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Workshop "Sustainability of Electric Power Sector Reforms in Latin America and the Caribbean"
(05/02, En, Es)
The Inter-American Development Bank
organized the Workshop:
Sustainability of Electric Power Sector Reforms in Latin America
May 20, 2002
IDB Headquarters - Washington, D.C.
The main objectives of this workshop, held on May 20, 2002, were to present the results of a sustainability study, which included case studies for Colombia, Honduras and Guatemala, and to discuss them with Bank staff, officials from the countries and specialists in the power sector reform.
Workshop full material
Background
The reform of the power sector was one of many reforms undertaken in Latin America at the beginning of the 90's seeking a solution to economic stagnation through the adoption of a new economic paradigm. In the infrastructure sector, these reforms favored private entrepreneurial participation in the provision of services, limiting the State's role to policy definition and regulation. Economic efficiency would be guaranteed by establishing competition in segments where it was feasible, and through regulation, in noncompetitive market sectors. Additionally, independent regulation would protect investors from opportunistic governmental intervention while defending consumers' interests. Attracting private investment through cost-recovery tariffs would attain financial sustainability. Social sustainability would be achieved by establishing clear and transparent subsidies, aimed at target populations, without distorting tariff signals.
However, despite its many achievements, after almost a decade of reform, many LAC countries find it hard to implement it. The recent electric blackouts in California and Brazil have cast doubts over the viability of the competitive model; opportunistic politicians are happy to put the blame in what they consider the failure of the "neo-liberal" model, and a return to the State model is opening its way. Even though the advocates of this extreme interpretation conveniently skip analysis of reasons that led to the failure of the State model in many countries, or the replication of the few successful examples, difficulties met to consolidate implementation of the reformist model call for deep consideration of their causes. So, a school of thinking has arisen in the last decade that finds an explanation to the difficulties faced by developing countries to adopt institutions that have proved successful in OECD countries in the absence of an adequate compatibility with the rest of institutions, formal and informal, in the country.
With these antecedents, the IDB started an investigation in three countries in the region, Honduras, Guatemala and Colombia, to identify the threat to the sustainability of the reforms in their power sectors and come up with strategies for their consolidation. The methodology adopted follows the new institutional economics approach, and starts with a diagnose of the reform and its implementation, trying to identify those constraints that have so far prevented its full adoption and fulfillment of original expectations. The results of the study will help the Bank to articulate a better toolkit to support the countries in the implementation of sustainable power sector reforms.
The project comprised the preparation of three country studies including local seminars; the central coordination, including the preparation of a conceptual paper and a comparative analysis paper; and the carrying out of a final workshop at Bank's headquarters. The Study was funded using Trust Funds from the Norwegian Agency NORAD, SDS/IFM (IDB) administrative budget and contributions from the Countries Governments (Colombia). This workshop was financed jointly by SDS/IFM administrative budget and the Office of Learning contributions.
Justification
While the sustainability of power sector reform could be classified as an activity aiming to the consolidation of the modernization of the State, it has close interfaces with the other areas of concentration of the new IDB's Institutional Strategy. The delivery of competitively priced high-quality public services is among the main factors contributing to increase and/or maintain competitiveness in the region. Furthermore, the sustainability of the ongoing power sector reforms is an essential element for the future competitiveness of the region in a world in which most countries are liberalizing their energy sectors and reaping sizable efficiency gains. Failure of reform may force the State to retake the heavy fiscal burden of the eighties with detrimental consequences. Social development activities would be impaired, the poor's productivity will suffer and the welfare gains permitted by their access to modern energy will be postponed. Not surprisingly, the chief objective of the new Energy Strategy is to guide the Bank in its efforts to support energy sector restructuring and reform in its borrowing countries. This support should help those sectors to become economically, financially, environmentally, socially, and politically sustainable. The study's recommendations will help the Bank to shape its support for the consolidation of reform, assuring in this way the continuity of its lending through the private sector window. However, to achieve this goals it is fundamental that staff at all levels in the Bank become acquainted with the complexities and challenges that confront the sector in order to be able to conduct a coherent approach. Hence, the importance of the workshop to convene Field Office specialist, staff from headquarters and Executive Directors to discuss the results and to suggest the best avenues on how to continue the Bank's support for the power sector reforms.
Infrastructure and Financial Markets Division
Sustainable Development Department
Inter-American Development Bank
E-mail: sds/ifm@iadb.org
Last updated: 02/26/07
