Institutions, Politics, and Contracts : The Attempt to Privatize the Water and Sanitation Utility of Lima, Peru

Alcazar, Lorena ; Xu, Lixin colin ; Zuluaga, Ana Maria

World Bank, Washington, DC

关键词: BILL COLLECTION;    BOREHOLES;    CENTRAL GOVERNMENT;    CONCESSION CONTRACT;    CONNECTION CHARGE;   

DOI  :  10.1596/1813-9450-2478
RP-ID  :  WPS2478

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

The main reason Lima failed to implementa concession was geographical: the scarcity of water sourcesmeant high marginal costs, partly for pumping water fromdeep wells and building adequate storage for dry periods.High extraction costs were compounded by years of neglect;much of the system needed to be replaced. Attracting privateinvestors meant setting prices high enough to recover thesehigh costs and provide a reasonable return on capital. Butthe government had subsidized costs for years, so aconcession would have required a sharp and sudden priceincrease to cover marginal costs. Moreover, anyforward-looking investor would want to slow the pace offuture investment by curbing demand through more effective(meter-based) bill collection. And cross-subsidies, whichreduce the incentive to conserve water, would also have tobe reduced. The ultimate cause of the concession'sfailure was geographical but the proximate cause waspolitical. Privatizing a utility is politically tricky if itinvolves higher prices and the controversial ceding ofmonopoly powers to private parties, especially foreigners.Private participation in water is further hampered by thesocial importance of water and by the lack of internationalexperience and the technical difficulties in designingprivatization reform in the sector. At the same time, wateroffers fewer benefits than other utlities--few revenues toreward supporters or compensate losers-- and the priceincreases likely in Peru would especially hurt the urbanpoor, who were important to the president's supportbase. After a favorable start, the political equationshifted against privatization. The concession's failurewas costly, in access goals not fully met, in adverseeffects on health, and in the failure to curb consumptionthrough metering--and hence in continued depletion of theaquifer and its increasing contamination by ocean salt.Peru's institutional weaknesses, especially its lack ofan autonomous judiciary, might have limited how much couldhave been achieved. But considering the net gains fromprivate operation in the much weaker nstitutional settingsin Africa, Lima would probably have been better off with a concession.