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This chapter provides an overview of sector reform and regulatory initiatives in water supply and sanitation from 1960-2010 in Guatemala, Honduras, El Salvador, Nicaragua, Panama, Dominican Republic, Paraguay, and Bolivia.

TitleRegulation of WS&S services in small towns : a review of experience in selected countries in Latin America
Publication TypeBook Chapter
Year of Publication2001
AuthorsYepes, G
Secondary TitleFragano, F., Linares, C., Lockwood, H., Rivera, D., Trevett, A. & Yepes, G., 2001. Case studies on decentralization of water supply and sanitation services in Latin America. (Strategic report / EHP no. 1)
PaginationP. 110-129
Date Published01/2001
PublisherEnvironmental Health Project (EHP)
Place PublishedArlington, VA, USA
Publication LanguageEnglish

Sector reforms initiated by most governments in the Latin America and Caribbean (LAC) region in the last 10 to 15 years focused on improving the provision of water and sanitation services and promoting decentralization and private sector participation (PSP) in financing and operating services. In the more developed countries in the region, reforms also included the creation of regulatory agencies to help deliver better and more efficient services and to protect consumers against potential abuse of monopoly power by public or private operators. 

Regulatory initiatives often occurred simultaneously with efforts to decentralize water supply and sanitation (WS&S) services. These dual initiatives frequently were not complementary. Those who favored local governments’ being in charge of operations were often opposed to a central regulatory system. In fact, regulation of medium-sized and small cities poses a special challenge to central regulation because of their size and wide disparities in human and financial resources. In practice, many small and medium-sized cities still regulate their services under an inadequate framework. On the other hand, economies of scale and scarce resources suggest that most local governments, and medium and small cities in particular, will need technical assistance and resources to effectively regulate services. Thus, the challenge is where to locate the regulator and the definition of functions as well as the development of a suitable mandate and policy framework within which effective regulation will take place. 
This chapter provides an overview of the organizational trends in the region in the past 40 years. It describes the special characteristics of WS&S services that make them a classic monopoly and delineates the general principles of and options for regulation. The discussion, which is based on a review of the literature, looks at sector reform and regulatory initiatives in Guatemala, Honduras, El Salvador, Nicaragua, Panama, Dominican Republic, Paraguay, and Bolivia. In general, these countries have relatively small populations (less than 10 million) and numerous small and medium-sized cities, the largest of which has a fraction of the population of the capital. These countries are at an early stage of the sector reform process. 
The chapter concludes with some preliminary observations and recommendations for framing a regulatory system, including the delegation of economic regulation to local governments and quality or social regulation to the central government. A key observation is that the responsibilities of the central government should include setting and vigorously enforcing realistic drinking water and wastewater discharge quality and service standards, promoting competition and benchmarking. [author abstract]


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