ABSTRACT
Historically, Latin American governments have often come under intense criticisms for over-regulating their economies, thus discouraging investment, while providing politicians with plenty of opportunities for the manipulation of market rules to favor their own constituencies and/or clientelistic networks. In this chapter, we will focus only on government regulation a ecting public utilities that that were privatized in the 1990s. The reason for such a choice is that the wave of public utility privatization that took place in the 1990s represented a turning point in the development of Latin America. First, by its very nature, it marked the reversal of import substitution industrialization policies and of the establishment of vast industrial sectors (either through nationalization or the creation of brand new companies), which many countries in the region adopted from the 1940s until the late 1980s. Second, given the sheer size of state owned enterprises (SOEs) in public utilities like electricity, telecommunications, transportation, water and sanitation, and their sale had profound repercussions for price-setting, investment, technology transfer, market competition, and customer service for the whole economy. Third, because large segments of the population used public utilities, their privatization had multiple repercussions (possibly better service but also higher tari s), and generated political controversy. Fourth, public utility privatization meant that the government had to build from scratch regulatory policy in these sectors as, prior to state divestiture, SOEs were monopolies that were left to regulate themselves or be supervised by ministries.
