Publication: Privatization by Capitalization : The Case of Bolivia - A Popular Participation Recipe for Cash-Starved SOEs
Date
1994-11
ISSN
Published
1994-11
Author(s)
Ewing, Andrew
Goldmark, Susan
Abstract
While campaigning for the 1993
presidential election, Gonzalo Sanchez de Lozada proposed
the unique Bolivian model of capitalization -- "Plan de
Todos" (Plan for everyone)--for six large state
enterprises in key sectors. The enterprises would be offered
for sale by international tender. The successful bidder
would pay the agreed price not to the government, but into
the company itself. The cash would be used for investment in
the sector. Initially the investor and the government would
hold equal, 50 percent stakes in the new company. The
government would immediately give its share in equal parts
to all adult Bolivians by endowing "pension
accounts" set up for each adult citizen. A 50 percent
stake in a company is usually enough to ensure management
control. However, to avoid any uncertainty and the risk of a
negative impact on the selling price, the capitalization law
proposes that a management contract be given to the
strategic investor for a fixed period of time. After that
time, the investors would be able to buy shares in open
markets to increase the shareholding beyond 50 percent.
Sanchez de Lozada won the election in July 1993. With the
help of World Bank advisors, he has been working to make
this capitalization concept a reality. However, it has run
into many of the thorny issues associated with traditional
privatization schemes. This Note describes the key
capitalization issues during the process.
Citation
“Ewing, Andrew; Goldmark, Susan. 1994. Privatization by Capitalization : The Case of Bolivia - A Popular Participation Recipe for Cash-Starved SOEs. Viewpoint. © World Bank, Washington, DC. http://openknowledge.worldbank.org/handle/10986/11679 License: CC BY 3.0 IGO.”
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