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Por Federico Basañes, Raimundo Soto (09/99, IFM-116, En) Vea también Infraestructura y Mercados Financieros

During the last decade, Latin American countries have accumulated extensive experience in the privatization of infrastructure services and in the institutional and regulatory reforms essential to foster a suitable environment for private investment. Chile, for example, has undertaken remarkable reforms and transferred publicly-owned utilities to the private sector either by selling the assets or through concession agreements. Because of the reforms, the country has been able to attract private participation to the provision of public services like energy, transportation, telecommunications, and potable water and sewerage. This has resulted in significant efficiency improvements as well as increased coverage.

The sectors involved in the reforms have usually had natural monopoly characteristics which, in turn, has required direct regulation of the private firms and the use of specific instruments (laws, contracts) to establish the way in which tariffs, quality, investment, exclusivity, etc., would be determined and evolve over time. Although the Chilean legal system is specifically designed to limit discretion in the public sector, some degree of discretion was permitted to allow the regulatory bodies to adjust to unforeseen developments such as changes in technology or demand. Also, some ambiguities or unspecified areas in the design of the new sector structure and the newly created regulatory framework remain.

Renegotiations and disputes arise frequently when complete long-term contracts cannot be written at the moment of contracting and in the absence of institutions which can credibly enforce those contracts. The consequences of these problems are exacerbated when market design is inadequate or regulation is incomplete. These problems are characteristic of in developing countries, as a result disputes have been a part of the Chilean privatization experience.

More than a decade after the start of the reform process, unforeseen events have provided evidence to the loopholes in the design of the reform. This has called for the use of discretion by regulatory agencies and, in some cases, has led to renegotiations and disputes beyond the authority of the regulatory agencies, causing the intervention of public officials.

In this paper we analyze a series of post-privatization disputes and renegotiations that have taken place in Chile since the late 1980s in the electricity sector. This sector was chosen because the privatization process was, to a large extent, completed a decade ago, providing enough time to properly evaluate renegotiations and disputes. The paper also assesses how the lessons learned in the reform of electricity were internalized in the design of the regulatory framework for highway concessions.

A number of issues which might have a played a crucial role in inducing or inhibiting disputes in the two sectors are presented and analyzed. This is followed by an examination of renegotiations and disputes between regulators and firms, among firms (when they are the result of the privatization process), and between consumers (represented for example by the Antitrust Commission) and firms currently working in the industry or potentially interested in participating. The focus is two fold, encompassing the nature of the dispute as well as the role different agents play in it (firms, consumers, the government, and other institutions such as the judiciary system).

The analysis of disputes covers different aspects. First, the paper presents an analysis of the sources of the dispute or the renegotiating process. Second, it describes the areas in which the original setting is challenged (e.g., prices and tariffs, quality of service, performance requirement, investment plan, competition rules). Third, it discusses who benefits (and how) from renegotiation. Fourth, the study determines whether the outcome of the renegotiation can potentially improve efficiency, enhance competition or induce competitive outcomes in noncompetitive markets. Finally, the paper looks at how the dispute was settled, in particular, at the role of Chilean institutions such as the Judiciary System, the Antitrust Commission, and the regulator, in providing rules for achieving efficient outcomes. This includes an assessment of how disputes were settled in terms of whether there was a regulatory ruling or whether the case was taken to court or solved through third party mediation.

The second section of the paper briefly describes the electricity sector in Chile. The third section analyzes how the structure and regulation of the sector might have inhibited or caused disputes. Section four presents eight cases of disputes in the electricity sector in Chile. Section five describes the role of institutions in the resolution of conflicts. The sixth section of the paper discusses highway concessions and the extent to which lessons from the electricity sector have been adopted in these programs. The last section presents the conclusions.

Ultima actualización: 14/10/04

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