Privatisation and Corporate Governance in Emerging Economies: What Went Wrong with Aguas Argentinas S.A.?
25 Pages Posted: 2 Aug 2008
Date Written: August 1, 2008
This study explores the role of corporate governance in privatized water companies in emerging economies with a review of a case from Argentina. Very few developing countries have privatized their water resources due to important externalities. There is much that is unseen and therefore unknown about water, including its buried infrastructure, which implies that information problems will be greater than in any other privatized business. Private participation will be less extended and the contracts with private parts will tend towards periodic renegotiation. In this context, the role of governance mechanisms is of critical importance.
The analysis of governance mechanisms in the privatisation of water services is done through a case study analysis. The city of Buenos Aires in 2006 became one of the few cases where, in less than fifteen years, water services were privatized and then re-nationalized. The failure can be related to the lack of a clear regulation with a strong and independent regulatory control body coupled with the reluctance of the company to have transparent and open governance mechanisms. In summary the failure can be traced to weak corporate governance, a common problem in emerging economies eager to attract private investors.
Keywords: privatisation, corporate governance, water and sewage, regulatory body, Aguas Argentinas
JEL Classification: G38, L95, M49
Suggested Citation: Suggested Citation