Institutions, Politics, and Contracts : The Attempt to Privatize the Water and Sanitation Utility of Lima, Peru
The main reason Lima failed to implement a concession was geographical: the scarcity of water sources meant high marginal costs, partly for pumping water from deep wells and building adequate storage for dry periods. High extraction costs were comp...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2000/11/717450/institutions-politics-contracts-attempt-privatize-water-sanitation-utility-lima-peru http://hdl.handle.net/10986/19761 |
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okr-10986-19761 |
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| recordtype |
oai_dc |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
BILL COLLECTION BOREHOLES CENTRAL GOVERNMENT CONCESSION CONTRACT CONNECTION CHARGE CONSERVE WATER CONSUMER COMPLAINTS CONSUMER SURPLUS COST OF WATER CUBIC METER CUBIC METER OF WATER CUT OFF DEBT DEMAND FOR WATER ECONOMIC FACTORS ELASTICITIES ELASTICITY OF DEMAND EQUILIBRIUM EXPENDITURES EXTERNAL COSTS EXTERNALITIES FINANCIAL VIABILITY FISHING FIXED CHARGE GROUNDWATER HEALTH PROBLEMS HEAVY METALS INCOME INDUSTRIAL USERS INFLATION INTERMEDIATE INPUTS INVESTMENT COSTS INVESTMENT REQUIREMENTS LABOR COSTS LABOR FORCE LEGISLATION LITERS PER CAPITA PER DAY MAINTENANCE COSTS MARGINAL COST MARGINAL COSTS METER READING MINES NUMBER OF CONNECTIONS PIPED WATER POLITICAL ECONOMY POLLUTION PRESENT VALUE PRICE OF WATER PRICE SETTING PRIVATE OPERATOR PRIVATE PARTICIPATION PRIVATE PARTICIPATION IN WATER PRODUCTIVITY PUBLIC UTILITY PUMPING QUALITY OF SERVICE RAINFALL RAINWATER RAW WATER RECHARGE REGULATING WATER SUPPLY REGULATORY AGENCIES REGULATORY FRAMEWORK RESIDENTIAL CONSUMERS RESIDENTIAL CUSTOMERS RESIDENTIAL DEMAND RETAINED EARNINGS RIVER FLOW RIVERS SALINITY SANITATION PROBLEMS SANITATION SERVICE SANITATION UTILITY SAVINGS SCARCE WATER SCARCITY OF WATER SERVICE AREA SEWERAGE SYSTEM SOCIAL COSTS SUPPLY INTERRUPTIONS SURFACE WATER TARIFF REFORM TARIFF REGULATION TARIFF SETTING TRANSPARENCY UTILITIES WAGES WATER COMPANIES WATER COMPANY WATER CONNECTIONS WATER CONSUMPTION WATER COVERAGE WATER DEMAND WATER REGULATION WATER SECTOR WATER SERVICE WATER SERVICES WATER SHORTAGES WATER SOURCES WATER STORAGE WATER SUPPLY WATER SYSTEM WATER TABLE WATER TARIFF WATER TARIFFS WATER UTILITY WELFARE EFFECTS WELFARE GAINS WELLS |
| spellingShingle |
BILL COLLECTION BOREHOLES CENTRAL GOVERNMENT CONCESSION CONTRACT CONNECTION CHARGE CONSERVE WATER CONSUMER COMPLAINTS CONSUMER SURPLUS COST OF WATER CUBIC METER CUBIC METER OF WATER CUT OFF DEBT DEMAND FOR WATER ECONOMIC FACTORS ELASTICITIES ELASTICITY OF DEMAND EQUILIBRIUM EXPENDITURES EXTERNAL COSTS EXTERNALITIES FINANCIAL VIABILITY FISHING FIXED CHARGE GROUNDWATER HEALTH PROBLEMS HEAVY METALS INCOME INDUSTRIAL USERS INFLATION INTERMEDIATE INPUTS INVESTMENT COSTS INVESTMENT REQUIREMENTS LABOR COSTS LABOR FORCE LEGISLATION LITERS PER CAPITA PER DAY MAINTENANCE COSTS MARGINAL COST MARGINAL COSTS METER READING MINES NUMBER OF CONNECTIONS PIPED WATER POLITICAL ECONOMY POLLUTION PRESENT VALUE PRICE OF WATER PRICE SETTING PRIVATE OPERATOR PRIVATE PARTICIPATION PRIVATE PARTICIPATION IN WATER PRODUCTIVITY PUBLIC UTILITY PUMPING QUALITY OF SERVICE RAINFALL RAINWATER RAW WATER RECHARGE REGULATING WATER SUPPLY REGULATORY AGENCIES REGULATORY FRAMEWORK RESIDENTIAL CONSUMERS RESIDENTIAL CUSTOMERS RESIDENTIAL DEMAND RETAINED EARNINGS RIVER FLOW RIVERS SALINITY SANITATION PROBLEMS SANITATION SERVICE SANITATION UTILITY SAVINGS SCARCE WATER SCARCITY OF WATER SERVICE AREA SEWERAGE SYSTEM SOCIAL COSTS SUPPLY INTERRUPTIONS SURFACE WATER TARIFF REFORM TARIFF REGULATION TARIFF SETTING TRANSPARENCY UTILITIES WAGES WATER COMPANIES WATER COMPANY WATER CONNECTIONS WATER CONSUMPTION WATER COVERAGE WATER DEMAND WATER REGULATION WATER SECTOR WATER SERVICE WATER SERVICES WATER SHORTAGES WATER SOURCES WATER STORAGE WATER SUPPLY WATER SYSTEM WATER TABLE WATER TARIFF WATER TARIFFS WATER UTILITY WELFARE EFFECTS WELFARE GAINS WELLS Alcazar, Lorena Xu, Lixin colin Zuluaga, Ana Maria Institutions, Politics, and Contracts : The Attempt to Privatize the Water and Sanitation Utility of Lima, Peru |
