WHAT ARE PARASTATALS? - CULTURE VOCABULARY - 2024

The parastatals are organizations in which the state is the largest shareholder. The executive branch may own part or all of the capital stock. A parastatal company operates as a private company, with its legal statutes, its assets, object, name and purposes, but under the tutelage of the State.

In some countries such as Mexico, the executive branch exercises public administration both centrally and through parastatals, which differ from each other by the level of independence for their operations and resource management.

Parastatals can operate the same or differently than private companies.

These legal entities are managed autonomously, with objectives, plans, goals to meet and a budget to invest, but they are really companies that have state contributions and whose profits are generally destined to social investment projects, such as health, education, roads, communication or others.

They are considered parastatal companies, those that according to the law, are within the following aspects:

1. Companies in which the State is the majority shareholder, with more than 50% of the capital stock.
2. Entities in which there are shares of a special order for the formation of capital, which can be subscribed by the Executive.
3. Organizations where their statutes establish that the power to appoint the members of the board of directors, that is, the president, director, administrator and manager, falls on the Government, as well as the power to cancel any agreement issued by said officials.

Characteristics of state-owned companies

Strategic objectives

They have strategic objectives, oriented to the public interest, to support the economic management of the executive, through commercial, agricultural, exploitation, production and service operations, attending to the needs and collective benefits to maintain social balance and peace.

Founded by the government or acquired

Some were founded by the Executive and others were private companies, acquired or absorbed for their rescue in the face of the danger of cessation of operations, through pronouncements of law, by virtue of which they could impact on the production or generation chain of some basic product or service, all this after evaluation of government bodies.

Own heritage

They count on their own assets, which they manage according to the policies, goals and objectives of the same organization.

They present through the legal bases, statutes and provisions, their legal quality, which gives them autonomy for the fulfillment of their functions, which differentiates them from other State institutions.

The executive branch must carry out permanent evaluations and controls to verify its level of effectiveness and efficiency, as a productive instrument, competent to meet the economic and social needs of the nation.

Composition of the parastatal sector

Parastatal companies are part of the public sector and are made up of: decentralized entities, state-owned companies, financial institutions and credit auxiliaries, national insurance and surety companies, and trusts.

Decentralized entities

These organisms are all those moral units that belong to the State, established through governmental pronouncements, dispositions of the Congress or by laws promulgated by the Executive.

They have a formal structure that assigns it a legally legal figure, with management direction, name, independence in the operation and management of resources. They are located in the facilities or offices of the State agencies.

Its capital stock belongs to the State, either partially or totally. Said funds come from resources or goods of the nation, through the allocation of budgets, contributions, permits or rights granted by the Executive, tax benefits or through the contribution of another decentralized entity.

It can be summarized that the most relevant characteristics of decentralized bodies are:

• The state is who establishes them by law.
• They have a legal status, as a legally private company, different from the Executive.
• With its own capital, assigned by the State.
• They are independent in managing their operations and resources.
• Administrative functions for social purposes are contemplated within the entity's object.
• They are evaluated and monitored by the Executive Power.

State-owned companies

Thus, the institutions or moral units in which the Executive owns shares that are higher or lower than 50%, are designated by means of a contribution to social capital, with public resources, state assets or allowances for subsidies.

Established or acquired by the Executive or through other parastatal entities, with statutes and legal quality and powers to carry out their operations separately or jointly.

Financial institutions and credit auxiliaries

They are state-owned companies that are part of the national financial system, and therefore their establishment, organizational structure, operations, regulations, control, evaluation of functions and regulation are issued by said financial system.

These financial entities arise in order to assist and support certain economic sectors of the country, to prevent some economic activities from being affected by a liquidity problem.

They must operate respecting all the norms and rules that order the finance system. However, it is the responsibility of the State to ensure its proper functioning and that its purposes cover the financial social needs of the country.

National insurance and bonding companies

They are state-owned companies, established with the purpose of protecting and safeguarding the capital of some important sectors of the economy, such as agriculture, livestock, manufacturing, transportation, etc.

In order to certify compliance with the commitments made between the institutions with other companies and to guarantee the productive capacity of their items.

Public trusts

They are parastatal entities with legal status, made up of decentralized organizations or state-owned companies, in order to carry out commercial operations (Trust Companies), whose investments are intended to provide support to the most important areas of development in the country.

A Trust consists of making a contract by means of which a person or institution, called the settlor, transfers and consigns a capital, assets or rights to a fiduciary organization, to manage it for a specified time.

Said patrimony is destined to make investments of a legal type and previously established at the signing of the contract, the benefits of which may be withdrawn at the end of the term, by the settlor or another beneficiary whom he has designated as trustee.

References

1. The parastatal sector and its importance. Recovered from: knowledgeweb.net
2. Corporate governance in public and parastatal companies. Recovered from: expoknews.com
3. Parastatal Entities Law. Recovered from: legislacion.vlex.com.mx
4. Martínez, R. (1983). Journal Article: Parastatal Companies. Development Problems. Recovered from: jstor.org.