Union Fenosa – from San Marcos to London

UNION FENOSA EN GUATEMALA by arenaentrelosdedos

In the smoke and mirrors of global finance, private equity firms have had a major relationship in a majority of firms that defaulted on their debt in 2009 thereby contributing on a grand scale to the recent financial crisis that has seen the burden falling disproportionately, as is the norm, on the world’s poorest, as losses have been nationalised across the world. This last week, we received news that Union Fenosa (Gas Natural) had sold its electricity distribution interests in Guatemala to a UK private equity company.

We have previously presented news of incidents of major human rights violations and deaths related to the Union Fenosa company in Guatemala. These attacks were primarily targeted at union representatives and community leaders. In 1998, then President Álvaro Arzú led the privatisation of the Guatemalan electrical distribution concern in favour of a monopolistic (and oligarchic) venture concerning the Spanish utility, Union Fenosa. As is the norm with these actions, the price of electricity rose to unpayable amounts for most Guatemalans. Over the years following privatisation, thousands of consumers filed complaints about the quality and excessive costs of the service – over 90,000 between January and May 2009 and popular discontent rose.


The organisation which has taken the brunt of these attacks is FRENA (the Front for Resistance in Defence of Natural Resources and the Rights of the People) and especially in the Department of San Marcos, where there has been and ongoing dispute. The dispute escalated and the government stepped in, not to protect the communities, but as is the way of things, to protect the interests of the company. Government action included suspending several constitutional rights such as freedom of movement, speech and assembly and enhancing the powers of security forces to conduct searches. The lives of community leaders were especially threatened in relation to Union Fenosa in a country where opposition to the interests of the oligarchs is seen as having a major negative effect on life expectancy. Our post, ‘Our lives can be cut short at a stroke’ references an article by Danilo Valladares on Inter Press Service. Friends of the Earth International sought to explain the origins of the dispute – again nothing here will surprise anyone who has, even at a cursory level, the consequences of privatisation on poor communities and where any wealth has been sucked upwards (and usually overseas) and all the risks shift downwards.

Continued human rights abuses in Guatemala against members of FRENA raised concerns among civil society groups in Spain and pressure there may have contributed to Union Fenosa selling to Gas Natural, another Spanish concern. To butcher Shakespeare, What’s in a name? That which we call a rose by any other name would smell as rotten. Threats and attacks continued to be directed at FRENA leaders and members, and violent deaths occurred, and the service continued to be poor punctuated by series of blackouts.

This last week, we received news that Union Fenosa (Gas Natural) had sold its electricity distribution interests in Guatemala to a UK private equity company called Actis for in the region of 345 million US dollars plus debt. Private equity companies are part of the smoke and mirrors shenanigans of the capital markets whose sole aim is to make money but seldom to add value – described in a recent book as having a business model which is more about value skimming than value creating. Apparently, “more than half of the companies that defaulted on their debt in 2009 were either previously or currently owned by private equity firms”.

The Commonwealth Development Corporation (CDC) was an organisation established by the UK Government in 1948 to promote agriculture and industry and alleviate poverty in some of the poorest parts of the empire. It was partially privatised and named CDC Group plc, from which Actis was spun out. In 2007, it became apparent that the formerly government-owned business had made millions of pounds for its former employees – a nice little earner indeed.

The UK publication Private Eye has been investigating CDC and Actis and looking at where CDC has really made pro-poor investments in the developing world. This investigation has led to the UK parliament holding an inquiry, of sorts. Despite CDC’s proclaimed vision, pro-poor development includes investing in, for example, luxury shopping malls in Ghana and Nigeria. Should Guatemala expect anything different? We have mentioned many times before about tax and it would be of interest as to how Actis will act in making a real contribution to the poor of Guatemala or if it is in the business of stripping out the wealth and leaving debt with the Guatemalan people ‘through the support and understanding of the regulatory bodies and the Guatemalan authorities’? It would be of interest if the company were to publicise its earnings in Guatemala when it comes to its reports and also to state how much taxes it pays. It states on its website that “Actis looks forward to building upon the work of Gas Natural Fenosa and delivering a world-class service to customers while operating to the highest environmental, safety and governance standards”. This, as we have seen, is not necessarily something that the people of San Marcos will be looking forward to.

Actis states that it promotes responsible investment through raising awareness of environmental, social and governance issues in all its business activities and respecting the dignity and well-being of all those with whom the business brings it into contact. Does this mean it will pay its share of taxes and respect the rights of the communities over whom Union Fenosa rode roughshod? Let’s wait and see.

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Categories: Coming events (UK), Justice

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