1. IMPACT OF PRIVATIZATION
OVER LABOR FORCE
In a Sample of Privatized Firms in Chile
CORFO, the Chilean Economic Development Agency
SOE’s Administration & Privatisation Committee, SEP
Carlos Mladinic, Chairman, SEP, cmladinic@corfo.cl

2. THE IMPACT OF PRIVATIZATION
UPON LABOR FORCE
• There are multiple impacts from privatization upon workers
and the labor force, which not necessarily involve a cutdown
of workers in privatized firms.
• In Chile, privatization has resulted in greater investment,
which has had a positive impact over the country’s labor
force.
• In state-owned firms transferred to the private sector,
workers are protected by agreements that increase stability,
severance protection and direct additional benefits.

3. BENEFITS FOR WORKERS
Privatizations during the 90’s
1.- Advanced legal severance payment, plus additional
W compensation.
O
R 2.- Option to purchase shares for up to 10% of the
K firm at preferential prices.
E
3.- CORFO’s credit to purchase shares, payable in 18
R years, with preferential interest rate.
S
4.- Personal credit of up to 87% the price of the shares
as liquidity support for consumption (preferential rate)
5.- Special severance packages for workers dismissed
during the first 24 months after privatization

4. BENEFITS FOR WORKERS
Privatizations during the 80’s
W 1.- Advanced payment of up to 90% of legal
O benefits; the worker is obliged to earmark 80%
R to purchase shares.
K
2.- 30% of the shares available for workers at
E
preferential prices.
R
S
3.- The amount due of severance payment is paid
when the worker retires.
4.- Preferential rate credit for personal
consumption.

5. COMPAÑÍA de ACERO del PACIFICO C.A.P (Iron Mines
& Steel Mill)
Trend for investments and Labor Force
CAP Investments and Workers
60 10,000
Workerss
Investme
Million
No. of
40
US$
nts
5,000
20
0 0
1987 1995 2000
Inversiones Trabajadores

6. Compañía de Telefonos de Chile CTC (Basic Telecom
Company)
Trend of investments and labor force
CTC Investments and Workers
600 10,000
500
No. of Workers
8,000
Investments
US$ Million
400
6,000
300
4,000
200
100 2,000
0 0
1987 1995 2000
Inversiones Trabajadores

7. Compañía Chilena de Electricidad, CHILECTRA
(Power Utility)
Trend Of Investments And Labor Force
Chilectra Investments and Workers
50 3.000
No. of Workers
40 2.500
Investments
US$ Million
2.000
30
1.500
20
1.000
10 500
0 0
1987 1995 2000
Inversiones Trabajadores

8. Empresa de Telecomunicaciones de Chile ENTEL (Long
Distance Telecom Company)
Trend of Investments and Labor Force
Entel Investments and Workers
140 2.000
120
No. of Workers
Investments
US$ Million
100 1.500
80
1.000
60
40 500
20
0 0
1987 1995 2000
Inversiones Trabajadores

9. LAN Chile (Flag Airline)
Trend of Investments and Labor Force
LAN Chile Investments and Workers
60 7.000
6.000
No. of Workers
50
Investments
US$ Million
40 5.000
4.000
30
3.000
20 2.000
10 1.000
0 0
1987 1995 2000
Inversiones Trabajadores

10. IMPACT OF PRIVATIZATION UPON LABOR FORCE
IN WATER UTILITIES
1999 2000 2001 2002
Total Esval workforce 720 529 478 376
Outsourced workforce 325 446 784 833
Public Works workforce 750 650 1.600 3.000
1999 2000 2001 2002
Total Aguas Andinas workforce 1.550 1.342 1.174 1.202
Outsourced workforce 150 150 250 300
Public Works workforce 2.100 3.400 3.800 4.000

