Mexico Pruning List of State-Owned Firms

Over the past five decades, Mexico’s government gradually acquired an unwieldy jumble of nearly 1,000 companies, from airlines to metal foundries, many of them money-losers.

Now, in an uphill drive to promote efficiency, it is trying to get rid of hundreds of the operations. Some are being sold, others are being closed down and some are being transferred to state governments.

But officials of President Miguel de la Madrid’s administration call the move only a pruning and say it will not change the government’s longstanding policy of maintaining a firm grip on the economy.

“What we’re aiming for is rationalization--getting rid of the marginal companies and using the resources to further improve the remaining government companies and making them more efficient,” said Ignacio Lara, spokesman for the Department of Energy, Mines and Government Industries, which oversees most of the companies.

Owns Giant Monopolies

The government’s wholly or partly owned companies enable it to control an estimated 65% to 70% of the nation’s economic activity. The rest is in private hands.

Because the constitution stipulates that “national strategic” enterprises should be owned by the state, the government is keeping full or controlling ownership of such giant monopolies as Pemex for the petroleum industry, Telephones of Mexico in telecommunications, the railways, electric power and uranium.

It also is keeping shares, in partnership with private enterprise, in shipbuilding and ship repair industries, petrochemicals, steel making, airlines and other major industries, even though some of them lose money.

Lara said in an interview that the purpose in retaining those companies is to assure their continued development, despite big administrative difficulties.

Pemex, for instance, handles all oil and natural gas sales, which made up nearly three-fourths of the nation’s $20 billion worth of exports in 1984. But an overblown, corruption-riddled bureaucracy keeps its productivity low.

The divestiture program, which began in March, calls for the disposal of 236 companies, some of them acquired as far back as the early 1940s. They include movie-making and book-publishing concerns, restaurants and night clubs, service stations and laundries in remote areas, lumber mills and distilleries.

Seven wholly owned, money-losing state corporations are being transferred to state governments that want them for political or social reasons, but up to now have been unwilling to put up the money to keep them running.

Tortilla Factories Closed

An additional 55 companies are being closed, including a string of tortilla factories, some laundries and others that--like a sugar mill hundreds of miles from the nearest sugar cane field--were started on paper years ago, but never got off the ground.

The rest are being sold, either as units or piecemeal as shares on the stock market. The powerful Mexican Labor Federation, which represents more than 4 million workers, recently bought the Condor bicycle factory and said it is interested in acquiring a handful of others, including a mineral water bottling plant.

“Many of these non-strategic industries were started by the government in fields where private enterprise either was afraid to venture in, did not have the money to do it or lacked the expertise,” Lara said. “And, to preserve jobs, many more companies were acquired by the government over the years as they went bankrupt.”

Jobs are a foremost issue in Mexico.

The country has had a combined unemployment and under-employment rate estimated at nearly 40% for several decades. And, with an annual population growth rate of 2.6%, it needs to create 850,000 new jobs annually just to keep up with the number of youths seeking employment for the first time.

For the past three years, since falling world oil prices helped plunge Mexico into an economic crisis, the number of new jobs has been about half that.