Peruvians Riot Over Planned Sale of 2 Regional Power Plants

The New York Times -- 17 June 2002

by Juan Forero

BOGOTÁ, Colombia, June 17 - Hundreds of troops took control of Peru's second-largest city today after the government imposed a state of emergency to end violent protests against the sale of two state-owned electricity generating companies.

The protests, which began on Friday and are the largest since President Alejandro Toledo took office 11 months ago, prompted the government on Sunday to ban public protests and suspend constitutional guarantees for 30 days in the city, Arequipa, and its province.

The protesters, worried that the $167 million sale of the regional companies, Egasa and Egesur, to a Belgian company would mean higher utility prices and layoffs, spilled into the center of Arequipa, a city of one million people.

The police used tear gas over the weekend to disperse crowds; one canister killed a 25-year-old university student. The Peruvian Air Force flew up to 17 Americans out of Arequipa to Lima on Sunday.

The crisis in Arequipa is a serious test of Mr. Toledo's government, which has been buffeted by protests from people frustrated with the administration's inability to relieve poverty.

The standoff, which was unusually violent, underscores the deep frustration across Latin America with government efforts to privatize state industries. Officials contend that privatization saves money and improves services. But many Latin Americans, frustrated by rising poverty and stagnant economies, say auctioning off government assets benefits only a few.

"The response from Latin America, the grass-roots response, has been growing rage over the privatization thrust," said Larry Birns, director of the Council on Hemispheric Affairs in Washington, which has studied privatizations.

Peruvians, recalling how privatization under the former president, Alberto K. Fujimori, netted billions of dollars that were largely stolen or misspent, worry that auctioning off state companies will only continue to line the pockets of corrupt officials.

Residents in Arequipa are particularly angry because, they contend, President Toledo is reneging on a campaign promise not to auction off utilities. The president said in a nationally televised address on Sunday, however, that the sales would benefit Arequipa's people. He said the sale, to Tractebel S.A., an energy division of the giant French utility group Suez Lyonnaise des Eaux, would go through despite the protests.

Indeed, the government sees privatization as crucial to the economic well-being of Peru. The government has said it hopes to earn $800 million from privatizations this year, money Mr. Toledo has said would translate into infrastructure and jobs.

The government's promises, though, did little to assuage concerns. Protesters defied the state of emergency by congregating in Arequipa's main square, while others blocked roads in southern Peru. Fearing the spread of protests, the government ordered tanks and troops into the streets of Lima today.