Reforming the Urban Water System in Santiago, Chile
In the late 1980s, Chile planned to privatize Santiago's sanitary works enterprise (EMOS) but instead reformed it under public ownership. It did so through a regulatory framework that mimicked the design of a concession with a private utility,...
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| Format: | Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2015
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| Online Access: | http://documents.worldbank.org/curated/en/2000/03/438162/reforming-urban-water-system-santiago-chile http://hdl.handle.net/10986/22314 |
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okr-10986-223142021-04-23T14:04:07Z Reforming the Urban Water System in Santiago, Chile Shirley, Mary M. Xu, L. Colin Zuluaga, Ana Maria CASH FLOW CONCESSION AREA CONSTRUCTION CONSUMER SURPLUS CONTAMINATED WATER COST RECOVERY DEBT DEMAND ESTIMATES DEMAND FOR WATER DIVIDENDS ECONOMIC EFFECTS ECONOMIC WELFARE EXPENDITURES FIXED COSTS HIGH LEVELS HOUSEHOLDS INCOME INFLATION INFORMATION ASYMMETRIES INSTITUTIONAL CHANGE INVESTMENT PROGRAM INVESTMENT REQUIREMENTS MARGINAL COSTS MUNICIPAL COMPANIES MUNICIPAL COMPANY MUNICIPALITIES NUMBER OF CONNECTIONS PIPED WATER POPULATION GROWTH PRICE OF WATER PRIVATE PROPERTY PRIVATE UTILITY PRIVATE WATER RIGHTS PRODUCTIVITY PUBLIC MANAGEMENT PUBLIC OWNERSHIP PUBLIC WATER PUBLIC WORKS RAW WATER REGULATORY FRAMEWORK SALE OF WATER SERVICE QUALITY SEWAGE TREATMENT SEWERAGE SERVICES SNOW MELT SURFACE WATER TARIFF DECISIONS TARIFF SETTING TARIFF SETTING PROCESS TRANSACTION COSTS URBAN WATER URBAN WATER SUPPLY URBAN WATER SYSTEM UTILITIES VARIABLE COSTS WAGES WASTEWATER WATER COMPANIES WATER COMPANY WATER CONNECTIONS WATER CONSUMPTION WATER INFRASTRUCTURE WATER LEGISLATION WATER MARKET WATER PRESSURE WATER REGULATION WATER RIGHTS WATER SECTOR WATER SERVICES WATER SHORTAGES WATER SOURCES WATER SYSTEM WATER SYSTEMS WATER TARIFFS WELFARE GAINS WELLS In the late 1980s, Chile planned to privatize Santiago's sanitary works enterprise (EMOS) but instead reformed it under public ownership. It did so through a regulatory framework that mimicked the design of a concession with a private utility, setting tariffs that ensured at least a seven percent return on assets, creating a neutral regulator independent of ministry intervention, and giving EMOS the right to appeal the regulator's tariff decisions. This reform of Santiago's water system is often cited as a case of successful reform under public management. Comparing a comprehensive measure of welfare with a counterfactual example, the authors show surprisingly large gains from Santiago's reform, given the relatively good initial conditions. (The gains accrued largely to government and employees, but consumers benefited from improved service and coverage). Why did reform in Santiago improve water system performance, when similar reform attempts under public management in other countries failed? 1) Chile has a long tradition of private water rights, shaped by early recognition that water is a scarce and tradable private good. 2) The reformed regulatory framework was designed to attract private investors to the water system and to motivate them to operate efficiently and expand the system. 3) Chile's unique electoral institutions sustained this framework under state operation after democracy was restored. 4) Chile's strong bureaucratic norms and institutions (permitting little corruption), combined with Santiago's relatively low-cost water system, permitted prices that effectively increased quasi-rents for investing in the system while minimizing the risk of inefficiency or monopoly rents. The authors also address the question of why EMOS was reformed but not privatized, and what the costs of not privatizing were. The system was privatized in 1999, but the changes from privatization are likely to be less significant than those introduced in 1989-90. 2015-07-28T18:30:00Z 2015-07-28T18:30:00Z 2000-03 Working Paper http://documents.worldbank.org/curated/en/2000/03/438162/reforming-urban-water-system-santiago-chile http://hdl.handle.net/10986/22314 English en_US Policy Research Working Paper;No. 2294 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Latin America & Caribbean South America Chile |
| 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 |
