Special Issue: Water Pricing and Public-Private Partnership in the Americas
WATER PRICING: AN OUTSIDER’S PERSPECTIVE (pp. 9-17)
Luis E. García, Fairfax, VA, USA
Abstract: In most countries, water policies and/or strategies endorse the application of the principle of water as an economic good. For Latin America, the current trends indicate that the application of economic instruments and the involvement of the private sector in the provision of water and sanitation services are being encouraged, while the public sector is generally perceived to be unable to provide water supply services in an efficient manner. It is argued that while water must be valued, and charges must be levied for its use, from a practical viewpoint, the questions that must be answered are who charges whom, for what, how, and by how much?
WATER PRICING REFORMS: ISSUES AND CHALLENGES OF IMPLEMENTATION (pp. 19-29)
Luiz Gabriel T. de Azevedo and Alexandre M. Baltar, World Bank, Country Office, Corporate Financial Center, Brasilia-DF, Brazil
Abstract: Water pricing has to consider that water resources are scarce and that incentives and economic principles have to be implemented with the objective of improving allocation and to enhance quality. Pricing mechanisms are not objectives by themselves, but a means to an end, the end being a more efficient water resources management, including the provision of water services. Since the implementation of water pricing reforms has proved to be difficult, it should be considered within a broad perspective of local and regional socio-economic, institutional, political, legal, ecological and cultural characteristics.
WATER PRICING IN SPAIN (pp. 31-41)
Antonio Embid-Irujo, University of Zaragoza, Zaragoza, Spain
Abstract: Water pricing management in Spain reflects the different opinions of the decentralised governments and the appropriate sectors of the country, where there is considerable impact of the different sectorial laws and practices. The responsibilities of the Federal Government and the Autonomous Communities on this issue are not specifically defined. This has resulted in differing opinions and actions, which could be resolved by considering cost-recovery of the water supply- related services, which are included in the Laws of the Communities (20001601CE).
THE FUNCTIONS, IMPACTS AND EFFECTIVENESS OF WATER PRICING: EVIDENCE FROM THE UNITED STATES AND CANADA (pp. 43-53)
Charles W. Howe, Institute of Behavioral Science, University of Colorado, Boulder, CO, USA
Abstract: The paper analyses what is considered to be different ‘prices’ of water: those which depend on the services that are provided, on the revenues structures, and on the types of water markets to which the users may have access to. Conflicting roles of water pricing are also discussed, like the validity of the arguments based on economic efficiency; the generation of adequate revenues for operation, maintenance and expansion of the water system; and the ‘equitable’ treatment towards water users. Water pricing case studies in United States and Canada are presented.
PROBLEMS WITH PRIVATE WATER CONCESSIONS: A REVIEW OF EXPERIENCES AND ANALYSIS OF DYNAMICS (pp. 55-87)
Emanuele Lobina, Public Services International Research Unit (PSIRU), University of Greenwich, London, UK
Abstract: Based on empirical evidence, this paper looks at experience with privatized water supply and sanitation concessions and operating contracts in transition and developing countries, with particular reference to Latin America. The paper is an attempt to address the complexity of issues affecting private sector participation in the water sector from a dynamic point of view, taking into account how the interests, objectives and resources of private sector operators continuously shape their relationships with local stakeholders, citizens and local governments alike, and how the interaction between multinational companies and other actors affect the developmental impact of private sector participation. It is argued that the introduction of commercial considerations into the system and the profit-seeking behaviour of private water operators are major determinants of the economic, social, political and environmental results of public-private partnerships (PPPs). Such factors may explain the discrepancy between the theory pointing at private sector participation as the way forward and the results of private sector participation in practice.
KEY ISSUES AND EXPERIENCE IN US WATER SERVICES PRIVATIZATION (pp. 89-98)
Jeffrey W. Jacobsa and Charles W. Howeb
aWater Science and Technology Board, National Research Council, Washington DC, USA; bInstitute of Behavioral Science, University of Colorado, Boulder, CO, USA
Abstract: Privatization of water services has long been an option for US municipal governments and water systems. There was a surge of interest in the prospects for private sector participation in water utility ownership and operations during the 1990s, both in the United States and abroad. This prompted the Water Science and Technology Board of the US National Research Council to appoint an expert committee to review the issues and experience with water services privatization in the United States. The committee was appointed in 1999 and its report, Privatization of Water Services in the United States: An Assessment of Issues and Experience, was approved and released in early 2002 (NRC, 2002). This paper summarizes that committee’s report and findings.
PRICE SETTING FOR WATER USE CHARGES IN BRAZIL (pp. 99-117)
Raymundo Garrido, Universidad Federal da Bahia, Faculdade de Ciencias Economicas, Salvador, BA, Brazil
Abstract: This paper analyses one of the essential aspects of water pricing, which is the mechanism on the basis of which appropriate water charges could be levied. This is why, in matters of water pricing, the question of ‘quantum’ is still a subject of consideration. The diversity of the results is often simply due to the specific regions or basins, or even rivers, lakes or aquifers, of the country. In other words, the diversity will occur according to the natural differences between bulk water markets, and not because of the existence of many different methodologies for water pricing.
