{"id":4561,"date":"2020-09-09T18:59:30","date_gmt":"2020-09-09T18:59:30","guid":{"rendered":"https:\/\/mersanlaw.com\/?p=4561"},"modified":"2025-06-30T22:19:26","modified_gmt":"2025-07-01T02:19:26","slug":"the-myth-of-the-pombero-and-state-owned-enterprises","status":"publish","type":"post","link":"https:\/\/www.mersanlaw.com\/en\/blog\/el-mito-del-pombero-y-las-empresas-estatales\/","title":{"rendered":"The Myth of the Pombero and State-Owned Enterprises"},"content":{"rendered":"
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Written by Tom\u00e1s Mers\u00e1n Riera, Partner<\/h3>

\u2709\ufe0f tomasmersan@mersanlaw.com<\/p><\/div><\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Paraguayan Folklore<\/strong><\/p>

It is 7:17 p.m. on a cool spring night. Out in the fields, the foreman, exhausted from a hard day\u2019s work, lights a cigar and pours himself a little sugarcane rum with grapefruit into his glass. Lost in thought, admiring the vastness of the countryside in the darkness, he begins to whistle. Between puffs of tobacco smoke, he reflects, and whistles, with increasing intensity.<\/p>

A few minutes later, he hears an alarming noise. In the distance, he hears strange footsteps that don\u2019t seem to come from a human\u2014or an animal, for that matter. Perhaps a hybrid of the two species. Frightened, the man assumes a defensive stance. The footsteps grow closer and closer. Suddenly, a peculiar figure appears: a short, hairy goblin. Almost human, almost animal. The foreman, unable to move, feels a cold sweat run down his body. Then, everything goes dark.\u00a0<\/strong><\/p>

This rural tale is part of the traditional Guaran\u00ed mythology that we have inherited from our ancestors, the indigenous landowners of the heart of South America. The legend of the Pombero<\/em>, over the years, it has affected generations of tribes, families, and individuals connected to the Guaran\u00ed culture. And for a long time, it instilled fear and suspicion in the vast rural areas of our country.<\/p>

Today, given the passage of time and the evolution of our society, it is nothing more than a fanciful myth from the past.<\/p>

Contemporary Myths<\/strong><\/p>

In our contemporary society, myths such as the Pombero<\/em>, the Kurup\u00ed<\/em>, and the Jasy Jatere<\/em> have been left behind, and today they are merely part of our cultural and historical heritage, passed down in elementary school classrooms and perhaps in the occasional conservative family.<\/p>

However, not all myths have disappeared. Some still persist, deeply rooted in our \u201ccultural, political, and economic DNA,\u201d like a kind of Guaran\u00ed molecular composition from which we have yet to break free. We still suffer from the belief in a deeply entrenched myth: state-owned enterprises.<\/p>

Throughout its history, the government has explored a variety of sectors, and it continues to do so. But the result is always the same: inefficiency and a waste of resources. We cannot name a single instance in which the government has provided (or currently provides) a service efficiently that satisfies consumers\u2014and owners\u2014as well as the market.<\/p>

Faced with this situation\u2014which is distressing on the one hand and exasperating on the other\u2014it\u2019s worth trying to understand: What are the reasons that lead us to this undeniable outcome time and time again?<\/p>

The first answer that comes to the reader\u2019s mind is, of course, the following: corruption, corruption, and\u2026 more corruption. Yes, of course. Without a doubt. But let\u2019s set corruption aside for a minute and see what else is happening, in economic and legal (as well as political) terms. Because state-owned enterprises, with very few exceptions, have failed spectacularly all over the world. This is true in both corrupt societies and more transparent ones.<\/p>

South Korean economist and author Ha-Joon Chang has identified a key concept that largely explains this almost inevitable fate of state-owned enterprises: incentives.<\/p>

What do we mean by \"incentives\" in this context?<\/p>

The idea is quite simple and intuitive. No government manager is capable of running a company as efficiently as its owner would. The problem would not exist if the owners of public companies (the citizens) could effectively oversee the managers (politicians). It is the traditional problem of lead agent<\/em>. Now, for the public to evaluate and verify the performance of managers at state-owned enterprises is, therefore, an extremely complex and imperfect task. This contrasts with what happens in private companies, where oversight among shareholders, managers, and executives is maintained within a more orderly, solid, and efficient structure.<\/p>

