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