Water supply and sanitation in Argentina
Encyclopedia
Water supply and sanitation in Argentina is characterized by relatively low tariffs, mostly reasonable service quality, low levels of metering and high levels of consumption for those with access to services. At the same time, according to the WHO
, 21% of the total population remains without access to house connections and 52% of the urban population do not have access to sewerage. The responsibility for operating and maintaining water and sanitation services rests with 19 provincial water and sewer companies, more than 100 municipalities and more than 950 cooperatives, the latter operating primarily in small towns. Among the largest water and sewer companies are Agua y Saneamientos Argentinos (AYSA) and Aguas Bonarenses S.A. (ABSA), both operating in Greater Buenos Aires
, Aguas Provinciales de Santa Fe
, and Aguas Cordobesas SA, all of them now publicly owned. In 2008 there were still a few private concessions, such as Aguas de Salta SA, which is majority-owned by Argentinean investors, and Obras Sanitarias de Mendoza
(OSM).
Most service providers barely recover operation and maintenance costs and have no capacity to self-finance investments. While private operators were able to achieve higher levels of cost recovery, since the Argentine financial crisis
in 2002 tariffs have been frozen and the self-financing capacity of utilities has disappeared. Roughly two-thirds of provincial water and sanitation spending since 2002 has come from general transfers from the federal government, the remainder coming from various national programs directed specifically to the sector.
Services are regulated by the 23 Provinces
, in the case of 14 through regulatory agencies that have some limited autonomy from the government. Overall, however, responsibilities are not always clearly defined, and institutions are often weak, subject to political interference and lacking enforcement powers. The various national institutions with policy-setting responsibilities in the sector are not always well coordinated. There is no coherent national policy in terms of sector financing, subsidies, tariffs and service standards. The federal structure of the country and the dispersion of sector responsibilities between and within various levels of government make the development of a coherent sector policy all the more difficult.
Between 1991 and 1999, as part of one of the world's largest privatization programs covering a range of sectors, water and sanitation concessions with the private sector were signed covering 28% of the country's municipalities and 60% of the population. The highest profile concession was signed in 1993 with a consortium led by the French firm Suez for the central parts of Greater Buenos Aires
. After the 2001 economic crisis
, many concessions were renegotiated. Many were terminated, as it was the case in Buenos Aires
in 2006.
The impact of private sector participation in water and sanitation is a controversial topic. While the public perception of the mostly international concessionaires is overwhelmingly negative in Argentina, some studies show positive impacts. For example, a 2002 study assessed the impact of privatization on child mortality based on household survey data, finding that child mortality fell 5 to 7 percent more in areas that privatized compared to those that remained under public or cooperative management. The authors estimate that the main reason is the massive expansion of access to water. According to Suez, the private concession in Buenos Aires extended access to water to 2 million people and access to sanitation to 1 million people, despite a freeze in tariffs imposed by the government in 2001 in violation of the concession agreement. The government argues that the concessionaire did not fully comply with its obligations concerning expansion and quality, saying that the supplied water had high levels of nitrate, pressure obligations were not kept and scheduled works were not carried out.
in urban areas (98%), using a broad definition of access. However, coverage using a narrower definition of access (house connections) is much lower at 83%, since many users still only have access through public standpipes. Also, access in rural areas remains relatively low for a country of Argentina’s level of development (80% using a broad definition, 45% for house connections).
Access to improved sanitation
, using a broad definition of access including septic tanks and improved latrines, is high at 91%. However, access to sewerage is only 44%.
Source: Joint Monitoring Program WHO
/UNICEF(JMP/2006). Data for water and sanitation based on the Census (2001).
According to a study by the Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento (CIPPEC) or Center for Implementation of Public Policies for Equity and Growth, the increase of coverage between 1991 and 2001 was lower in the poorest provinces.
In Buenos Aires, in 2008 there were two water treatment plants and a new one was about to begin.
Concerning sanitation, existing sewage collection systems are insufficient to handle the increasing flows as a growing number of households connect to the sewer systems, leading to frequent sewer overflows.
The level of wastewater treatment varies among the Argentinean regions. According to the Pan American Health Organization, at the national level 10% of the collected wastewater was being treated in 2000. Whereas in many regional capitals, such as Mendoza
, Córdoba
, Tucumán, Neuquén
, Jujuy
, Salta
and San Juan
, most of the wastewater was treated, in the two largest urban area
s of the country, Buenos Aires
and Rosario
, there was practically no treatment at all, resulting in serious environmental problems. However, in 2008 a bidding process was launched to build a wastewater treatment plant in Buenos Aires.
