PRIVATIZATION
make external investment attractive to encourage foreigners to participate actively in a country's privatization process. Enterprise Efficiency Prices and Costs Except for demanding a distribution of dividends equal to 100 percent of the profits, subjecting new investments to the approval of the National Investment System, and limiting the diversification potential of the enterprises, the military regime generally granted the administrators of Chilean public enterprises a high degree of autonomy. Before this privatization, moreover, Chilean public enterprises as a rule already tended to operate with "real" prices and costs—that is, prices and costs reasonably similar to what they would have been in an ideal, undistorted market economy under competitive circumstances. This was especially true during the second round of privatizations. Public enterprises therefore tended to be efficient. In four of the six cases studied in this report, the analysis suggests that the rise in the profits of the privatized enterprises is significant and corresponds to a genuine increase in efficiency—and not to a simple correction in the relative prices and costs. This contradicts earlier studies, in which the application of a discrimination analysis and an analysis of the principal components of a relatively large sample of public, private, and privatized enterprises in the 1980s did not permit significant differentiation among these groups of enterprises on the basis of efficiency indicators, even though the means and the averages of the majority of these indicators were higher for private and privatized enterprises than for public enterprises. If there is a lesson to be gleaned from this, it is that under special circumstances, when public enterprises can be isolated from political pressures to subsidize the prices of their products or hire excess personnel and these firms can be subjected to competition, relatively efficient public enterprises may exist temporarily. In any case, these same privatized enterprises tend to show relatively better yields. Union Pressures The freedom to unionize (under competitive conditions) exists in Chile, and collective bargaining takes place at the enterprise level. Enterprises, in turn, are in competition with other local and, often, international enterprises. From the case analysis in this study and the reports, it can be asserted that union pressures re-
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