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Privatization in Colombia: A Plant Performance Analysis

  • Carlos Pombo
  • Manuel Ramírez

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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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. Rafael La Porta & Florencio López-De-Silanes, 1999. "The Benefits Of Privatization: Evidence From Mexico," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1193-1242, November.
  2. Gutierrez, Luis H., 2003. "Regulatory governance in the Latin American telecommunications sector," Utilities Policy, Elsevier, vol. 11(4), pages 225-240, December.
  3. 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, June.
  4. Carlos Pombo, 1999. "Productividad industrial en Colombia: Una aplicación de números índices," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO.
  5. 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.
  6. Pombo, Carlos, 2001. "Regulatory reform in Colombia's electric utilities," The Quarterly Review of Economics and Finance, Elsevier, vol. 41(5), pages 683-711.
  7. 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.
  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. 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.
  10. David M. Newbery, 2002. "Privatization, Restructuring, and Regulation of Network Utilities," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262640481, June.
  11. 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.
  12. 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.
  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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