In 1980 the military government under Jorge Rafael Videla
decentralized the provision of water and sanitation services in the main cities served by OSN, except for the metropolitan area of Buenos Aires where OSN continued to provide services. In other cities OSN transferred its responsibilities to provincial governments. Each province chose its model of service provision (municipal, public enterprises, cooperatives or others).
Between 1991 and 1999 under the government of Carlos Menem
, as part of one of the worlds largest privatization programs covering a range of sectors, water and sanitation concessions with the private sector were signed in 28% of the country's municipalities covering 60% of the population. The highest profile concession was signed in 1993 with a consortium led by the French firm Suez for the metropolitan area of Buenos Aires
. After the 2001 economic crisis
, under the government of Néstor Kirchner
, many concessions were renegotiated. Some were even terminated and the responsibility for service provision reverted to public entities, as it was the case in Buenos Aires where the newly created public enterprise Aguas y Saneamientos Argentinos took over the responsibility for service provision in 2006. At the beginning of 2008, the government of the Province of Mendoza
announced that it is interested in increasing its control of the provincial water utility Obras Sanitarias de Mendoza, of which it owns 20%, buying another 20% from Saur International.
Critics argue that the concessionaire failed to achieve the targets set under the concession contract. When the government rescinded the concession in March 2006, it argued that Aguas Argentinas did not comply with obligations concerning expansion and quality. According to the government, the supplied water had high levels of nitrate, pressure obligations were not kept and scheduled waterworks were not executed by the concessionaire. On the other hand, proponents of private participation state that a freeze in tariffs at the time of the devaluation of the Peso during the Argentinean economic crisis in 2001 substantially reduced the real value of tariff revenues and thus made it difficult to achieve the original targets.
One factor which may have caused the cancellation of the concession contract was the precipitate preparation. Alcazar et al. list some features of the concession which indicate an overhasty process:
In addition, the inexperienced regulatory agency was repeatedly bypassed when decisions were taken, for example in the renegotiation of the contract in 1997. In that way, ETOSS was further weakened. The concession contract authorized Aguas Argentinas to demand dollars at the old 1:1 exchange rate after the peso devaluation. Solanes points out that without this practice companies may seek financing in local capital markets to avoid currency fluctuations. He also argues that the needs of the poor were not addressed in the concession. No subsidies were provided for the poor and the tariff system did not encourage expansion of coverage to poor areas, since new connections were often unaffordable and new users also had to pay the costs of expanding the network.
The concessionaire did invest much more than its public predecessor and achieved substantial increases in access to water and sewerage. According to the Argentinean economist Sebastian Galiani, the public company OSN had invested only US$25m per year between 1983 and 1993, while the private concessionaire Aguas Argentinas increased investments to around US$200 m per year between 1993 and 2000.
According to Suez, during the 13 year-duration of its concession it extended access to water to 2 million people and access to sanitation to 1 million people, despite the economic crisis. Between 2003 and 2005 alone about 100,000 inhabitants of poor neighborhoods and slums are said to have been connected through a "participatory management model" piloted by Aguas Argentinas. Aspects of the model have been adopted by the government to extend services to another 400,000 people in La Matanza in the province of Buenos Aires in the project "Water plus work" ("Aguas más trabajo").
initiated the reform of its water sector in 1996. At the same time many other Argentinean provinces and municipalities brought in the private sector to improve water and sanitation services. While Salta also followed this approach, the process differed somewhat from the one in many other parts of Argentina. First, the provincial government conducted a series of meetings with municipalities and user organizations to discuss the benefits and risks of the concession before it was bid out. This process of consultations was continued by the private concessionaire after the contract was awarded. Second, the government decided from the onset that water and sanitation services in the poor province could not be financed entirely through tariff revenues. It thus decided to finance much of the investments to be undertaken by the private concessionaire with public grants, in addition to providing consumption subsidies. Third, the regulatory agency allowed the concessionaire to provide services at a lower standard in remote or isolated areas that were deemed unprofitable at conventional service standards. Fourth, the provincial regulatory agency granted tariff increases before and even after the 2001 economic crisis. These tariff increases were lower than it would have been necessary without subsidies or flexible service standards. And fifth, the government "ignored the traditional paradigm of only permitting companies with significant previous experience in water supply and sanitation to compete in the bidding process". This provision had favored a few large multinational water firms in other bidding processes. In Salta, however, the bid was won by the Argentinean construction, power and toll road enterprise MECON S.A. which signed a technical assistance contract with the Brazilian Paraná
State public utility SANEPAR.
