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 8: Can the gains from Argentina's utilities reform offset credit shocks?

Daniel Benitez, Omar Chisari and Antonio Estache

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


8. Can the gains from Argentina’s utilities reform offset credit shocks? Daniel Benitez, Omar Chisari and Antonio Estache 1. INTRODUCTION In the early 1990s, Argentina began the transfer of operations, and sometimes ownership, of infrastructure services to the private sector.1 Since then, performance indicators clearly show that quality and access have, on average, improved in electricity, gas, water and sanitation, and telecommunications. However, since 1995, the cost of Argentina’s external financing has been subject to a series of increases – notably the ‘tequila’ effect and the ‘vodka’ effect resulting from the Mexican and Russian crises, respectively, and the more recent 2002 financial crisis. The increased costs to its external credit have decelerated the Argentinean economy and decreased the standard of living for a large portion of the middle and lower income classes. These shocks have also had an impact on the effects of utility reforms and have, in many ways, confused the perceived contributions from the reforms and their distributional influence. One of the agents commonly ignored in any discussion of longer term winners and losers of utility reform is the government, which has benefited in more ways than is usually acknowledged. The initial financial proceeds and debt reduction resulting from the privatization transactions are widely recognized. However, improved efficiency of public expenditure, increased tax base and additional economic activity have further, longer lasting effects which, under certain conditions, may have the strongest impact in present net value terms. This is not to...

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