Can we regulate small and rural water supply and sanitation operators in Latin America?

The recent reforms in the water supply and sanitation (WSS) legal framework in Peru has given the National Superintendence of Water Supply and Sanitation Services of Peru (SUNASS) a new role in the regulation and supervision of service providers in small towns and rural communities, expanding its regulatory action beyond the urban area scope. Therefore, SUNASS needs to develop a regulatory framework and tools to effectively supervise around 28,000 small and rural operators, which provide service to 21% of the Peruvian population.
 

To achieve this goal, SUNASS, with the support of the World Bank, visited different WSS sector entities in Colombia which are responsible for the regulation, supervision and issuing policies regarding rural service provision. The objective of this South-South knowledge exchange was to gain valuable information from the Colombian counterparts about the challenges, lessons learned, and useful mechanisms for a successful reform process. 

The visit was focused on finding answers to the following questions: How can we regulate operators which we had no experience in dealing with previously? How can we collect data from these operators, and -- even more importantly -- what information do we really need to collect? What rates should be charged for the rural service provision and how do we calculate them?
 

After an intense week of site visits and discussions, some answers started to emerge. Meetings with the Superintendent of Public Services, the Commission of WSS Regulation, the Ministry of Housing, Cities and Territories and a field visit to Empocaldas, a regional WSS operator located in Manizales (Colombia’s coffee region) gave the team a deep insight of the Colombia’s reform process –what has worked and what not- and the time needed for the implementation of such reforms. The team gathered relevant knowledge about business principles behind the operations of the Colombian WSS service delivery model, the importance of applying differentiated approaches and schemes for diverse locations and social contexts, the use of corporate governance and behaviour economics mechanisms, and the focus on coordination at all government levels. 

For instance, a better understanding of the methodology to estimate WSS tariffs for rural areas, the terms for rural providers to progressively reach service standards, the tool to formulate investment projects for rural areas and differentiated schemes, as well as the Integrated Information System that establishes differentiated monitoring for each population segment, were some of the key takeaways that the SUNASS team brought back to Peru. 

Many Latin American countries still face the big challenge of regulating the rural WSS sector. Throughout the last 20 years, Colombia, with its heavily decentralized structure of the WSS sector and its unique approach to involve the private sector, has been adjusting, on a trial and error basis, its policies and tools to improve the regulation and supervision of more than 1,300 service providers. Although not perfect to any standards, the experience gained Colombia is an extraordinary source of knowledge for many countries.   

Following the discussions that took place in the south-south exchange with Colombia during the visit  came apparent that it is possible to regulate small and rural WSS operators. However, as a recent World Bank report “Aligning Institutions and Incentives for Sustainable Water Supply and Sanitation Services” shows, countries need to be careful to not over emphasize “best practices” as there are no “one-size-fits-all” solutions. Therefore, Peru should follow its own pathway, reinforcing endogenous drivers for reform and working on the design of programs that are rooted into local, political and administrative realities and capabilities.