The private concession led to a substantial increase in access to water and sanitation from the time of concession award in 1999 to 2005. It also provided a significant decrease in service interruptions and improved customer service. 13 more municipalities joined the concession contract after it had been signed in order to share in its benefits, bringing the total number of municipalities served by the concessionaire to 56.
While most other private water concessions in Argentina were rescinded in the years after the 2001 economic crisis, the Salta concession has been upheld until 2009 despite a number of problems. In February 2008 the regulatory agency initiated penal proceedings against the concessionaire because one of its wastewater treatment plants discharging to the Arenales River was not functioning. In June 2008 the company was accused of not having complied with contractual targets for the installation of meters, water pressure, continuity of supply, drinking water quality norms, and of applying excessive interests on late payments. In May 2009 Juan Manuel Urtubey
, governor of the Province, terminated the concession contract because of non-compliance and created a transition unit to provide services until a state company would be created whose shares would be held by the Province (90%) and workers (10%).
Despite recent progress in clarifying responsibilities, the institutional framework at the national level still lacks coherence and coordination among federal actors is weak. The Ministry of Public Works proposes sector policies to the Ministry of Federal Planning, Public Investment and Services which approves them. Within this policy framework the National Agency for Water and Sanitation Works (ENOHSA), a decentralized agency under the Ministry of Public Works, provides financing and technical assistance to service providers. As an advisor to the Ministry of Public Works it de facto influences sector policies. Recently ENOHSA has been also given the faculty to directly execute infrastructure works. There has been some confusion between its position as conceding power (in the Buenos Aires
concession) and as policy-maker for the overall sector. There is no coherent national policy in terms of sector financing, subsidies, tariffs and service standards. Nor is there a sector law for water and sanitation. The federal structure of the country and the dispersion of sector responsibilities between and within various levels of government make the development of a coherent sector policy all the more difficult.
In 2000, the Argentinean water and sanitation tariff levels were high, given the low quality of services. According to the Panamerican Health Organization (PAHO), the mean tariff for water and sanitation was US$ 0.79 per m3. There are two different tariff systems. The first method is based on the former OSN tariff system. It estimates the consumption of each user according to characteristics such as dwelling size, location of residence and type of dwelling. The second tariff system contains a fixed charge and a variable part which is based on metered consumption. This latter method was made possible by the extensive introduction of water metering, which was included in many concession contracts in the 1990s. The average household expenditure for water supply and sanitation in 2002 was 2.6%, ranging from 2.1% in the highest (wealthiest) quintile to 3.5% in the lowest (poorest) one.
When the linkage of the Argentinean peso to the US-Dollar
was abandoned due to a serious economic crisis
in 2002, the tariffs did not increase but converted 1 to 1 to the devalued peso, resulting in various contract renegotiations. This decision worsened the financial situation of the suppliers. The lack of financial resources results in problems concerning even in maintaining the supply system.
Cutting off water services for non-payment is prohibited in Argentina based on a common interpretation of the constitution.
Approved on January 31, 2007 in the amount of US$240 million, the loan will address specific problems of irrigation, drainage, as well as low access to water and sanitation in the northern provinces of: Jujuy, Catamarca, Santiago del Estero, Tucumán, and Chaco.
Approved on September 25, 2006 in the amount of US$ 180,000,000, the program will partly finance water and/or sewerage systems for communities up to 50,000 in Argentina.
The US$270 million loan was approved on June 28, 2007, and finances 40% sewerage and 16% flood protection for the highly vulnerable and low-income communities in the Province of Buenos Aires.
The US$175 million loan approved on April 3, 2006, finances water (27%), sanitation (27%), and sewerage (14%) projects in Argentina.
The US$190 million loan approved on May 18, 2006, finances flood protection (94%) as well as general water and sanitation sector (2%) in the city of Buenos Aires through the protection of the city's critical infrastructure and the introduction of risk management into the Government investment program.
The US$267 million loan approved on February 15, 2006, finances infrastructure services in sewerage (30%) and flood protection (5%) in the Province of Buenos Aires.
Who
Who may refer to:* Who , an English-language pronoun* who , a Unix command* Who?, one of the Five Ws in journalism- Art and entertainment :* Who? , a 1958 novel by Algis Budrys...
, 21% of the total population remains without access to house connections and 52% of the urban population do not have access to sewerage. The responsibility for operating and maintaining water and sanitation services rests with 19 provincial water and sewer companies, more than 100 municipalities and more than 950 cooperatives, the latter operating primarily in small towns. Among the largest water and sewer companies are Agua y Saneamientos Argentinos (AYSA) and Aguas Bonarenses S.A. (ABSA), both operating in Greater Buenos Aires
Greater Buenos Aires
Greater Buenos Aires is the generic denomination to refer to the megalopolis comprising the autonomous city of Buenos Aires and the conurbation around it, over the province of Buenos Aires—namely the adjacent 24 partidos or municipalities—which nonetheless do not constitute a single administrative...
