Benedicte Bull


ISSN 0809-0440

ISSBN 82-570-4829-1

Aid, Power, and Privatization:
Domestic and International Sources of Telecommunication Reform in Central America

This dissertation is concerned with the broad issue of how and why developing countries respond to pressure for increased market orientation. More specifically, it asks the question: how can we account for the different approaches to market-oriented reforms in the telecommunication sector in Central America? It is based on case studies of telecommunication reform in three countries: Guatemala, Costa Rica and Honduras. The main focus is the period from 1986-2000, but the processes occurring are placed in a longer historical context of shifting control over the telecommunication sector in Central America, between the state, the military and U.S. banana companies.
The most commonly accepted answer to the question above is that introduction of such reforms is a result of external pressure, primarily from international financial institutions (IFIs). This dissertation challenges that view and argues that the reforms must be understood as a result of interaction between the international financial institutions and domestic actors; and that the outcomes are hybrids between the policies promoted by the international agencies, and ideas and interests of the domestic actors. In order to understand the processes, we both have to investigate the ideas and strategies of the specific international actors involved, and the ideas and strategies of various domestic actors, including not only the governments, but also private sector groups, the military and civil society.
The dissertation is based on document studies and approximately 130 interviews with politicians, private sector representatives, public sector officials and members of civil society in the three countries, as well as in the four international organizations involved: the World Bank, the Inter-American Development Bank (IDB), the IMF and the USAID. The main focus is on the World Bank and the IDB, as they have been most closely involved in the processes.
Among the conclusions of the dissertation are the following. First, approaches to neo-liberal reforms depend on the nature of the relationship between state and non-state elites, primarily the private sector. This affects who the proponents of market-orientation are, what are their motives, and what strategies are available to them. Second, attempts by international organizations to pressure governments to pursue reform through the use of conditionalities have generally been unsuccessful. The exercise of influence through transfer of ideas has been more important, but the success of such policies depends on the existence of domestic counterparts with compatible ideas and interests. External influence cannot therefore be analyzed in isolation from domestic politics.
A secondary focus of the dissertation is the outcome of privatization and liberalization processes in different contexts. The dissertation investigates outcomes in terms of price, availability and quality of services, as well as concentration of wealth as a result of privatization. The conclusion is that in the countries that have privatized and liberalized the telecommunication sectors, there has been a rapid increase in the coverage of mobile phones in central areas, and a fall in prices of international telephony. However, development of rural telephony lags behind, and prices of subscription and basic phone services have increased. With respect to concentration of wealth, it is shown that privatization and liberalization have involved both continuity and change. Local groups in partnership with transnational telecommunication companies own the new telecommunication companies. This strengthens the local private sector, but it also brings new actors into the domestic political economy.