Private Sector Participation in Water Supply and Sanitation in Latin America

The water and sanitation sector in Latin America and the Caribbean is facing a crisis of confidence. The return of cholera to the region in 1991 was a symptom of deep seated problems and exposed the fragility and inadequacy of publicly operated water supplies and sanitation systems. Despite substantial efforts to improve the quality and coverage of service, one quarter of the urban population is not connected to a public water system, half lacks public sewerage, and the sewage is virtually untreated. The results are a constant threat to the health of the entire population, a perpetuation of unmet basic needs of the poor, and a steady deterioration of the environment. In recent years, private sector participation in water and sanitation has been a topic of discussion among various countries in Latin America, as evidenced by the large attendance at a number of regional seminars organized by the Technical Department of the World Bank's Latin America and the Caribbean Regional Office. These seminars have shown that virtually all public water companies are interested in cooperating with the private sector. Some have advanced further and have already involved the private sector in their operations in one way or another. The seminars have catalyzed the pursuit of greater private sector participation and the evolution of privatization models adapted to the institutional realities of Latin America and the Caribbean. This publication incorporates some of the insights gained at these seminars and is aimed at assisting the decisionmaking process that many countries face. The publication consists of two chapters. In the first¾Options for Private Sector Participation¾the main problems of the public sector are analyzed, the rationale for private sector participation (PSP) is explained, and the array of options for PSP is reviewed. In the second chapter Case Study: The Buenos Aires Concession the large concession for the Greater Buenos Aires water supply and sewerage services awarded by the government of Argentina to a private consortium of foreign operators and local investors is presented and analyzed, because it provides an excellent example of the planning and implementation stages that are needed to ensure a successful transition from public to private management.