, Aguas Provinciales de Santa Fe
Santa Fe Province
The Invincible Province of Santa Fe, in Spanish Provincia Invencible de Santa Fe , is a province of Argentina, located in the center-east of the country. Neighboring provinces are from the north clockwise Chaco , Corrientes, Entre Ríos, Buenos Aires, Córdoba, and Santiago del Estero...
, and Aguas Cordobesas SA, all of them now publicly owned. In 2008 there were still a few private concessions, such as Aguas de Salta SA, which is majority-owned by Argentinean investors, and Obras Sanitarias de Mendoza
Mendoza, Argentina
Mendoza is the capital city of Mendoza Province, in Argentina. It is located in the northern-central part of the province, in a region of foothills and high plains, on the eastern side of the Andes. As of the , Mendoza's population was 110,993...
(OSM).
Most service providers barely recover operation and maintenance costs and have no capacity to self-finance investments. While private operators were able to achieve higher levels of cost recovery, since the Argentine financial crisis
Argentine economic crisis (1999-2002)
The Argentine economic crisis was a financial situation, tied to poilitical unrest, that affected Argentina's economy during the late 1990s and early 2000s...
in 2002 tariffs have been frozen and the self-financing capacity of utilities has disappeared. Roughly two-thirds of provincial water and sanitation spending since 2002 has come from general transfers from the federal government, the remainder coming from various national programs directed specifically to the sector.
Services are regulated by the 23 Provinces
Provinces of Argentina
Argentina is subdivided into twenty-three provinces and one autonomous city...
, in the case of 14 through regulatory agencies that have some limited autonomy from the government. Overall, however, responsibilities are not always clearly defined, and institutions are often weak, subject to political interference and lacking enforcement powers. The various national institutions with policy-setting responsibilities in the sector are not always well coordinated. There is no coherent national policy in terms of sector financing, subsidies, tariffs and service standards. The federal structure of the country and the dispersion of sector responsibilities between and within various levels of government make the development of a coherent sector policy all the more difficult.
Between 1991 and 1999, as part of one of the world's largest privatization programs covering a range of sectors, water and sanitation concessions with the private sector were signed covering 28% of the country's municipalities and 60% of the population. The highest profile concession was signed in 1993 with a consortium led by the French firm Suez for the central parts of Greater Buenos Aires
Greater Buenos Aires
Greater Buenos Aires is the generic denomination to refer to the megalopolis comprising the autonomous city of Buenos Aires and the conurbation around it, over the province of Buenos Aires—namely the adjacent 24 partidos or municipalities—which nonetheless do not constitute a single administrative...
. After the 2001 economic crisis
Argentine economic crisis (1999-2002)
The Argentine economic crisis was a financial situation, tied to poilitical unrest, that affected Argentina's economy during the late 1990s and early 2000s...
, many concessions were renegotiated. Many were terminated, as it was the case in Buenos Aires
Buenos Aires
Buenos Aires is the capital and largest city of Argentina, and the second-largest metropolitan area in South America, after São Paulo. It is located on the western shore of the estuary of the Río de la Plata, on the southeastern coast of the South American continent...
in 2006.
The impact of private sector participation in water and sanitation is a controversial topic. While the public perception of the mostly international concessionaires is overwhelmingly negative in Argentina, some studies show positive impacts. For example, a 2002 study assessed the impact of privatization on child mortality based on household survey data, finding that child mortality fell 5 to 7 percent more in areas that privatized compared to those that remained under public or cooperative management. The authors estimate that the main reason is the massive expansion of access to water. According to Suez, the private concession in Buenos Aires extended access to water to 2 million people and access to sanitation to 1 million people, despite a freeze in tariffs imposed by the government in 2001 in violation of the concession agreement. The government argues that the concessionaire did not fully comply with its obligations concerning expansion and quality, saying that the supplied water had high levels of nitrate, pressure obligations were not kept and scheduled works were not carried out.
Access
Argentina has achieved very high levels of access to an improved water sourceImproved water source
According to the Joint Monitoring Program for Water Supply and Sanitation by the World Health Organization and UNICEF the following are considered as "improved" water sources:* household connections* public standpipes* boreholes* protected dug wells...
in urban areas (98%), using a broad definition of access. However, coverage using a narrower definition of access (house connections) is much lower at 83%, since many users still only have access through public standpipes. Also, access in rural areas remains relatively low for a country of Argentina’s level of development (80% using a broad definition, 45% for house connections).