| geographic_facet |
Latin America & Caribbean Peru |
| relation |
Policy Research Working Paper;No. 2478 |
| description |
The main reason Lima failed to implement
a concession was geographical: the scarcity of water sources
meant high marginal costs, partly for pumping water from
deep 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 private
investors meant setting prices high enough to recover these
high costs and provide a reasonable return on capital. But
the government had subsidized costs for years, so a
concession would have required a sharp and sudden price
increase to cover marginal costs. Moreover, any
forward-looking investor would want to slow the pace of
future investment by curbing demand through more effective
(meter-based) bill collection. And cross-subsidies, which
reduce the incentive to conserve water, would also have to
be reduced. The ultimate cause of the concession's
failure was geographical but the proximate cause was
political. Privatizing a utility is politically tricky if it
involves higher prices and the controversial ceding of
monopoly powers to private parties, especially foreigners.
Private participation in water is further hampered by the
social importance of water and by the lack of international
experience and the technical difficulties in designing
privatization reform in the sector. At the same time, water
offers fewer benefits than other utlities--few revenues to
reward supporters or compensate losers-- and the price
increases likely in Peru would especially hurt the urban
poor, who were important to the president's support
base. After a favorable start, the political equation
shifted against privatization. The concession's failure
was costly, in access goals not fully met, in adverse
effects on health, and in the failure to curb consumption
through metering--and hence in continued depletion of the
aquifer and its increasing contamination by ocean salt.
Peru's institutional weaknesses, especially its lack of
an autonomous judiciary, might have limited how much could
have been achieved. But considering the net gains from
private operation in the much weaker nstitutional settings
in Africa, Lima would probably have been better off with a concession. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Alcazar, Lorena Xu, Lixin colin Zuluaga, Ana Maria |
| author_facet |
Alcazar, Lorena Xu, Lixin colin Zuluaga, Ana Maria |
| author_sort |
Alcazar, Lorena |
| title |
Institutions, Politics, and Contracts : The Attempt to Privatize the Water and Sanitation Utility of Lima, Peru |
| title_short |
Institutions, Politics, and Contracts : The Attempt to Privatize the Water and Sanitation Utility of Lima, Peru |
| title_full |
Institutions, Politics, and Contracts : The Attempt to Privatize the Water and Sanitation Utility of Lima, Peru |
| title_fullStr |
Institutions, Politics, and Contracts : The Attempt to Privatize the Water and Sanitation Utility of Lima, Peru |
| title_full_unstemmed |
Institutions, Politics, and Contracts : The Attempt to Privatize the Water and Sanitation Utility of Lima, Peru |
| title_sort |
institutions, politics, and contracts : the attempt to privatize the water and sanitation utility of lima, peru |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2000/11/717450/institutions-politics-contracts-attempt-privatize-water-sanitation-utility-lima-peru http://hdl.handle.net/10986/19761 |
| _version_ |
1764440571641856000 |
| spelling |
