Can Paraguay’s state-owned service provider be saved?

The government of Paraguay still seems determined to restore state-owned service provider Corporación Paraguaya de Comunicaciones (Copaco) to something like profitability, despite a number of failed attempts in the past.

It is not downplaying the problems Copaco faces, however. President Santiago Peña, quoted by the government’s news service, has described Copaco as “practically bankrupt”.

It probably doesn’t help that Rodrigo Benito Ferreira, who was appointed to run the company four months ago, has now been replaced. New incumbent Oscar Stark’s job won’t be easy; he says that Copaco loses 500 million guaraníes (about US$69,000) a day.

Long-standing issues relating to overstaffing appear to be ongoing, with approximately US$1.92 million allocated every month to wages for the 2,850 employees, plus another US$275,105 for the social security agency. These costs, according to Stark, are unsustainable.

And that’s not all. The BNamericas news service says that the company has accumulated debt equivalent to US$112 million, most of it involving payments to suppliers. 

The new Copaco head plans to draw up measures to be taken within two weeks; these will focus on a sharp reduction in spending. Privatisation – which was attempted in 2002 but failed in the middle of a banking scandal – will not be on the drawing board, given the president’s belief that there is an important role for telecommunications in the country’s digital agenda.

He suggests in particular that Copaco, which owns a national 18,000 kilometre fibre optic network, may support the provision of fibre optics for the educational sector.

The money required is unlikely to come from service provision any time soon, however. Copaco’s fixed telephony service has only 127,000 subscribers; most of the country’s six million inhabitants uses mobile. Copaco does have a mobile unit but this is also losing money and has to compete with big names in the private sector like Tigo Paraguay (Millicom), Claro Paraguay (América Móvil) and Personal Paraguay (Telecom Argentina).

The bottom line is that plans to revive the company, which may include a cash injection, will need to make it much more competitive and efficient, which, so far, has proved difficult.