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 9: Capitalization, regulation and the poor: access to basic services in Bolivia

Gover Barja and Miguel Urquiola

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


Gover Barja and Miguel Urquiola 1. INTRODUCTION Like other Latin American countries, Bolivia included privatization in a package of structural reforms that has significantly liberalized its economy over the last 15 years. As elsewhere, in an effort to attract investment and increase efficiency, utilities were among the key enterprises transferred to the private sector. As Estache et al. (2000) note, there is growing interest on how such transfers affected lower income households, their access to basic services, and their welfare in general. While this has not generally been a major concern in Bolivia, the economic slowdown of the past two years has resulted in growing criticism of the entire liberalization process. Thus, further analysis of the ‘social’ impact of privatization could usefully inform on-going policy discussions. In this context, this study describes Bolivia’s privatization process, with emphasis on the particularities of ‘capitalization’, one of the mechanisms used for privatization, and its complementary regulatory framework. Against this background, the chapter then analyses the impact of reforms on lower income households along two dimensions: (i) access, understood as connection, and (ii) affordability, as determined by changes in consumption and pricing patterns. The study focuses on urban households because of data availability, but rural areas are included whenever feasible. The general picture that emerges from the analysis points to the following observations: (i) Capitalization and regulation, and liberalization of the utilities sector in general, have succeeded in attracting foreign investment, thus fulfilling one of the central goals...

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