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Argentina's transport privatization and re-regulation : ups and downs of a daring decade-long experience

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Author Info

  • Estache, Antonio
  • Carbajo, Jose C.
  • de Rus, Gines

Abstract

When Argentina initiated reform of its transport sector in 1989, it had few models to follow. It was the first Latin American country to privatize its intercity railroad, to explicitly organize intraport competition, and to grant a private concession to operate its subway. It was second (after Japan) to privatize its urban commuter railways and one of the first in the developing world to grant road concessions to private operators. Argentina's experience shows that transport privatization and deregulation provide efficiency gains that can be delivered to users. Despite unexpectedly high residual subsidy requirements, fiscal costs are lower, services have improved, and new investment is taking place. Argentina's decade-long experience shows that the reform process involves learning by doing. Inexperienced new regulators quickly face the challenges in controlling monopoly power and providing long-run incentives for private investment. Designing sustainable reform requires a commitment by government to minimize its role in the sector and to respect its original promises to both users and concessionaires. Argentina has learned the importance of building up the regulatory capacity needed to monitor contracts, especially when initial uncertainty about demand and cost conditions is strong and renegotiation is the probable outcome of daring reform. The government's main challenge in monitoring contracts is to get enough information to reach a balance in its decisions about distributing efficiency gains fairly between consumers and private investors. This is one area in which Argentina may not yet have met the challenge. As the last wave of contract extensions in rail and roads comes to an end, one issues is likely to be the need for better targeting of subsidies for the poor.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2249.

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Date of creation: 30 Nov 1999
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Handle: RePEc:wbk:wbrwps:2249

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Related research

Keywords: Public Sector Economics&Finance; Roads&Highways; Environmental Economics&Policies; Banks&Banking Reform; Transport and Trade Logistics; Environmental Economics&Policies; Public Sector Economics&Finance; Airports and Air Services; Roads&Highways; Railways Transport;

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  1. Winston, Clifford, 1993. "Economic Deregulation: Days of Reckoning for Microeconomists," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1263-89, September.
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Cited by:
  1. Michel Bellier & Yue Maggie Zhou, 2003. "Private Participation in Infrastructure in China : Issues and Recommendations for the Road, Water, and Power Sectors," World Bank Publications, The World Bank, number 15156, January.

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