Private Life

How privatization is helping to revive Peru

The wind in Atico, Peru, is filled with the smell of salt and the sound of metal halyards slapping against their boat masts. At the end of the work day, the lagoon is so full of fishing boats that the entire center of town seems to rise and fall with the tides. On the shore, the docks are covered below with barnacles and above with scales and freezers to hold the day's catch.

Fishing is not new to Atico. For millennia, early Peruvians used the small lagoon in the middle of the village as a base for fishing. Near here, anthropologists have found bone fishhooks and remnants of nets made of animal innards that could be more than 2,500 years old. Many families here have included fishermen for longer than can be traced.

"I've got salt water in my veins," said 67-year-old Germán Herrera, a barrel-chested man whose calloused hands learned to throw fishing nets to the sea at age 8. "My father used to say that if our family couldn't fish, we couldn't live."

Unfortunately for Herrera, he was forced to prove his father's axiom wrong in a story repeated too often in Peru. Twenty-five years ago, Herrera's town was a thriving pillar of an industry that nationally provided a fourth of the world's fishmeal. But the lives of the fishermen and the town were permanently altered when private companies in Atico--like their counterparts elsewhere in the country--were nationalized during the military government of the early 1970s and placed under a state bureaucracy called PescaPerú.

Within 10 years, Peru's fishmeal production was reduced to a fifth of its former highs, while PescaPerú had grown from nothing to the recipient of subsidies worth nearly 1 percent of the budget of the increasingly impoverished nation. The fishing industry was ruined in the process. In Atico, as in more than two dozen Peruvian towns where the sea had provided more than three jobs in four, boats literally rotted in the harbors and former fishermen abandoned their homes and fled to Lima's growing slums, desperate for work.

Herrera was able to keep his home, thanks only to money he had put away in hopes of buying a bigger boat. But he had to take work as a house painter and on government crews building roads a couple of hours away in the mountains. His fishing, he recalls sadly, was limited to about five days a month.

But two years ago, says Herrera, life started returning to this small town 350 miles southeast of Lima. Two of his three brothers who had been forced to leave half a generation earlier returned. At first there were a few new jobs, then a few more. Herrara is again earning enough to live from fishing, and the town is about as productive as it was 40 years ago, but still less productive than in the heyday just before nationalization.

"The new jobs came when they sold the businesses," the white-haired Herrera says simply. "I don't know anything about politics, but I know about jobs. There were no good jobs before and now there are plenty. For that, I give my thanks."

The main offices of Copri, the committee charged with privatizing some 240 state-run companies, are in a small, rectangular building that literally spends most of the day in the dark shadow of the massive headquarters of the Ministry of Energy and Mines in Lima. As center stage in an aggressive privatization program initiated under President Alberto Fujimori's administration, Copri is an increasingly busy place.

Copri planned the sale of the public companies that ran Atico's fishing industry. Because of the poor condition of the industry in Atico, Copri reports that selling the rights to the area to an international consortium brought the government a modest return, about $650,000. But most agree with Herrera that the most important result was the creation of more than 150 new jobs, breathing life into the crippled town.

The building that houses Copri once served as the Ministry of Energy and Mines's bank, but the privatizations have allowed it to consolidate in the main structure. "It's kind of funny, but this building used to be for handing out money every payday," says Copri operations director Manuel Llosa, who supervises the day-to-day activities of the staff of about 40. "Now, it's used for bringing money in."

Copri has brought plenty of money in. Since its founding in 1992, the committee has sold more than 75 companies for nearly $4 billion, including the national telephone company, a passenger airline service, two major banks, eight hotel chains, and factories producing everything from cement and bricks to tomato paste and breakfast cereal. But the most encouraging and long-lasting part of the equation, according to many observers, is what has happened to the companies since being sold.

"Almost without exception, privatization in Peru has meant higher production, more efficiency, and better income for the employees," said Lima political scientist Gerard Máton. "It's amazing what happens when people are forced to look at the bottom line."

The noted Italian philosopher and naturalist Antonio Raymondi wrote that Peru was like "a beggar sitting on a bench made of gold." Peru's poverty often overshadows the fact that the country is hugely blessed with natural resources.

Even now, with its unlikely mix of state companies and fledgling private firms, Peru ranks among the world's top eight producers of six major metals, including silver and gold. The fishing industry is again among the top six in the world and rising, and Peruvian farms lead or are second in South America in the production of five fruits or vegetables. The piecemeal privatization of the state oil company PetroPerú has so far attracted nine buyers from seven countries, including the United States, Russia, and Taiwan. Peru's expansive portion of the Amazon jungle has unknown potential for exploration, and the national tourist trade, which many experts refer to as virtually unlimited, is just starting to take off.

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