Bright spots in water privatization

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New IDB President Luis Alberto Moreno writes about the current Latin American landscape for water privatization in the WSJ (subscription required). He points out that while the industry’s past has been turbid, this should not cloud the lessons from recent successful private ventures. Among other things, he argues that public-utilities have benefited from private-sector innovation, that low-income areas need not be marginalized by private investors and that a new class of domestic Latin American companies are stepping into the void left by retracting multinationals. He also stresses the importance of small-scale providers:

Small-scale water companies thrive in almost every Latin American country. In Colombia, more than 150 such enterprises provide water and sanitation services under contract to municipal governments. Most of these are small businesses located in remote rural areas. Paraguay and Bolivia have dozens of water entrepreneurs who use their own capital to build networks in communities not reached by public utilities. These providers are succeeding because they offer reliable services at competitive prices with the support of local governments and citizens.

…Private investment is not a panacea for Latin America's sanitation problems. More than 90% of the region's population still depends on public utilities, and in the near term investors are not likely to provide the tens of billions of dollars that are needed to close the sanitation gap. But as they look for ways to extend drinking water and sewer services to the millions of citizens who still lack them, governments should leverage the experience and creativity of private providers on their home turf.

See Schwartz and Kariuki for more on small-scale infrastructure providers. Or a previous post on Peru’s water privatization strategy.

Update: Biwater has found out that successful water privatization in Tanzania and Sudan is just as challenging.

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