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 7: The reform of the utilities sector in Argentina

José Delfino and Ariel Casarin

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


José Delfino and Ariel Casarin 1. INTRODUCTION The privatization of the national public utilities that took place almost a decade ago in Argentina seems to be explained by the persisting deficits of the enterprises, a general dissatisfaction with their performance and the difficulties government faced in their control. Furthermore, several macroeconomic imbalances, such as hyperinflation, declining economic activity and large fiscal deficits (to a great extent explained by public utilities losses), placed privatization at the centre of a broader programme of structural reforms. This critical economic situation had two important consequences. On the one hand, it put pressure on the privatization process by constraining public policies. This translated into weak regulatory mechanisms that initially ignored the market structures emerging as a consequence of privatization (although more rigid regulations were adopted later and competition was encouraged by splitting up the utilities being privatized). On the other hand, the prevailing economic situation of the country prompted significant tariff increases during the pre-privatization period and the progressive elimination of cross-subsidies. Both measures were intended to achieve more cost-reflective prices in order to ensure private operators a reasonable rate of return. The purpose of this study is to assess the welfare changes and the distributional impact associated with the privatization of telecommunications, electricity, natural gas, and water and sewerage services of the Gran Buenos Aires area. It is interesting to focus the analysis on Buenos Aires because it is the site of the earliest reforms and also...

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