Chapter 4: Consumer participation and pro-poor regulation in Latin America
81 water and sanitation, and so on. Further motivation underlying the privatization drive was the willingness to attract private ﬁnancing in order to alleviate the burden of public services on the budget. In addition, increased liberalization of services worldwide made it possible to attract substantive inﬂows of capital to these sectors, strengthening the foreign exchange position of the recipient countries. However, service access (coverage) is the outcome of supply and demand factors. The supply side represents the possibility of physically connecting to the network. The demand side is related to the household decision to connect. Besides the possibility of physically connecting to the network, a household’s decision to connect is inﬂuenced by four factors: aﬀordability, quality, relevance and ﬁt.1 Change in ownership (from public to private) per se is not the solution for all the problems associated with access to services. We will argue in this chapter that the main problem so far is that the features characterizing public utility provision – absence of competition and lack of transparency in regulatory procedures – still characterize utility provision after nearly a decade of privatization. 1.1. Access and Aﬀordability: can Regulation be the Answer? Private provision is the model chosen by governments in Latin America to solve the limitations of the public utility model. Given the nature of utility markets, regulatory mechanisms needed to be put in place. Utilities exhibit sunk costs, and sizeable investments are required to enter the market. Regulation in Latin America was primarily conceived to protect...
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