okr-10986-197612021-04-23T14:03:44Z Institutions, Politics, and Contracts : The Attempt to Privatize the Water and Sanitation Utility of Lima, Peru Alcazar, Lorena Xu, Lixin colin Zuluaga, Ana Maria BILL COLLECTION BOREHOLES CENTRAL GOVERNMENT CONCESSION CONTRACT CONNECTION CHARGE CONSERVE WATER CONSUMER COMPLAINTS CONSUMER SURPLUS COST OF WATER CUBIC METER CUBIC METER OF WATER CUT OFF DEBT DEMAND FOR WATER ECONOMIC FACTORS ELASTICITIES ELASTICITY OF DEMAND EQUILIBRIUM EXPENDITURES EXTERNAL COSTS EXTERNALITIES FINANCIAL VIABILITY FISHING FIXED CHARGE GROUNDWATER HEALTH PROBLEMS HEAVY METALS INCOME INDUSTRIAL USERS INFLATION INTERMEDIATE INPUTS INVESTMENT COSTS INVESTMENT REQUIREMENTS LABOR COSTS LABOR FORCE LEGISLATION LITERS PER CAPITA PER DAY MAINTENANCE COSTS MARGINAL COST MARGINAL COSTS METER READING MINES NUMBER OF CONNECTIONS PIPED WATER POLITICAL ECONOMY POLLUTION PRESENT VALUE PRICE OF WATER PRICE SETTING PRIVATE OPERATOR PRIVATE PARTICIPATION PRIVATE PARTICIPATION IN WATER PRODUCTIVITY PUBLIC UTILITY PUMPING QUALITY OF SERVICE RAINFALL RAINWATER RAW WATER RECHARGE REGULATING WATER SUPPLY REGULATORY AGENCIES REGULATORY FRAMEWORK RESIDENTIAL CONSUMERS RESIDENTIAL CUSTOMERS RESIDENTIAL DEMAND RETAINED EARNINGS RIVER FLOW RIVERS SALINITY SANITATION PROBLEMS SANITATION SERVICE SANITATION UTILITY SAVINGS SCARCE WATER SCARCITY OF WATER SERVICE AREA SEWERAGE SYSTEM SOCIAL COSTS SUPPLY INTERRUPTIONS SURFACE WATER TARIFF REFORM TARIFF REGULATION TARIFF SETTING TRANSPARENCY UTILITIES WAGES WATER COMPANIES WATER COMPANY WATER CONNECTIONS WATER CONSUMPTION WATER COVERAGE WATER DEMAND WATER REGULATION WATER SECTOR WATER SERVICE WATER SERVICES WATER SHORTAGES WATER SOURCES WATER STORAGE WATER SUPPLY WATER SYSTEM WATER TABLE WATER TARIFF WATER TARIFFS WATER UTILITY WELFARE EFFECTS WELFARE GAINS WELLS The main reason Lima failed to implement a concession was geographical: the scarcity of water sources meant high marginal costs, partly for pumping water from deep 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 private investors meant setting prices high enough to recover these high costs and provide a reasonable return on capital. But the government had subsidized costs for years, so a concession would have required a sharp and sudden price increase to cover marginal costs. Moreover, any forward-looking investor would want to slow the pace of future investment by curbing demand through more effective (meter-based) bill collection. And cross-subsidies, which reduce the incentive to conserve water, would also have to be reduced. The ultimate cause of the concession's failure was geographical but the proximate cause was political. Privatizing a utility is politically tricky if it involves higher prices and the controversial ceding of monopoly powers to private parties, especially foreigners. Private participation in water is further hampered by the social importance of water and by the lack of international experience and the technical difficulties in designing privatization reform in the sector. At the same time, water offers fewer benefits than other utlities--few revenues to reward supporters or compensate losers-- and the price increases likely in Peru would especially hurt the urban poor, who were important to the president's support base. After a favorable start, the political equation shifted against privatization. The concession's failure was costly, in access goals not fully met, in adverse effects on health, and in the failure to curb consumption through metering--and hence in continued depletion of the aquifer and its increasing contamination by ocean salt. Peru's institutional weaknesses, especially its lack of an autonomous judiciary, might have limited how much could have been achieved. But considering the net gains from private operation in the much weaker nstitutional settings in Africa, Lima would probably have been better off with a concession. 2014-08-27T18:05:46Z 2014-08-27T18:05:46Z 2000-11 http://documents.worldbank.org/curated/en/2000/11/717450/institutions-politics-contracts-attempt-privatize-water-sanitation-utility-lima-peru http://hdl.handle.net/10986/19761 English en_US Policy Research Working Paper;No. 2478 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean Peru |