In the words of the controversial Lebanese-born author Nassim Nicholas Taleb in one of his most recent works, only those who take risks and \u201c\u201dare risking their lives\"<\/em> They are the ones who, ultimately, should be able to internalize and see the benefits (or losses) resulting from the risks taken. A startup is managed efficiently because those who have made the investment are the ones whose net worth would be directly affected by the company\u2019s success or failure. They're risking their lives<\/em>. In the case of a state-owned enterprise, on the other hand, the \u201cshareholders\u201d (citizens) do not directly bear the consequences of its success or failure, much less the investment made, nor do they have a direct way to demand accountability. Public \u201cmanagers\u201d who fail, time and again, in their role of keeping the enterprise afloat are the least affected.<\/p>

It\u2019s true that a company\u2019s success depends on many factors. But it is primarily this simple\u2014yet essential\u2014idea that makes private initiatives more efficient. After all, there\u2019s a reason why companies like Apple, Amazon, Microsoft, and Alibaba\u2014to name a few\u2014generate more revenue than entire countries such as Portugal, Belgium, Puerto Rico, and, of course, Paraguay.<\/p>

So, less government. More market, right? <\/strong><\/p>

The government\u2019s failures in venturing into the business world have not been entirely in vain. There were historical moments when state-owned enterprises were necessary, when the private sector was unable to provide certain services. Today, however, the state\u2019s primary role in relation to private investment is (or should be) as follows: to provide legal certainty and to arbitrate in cases of market imperfections.<\/p>

On the one hand, the government should protect private property rights, which ensure that those who take risks can receive dividends and capitalize on profits, as an incentive for continued investment. On the other hand, the government should correct certain market imperfections that lead to undesirable inefficiencies. To name a few: consumer abuses, ensuring competition, and uncompensated externalities; these are imperfections that the government, using resources collected from citizens, can usually resolve more efficiently.<\/p>

These ideas can be summed up in the phrase coined by former German Chancellor Konrad Adenauer: \u201cAs much market as possible, as much government as necessary.\u201d.<\/p>

With so many lessons learned throughout the world and throughout history\u2014including our own history\u2014the government should focus exclusively on providing a secure platform for entrepreneurs and private investment, in order to avoid falling prey to old folk myths such as the legend of the Pombero<\/em>, or worse, as in the modern urban myths surrounding public companies.<\/p>

Cover illustration by Carlos Arg\u00fcello Sullow.<\/em><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>","protected":false},"excerpt":{"rendered":"

Escrito por Tom\u00e1s Mers\u00e1n Riera, Socio \u2709\ufe0f tomasmersan@mersanlaw.com Folklore paraguayo Son las 19:17 de una fresca noche primaveral. En el campo, el capataz, fatigado por una pesada jornada laboral, enciende un cigarro y se sirve un poco de ca\u00f1a con pomelo en el vaso. Pensativo, admirando la inmensidad del campo a oscuras, empieza a silbar….<\/p>","protected":false},"author":1,"featured_media":4562,"comment_status":"open","ping_status":"open","sticky":false,"template":"elementor_theme","format":"standard","meta":{"_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[13],"tags":[],"class_list":["post-4561","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog"],"_links":{"self":[{"href":"https:\/\/www.mersanlaw.com\/en\/wp-json\/wp\/v2\/posts\/4561","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.mersanlaw.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mersanlaw.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.mersanlaw.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mersanlaw.com\/en\/wp-json\/wp\/v2\/comments?post=4561"}],"version-history":[{"count":0,"href":"https:\/\/www.mersanlaw.com\/en\/wp-json\/wp\/v2\/posts\/4561\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.mersanlaw.com\/en\/wp-json\/wp\/v2\/media\/4562"}],"wp:attachment":[{"href":"https:\/\/www.mersanlaw.com\/en\/wp-json\/wp\/v2\/media?parent=4561"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mersanlaw.com\/en\/wp-json\/wp\/v2\/categories?post=4561"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mersanlaw.com\/en\/wp-json\/wp\/v2\/tags?post=4561"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}