Utility Privatization and Regulation

Utility Privatization and Regulation

A Fair Deal for Consumers?

Edited by Cecilia Ugaz

The authors address the question of infrastructure reforms in a novel way by focusing on the impact which they can have on consumers through the prices paid by different groups and on their access to the networks. They analyse original material from four Latin American countries – Argentina, Bolivia, Chile, Peru – and two European countries – Spain and the UK. Access is especially relevant when considering immature systems which have not yet extended to cover the majority of the population, as is the case in many Latin American countries. The authors also address the widespread impact of privatization on the economy (via macroeconomic influences) and the more general issues of subsidies and regulation which are endemic to these industries. The book focuses on the reform of four sectors: telecommunications, electricity, gas, and water and sanitation.

Chapter 2: Access by the poor in Latin America's utility reform: subsidies and service obligations

Omar Chisari, Antonio Estache and Catherine Waddams Price

Subjects: development studies, development economics, economics and finance, development economics, public sector economics


2. Access by the poor in Latin America’s utility reform: subsidies and service obligations Omar Chisari, Antonio Estache and Catherine Waddams Price 1. INTRODUCTION Any infrastructure reformers concerned with social issues in a developing country need to address two problems. The first is increasing access by the poor, and the second is ensuring consumption affordability, that is the ability of the poor to pay for both consumption and the amortization of the access charges.1 The two are related. The main concern of both policy makers and academics has been to identify options to cut costs so that coverage can be accelerated, focusing on cheaper technologies or on various financing/lending schemes. Latin America has been a pioneer in many aspects of such reform. What regulatory reform experience has demonstrated is that many operators perceive poor financial returns from supplying the poor and postpone such supply as long as possible, unless specific policy requirements force them to do otherwise. Hence governments often impose some type of service obligation or connection targets on operators as part of a multiple obligation public–private partnership. In Latin America, the inclusion of service obligations in ‘privatization’ transactions has been a recurring feature during the 1990s and is likely to continue in the foreseeable future to meet the needs of the rural population and the urban poor, particularly in telecommunications, water and sanitation. By 1996 only about 10 percent of the population in Latin America had access to telecoms services, 75 percent to safe water...

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