A priority debate postponed

Víctor Renes; Carmen González
Cáritas Española; Intermón Oxfam

Since the mid-1980s, the successive governments have promoted privatisation as an instrument of either financial or public policy. So far, state bodies have shown little will to measure the social impact of this process – either in Spain or in Latin America, where Spanish capital has had an active role. It is urgent to increase public expenditure and redirect public resources to areas where they will be most likely to bring about redistribution of income and opportunity.

Littleevaluation of social impact

Sincethe mid-1980s, the successive Spanish governments have promoted privatisation asan instrument of either financial or public policy.[1]More and more sectors have been privatised. The process is still at an earlystage in the Basic Social Services (BSS), but the lack of assessments of theeffects of privatisation on society – and particularly on its mostunderprivileged groups – shows the scant attention paid by public bodies tothe social repercussions of their policies. We urge these bodies to carry out astudy of the impact of the privatisation processes launched to date, and to makeprior impact assessments that will facilitate democratic decision-making beforeimplementing any future agreements. If there is a political will, the directionof future policies may be changed.

Thepresent report refers to two dimensions of private sector participation in theprovision of BSS.[2]In the national context, we analyse the progress the privatisation process hashad in Spain over the past few years. In the international context, we describethe participation of Spanish companies in the privatisation of BSS in othercountries, especially Latin America as the region receiving the greatest annualflow of Spanish investment.

Theneed to increase meagre social expenditure

Theanalysis of social service privatisation trends and their influence on povertyand exclusion needs to be framed in the context of guaranteeing basic socialrights.

InSpain, expenditure on Social Protection in 1999[3]was 20.0% of the GDP, 7.4% less than the average European Union expenditure.This difference has progressively increased since 1994, when the expenditure onSocial Protection in Spain was 22.8% of the GDP, vis-à-vis the European Unionaverage of 28.4%.

Witha population of over seven million people, or 18% of the population in Spain,living under the poverty line (FOESSA Report on living conditions in Spain) andwith progressive cuts in benefits in the public sector, many socialorganisations have called on the government to increase social publicexpenditure. Government spending on social programmes is one of the mostimportant instruments available to the State to influence redistribution ofincome and to promote social equity. However, the government has chosenprivatisation, starting with private management formulas, without any seriousdebate on the possible alternatives.

Privatisation,commitment, solidarity: an urgent debate

InSeptember 2002, the new Minister of Labour and Social Affairs, EduardoZaplana, announced thedecision to introduce joint management in some of the public services and socialbenefits. This formula had already been used to meet budget shortfalls in PublicHealth and Education, when they were transferred to the Autonomous Communities(the regions and nationalities) without the guarantee of sufficient resources topay for them. The past record of public commitment to social services for theless privileged does not bode well for the future privatisation of other BSS.This is the case of services aimed at the homeless, a network with anoverwhelming proportion of private service providers.[4]Publicly owned centres amount to 21% of the total vis-à-vis 55% owned byreligious institutions and 15% by other private sector groups. The weak presenceof the public sector is even weaker if we consider the data regarding themanagement of each centre, as the publicly owned centres, especially themunicipal ones, are often managed by non-governmental social bodies. Accordingto this, the public sector is reduced to 14% with the private sector occupyingnearly 80%.

Inthe field of public health, the Autonomous Communities had to resort to indirecttaxes (petrol tax) to cover deficits. Also, private management of public healthhas increased considerably through arrangements with private companies toprovide clinical services, including hospital management. In the field ofeducation, arrangements with private schools have increased significantly.According to the analysis of the trade unions based on official data, the numberof students enrolled in public schools drops 0.4% per year. Thus, between 1996and 2002, public education has lost 2%, or some two million students.

Thescarcity of public resources and the trend towards privatisation have a greatimpact on the ageing, who find themselves in “situations of dependency”because of age-related illnesses, and need more health services. Since1996, the solutionpromoted by the present government has been to support private companies andinitiatives, especially in the case of homes for dependent senior citizens, tobetter organise this “service market.” If we consider that nine out of ten“dependent” people are unable to afford a private insurance to cover suchservices – and that there is no public insurance available – the risk oftheir abandonment under such “privatising” solutions is imminent.

Therefore,we must discuss not only privatisation, but also commitment and solidarity. Astate plan is urgently needed; not only to care for the homeless but to addresspoverty and exclusion in general, with defined budgets that allocate a higherpercentage of the GDP to social expenditure. To defend human, economic andsocial rights of all citizens based on social interest, not economicprofitability, the state needs to increase public expenditure and redirectpublic resources to areas such as education, health and nutrition, where thoseresources will be most likely to bring about redistribution of income andopportunity.