CASH FLOW CONCESSION AREA CONSTRUCTION CONSUMER SURPLUS CONTAMINATED WATER COST RECOVERY DEBT DEMAND ESTIMATES DEMAND FOR WATER DIVIDENDS ECONOMIC EFFECTS ECONOMIC WELFARE EXPENDITURES FIXED COSTS HIGH LEVELS HOUSEHOLDS INCOME INFLATION INFORMATION ASYMMETRIES INSTITUTIONAL CHANGE INVESTMENT PROGRAM INVESTMENT REQUIREMENTS MARGINAL COSTS MUNICIPAL COMPANIES MUNICIPAL COMPANY MUNICIPALITIES NUMBER OF CONNECTIONS PIPED WATER POPULATION GROWTH PRICE OF WATER PRIVATE PROPERTY PRIVATE UTILITY PRIVATE WATER RIGHTS PRODUCTIVITY PUBLIC MANAGEMENT PUBLIC OWNERSHIP PUBLIC WATER PUBLIC WORKS RAW WATER REGULATORY FRAMEWORK SALE OF WATER SERVICE QUALITY SEWAGE TREATMENT SEWERAGE SERVICES SNOW MELT SURFACE WATER TARIFF DECISIONS TARIFF SETTING TARIFF SETTING PROCESS TRANSACTION COSTS URBAN WATER URBAN WATER SUPPLY URBAN WATER SYSTEM UTILITIES VARIABLE COSTS WAGES WASTEWATER WATER COMPANIES WATER COMPANY WATER CONNECTIONS WATER CONSUMPTION WATER INFRASTRUCTURE WATER LEGISLATION WATER MARKET WATER PRESSURE WATER REGULATION WATER RIGHTS WATER SECTOR WATER SERVICES WATER SHORTAGES WATER SOURCES WATER SYSTEM WATER SYSTEMS WATER TARIFFS WELFARE GAINS WELLS |
| spellingShingle |
CASH FLOW CONCESSION AREA CONSTRUCTION CONSUMER SURPLUS CONTAMINATED WATER COST RECOVERY DEBT DEMAND ESTIMATES DEMAND FOR WATER DIVIDENDS ECONOMIC EFFECTS ECONOMIC WELFARE EXPENDITURES FIXED COSTS HIGH LEVELS HOUSEHOLDS INCOME INFLATION INFORMATION ASYMMETRIES INSTITUTIONAL CHANGE INVESTMENT PROGRAM INVESTMENT REQUIREMENTS MARGINAL COSTS MUNICIPAL COMPANIES MUNICIPAL COMPANY MUNICIPALITIES NUMBER OF CONNECTIONS PIPED WATER POPULATION GROWTH PRICE OF WATER PRIVATE PROPERTY PRIVATE UTILITY PRIVATE WATER RIGHTS PRODUCTIVITY PUBLIC MANAGEMENT PUBLIC OWNERSHIP PUBLIC WATER PUBLIC WORKS RAW WATER REGULATORY FRAMEWORK SALE OF WATER SERVICE QUALITY SEWAGE TREATMENT SEWERAGE SERVICES SNOW MELT SURFACE WATER TARIFF DECISIONS TARIFF SETTING TARIFF SETTING PROCESS TRANSACTION COSTS URBAN WATER URBAN WATER SUPPLY URBAN WATER SYSTEM UTILITIES VARIABLE COSTS WAGES WASTEWATER WATER COMPANIES WATER COMPANY WATER CONNECTIONS WATER CONSUMPTION WATER INFRASTRUCTURE WATER LEGISLATION WATER MARKET WATER PRESSURE WATER REGULATION WATER RIGHTS WATER SECTOR WATER SERVICES WATER SHORTAGES WATER SOURCES WATER SYSTEM WATER SYSTEMS WATER TARIFFS WELFARE GAINS WELLS Shirley, Mary M. Xu, L. Colin Zuluaga, Ana Maria Reforming the Urban Water System in Santiago, Chile |
| geographic_facet |
Latin America & Caribbean South America Chile |
| relation |
Policy Research Working Paper;No. 2294 |
| description |
In the late 1980s, Chile planned to
privatize Santiago's sanitary works enterprise (EMOS) but
instead reformed it under public ownership. It did so
through a regulatory framework that mimicked the design of a
concession with a private utility, setting tariffs that
ensured at least a seven percent return on assets, creating
a neutral regulator independent of ministry intervention,
and giving EMOS the right to appeal the regulator's tariff
decisions. This reform of Santiago's water system is often
cited as a case of successful reform under public
management. Comparing a comprehensive measure of welfare
with a counterfactual example, the authors show surprisingly
large gains from Santiago's reform, given the relatively good
initial conditions. (The gains accrued largely to government
and employees, but consumers benefited from improved service
and coverage). Why did reform in Santiago improve water
system performance, when similar reform attempts under
public management in other countries failed? 1) Chile has a
long tradition of private water rights, shaped by early
recognition that water is a scarce and tradable private
good. 2) The reformed regulatory framework was designed to
attract private investors to the water system and to
motivate them to operate efficiently and expand the system.
3) Chile's unique electoral institutions sustained this
framework under state operation after democracy was
restored. 4) Chile's strong bureaucratic norms and
institutions (permitting little corruption), combined with
Santiago's relatively low-cost water system, permitted prices
that effectively increased quasi-rents for investing in the
system while minimizing the risk of inefficiency or monopoly
rents. The authors also address the question of why EMOS was
reformed but not privatized, and what the costs of not
privatizing were. The system was privatized in 1999, but the
changes from privatization are likely to be less significant
than those introduced in 1989-90. |
| format |
Working Paper |
| author |
Shirley, Mary M. Xu, L. Colin Zuluaga, Ana Maria |
| author_facet |
Shirley, Mary M. Xu, L. Colin Zuluaga, Ana Maria |
| author_sort |
Shirley, Mary M. |
| title |
Reforming the Urban Water System in Santiago, Chile |
| title_short |
Reforming the Urban Water System in Santiago, Chile |
| title_full |
Reforming the Urban Water System in Santiago, Chile |
| title_fullStr |
Reforming the Urban Water System in Santiago, Chile |
| title_full_unstemmed |
Reforming the Urban Water System in Santiago, Chile |
| title_sort |
reforming the urban water system in santiago, chile |
| publisher |
World Bank, Washington, DC |
| publishDate |
2015 |
| url |
http://documents.worldbank.org/curated/en/2000/03/438162/reforming-urban-water-system-santiago-chile http://hdl.handle.net/10986/22314 |
| _version_ |
1764450609228939264 |