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 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 world's 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.
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 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 Province 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. 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%). == Responsibility for water supply and sanitation ==