Peru has lots of fresh water – though Peruvians have very little access to it. The problem is not just geography, but also poorly run state enterprises and a lack of investment. The government is cautiously turning to the private sector:
The government wants to offer private investors long-term contracts, known as concessions, to operate some of the country's 45 water and sewerage companies. The idea is that each contract will be a locally determined variant on a public-private partnership. Soft loans from the Inter-American Development Bank and from the German government will be used as subsidy, to prevent the steep rises in charges that proved explosive in Bolivia. The first contract, for Tumbes, a small city in the north, was awarded last July to an Argentine-led consortium. It is supposed to invest $30m to more than double coverage from its current level of 40%.
I lived in Peru for five years and know that public hostility to privatization is fierce. It will be interesting to see how the idea is sold from city to city. The Government’s strategy:
“We're trying to show people that while privatisation is like selling grandma's jewels, a concession is merely renting them out for the ball but still owning them.”
The Economist asks: what about coupling private management with targeted subsidies for the poor?
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