WATER CHARGES: PAYING FOR THE COMMONS IN BRAZIL (pp. 119-132)
Benedito P.F. Braga, Clarice Strauss and Fatima Paiva, Agencia Nacional de Aguas, Brasilia DF, Brazil
Contact: Benedito P.F. Braga, e-mail: firstname.lastname@example.org
Abstract: This paper discusses the processes leading to the current basis for water pricing in Paraiba do Sul basin of Brazil. Reaching agreements required trade-offs between all parties involved. A simple method that could be promptly accepted by all was preferred. Agreements were reached between the various stakeholders, and water pricing started in early 2003. Although the current formula for water pricing is far from perfect, and will require further adjustments, the decision to levy bulk water charges has been generally accepted, and is now fully operational The paper also addresses experiences for the state of Ceara, where water charges were established as a pioneering strategy to address cyclic droughts in this semi-arid region. Co-operation among the stakeholders transformed a water crisis scenario into a ‘win-win’ situation, laying the seeds for further regional economic development.
WATER REFORM ACROSS THE STATE/SOCIETY DIVIDE: THE CASE OF CEARÁ, BRAZIL (pp. 133-147)
Maria Carmen Lemosa and Joáo Lúcio Farias de Oliveirab
aUniversity of Michigan, Ann Arbor, MI, USA; bDepartamento Nacional de Obras e Combate as Secas (DNOCS), Fortaleza, CE, Brazil
Contact: Maria Carmen Lemos, e-mail: email@example.com
Abstract: This paper focuses on partnerships across the state-society divide in the management of bulk water in the state of Ceará, in Northeast Brazil. It examines the creation of Users’ Commissions in two of Ceará’s river basins-the Lower Jaguaribe/Banabuiú and the Curú. It is argued that the presence of synergy across the state-society divide is critical to guarantee meaningful public participation. In turn, meaning participation improves decision making at the river basin level and supports positive values in policy making such as decentralization, equity, accountability and transparency.
INSTITUTIONAL FRAMEWORK FOR WATER TARIFFS IN THE BUENOS AIRES CONCESSION, ARGENTINA (pp. 149-164)
Lilian del Castillo Laborde, University of Buenos Aires, Buenos Aires, Argentina
Abstract: The institutional frameworks for water tariffs in Argentina have their own special features. Some refer to the different types of users, i.e. public, industrial or household, whereas others consider the utilities providing the service in terms of whether the utility concerned is a public or private operation, or to the governmental water resources policy. The pricing of the service and the tariff schedule is the outcome of the assessment of these related components. The focus of this paper is on the legal and institutional regulatory frameworks for water tariffs in Argentina primarily for the single utility providing water and sanitation services to the city of Buenos Aires and the Greater Buenos Aires area.
PRIVATE-SECTOR PARTICIPATION IN THE MANAGEMENT OF POTABLE WATER IN MEXICO CITY, 1992-2002 (pp. 165-179)
Boris Marañón, in collaboration with The Third World Centre for Water Management, Atizapan, Estado de Mexico, Mexico
Abstract: This paper is the result of a study that analyses the process of private-sector participation in water management in Mexico City. Because the concession to provide the service was not awarded to one single company, there are important differences in comparison with the experience of other cities, both in Mexico and in the rest of the world. The transfer of responsibility for the services was intended to be a gradual, three-phase process. Even so, the city government was to retain property tights over the infrastructure and would continue to set tariffs, while the companies would be paid, over 10 years, for each activity realized.
PARTICIPATION OF THE PRIVATE SECTOR IN WATER AND SANITATION SERVICES: ASSESSMENT OF GUANAJUATO, MEXICO (pp. 181-197)
Ricardo Sandoval-Minero, State Commission of Water, Guanajuato, Mexico
Abstract: From the decade of the 1990s, different forms of private participation have been promoted in Mexico to provide drinking water and sanitation services. While this paper will not analyse all these experiences, it is important to note that the many failures experienced during the last 10 years are important lessons, which the private and public sectors must learn in terms of the real opportunities and constraints to this development. Many things have changed since the initial optimistic expectations, when the potential market was estimated at billions of dollars, due to the poor status of drinking water and wastewater treatment coverage that Mexico was experiencing at that time. Currently, the private sector is willing to invest, only if there is a stringent bidding process, with transparent processes which would protect their investment. Not surprisingly, the private sector refuses to participate in any type of risky enterprises, which would not protect their capital investments and ensure reasonable economic return on such investments.
CONCEPTS OF THE CHILEAN SANITATION LEGISLATION: EFFICIENT CHARGES AND TARGETED SUBSIDIES (pp. 199-216)
Damaris Orphanópoulos, Ministry of Public Works, Santiago, Chile
Abstract: Sanitation services in Chile were controlled by the federal government until 1988. Prior to this period, the services were somewhat inefficient, the tariffs were low, and a universal subsidy was provided to all users, irrespective of their economic conditions. During 1988, 1989 and 1990, new laws for water supply and sanitation were enacted. These laws were based on the following considerations: companies would be given concessions to provide water and sanitation services; the tariffs would ensure the economic viability of these companies; and the subsidies would target the poorest sectors of the population. A legal institution, the Sanitary Services Office, was also established. This body has been subsequently modified according to the needs of the country, and is still under operation.
The Human Right to Water: Legal and Policy Dimensions, edited by Salman M.A. Salman and Siobha´n McInerney-Lankford Law, Justice and Development Series, World Bank, 2004
Organization for Economic Cooperation and Development (OECD) Economic Surveys 2002–2003, Mexico, OECD, 2004