Argentina's Transport Privatization and Re-Regulation: Ups and Downs of a Daring Decade-Long Experience

24 Pages Posted: 20 Apr 2016

See all articles by Antonio Estache

Antonio Estache

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES)

José Carbajo

European Bank for Reconstruction and Development (EBRD)

Gines de Rus

University of Las Palmas de Gran Canaria

Date Written: November 1, 1999

Abstract

Argentina's policy for reform of the transport sector has been a mix of competition in the market and, through concessions, for the market. Capacity has increased, demand has grown, and prices and services have improved. Public financing has not been eliminated but it has been drastically reduced.

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 issue is likely to be the need for better targeting of subsidies for the poor.

This paper - a product of Governance, Regulation, and Finance, World Bank Institute - is part of a larger effort in the institute to increase understanding of infrastructure regulation.

Suggested Citation

Estache, Antonio and Carbajo, José and de Rus, Gines, Argentina's Transport Privatization and Re-Regulation: Ups and Downs of a Daring Decade-Long Experience (November 1, 1999). World Bank Policy Research Working Paper No. 2249. Available at SSRN: https://ssrn.com/abstract=629185

Antonio Estache (Contact Author)

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
32 (0)2 6503838 (Phone)

José Carbajo

European Bank for Reconstruction and Development (EBRD) ( email )

One Exchange Square
London, EC2A 2EH
United Kingdom

Gines De Rus

University of Las Palmas de Gran Canaria ( email )

Campus de Tafira
35017 Las Palmas, Las Palmas 35017
Spain
34 928451808 (Phone)
34 928458183 (Fax)

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