The Role of Local Economic Groups in Telecommunication Privatization in Central America

Abstract

During the 1990s, the telecommunication sectors in most Latin American countries were privatized, liberalized and deregulated. In the literature, this shift has been accounted for by pointing to technological transformations, changing political coalitions or the pressure from international financial institutions (IFIs). This article argues that a centerpiece in the explanation of the general shift towards opening the telecommunication sector, and of the specific forms that this took in the different countries, is the ideas and strategies of local economic groups. The article traces the processes of attempted and implemented telecommunication reforms in three Central American countries - Costa Rica, Guatemala and Honduras - and argues that it was the local private sectors in shifting alliances with transnational corporations that were the main forces behind reforms. The IFIs had primarily an indirect role, through squeezing the budgets of the state owned telecommunication companies contributing to their deteriorating quality, and through supporting the political organization of the local private sector. The article also analyzes the regulatory regimes resulting from the reforms and the extent to which they benefit the local economic groups, the consumers, the state and/or transnational companies.