Uruguayan Government Rejects Brazilian Offer to Buy State Airline LADB Staff

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1-13-1994 Uruguayan Government Rejects Brazilian Offer To Buy State Airline LADB Staff

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Recommended Citation LADB Staff. "Uruguayan Government Rejects Brazilian Offer To Buy State Airline." (1994). https://digitalrepository.unm.edu/ notisur/11311

This Article is brought to you for free and open access by the Latin America Digital Beat (LADB) at UNM Digital Repository. It has been accepted for inclusion in NotiSur by an authorized administrator of UNM Digital Repository. For more information, please contact [email protected]. LADB Article Id: 57079 ISSN: 1060-4189 Uruguayan Government Rejects Brazilian Offer To Buy State Airline by LADB Staff Category/Department: Uruguay Published: 1994-01-13

In December, President Luis Lacalle's administration rejected an offer by the Brazilian airlines VASP (Viacao Aerea Sao Paulo, SA) to buy Uruguay's state aviation company PLUNA (Primeras Lineas Uruguayas de Navegacion Aerea), since the VASP is heavily indebted to creditors and thus considered financially unstable. In late 1992, the Lacalle administration had announced plans to accelerate the privatization of government enterprises, beginning with the state-run telephone company ANTEL (Administracion Nacional de Telecomunicaciones).

Nevertheless, in a national plebiscite in December of that same year, Uruguayan voters demanded that the government's privatization law approved by the Lacalle administration in September 1991 be overhauled to prohibit all state monopolies from being sold, and to force the executive to seek legislative approval for the sale of all non-monopoly businesses . As a result, the government's privatization plans ground to a complete halt, until June of 1993, when the Lacalle administration announced that it would open PLUNA airlines to bids from foreign companies. PLUNA is a small enterprise which only maintains five international flights to Argentina, Brazil, Chile, Paraguay, and Spain. The company has concessions from the US to fly to Miami, although no PLUNA flights to that country are presently operating.

Originally, four foreign companies expressed interest: American Airlines, Spain's Iberia, Aerolineas Argentinas, and the VASP. When bidding closed at the end of September, however, only the Brazilian airline actually presented an offer to the government, which was then reviewed for nearly two months by an Advisory Commission (Comision Asesora de Adjudicacion). In December, the government rejected the VASP offer, since the Advisory Commission ruled that VASP would be unlikely to run PLUNA profitably given the Brazilian company's outstanding debts to creditors.

According to the Commission, over the past three years, VASP's debts were worth 80% more than the value of that company's total assets. Indeed, in November 1992, Brazilian authorities reported that VASP was on the verge of bankruptcy due to a staggering US$800 million in outstanding debts. That same month, Brazilians courts had impounded 22 planes from VASP's fleet of 60 due to US $24.7 million in back rent owed to the two foreign companies that leased those aircraft to VASP (see Chronicle 11/26/92). The Lacalle administration says it plans to again offer PLUNA to interested bidders in the next few weeks, although given the lack of offers in September, the government may have to improve the terms of sale to attract interested buyers. Since President Lacalle took office in 1990, his administration has been unable to privatize a single state enterprise. To date, the government has only managed to sign contracts with some private companies to operate railway lines formerly run by the government.

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