A Fair Deal for Consumers?
Edited by Cecilia Ugaz
Chapter 4: Consumer participation and pro-poor regulation in Latin America
4. Consumer participation and propoor regulation in Latin America Cecilia Ugaz 1. INTRODUCTION In spite of not being ‘public goods’ in the strict sense of the term, public provision has been a common way of supplying utilities services around the world. Among the major reasons underlying the dominant position of the public sector as the provider of infrastructure are the recognition of the economic and political importance of infrastructure for development, and the faith that government provision could oﬀset market failures characterizing the utilities market. However, under public provision, universal access to the services remained elusive, with large sectors of the population being excluded. At the same time, the ﬁnancing of services became a heavy burden on government budgets. As documented elsewhere in this book, a major move towards privatization started in Latin America in the 1980s and early 1990s following the pioneering experiences of Chile’s and the UK’s infrastructure reform. Prior to privatization, the utilities sector in most Latin American countries was characterized by direct governmental intervention in pricing and investment decisions, and by non-transparent, non-independent regulatory systems. As a result, tariﬀs associated with infrastructure services were twisted to obey political considerations, notably, average tariﬀs were set below long-run average costs. The results were disastrous for the ﬁnancial viability of the enterprises, causing underinvestment and declining quality. Lack of investment capacity seriously undermined network expansion needed to serve the increasing number of poor migrants coming to cities seeking opportunities for a better life. As a consequence,...
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