The Limitations of Water Regulation: The Failure of the Cochabamba Concession in Bolivia

Abstract

This article examines the limitations of governmental capacity to regulate private sector participation in urban water supply in developing countries through an analysis of the most dramatic failure to date of a major franchise contract for supplying water and sanitation services to a large city ± the 40-year concession awarded in September 1999 to Aguas del Tunari (AdT) in Cochabamba, Bolivia. Five months later, the population rioted against water tariff increases and the contract was cancelled. The paper analyses the background, context and factors that explain the failure of the concession and seeks to draw lessons for the regulation of future concessions.

Analyzing economic market interactions as conflicts: New concepts to assess market-based policy instruments

“…Furthermore, the right to provide drinking water was given exclusively to the firm taking over the system. Thus, several interest groups (such as private water vendors or the richer households that had dug their own wells) who were going to lose from the privatization, seemed, according to Nickson and Vargas (2002), to have played a significant role in organizing the protest of the poor against the privatization plans. These groups used popular opposition to pursue their interests, mingling them with the necessity to assure the basic needs of the poor.…”

“…Third and related to the above points, an already existing conflict between the actors was not considered: the US-financed programs to eradicate coca-production in 1999 caused the coca-leaf farmers in the region to lose their source of employment. This caused considerable migration of these people to the city of Cochabamba with the corresponding consequences regarding unemployment rates and poverty (Nickson and Vargas 2002). Thus all three boundary conditions for the successful implementation of a privatization process were not explicitly addressed -to the detriment of both the consumers and producers.…”

Factors Influencing Organisation Efficiency of Water Supply and Sanitation Authorities in Tanzania: The Analysis of Mbeya Urban Water Supply Authority

“…Most of the water supply utilities fail to provide consumers with adequate water supply (Nickson, 2002). Along the notable challenge, fairly few studies examine the efficiency of water supply utilities as important organs for the survival of human beings.…”

Water services regulation for the urban poor: Zambia

“…Weak regulatory capacity and/or external political pressure in developing countries may undermine the regulatory capacity. 11 In order to strike the right balance between protecting individuals' and utilities' rights, the UK Government has endorsed five principles of 'good regulation': proportionality, accountability, consistency, transparency and targeting of interventions. 12 Other crucial factors for regulators in developing countries is independence from political pressure, timing of regulatory decisions, regulation of small-scale service providers, and capacity-building for staff working for the regulator.…”

“…12 Other crucial factors for regulators in developing countries is independence from political pressure, timing of regulatory decisions, regulation of small-scale service providers, and capacity-building for staff working for the regulator. 11 This paper reports on research carried out in developing countries on systems and structures put in place to regulate water service providers effectively for the benefit of all consumers, particularly the poor.…”