TY - BOOK ID - 137274396 TI - The Buenos Aires Water Concession AU - Alcazar, Lorena AU - Abdala, A. Manuel AU - Shirley, Mary PY - 1999 PB - Washington, D.C., The World Bank, DB - UniCat KW - Debt Markets KW - Decision Making KW - Economics KW - Emerging Markets KW - Environment KW - Environmental Economics and Policies KW - Finance and Financial Sector Development KW - Financial Literacy KW - Incentives KW - Income KW - Industry KW - Information KW - Information Asymmetries KW - Infrastructure Economics KW - Infrastructure Economics and Finance KW - Interest KW - Investment KW - Marginal Cost KW - Outcomes KW - Perverse Incentives KW - Prices KW - Private Sector Development KW - Productivity KW - Regulation KW - Revenues KW - Supply KW - Taking KW - Tariffs KW - Town Water Supply and Sanitation KW - Urban Water Supply and Sanitation KW - Water KW - Water and Industry KW - Water Conservation KW - Water Resources KW - Water Supply and Sanitation KW - Water Supply and Sanitation Governance and Institutions KW - Welfare Effects UR - https://www.unicat.be/uniCat?func=search&query=sysid:137274396 AB - April 2000 - Transparent, rule-based decisionmaking is important to maintaining public trust in regulated infrastructure. The Buenos Aires water and sanitation concession led to remarkable improvements in delivery and coverage of services and to lower prices for consumers. But a poor information base, lack of transparency in regulatory decisions, and the ad hoc nature of executive branch interventions make it difficult to reassure consumers that their welfare is being protected and that the concession is sustainable. The signing of a concession contract for the Buenos Aires water and sanitation system in December 1992 attracted worldwide attention and caused considerable controversy in Argentina. It was one of the world's largest concessions, but the case was also interesting for other reasons. The concession was implemented rapidly, in contrast with slow implementation of privatization in Santiago, for example. And reform generated major improvements in the sector, including wider coverage, better service, more efficient company operations, and reduced waste. Moreover, the winning bid brought an immediate 26.9 percent reduction in water system tariffs. Consumers benefited from the system's expansion and from the immediate drop in real prices, which was only partly reversed by subsequent changes in tariffs and access charges. And these improvements would probably not have occurred under public administration of the system. Still, as Alcazar, Abdala, and Shirley show, information asymmetries, perverse incentives, and weak regulatory institutions could threaten the concession's sustainability. Opportunities for the company to act opportunistically - and the regulator, arbitrarily - exist because of politicized regulation, a poor information base, serious flaws in the concession contract, a lumpy and ad hoc tariff system, and a general lack of transparency in the regulatory process. Because of these circumstances, public confidence in the process has eroded. The Buenos Aires concession shows how important transparent, rule-based decisionmaking is to maintaining public trust in regulated infrastructure. This paper - a product of Regulation and Competition Policy, Development Research Group - is part of a larger effort in the group to analyze institutional issues in regulated infrastructure. The study was funded by the Bank's Research Support Budget under the research project Institutions, Politics, and Contracts: Private Sector Participation in Urban Water Supply (RPO 681-87). Mary Shirley may be contacted at mshirley@worldbank.org. ER -