Private Utility Supply in a Hostile Environment: The Experience of Water/Sanitation and Electricity Distribution Utilities in Northern Colombia, the Dominican Republic, and Ecuador
By Luigi Manzetti, Carlos Rufin (01/06, IFM-142, En) See also Infrastructure and Financial Markets
While one might have hoped that improved performance and efficiency gains due to privatization would have reduced costs sufficiently to re-establish the balance between costs and revenues, this has not been always the case in public utilities around the region. Furthermore, fiscal constraints limit the amount of subsidies available from the government. While raising tariffs may be the only option left, it is not difficult to see the reasons political and otherwise why this has not been done. Nonetheless, understanding the reasons why people consider water and electricity as an entitlement and refuse to pay market prices for them, and identifying the factors behind successful experiences is crucial for the sustainability of infrastructure reforms in the region. Bank teams, which must agreed on tariff conditionality on every public utility project to comply with Bank policies, have an urgent need for incorporating fresh approaches when trying to optimize the scant government resources available for subsidizing the services.
Seeking to raise awareness among Banks management and staff on the crucial importance of incorporating political economy considerations in the proposals to comply with Banks policy on public utility tariffs and subsidies, in 2004 the Infrastructure Division of the Sustainable Development Department (SDS/IFM) held two one-day workshops. During these workshops Bank staff discussed the relevant experience of four selected privatized Latin American public utilities as presented by their management and by regulators. Jaime Millán, Principal Energy Economist at SDS/IFM organized and coordinated the workshops. Luigi Manzetti and Carlos Ruffin were the moderators of the events and the present publication constitutes a summary of the discussions and conclusions drawn from the experience.
Last updated: 05/08/07
