THE ARGENTINE TELECOMMUNICATIONS SECTOR Page 12 However, the Alfonsin administration was unable to persuade the Congress to approve its decision to partially privatize ENTel. The Radical Party had lost the 1987 congressional elections and the Peronists held a majority **itn** the Senate. Even though there was popular support for the partial privatization of ENTel, the Congress opposed the government's proposal.<sup>22</sup> This oppositioin was due in part to some members ideological objections to privatization and in part to some members objections to the actual terms of the deal, particularly to the lack of competition and regulation. More importantly, the Peronists also anticipated winning the 1989 presidential election and for that reason were unwilling to support any action that would help the Radical Party candidate. Ultimately, the government ran out of time. The Peronist presidential candidate, Carlos Saul Menem, was elected in May 1989 and the Minister of Public Works, Rodolfo Terragno, was tapped to act as the liaison between the out-going and in-coming governments, ending his efforts to partially privatize ENTel.

Thus, for political reasons, the Telefonica proposal in the end was unsuccessful. The proposal was flawed **in** that it neither provided for competition or for adequate regulation of the telecommunications sector. However, it opened the door for another, more complete reform of ENTel.

# **IV. The Privatization of ENTel**

One of the most remarkable aspects of the 1990 privatization of ENTel is that it happened at all. The unheralded shift from adversarial to cooperative politics provided a window of opportunity. The primary goal of the Menem government was to take advantage of the opportunity presented by the shift in Argentine politics and demonstrate its ability to transform the Argentine economy by reducing both the scope of government activity and the level of the government's indebtedness. By actually completing the privatization, the Menem government was able to demonstrate early in its term that it had the resolve and ability necessary to fundamentally change the role of government in the Argentine economy. The momentum for the sale was derived from the country's economic crisis and a rare political opportuiaity. This gave the sale its own dynamic; the fact that the completion of the sale was central to the government's attempt to establish its credibility imposed a discipline on the actors involved and limited the influence of the sale's critics. While thc privatization team recognized the importance of the sale conditions and the need for a regulatory regime, these issues were secondary to the completion of the transaction. However, the conduct of the sale itself, as well as its completion, contained signals as to the future conduct of the Argentine government.<sup>23</sup> The chapter first gives a

> 22 Government polls had shown that while Argentineans did not approve of privatization in general, they did support the privatization of ENTel. A poll conducted by Guillermo Bravo and Pessah consultants showed that 55-59% of the interviewed ENTel users had expressed support of the proposal to partially privatize ENTel.

> 23 During the public ceremony in which the executive decree establishing the terms and conditions of the sale of ENTel was signed the Minister of Public Works and Services, Jose Roberto Dromi explained that "the Government, complying with the mandate from the people, wvished to change the structure of the state in Argentina," La Nacion, January 8. 1990, "Se pone en marcha la privatizacion de ENTel."