Access to improved sanitation
Improved sanitation
According to the Joint Monitoring Programme for Water Supply and Sanitation by the World Health Organization and UNICEF the following are considered as "improved" sanitation:* connection to a public sewer* connection to a septic system* pour-flush latrine...
, using a broad definition of access including septic tanks and improved latrines, is high at 91%. However, access to sewerage is only 44%.
| Urban (90% ofthe population) | Rural (10% ofthe population) | Total | ||
|---|---|---|---|---|
| Water | Broad definition | 98% | 80% | 96% |
| House connections | 83% | 45% | 79% | |
| Sanitation | Broad definition | 92% | 83% | 91% |
| Sewerage | 48% | 5% | 44% |
Source: Joint Monitoring Program WHO
Who
Who may refer to:* Who , an English-language pronoun* who , a Unix command* Who?, one of the Five Ws in journalism- Art and entertainment :* Who? , a 1958 novel by Algis Budrys...
/UNICEF(JMP/2006). Data for water and sanitation based on the Census (2001).
According to a study by the Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento (CIPPEC) or Center for Implementation of Public Policies for Equity and Growth, the increase of coverage between 1991 and 2001 was lower in the poorest provinces.
Service quality
There are apparently no comprehensive data on water and sanitation water quality in Argentina. In urban areas, service generally is continuous and of potable quality. However, water rationing occurs in some cities during the summer months, and drinking water quality is sometimes sub-standard.In Buenos Aires, in 2008 there were two water treatment plants and a new one was about to begin.
Concerning sanitation, existing sewage collection systems are insufficient to handle the increasing flows as a growing number of households connect to the sewer systems, leading to frequent sewer overflows.
The level of wastewater treatment varies among the Argentinean regions. According to the Pan American Health Organization, at the national level 10% of the collected wastewater was being treated in 2000. Whereas in many regional capitals, such as Mendoza
Mendoza, Argentina
Mendoza is the capital city of Mendoza Province, in Argentina. It is located in the northern-central part of the province, in a region of foothills and high plains, on the eastern side of the Andes. As of the , Mendoza's population was 110,993...
, Córdoba
Córdoba, Argentina
Córdoba is a city located near the geographical center of Argentina, in the foothills of the Sierras Chicas on the Suquía River, about northwest of Buenos Aires. It is the capital of Córdoba Province. Córdoba is the second-largest city in Argentina after the federal capital Buenos Aires, with...
, Tucumán, Neuquén
Neuquén, Argentina
-Sister cities:Neuquén is sister city, as designated by Sister Cities International with: Knoxville, Tennessee, United States Treviso, Veneto, Italy Valdivia, Chile-External links: - Official website....
, Jujuy
San Salvador de Jujuy
San Salvador de Jujuy , commonly known as Jujuy and locally often referred to as San Salvador, is the capital city of Jujuy Province in northwest Argentina. It lies near the southern end of the Humahuaca Canyon where wooded hills meet the lowlands....
, Salta
Salta
Salta is a city in northwestern Argentina and the capital city of the Salta Province. Along with its metropolitan area, it has a population of 464,678 inhabitants as of the , making it Argentina's eighth largest city.-Overview:...
and San Juan
San Juan, Argentina
San Juan is the capital city of the Argentine province of San Juan in the Cuyo region, located in the Tulúm Valley, west of the San Juan River, at above mean sea level, with a population of around 112,000 as per the ....
, most of the wastewater was treated, in the two largest urban area
Urban area
An urban area is characterized by higher population density and vast human features in comparison to areas surrounding it. Urban areas may be cities, towns or conurbations, but the term is not commonly extended to rural settlements such as villages and hamlets.Urban areas are created and further...
s of the country, Buenos Aires
Greater Buenos Aires
Greater Buenos Aires is the generic denomination to refer to the megalopolis comprising the autonomous city of Buenos Aires and the conurbation around it, over the province of Buenos Aires—namely the adjacent 24 partidos or municipalities—which nonetheless do not constitute a single administrative...
and Rosario
Greater Rosario
Greater Rosario is the metropolitan area of the city of Rosario, in the province of Santa Fe, Argentina. This metropolis has a population of about 1.5 million , thus being Argentina's second most populated urban settlement, after Buenos Aires....
, there was practically no treatment at all, resulting in serious environmental problems. However, in 2008 a bidding process was launched to build a wastewater treatment plant in Buenos Aires.