Impactof Spanish companies in Latin American BSS

Seekinggrowth and expansion and better competition with leading companies in Europe,major Spanish companies in the 1970s started to enter Latin American markets,finding relatively low costs and good prospects for growth. Two decades later,with the increasing liberalisation of Latin American economies, theprivatisation of state companies that provide basic services and publicutilities,[5]and projections on growth rates higher than those for Spain, Spanish companiesdeveloped their role in the provision of BSS in those countries.[6]The focus was on water supply, sanitation, and health services and the majorityof these investments were in Chile, Argentina and Bolivia (see table 1).

Table1. - Participation of Spanish companies in the privatisation of BSS in Argentinaand Chile

Investing company

Company receiving investment

Sector of activity

Adeslas Seguros de Salud

Hospitales Bazterrica


Dragados y Construcciones

Aguas de Gran Buenos Aires

Water and waste management

Soc. Gral. Aguas Barcelona

Aguas Argentinas S.A.

Water and waste management

Soc. Gral. Aguas Barcelona

Aguas Provinciales de Sta. Fe

Water and waste management

Soc. Gral. Aguas Barcelona


Water and waste management

Soc. Gral. Aguas Barcelona

Ormas ambiental

Water and waste management

Soc. Gral. Aguas Barcelona




Emp. Servicios sanitarios de los Lagos (Essal)

Sanitation services

Source:A. Arahuetes (2001) with data from Reuters, América Economía, Financial Times,The Wall Street Journal Americas, and the newspapers Expansión and Cinco Días.

The30% participation of the Abengoa Company in the international consortium“Aguas de Tunari” to provide drinking water in Cochabamba, Bolivia, has beenemblematic of Spanish investment abroad. Strong social movements denounced theshortcomings of earlier privatised concessions of drinking water services: thecollapse of those concessions left the urban poor unconnected to the publicnetwork and generated risks to health, and the companies’ lack oftransparency. These protests, coupled with the deficiencies of the DrinkingWater and Sanitary Sewage Law, caused both the abandonment of the waterconsortium and substantial changes in regulations.

Thisexample shows that debate on the social repercussions of BSS privatisationassumes even greater importance in countries with high poverty and socialinequality where, according to a recent assessment by UNDP, ECLAC and UNICEF,universal access to BSS had not yet been reached.[7]

Theimpact of the presence of Spanish companies in achieving social goals abroadwill no doubt be determined by the role the State plays in the design, funding,provision and regulation of social services and by the way in which the Statesupports the capacity of consumers, workers and civil society organisations toexpress their views. The role of all these stakeholders, the attitude of privatecompanies and the new forms of regulation and responsibility developed by thegovernment and the country’s political groups will be essential inguaranteeing universal access to these services and will determine the degree towhich, at each stage, private interests back social equity policies.

Conclusion:the State should protect BSS from liberalisation

Therefore,we have underscored the role that the State can play, both in Latin America andin Spain, to ensure universal provision of social services. However, a broadanalysis concludes that the General Agreement on Trade and Services (GATS)“could have devastating effects on the governments’ capacity to alleviatethe needs of their poorer and helpless citizens.”[8]The social movements urge governments not to subjugate the people’s socialneeds to political and economic interests, and demand that the former be theones to dictate the rhythm and flexibility of service liberalisation agreements.Basic Social Services should not be part of any liberalising commitment and thegovernments should maintain the right to limit liberalisation in those keyareas, for the sake of national development and the reduction of poverty.[9]


[1] See: Germà Bel y Antón Costas, La Privatización y sus Motivaciones en España: de Instrumento a Política, Universitat Barcelona.

[2] The concept of private sector participation in this article covers actions such as the sale of assets, sub-contracting of services, user rates and private-public associations.

[3] According to Eurosat data, ‘Dépenses et Recettes’, 1980-1999.

[4] Pedro José Cabrera. La Acción Social con Personas sin Hogar en España. FOESSA-Cáritas. Madrid, 2000.

[5] “Endesa launched internationalisation of its business in 1992, both for internal… and external… reasons, the need to seek markets in non-developed countries, the proliferation of deregulation and liberalisation initiatives…” Rafael Miranda, Endesa Councillor Delegate, “Estrategias de Internacionalización: la Experiencia de Endesa”, ICE, No 799, 2002.

[6] A. Arahuetes. Las Inversiones Directas de las Empresas de Alemania, Francia, Italia, Reino Unido y España en América Latina en el Periodo 1990-2000, 2001, and ECLAC, La Inversión Europea en la Industria Energética de América Latina, Series Seminarios y Conferencias.

[7] A commitment taken on by the 20/20 Initiative, which aims at achieving basic social service coverage, as an essential goal to fight against the most extreme manifestations of poverty, ECLAC, Equidad, Desarrollo y Ciudadanía.

[8] World Development Movement, “In Whose Service”, London, 2001.

[9] Oxfam Internacional, “Cambiar las Reglas: Comercio, Globalización y Lucha contra la Pobreza”, 2002.