THE ARGENTINE TELECOMMUNICATIONS SECTOR Page 10

> permits with precarious status to other providers. 'The government was responsible for policing the sector, for encouraging research, for promoting the development of domestic industry, and for coo-dinating all activities in the sector.'"

Despite the discontinuities in Argentinie politics, there was a consistent theme in telecommunications policy. This was the development of an Argentine telecommunications equipment industry. As it did in many other sectors, the Argentine government promoted import substitution in telecommunications equipment, forcing ENT'el to source its needs in Argentina. The result was that ENTel was limited in its access to technology and burdened with the cost of buying equipment at prices well above those in other countries. T'he outcome was equipment prices higher than in Europe or in the U.S and higher than in some other Latin American countries.

Despite the high costs imposed by Argentine industrial policy, by the late 1950s ENTel was one of the largest telecommunications carriers in the world. This may be both a reflection of Argentina's relative wealth and of the suppliers' demand for government patronagu. In 1956 it was one of the ter, largest finns in termns of the number of lines installed and it ranked seventh in the number of calls placed. In 1957 Argerntina had 42.86 % of the telephones installed in South America and the telephone density in the city of Buenos Aires was almost twice as high as any other major urban area in Latin America. However, even as the system grew, the backlog of lines increased. In many areas where ENTel failed to provide service, local cooperatives sprang up to build and administer local networks.'<sup>8</sup> In addition, ENTel developed managerial and labor problems: the quality of service provided was poor; the unions in some cases took over managerial activities; strikes were accompanied by sabotage; phantom workers collected salaries from the company; and clandestine telephone connections were made where payments were not made to ENTel but rather to ENTel staff. (See Figures I to 8 and Tables I to 4 at the end of the paper for more details.)

# **c. The 1988 Attempt by the Alfonsin Government to Privatize ENTel's Management**

The civilian government of President Raul Alfonsin first tried to improve the level of service and reduce the backlog of unmet demand by using dramatically higher connection chiarges to finance an increase in ENTel's level of investment. When that failed the Alfonsin government tried to partially privatize the firm in a bid to improve management and attract more capital. By 1985 the backlog represented 1,298,000 lines or 52.7% of the lines in service. (See Figure 5 and Table 2.) The Megatel expansion plan that was launched in 1985 was intended to both address this backlog and promrte domestic industry.'" The Megatel Plan was to provide for the installation of I million lines between 1986 and 1989. Neither the Argentine government nor ENTel were able to finance this expansion, so the plan

> 1' Law 19,798/1972.

1 ENTel Annual Reports. 1958-60. Local cooperatives did not appear in the areas served by CAT, apparently because CAT was able to meet demand.

'9 This plan was initiated within the executive branch and did not need tha approval of Congress.