The Liberalization of Infrastructure
- Elgar original reference
Edited by Matthias Finger and Rolf W. Künneke
Chapter 22: The Liberalization of Infrastructures in Latin America
1 Francesc Trillas and Miguel A. Montoya INTRODUCTION The Latin America and Caribbean region has been a laboratory of liberalization and regulatory reform in the infrastructure sectors for the past two decades. Private investment in infrastructures was seen as part of a reform package designed to take the region out of the lost decade after the international economic crisis of the 1970s and the regional debt crisis of the early 1980s. In no other region has the development strategy been based as much on private investment in infrastructures. As Figure 22.1 shows, most of this private investment has gone to the telecommunications sector, but energy and transport have also received more private investment than any region of the world between 1990 and 2007. Some segments of these sectors have been liberalized in the sense of allowing competition either in the market or for the market (through competitive bidding for concession contracts). Competition was expected to increase output, reduce costs and improve customer service, while privatization was expected to provide better incentives to firm managers and staff, while reducing red tape and politicization. Liberalization and privatization pose significant institutional challenges, however, and there has been high cross-country variation on how these challenges have been addressed. Industry reform based on private investment works best when it is accompanied by an effective and strong regulatory framework. Infrastructure industries are a key part of welfare2 (as measured for example through the UN Human Development Index) and a key determinant of economic growth. Besides, their...
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