History and recent developments
From 1880 until 1980, the national utility Obras Sanitarias de la Nación (OSN) was in charge of providing water and sewer services in the main cities, while in smaller cities it was the responsibility of provincial governments, municipalities and cooperatives.In 1980 the military government under Jorge Rafael Videla
Jorge Rafael Videla
Jorge Rafael Videla Redondo is a former senior commander in the Argentine Army who was the de facto President of Argentina from 1976 to 1981. He came to power in a coup d'état that deposed Isabel Martínez de Perón...
decentralized the provision of water and sanitation services in the main cities served by OSN, except for the metropolitan area of Buenos Aires where OSN continued to provide services. In other cities OSN transferred its responsibilities to provincial governments. Each province chose its model of service provision (municipal, public enterprises, cooperatives or others).
Between 1991 and 1999 under the government of Carlos Menem
Carlos Menem
Carlos Saúl Menem is an Argentine politician who was President of Argentina from 1989 to 1999. He is currently an Argentine National Senator for La Rioja Province.-Early life:...
, as part of one of the worlds largest privatization programs covering a range of sectors, water and sanitation concessions with the private sector were signed in 28% of the country's municipalities covering 60% of the population. The highest profile concession was signed in 1993 with a consortium led by the French firm Suez for the metropolitan area of Buenos Aires
Greater Buenos Aires
Greater Buenos Aires is the generic denomination to refer to the megalopolis comprising the autonomous city of Buenos Aires and the conurbation around it, over the province of Buenos Aires—namely the adjacent 24 partidos or municipalities—which nonetheless do not constitute a single administrative...
. After the 2001 economic crisis
Argentine economic crisis (1999-2002)
The Argentine economic crisis was a financial situation, tied to poilitical unrest, that affected Argentina's economy during the late 1990s and early 2000s...
, under the government of Néstor Kirchner
Néstor Kirchner
Néstor Carlos Kirchner was an Argentine politician who served as the 54th President of Argentina from 25 May 2003 until 10 December 2007. Previously, he was Governor of Santa Cruz Province since 10 December 1991. He briefly served as Secretary General of the Union of South American Nations ...
, many concessions were renegotiated. Some were even terminated and the responsibility for service provision reverted to public entities, as it was the case in Buenos Aires where the newly created public enterprise Aguas y Saneamientos Argentinos took over the responsibility for service provision in 2006. At the beginning of 2008, the government of the Province of Mendoza
Mendoza Province
The Province of Mendoza is a province of Argentina, located in the western central part of the country in the Cuyo region. It borders to the north with San Juan, the south with La Pampa and Neuquén, the east with San Luis, and to the west with the republic of Chile; the international limit is...
announced that it is interested in increasing its control of the provincial water utility Obras Sanitarias de Mendoza, of which it owns 20%, buying another 20% from Saur International.
Impact of private sector participation
So far there has been no comprehensive, objective assessment of the impact of private sector participation in water supply and sanitation in Argentina. However, there has been some partial evidence. For example, a 2002 study assessed the impact of privatization on child mortality based on household survey data, finding that in the 1991-1997 period child mortality fell 5 to 7 percent more in areas that privatized compared to those that remained under public or cooperative management. It also found that the effect was largest in poorest areas (24%). The authors estimate that the main reason is the massive expansion of access to water, which was concentrated in poorer areas that did not receive services before private sector participation was introduced.The Buenos Aires concession
The largest and best-known case of private sector participation in the Argentine water and sanitation sector was the Buenos Aires concession, signed in 1993 and revoked in 2006. Its impact remains controversial and in early 2008 an arbitration case was still pending with the International Center for Settlement of Investment Disputes (ICSID) of the World Bank Group.Critics argue that the concessionaire failed to achieve the targets set under the concession contract. When the government rescinded the concession in March 2006, it argued that Aguas Argentinas did not comply with obligations concerning expansion and quality. According to the government, the supplied water had high levels of nitrate, pressure obligations were not kept and scheduled waterworks were not executed by the concessionaire. On the other hand, proponents of private participation state that a freeze in tariffs at the time of the devaluation of the Peso during the Argentinean economic crisis in 2001 substantially reduced the real value of tariff revenues and thus made it difficult to achieve the original targets.
One factor which may have caused the cancellation of the concession contract was the precipitate preparation. Alcazar et al. list some features of the concession which indicate an overhasty process:
- The regulatory agency ETOSS (Ente Tripartito de Obras de Servicios de Saneamiento, Tripartite Entity for Sanitary Services) lacked experience, since it was founded quickly as part of the concession process.
