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How Far Does It Go? The Buenos Aires Water Concession a Decade after the Reform

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Summary.
Sanitation services in Argentina had traditionally been provided by a state-owned utility until
1982, when the national government transferred the responsibility of service provision to local
governments. The city of Buenos Aires and a few adjacent districts were excluded from this
move, retained under the control of Obras Sanitarias de la Nación (OSN). The performance of
the decentralized sanitation system revealed reduced rates of network expansion, little
innovation, poor-quality service and operating deficits of the utilities. General dissatisfaction
with the system’s performance and ever-increasing pressures to enhance service provision and
to ease the burden of financing underperforming assets led the way to private sector
participation in the industry, a policy that was probably also influenced by the massive
privatizations adopted by the Menem administration since 1989. As a result, by the end of the
1990s private operators were serving two-thirds of the population covered by the sanitation
network.
The Buenos Aires concession is the largest and best-documented episode of privatization in the
sanitation sector in Argentina. In May 1993, OSN’s responsibility for the water and sewerage
services of Buenos Aires was handed over to the Aguas Argentinas consortium under a 30-year
concession contract with the main objectives of reducing the government’s funding, and
expanding coverage according to a plan of specific targets aimed at achieving both quality of
service standards and universal service by the end of the concession period. The franchise was
awarded to the consortium offering the largest reduction over prevailing OSN tariffs. Since
privatization, the government’s regulatory role has been in the hands of the Ente Tripartito de
Obras y Servicios Sanitarios, a regulatory agency responsible for monitoring the concessionaire
and enforcing the contract and regulations.
The decade that has elapsed since the privatization offers a substantial body of evidence on the
performance of Aguas Argentinas. Opposing views about private management have emerged
following the reform. Some observers argue that the Buenos Aires concession brought about
large benefits to consumers’ welfare, while others emphasize that privatization goals have not
been fully achieved because of the firm’s opportunistic behaviour and the regulator’s limited
ability to protect the interest of consumers.
This paper examines the evolution of the Buenos Aires sanitation system during the postprivatization
period. Its purpose is to evaluate the private management experience and assess
the empirical validity of the main concerns voiced in its favour and against it. The analysis
therefore concentrates on the evolution of system performance as it relates to the privatization
objectives of expanding coverage, reducing consumers’ tariffs and increasing service standards.
The paper is organized into eight sections. Section 2 examines the completion of the contract’s
targets as they relate to service coverage and investment outlays. Section 3 describes the
taxonomy of unexpected tariff reforms. Section 4 reviews the financial performance of the
licensee, while section 5 uses a simple model of index numbers to provide a comprehensive
assessment of the concessions’ economic performance. Section 6 considers the role of the
regulator, section 7 comments on actual pro-poor policies and explores alternatives leading to
the achievement of universal service, and section 8 is the conclusion.

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Informasi Detail

Judul Seri

Social Policy and Development Programme

No. Panggil

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Penerbit

Geneva : United Nations Research Institute for Social Development (UNRISD)., 2007

Deskripsi Fisik

Social Policy and Development Programme Paper Number 32 May 2007

Bahasa

English

ISBN/ISSN

10208208

Klasifikasi

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Tipe Isi

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Tipe Media

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Tipe Pembawa

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Edisi

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Subjek

ILMU SOSIAL

Info Detail Spesifik

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Pernyataan Tanggungjawab

agus

Versi lain/terkait

Lampiran Berkas

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