11. A comparison: privatizations during the ‘80s and ‘90s:
Sales values got by SEP
Privatizations Company's N° Times
Stake sold Sales Value
during the 80's net worth Profit
Endesa 60,9% 521,4 856,2 9
Gener 95,1% 88,3 92,8 4
Chilectra 81,6% 117,0 143,4 4
Chilquinta 84,8% 29,1 34,3 5
Iansa 80,6% 48,5 60,2 7
Entel 62,0% 124,5 200,8 4
Soquimich 93,0% 208,7 224,4 4
Cap 59,6% 68,9 115,6 4
Total 1.206,4 1.727,7
Privatizations Company's N° Times
Stake sold Sales Value
SEP net worth Profit
Edelaysen 91,0% 43,0 47,3 56
Esval 40,0% 104,9 314,0 22
Emos 42,0% 918,7 1.755,3 37
Essal 51,0% 93,6 183,5 60
Essel 45,0% 122,4 238,8 58
Essbio 51,0% 283,0 586,0 46
Essam - 178,9 178,9 46
Total 1.744,5 3.303,8

12. OUTSOURCED LABOR FORCE
FIRMS PRIVATIZED IN THE 80’s
Outsourced workers 1987 1995 2000
Cap 0 26 44
CTC 6.168 38.304 51.549
Chilectra 145 1.238 2.283
Lan Chile N/I N/I N/I
Entel 1.330 5.846 7.698
Total Outsourced Workers 7.643 45.414 61.574

13. IMPACT UPON LABOR FORCE
FIRMS PRIVATIZED IN THE 80’s
Workers/Firms with respect toTotal Work Force
1,6%
1,4%
outsourced labor + own workers
1,2%
1,0%
0,8%
0,6%
Own workers
0,4%
0,2%
0,0%
1987 1995 2000
Years
Internos Inter + Exter

14. FIRMS PRIVATIZED IN THE 90’s
WATER UTILITIES
Trend of Investments in US$ million and workers
1997 1998 1999 2000 2001
Esval Investments 57 67 19 15 57
Esval Workers 736 698 720 529 487
Emos Investments 49 47 37 62 124
Emos Workers 1.836 1.692 1.550 1.342 1.202
Essal Investments 12 8 8 10 32
Essal Workers 311 315 348 244 234
Essel Investments 9 9 7 3 14
Essel Workers 324 324 321 245 73

15. WATER UTILITIES
TREND OF INVESTMENTS AND LABOR FORCE
Workers and Investments in Water Utilities
250 3.500
3.000
200
No. of Workers
2.500
US$ Million
150 2.000
100 1.500
Total Investments
1.000
50
500
0 0
1997 1998 1999 2000 2001
Año
Total Inversiones Total Trabajadores

16. THE IMPACT OF PRIVATIZATION UPON
WORKERS AND LABOR FORCE
Conclusions
• Corporate investments have increased as a result of
privatizations in Chile, with a positive impact upon the labor
force.
• In the sample of firms privatized during the 80’s, workers
(both direct and indirect) increased their share of National
Work Force from 0.58% in 1987, to 1.34% in 2000. Direct
employment created by the firms of the sample privatized
during the 80’s decreased from 0.41% to 0.28%.
• Direct employment in the sample of firms transferred during
the 90’s decreased by 32% during the last years. This may
reflect previous overstaffing as well as deeper and quicker
outsourcing processes. There are no figures available for
indirect employment resulting from the externalization of
operations or increased investments.

17. THE IMPACT OF PRIVATIZATION UPON
WORKERS AND LABOR FORCE
Conclusions
• Workers must be involved in privatization processes. In Chile, the
success of the process is explained by the direct involvement of the
workers, as well as by the execution of previous agreements that
directly benefited them, for example:
 Participation in the firm’s shareholding.
 Privatization’s Success bonuses.
 Extra compensation in case of discharge, during a specific time
period, protecting the vulnerability of elder or less skilled
workers.
 Overall, special benefits well above those granted by state-
owned firms.

18. THE IMPACT OF PRIVATIZATION UPON
WORKERS AND LABOR FORCE
Conclusions
• Investments made in 2000 in the sample of firms privatized in the
80’s exceed by 450% those made in 1987, prior to their privatization,
while in 1995 they had been 660% greater.
• Investment increased from US$ 71 million to US$ 221 million in
water utilities privatized in the 90’s, with a positive impact upon the
country’s employment.
• Impact on employment does not depend on whether the firms’
shares are controlled by the State or by the private sector, rather on
the growth of the industry, and on the ability to investment of such
firms.
• For example, telecommunications industry’s sales in 1987 –when the
state-owned firms were privatized– amounted to US$ 308, while they
reached US$ 2,613 million in 2000. However, this requires investment
volumes that the State was unable to afford.