- The available information in the concession contract about the state of the existing infrastructure was so poor, that the Argentinean government denied taking responsibility for it. This lack of information could have let the bidder to accept the contract in the expectation of future renegotiation.
- Instead of creating a new and more transparent tariff system, the old one was adopted from OSN.
In addition, the inexperienced regulatory agency was repeatedly bypassed when decisions were taken, for example in the renegotiation of the contract in 1997. In that way, ETOSS was further weakened. The concession contract authorized Aguas Argentinas to demand dollars at the old 1:1 exchange rate after the peso devaluation. Solanes points out that without this practice companies may seek financing in local capital markets to avoid currency fluctuations. He also argues that the needs of the poor were not addressed in the concession. No subsidies were provided for the poor and the tariff system did not encourage expansion of coverage to poor areas, since new connections were often unaffordable and new users also had to pay the costs of expanding the network.
The concessionaire did invest much more than its public predecessor and achieved substantial increases in access to water and sewerage. According to the Argentinean economist Sebastian Galiani, the public company OSN had invested only US$25m per year between 1983 and 1993, while the private concessionaire Aguas Argentinas increased investments to around US$200 m per year between 1993 and 2000.
According to Suez, during the 13 year-duration of its concession it extended access to water to 2 million people and access to sanitation to 1 million people, despite the economic crisis. Between 2003 and 2005 alone about 100,000 inhabitants of poor neighborhoods and slums are said to have been connected through a "participatory management model" piloted by Aguas Argentinas. Aspects of the model have been adopted by the government to extend services to another 400,000 people in La Matanza in the province of Buenos Aires in the project "Water plus work" ("Aguas más trabajo").
An example of local private sector participation: Salta
The government of Salta ProvinceSalta Province
Salta is a province of Argentina, located in the northwest of the country. Neighboring provinces are from the east clockwise Formosa, Chaco, Santiago del Estero, Tucumán and Catamarca. It also surrounds Jujuy...
initiated the reform of its water sector in 1996. At the same time many other Argentinean provinces and municipalities brought in the private sector to improve water and sanitation services. While Salta also followed this approach, the process differed somewhat from the one in many other parts of Argentina. First, the provincial government conducted a series of meetings with municipalities and user organizations to discuss the benefits and risks of the concession before it was bid out. This process of consultations was continued by the private concessionaire after the contract was awarded. Second, the government decided from the onset that water and sanitation services in the poor province could not be financed entirely through tariff revenues. It thus decided to finance much of the investments to be undertaken by the private concessionaire with public grants, in addition to providing consumption subsidies. Third, the regulatory agency allowed the concessionaire to provide services at a lower standard in remote or isolated areas that were deemed unprofitable at conventional service standards. Fourth, the provincial regulatory agency granted tariff increases before and even after the 2001 economic crisis. These tariff increases were lower than it would have been necessary without subsidies or flexible service standards. And fifth, the government "ignored the traditional paradigm of only permitting companies with significant previous experience in water supply and sanitation to compete in the bidding process". This provision had favored a few large multinational water firms in other bidding processes. In Salta, however, the bid was won by the Argentinean construction, power and toll road enterprise MECON S.A. which signed a technical assistance contract with the Brazilian Paraná
Paraná (state)
Paraná is one of the states of Brazil, located in the South of the country, bordered on the north by São Paulo state, on the east by the Atlantic Ocean, on the south by Santa Catarina state and the Misiones Province of Argentina, and on the west by Mato Grosso do Sul and the republic of Paraguay,...
State public utility SANEPAR.
The private concession led to a substantial increase in access to water and sanitation from the time of concession award in 1999 to 2005. It also provided a significant decrease in service interruptions and improved customer service. 13 more municipalities joined the concession contract after it had been signed in order to share in its benefits, bringing the total number of municipalities served by the concessionaire to 56.
While most other private water concessions in Argentina were rescinded in the years after the 2001 economic crisis, the Salta concession has been upheld until 2009 despite a number of problems. In February 2008 the regulatory agency initiated penal proceedings against the concessionaire because one of its wastewater treatment plants discharging to the Arenales River was not functioning. In June 2008 the company was accused of not having complied with contractual targets for the installation of meters, water pressure, continuity of supply, drinking water quality norms, and of applying excessive interests on late payments. In May 2009 Juan Manuel Urtubey
Juan Manuel Urtubey
Juan Manuel Urtubey is an Argentine politician, formerly a senior figure in the ruling Front for Victory faction of the Justicialist Party in the Argentine Chamber of Deputies and now Governor of Salta Province....
, governor of the Province, terminated the concession contract because of non-compliance and created a transition unit to provide services until a state company would be created whose shares would be held by the Province (90%) and workers (10%).
