Public Ultimate Losers as Privatized Argentina Is Anything but an Eden : Latin America: Benefits elusive in sale of major state industries, including the airline, telephone company, steel, television stations and the gas and electric utilities.

Welcome to newly privatized Argentina, where the planes are late, costly telephones die when it rains and highways have new tolls to go with the old potholes.

Three years into an ambitious program of selling off state-owned industries, hailed as the biggest and fastest anywhere, many Argentines wonder: What, exactly, are the benefits?

Few are yet to be found in either transportation or communications.

Aerolineas Argentinas is seldom on time, tickets are expensive, pilots question safety procedures and stewardesses suggest that complainers use other airlines. Before it went private, the airline’s on-time record was better, fares were much lower, maintenance was good and even the food was decent.

Federal highways that used to be free now have tolls, but remain in the same condition: narrow, poorly lit, with few guardrails or spaces to pull over, with more potholes than center lines.

The telephone company, now private, charges $750 for new lines that misdial or go dead when it rains, just like the old ones did, and rates are among the world’s highest.

“Two years ago, people were in favor of privatizations by a 2-1 margin,” pollster Rosendo Fraga said. “Now, 1.5 are against for every one in favor.”

In the view of Alberto Abbate, a cost analyst and political gadfly, “It’s not whether public companies and services should have been privatized, but how. It could have been done much better.”

Reversing half a century of nationalization, President Carlos Saul Menem sold off major state industries, including the airline, telephone company, steel, television stations and the gas and electric utilities.

Highways, railroads, the Buenos Aires zoo and the water utility were made into concessions.

Still to be sold are the oil company, post office, national mint, two nuclear power stations, the shipping line and plants that make petrochemicals, army tanks and submarines.

In their heyday, the companies provided jobs, revenue and at least the illusion of sustained growth. At the end of the 1980s, however, most were obsolete, overstaffed, undercapitalized and losing huge amounts of money even with annual revenues in the billions of dollars.

For 33 companies bought outright and contracts to manage 19 others, domestic and foreign investors paid a total of $5.34 billion and wiped out $7 billion of Argentina’s foreign debt.

When Menem leaves office in 1995, almost every public service and defense industry once run by the state will be privately owned or managed.

It is sometimes hard to remember that Menem, who was inaugurated in July, 1989, amid recession and hyperinflation, feared that no one would buy the companies he was desperate to sell.

The government’s oil company was probably the only big one in the world that regularly lost money. The railroad had three times the employees it needed and unions blocked layoffs.

State-owned industries were decaying and there was little public money or political will to fix them. Private investors snapped most of them up because the terms were generous and they felt they could run the companies better.

Gas and electricity rates were raised as soon as the utilities were sold. The state oil company, which goes on the block this year, has reduced its number of employees from 52,000 to 16,000 and is making a profit.

Telefonica of Spain and Telecom of France and Italy, which now run the telephone company, were virtually guaranteed a profit by the contract terms.

Iberia, Spain’s national carrier, got a near-monopoly domestically as part of its deal to buy Aerolineas Argentinas. As a result, the fare is $454 from Buenos Aires to Bariloche, a resort in the Andes. Foreign airlines charge $215 to Santiago, Chile, and $385 to Rio de Janeiro, Brazil, both farther away.

As for the railroads, “As many people ride commuter trains in Buenos Aires as they do in all of North America,” or about 1 million a day, said James Stoetzel of Burlington Northern, a Chicago railroad that bid for a contract. “The key,” he said, “is to get them all to pay.”