Water privatization in Buenos Aires
This is a classic case of water privatization -- what were its strengths and weaknesses?
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I can not understand why politicians call those processes as "privatization of water", water itself remain public, what switch to private is the operation and maintenance of the infrastructure to extract and distribute the water, which is a different thing. To drill pits, to install and maintain pipes, to equalize pressure, all those process requires investment. Where those investments are made by government is used by politicians to benefit special groups which often pay nothing for the service, and many others are excluded by lack of coverage.Again my comparison Chile and Peru: in Arica, Chile coverage (privately operated) is near 100% and everyone pays for a good service, in Tacna, Peru (operated by municipality) many dont pay and coverage as supply are very poor, with lots of shortage. Cost of service always rise in a privatization because people pay exactly what it cost, plus the profit of operator, and what about the poor who can not afford it? government give them direct subsidies if they qualify. The system is not perfect but much better than operated by government
Sure David! In Chile the poorest (1st and part of 2nd quintil) got many subsidies, one of those is a direct subsidy who pay part or full of the monthly bill for water. Some advocated for a tariff diferenciation in which the rich pays more to compensate lower or no bill for poor, I wrote with other collegues an article evaluating the effect in distribution of income of differentiated tariff, our conclusion was that benefits of direct subsidy exceed those of differentiate tariff, which has few effect to improve the distribution of income, the article is published at http://www.scielo.cl/pdf/ingeniare/v19n1/art13.pdf (in Spanish, sorry)
I don't agree with the statement "cost of service always rise in a privatization". What rises is price! Cost might (and probably always does) go down with privatization, owing to increased efficiency. Only in cases of privatization without competition (i.e. a public monopoly becomes a private monopoly and there are no price controls) can actual "cost" (not sure if that would be the appropriate term but to use your words) increase if profits rise more than what the savings in efficiency grant (and as long as demand elasticity plays to the supplier's advantage).
Well, it depends on point of view: the "cost" for consumers is the amount (price) of their bills ;) the cost of production varies and maybe is not directly comparable because private firms may give additional services (increased coverage by example) with extra cost, the state administration may have deficit with few consequences, etc.
Good case study. Note that the industry term is "non revenue water" more than "unaccounted for water" -- that's because NRW includes water that's delivered but not paid for.
For a LDC success in privatization, see http://cmsdata.iucn.org/downloads/phnom_penh_waterfinal.pdf
For the challenge of moving to meters in England/Wales, see:
http://www.feem-project.net/epiwater/docs/d32-d6-1/CS12_United%20Kingdom...
Note that Chile deals with affordability, if I recall right, by showing "eligible poor" how much they'd pay but then reducing the bill (I've also heard they give income transfers and all households pay full cost).
The Chilean system of direct subsidies had some fails that has been fixed in the last two years. The biggest fail was that to qualify as "poor" you had to be surveyed by a local government authority (municipality), and, well in municipalities mayors used this authority to pay politic favors. Now the system is changing an the system of surveying is done by the Ministry of Social Development with rules much more strict to ensure the real levels of income of families. In Chile we have an unique number who identifies every citizen and incomes are easy to track for authorities and now they are crossing information with tax office to ensure that the "real poor" are qualified to receive subsidies. Since many decades the help to the poor has switched to direct subsidies, very localized to the poor, the improving to the system to qualify the poor is one of the most important policies who government has made because tend to split the benefits from political assistencialism
Tomas, India is at the beginning of the implementation of the massive unique identification number project and will hopefully soon move to the direct subsidies from the currently inefficient and corrupt system that doles out goodies based on whether a family can obtain a "below poverty line" card from the local govt. The Chile experience seems to give hope of lesser leakages!
Hello Saranya, good news, a good system of information is the first step for an efficient system of subsidies, however is a necessary but not sufficient condition, Chile has a long way on this and many experiences may be valuable. One of the problems who is just starting to fix in recent years is the authority who make the information of who qualifies for subsidies, during many years this was in charge of local governments and it was a source of corruption and electoral favours from mayors to re-elect forever. Now the system is being switched to a more technical and centralized officeconnected with the databases of tax authority in order to detect frauds automatically. The main problem of direct subsidies is that they tend to be discretionary by political reasons... and corruption is everywhere, not only in India ;)
I have a quarrel with the first practice question. There was a drop in investment as a result of a dispute the government and the service provider about rate setting. I understand that there was an influx of new capital initially, but that doesn't mean that everything stayed that way. Was there a net increase in investment? It appears so, but that increased investment was not consistent.
Tomas -- can you comment on my post? Do poor in Chile get income subsidies or a subsidy for water service? Thanks!