Policy and regulation
Provinces have responsibility for setting rules and policies in the sector for their area. Institutions are weak, subject to political interference and lacking in enforcement powers. 14 out of 23 provinces have regulatory bodies, but they often have limited capacity and unclear institutional responsibilities. In most cases, they act as supervisors of private concession contracts, not covering public and cooperative service providers. This autonomy of provinces resulted in a highly heterogeneous system of water supply and sanitation. Moreover, it hinders to create an overview of the situation at the national level.Despite recent progress in clarifying responsibilities, the institutional framework at the national level still lacks coherence and coordination among federal actors is weak. The Ministry of Public Works proposes sector policies to the Ministry of Federal Planning, Public Investment and Services which approves them. Within this policy framework the National Agency for Water and Sanitation Works (ENOHSA), a decentralized agency under the Ministry of Public Works, provides financing and technical assistance to service providers. As an advisor to the Ministry of Public Works it de facto influences sector policies. Recently ENOHSA has been also given the faculty to directly execute infrastructure works. There has been some confusion between its position as conceding power (in the Buenos Aires
Buenos Aires
Buenos Aires is the capital and largest city of Argentina, and the second-largest metropolitan area in South America, after São Paulo. It is located on the western shore of the estuary of the Río de la Plata, on the southeastern coast of the South American continent...
concession) and as policy-maker for the overall sector. There is no coherent national policy in terms of sector financing, subsidies, tariffs and service standards. Nor is there a sector law for water and sanitation. The federal structure of the country and the dispersion of sector responsibilities between and within various levels of government make the development of a coherent sector policy all the more difficult.
Service provision
Provision of water and sanitation supply in Argentina is organized on a municipal or provincial basis by around 1,650 public, cooperative and private entities of various forms. 14 service providers are provincial (Argentina has 23 provinces), but do not necessarily serve the entire province. Some are multi-municipal, some serve a single municipality and others parts of a municipality. There are at least 990 mostly smaller cooperative service providers in Argentina, making Argentina the country in Latin America where this form of service provision is most prevalent.Tariffs
Cost recovery
Most service providers barely recover operation and maintenance costs and have no capacity to self-finance investments. While private operators were able to achieve higher levels of cost recovery and to substantially expand services before the crisis, since 2002 their tariffs have been frozen and their self-financing capacity has disappeared. Service providers thus are almost entirely dependent on federal transfers for investment financing. Roughly two-thirds of provincial water and sanitation spending over the period has come from general transfers from the federal government, the remainder coming from various programs directed specifically to the sector, including for flood protection and water resources management.When the linkage of the Argentinean peso to the US-Dollar
Argentine Currency Board
The Argentine Currency Board pegged the Argentine peso to the U.S. dollar between 1991 and 2002 in an attempt to eliminate hyperinflation and stimulate economic growth. While it initially met with considerable success, the board's actions ultimately failed. In contrast of what most people think,...
was abandoned due to a serious economic crisis
Argentine economic crisis (1999-2002)
The Argentine economic crisis was a financial situation, tied to poilitical unrest, that affected Argentina's economy during the late 1990s and early 2000s...
in 2002, the tariffs did not increase but converted 1 to 1 to the devalued peso, resulting in various contract renegotiations. This decision worsened the financial situation of the suppliers. The lack of financial resources results in problems concerning even in maintaining the supply system.
Cutting off water services for non-payment is prohibited in Argentina based on a common interpretation of the constitution.
Inter-American Development Bank
Approved on January 31, 2007 in the amount of US$240 million, the loan will address specific problems of irrigation, drainage, as well as low access to water and sanitation in the northern provinces of: Jujuy, Catamarca, Santiago del Estero, Tucumán, and Chaco.
Approved on September 25, 2006 in the amount of US$ 180,000,000, the program will partly finance water and/or sewerage systems for communities up to 50,000 in Argentina.
World Bank
The US$270 million loan was approved on June 28, 2007, and finances 40% sewerage and 16% flood protection for the highly vulnerable and low-income communities in the Province of Buenos Aires.
The US$175 million loan approved on April 3, 2006, finances water (27%), sanitation (27%), and sewerage (14%) projects in Argentina.
The US$190 million loan approved on May 18, 2006, finances flood protection (94%) as well as general water and sanitation sector (2%) in the city of Buenos Aires through the protection of the city's critical infrastructure and the introduction of risk management into the Government investment program.
The US$267 million loan approved on February 15, 2006, finances infrastructure services in sewerage (30%) and flood protection (5%) in the Province of Buenos Aires.