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Privatization in Colombia: A Plant Performance Analysis

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  • Carlos Pombo
  • Manuel Ramírez

Abstract

This paper describes the privatization program carried out in the productive sector of the Colombian economy during the 1990s. It evaluates privatization within the policy context of general market deregulation and the promotion of private investment in the provision of public infrastructure and domiciliary public services. Two case studies are explored: the manufacturing and power sectors. The paper follows the ex-post measuring and econometric analysis of a set of operative and restructuring performance indicators for the privatized firms. For manufacturing, the study sample consists of 30 large manufacturing firms of which the Instituto de Fomento Industrial was the founding or supporting partner. The main findings suggest that those firms followed pro-cyclical behavior relative to their private competitors and undertook tight plant operative restructuring. For the power sector, the paper studies the impact of regulatory reform on market entry, ownership structure, market competition, and productive efficiency of the privatized holdings. The results suggest that privatization and entry competition in power generation have had a positive effect on the privatized utilities’ efficiency and investment. With respect to thermal generation, the measurement of productive efficiency follows a data envelope analysis technique based on a sample of 33 plants that account for 85% of the installed capacity. The sample units are plants that were active before the reform and new entrants that started business operations after the reform. The main outcome shows that efficiency scores have improved after the reform and that regulatory policy has had a positive effect on productive efficiency.

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Bibliographic Info

Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 3151.

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Date of creation: Jun 2003
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Handle: RePEc:idb:wpaper:3151

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  1. Gutierrez, Luis H., 2003. "Regulatory governance in the Latin American telecommunications sector," Utilities Policy, Elsevier, vol. 11(4), pages 225-240, December.
  2. Estache, Antonio & Rodriguez-Pardina, Martin, 1999. "Light and lightning at the end of the public tunnel : reform of the electricity sector in the Southern Cone," Policy Research Working Paper Series 2074, The World Bank.
  3. Julio Cesar Alonso & Israel Fainboim Yaker & Carlos Jorge Rodriguez & Juan Benavides, 2001. "Participación privada en proyectos de infraestructura y determinantes de los esquemas contractuales adoptados: El caso colombiano," Research Department Publications 3111, Inter-American Development Bank, Research Department.
  4. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
  5. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
  6. Carlos Pombo, 1999. "Productividad industrial en Colombia: Una aplicación de números índices," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO.
  7. Rafael La Porta & Florencio Lopez-de-Silane, 1997. "The Benefits of Privatization: Evidence from Mexico," NBER Working Papers 6215, National Bureau of Economic Research, Inc.
  8. Gutierrez, Luis H. & Berg, Sanford, 2000. "Telecommunications liberalization and regulatory governance: lessons from Latin America," Telecommunications Policy, Elsevier, vol. 24(10-11), pages 865-884, November.
  9. Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, December.
  10. Carlos Pombo, 2001. "Regulatory reform in Colombia's electric utilities," BORRADORES DE INVESTIGACIÓN 003448, UNIVERSIDAD DEL ROSARIO.
  11. David M. Newbery, 2002. "Privatization, Restructuring, and Regulation of Network Utilities," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262640481, December.
  12. Rodrigo Gutierrez & Pablo Serra & Ronald Fischer, 2003. "The Effects of Privatization on Firms and on Social Welfare: The Chilean Case," Research Department Publications 3150, Inter-American Development Bank, Research Department.
  13. Dixon, R & Thirlwall, A P, 1975. "A Model of Regional Growth-Rate Differences on Kaldorian Lines," Oxford Economic Papers, Oxford University Press, vol. 27(2), pages 201-14, July.
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Cited by:
  1. Daniele CHECCHI & Massimo FLORIO & Jorge CARRERA, 2004. "Privatization discontent and its determinants: evidence from Latin America," Departmental Working Papers 2004-23, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  2. Aarón Garavito A. & Ana María Iregui & María Teresa Ramírez G., 2012. "Inversión Extranjera Directa en Colombia: Evolución reciente y marco normativo," BORRADORES DE ECONOMIA 009655, BANCO DE LA REPÚBLICA.
  3. Ligia Melo & Néstor Espinosa, 2005. "Ineficiencia en la distribución de energía eléctrica: una aplicación de las funciones de distancia estocástica," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE.
  4. Pombo, Carlos & Taborda, Rodrigo, 2006. "Performance and efficiency in Colombia's power distribution system: Effects of the 1994 reform," Energy Economics, Elsevier, vol. 28(3), pages 339-369, May.
  5. Alberto Chong & Florencio Lopez-de-Silanes, 2003. "The Truth About Privatization in Latin America," Research Department Publications 3180, Inter-American Development Bank, Research Department.
  6. Felipe Barrera-Osorio & Mauricio Olivera & Carlos Ospino, 2009. "Does Society Win or Lose as a Result of Privatization? The Case of Water Sector Privatization in Colombia," Economica, London School of Economics and Political Science, vol. 76(304), pages 649-674, October.
  7. Kabir Malik & Maureen Cropper & Alexander Limonov & Anoop Singh, 2011. "Estimating the Impact of Restructuring on Electricity Generation Efficiency: The Case of the Indian Thermal Power Sector," NBER Working Papers 17383, National Bureau of Economic Research, Inc.
  8. Mauricio Olivera & Felipe Barrera, 2007. "La sociedad gana o pierde como resultado de la privatizacion? El caso de Colombia," Research Department Publications 3231, Inter-American Development Bank, Research Department.
  9. Isidro Hernández, 2003. "Las privatizaciones en Colombia," REVISTA APUNTES DEL CENES, UNIVERSIDAD PEDAGOGICA Y TECNOLOGICA DE COLOMBIA.

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