Chapter 10: Redistributive impact of privatization and the regulation of utilities in Chile
Ricardo Paredes M. 1. INTRODUCTION Privatization has been one of the primary factors generating changes in the economy over the last decade. Western countries with some privatization experience have, on an overall basis, evaluated the process favourably. However, privatization has faced major diﬃculties in most countries because serious political opposition has limited its extent. In part, the opposition reﬂects the uncertainty faced by workers and consumers regarding the impact privatization will have on employment and prices. There is no doubt that these fears are closely related with the regulatory framework and the eﬀect that this framework has on ﬁnal prices. In Chile, the regulation of natural monopolies was introduced before privatization, which makes it possible to distinguish between the privatization and deregulation eras. Discussion has focused on the theory that the cost of inadequate and unsuitable regulation could have been extremely high.1 In the case of Chile, this concern can be summarized in three related factors. First, regulations (laws and administrative decrees) were not suﬃciently clear and several aspects were not properly dealt with. Second, before privatization was actually implemented, insuﬃcient consideration was given to the speciﬁc mechanisms required to regulate private monopolies adequately. Third, some privatized ﬁrms have retained certain powers which would have been more appropriate in respect of state-owned enterprises. Together, these elements have hindered the development of an appropriate degree of competition in the market and have pervasively aﬀected consumers, particularly the poorest sector. Despite the importance of the...
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