Justification for intervention for economic regulatory efforts arises out of alleged inability of the marketplace to deal with particular structural problems. Of course, details of any program often reflect political force, not reasoned argument. Yet thoughtful justification is still needed when programs are evaluated.[1]
The case of water reform in Chile is an interesting one. First of all, it allows us to think about a situation where regulatory reforms face political decision-making through the outcome of proposed legislation. Secondly, the case doesn’t deal with lack of political commitment, but rather involves a situation where the government now faces an important question of passing a legislation that directly affects their households ? the main question is not whether to privatize, but how to regulate what will be privatized. Finally, it shows us the importance of having a credible and independent regulatory framework in order to have effective reforms.
Despite the successful accomplishment of SENDOS, government had few concerns it was facing with publicly owned companies:
- It had to restructure the public entity that was responsible for regulating quality while providing the service. SENDOS did not have the authority for economic regulation and control of tariffs which was under the Ministry of Economy. Only after the reforms a regulatory agency, SISS was established and given a right, among others, to set tariffs and audit companies. But even then, it was constrained it its ability due to much dependency on the government.
- The regulatory system did not provide the government with credible checks and balances system. Besides defining a geographic area the company was obliged to serve, a lot was unclear incl ...