouts and many businesses had to spend millions on their own energy substations.

The Mexican electricians union, on the other hand, says that when Calderon ordered police to seize Luz y Fuerza del Centro on Oct. 10, it was baldly political: He hoped to break the union representing 66,000 current and retired employees and weaken his rival, leftist leader Andres Manuel Lopez Obrador, whom the union backed.

In fact, there's truth in both arguments, and both are good for Calderon. If it survives legal challenges, the move will allow him to dispense with an inefficient company that bedeviled his predecessors while busting a union long regarded as corrupt and hostile to his presidency.

Luz y Fuerza, or Light and Power, seemed to operate in multiples of three. The company lost a third of its electricity to "theft, technical failures, corruption or inefficiency," Calderon said. Union featherbedding resulted in three times as many employees per customer as the state-run Federal Electricity Commission, which supplies energy to the rest of the country and has been given the business of the disbanded company. Retirees earned pensions three times greater than the take-home pay of active employees.

Since Calderon's decree, the union has turned out tens of thousands of demonstrators to protest the "authoritarian" decision. But there also was support for the liquidation among ratepayers fed up with poor service and alleged fraud in the reelection of union boss Martin Esparza. Many Mexicans are tired of a lack of public accountability -- for union dues or government funds -- and welcomed the move.

But experience tells Mexicans to beware of hidden agendas. Many suspect that breaking this union was a precursor to privatizing electricity in the hands of foreigners or friends of Calderon, as was the case previously with banks and television. It would be a terrible mistake for the government to perpetuate a system of crony capitalism that has cost the state legitimacy and created monopolies impeding economic growth. Instead, many Mexicans are asking whether Calderon will go after corruption in other unions, notably ones that have backed him. Doing so would go a long way toward convincing his countrymen that the dissolution of the electricity company was more about pesos than politics.

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