June 2001 Insights Issue #37

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PPPs in Latin America: can they help the poor?

Public-private partnerships in the 1990s radically improved the efficiency of water supply delivery in Cartagena, Colombia and Córdoba, Argentina. PPPs have not, however, improved water service delivery to the poor. Can the public sector support long term pro-poor partnerships or is government capacity hampered by the absence of a merit-based professional civil service? Research by GHK International and the University of Birmingham is developing a framework to facilitate municipal capacity building within PPPs.

Cartagena signed a 26-year contract with Aguas de Cartagena in 1995 to run and maintain the city's urban water supply (UWS). So too in 1997, Córdoba signed a 30-year concession contract with Aguas Cordobesas. The PPPs in both cities led to impressive gains in efficiency. Coverage and water quality improved, staff productivity increased, better pipe maintenance led to a dramatic fall in leakages, putting an end to shortages and cut offs.

But, can PPP improve the water needs of low-income families? And if not, why not? Pro-poor initiatives are at present confined to pilot projects extending the network into selected neighbourhoods. These can depend on the local community who provide voluntary labour under the supervision of the private operator.

The crucial issue of ability to pay remains unresolved. The private operator is reluctant to extend the network into poor households, sceptical of introducing a 'payment culture'. Will low-income residents benefit from cross-subsidisation through lower connection and standing charges and from a low tariff for minimum consumption? The public sector needs to resolve the question of ability to pay if the pro-poor element is to be a major feature of the partnership. Yet its ability to do so is severely constrained by institutional weakness: a professional municipal career system is non-existent in both cities. Within the PPP, the public sector is at a disadvantage and cannot negotiate a pro-poor strategy for several reasons:

Sustainability

The terms of the Mayor of Cartagena and Governor of Córdoba are three and four years respectively, and non-renewable. Departmental heads are appointed by the incumbent leader. A serious lack of continuity gives the private sector the edge in negotiations on pro-poor initiatives.

Technical back-up

The political representatives of public sector bodies lack technical support. A technical unit would provide a formal channel for poor people's demands, complaints and suggestions.

Urban planning

Both municipalities lack the capacity to integrate visions for UWS within wider strategies. UWS planning is out of step with that of other services. Powerful real estate companies direct housing growth rather than the municipality which typically grants approval for expensive developments, whilst ignoring UWS cost implications. Long term water investment programmes are adjusted to accommodate real estate demands.

Sectoral planning

Pro-poor UWS public policy is unstructured. In negotiating and implementing pilot 'pro-poor' projects, the public sector does not act as a 'broker' between the local community and the private company. The private sector usually deals directly with the community without effective participation by the public sector. For pro-poor UWS policies to succeed, the public sector should:

• establish a technical team to advise on all matters relating to implementation of the partnership
• carry out a comprehensive study of poor people's needs to build a coherent pro-poor strategy within PPPs
• engage in confidence-building dialogue with poor residents to ensure their needs are properly represented.