Transcript Financing access to basic utilities for all

Regional multi-stakeholder consultation on
“Financing access to basic utilities for all”
(Lusaka, Zambia, 23-25 April 2007)
Outcome of the first regional multi-stakeholder
consultation on “Financing access to basic
utilities for all”
in Brasilia, Brazil, 11-13 December 2006
Meeting report and background information is available at:
http://www.un.org/esa/ffd
Overview:
I.
Mobilizing finance: Stable and predictable
financing mechanisms for utility providers at the
sub-national level
II.
Ensuring sustainable access for the poor through
internal revenue generation – electricity
III.
Ensuring sustainable access for the poor through
internal revenue generation – water and
sanitation
IV.
Macroeconomic factors to be taken into account
Section I
Mobilizing finance:
Stable and predictable financing
mechanisms for utility providers at
the sub-national level
1.1. Sub-national bonded debt
Municipal bonds as financing mechanisms
Few issues in Latin America despite heavy
promotion by World Bank, USAID and others (Mexico
is exception)
Fiscal Responsibility Laws limit debt of
municipalities
Fiscal transfers from central government remain
most important source of finance
1.2. The role of financial
intermediaries

Some success with pooled financing arrangements
through municipal development funds:
 Colombia:
Financial institution “Findeter”
 South Africa: Infrastructure Finance Corporation Limited

Getting international credit rating is a challenge
Section II
Ensuring sustainable access for the poor
through internal revenue generation –
electricity
2.1. Pre-conditions for
Successful Sustainable
Investment into utilities


Importance of local institutions and local context for
sustainable investment into basic utilities
”LUZ PARA TODOS” (LIGHT FOR ALL)-initiative aims
to extend electricity to the whole population in Brazil
by the year 2008
 Supply options: grid extension (urban areas) as well as local
renewable energy systems for more isolated rural areas,
such as palm oil, photovoltaic (PV) cells for community and
domestic use, and micro and small hydro plants
Section III
Ensuring sustainable access for the poor
through internal revenue generation –
water and sanitation
3.1. Raising internal revenue
generation through
participatory approaches
The experience of Porto Alegre, Brazil

Attempts to privatize public services in Porto Alegre were
rejected; public provision has been successful

Residents of Porto Alegre take part in financial decisions of
municipality through a participatory budget process

Financing through:


Cross-subsidies from rich to poor households
Multilateral loans
3.2. Applying cross-subsidies
The experience of Buenos Aires and surrounding
municipalities in Argentina
 9,6 million people, 38% below the poverty line
 “Social rate for water” is financed through crosssubsidies
To identify the target groups for social rates correctly a
social survey was undertaken, assessing data on income,
health and consumption related variables
Users of social rate had to take part in the social survey
3.3. Increasing internal
revenue generation through
minimizing losses
The experience of Mexico City




Inequitable distribution of water
Ineffectiveness of consumption subsidies
Problems: 35% of leakages, 50 years old distribution
network, tectonic movements
2001-2006 efficiency-enhancing measures:
822 km of secondary networks (6,7% of the total) were
substituted with High Density Polyethylene
Collaborative effort between state and central government
(“Fideicomiso 1928”) increased the efficiency of the water
and sanitation system.
Section IV
Macroeconomic factors to be taken into
account
4.1. Appropriate fiscal and monetary
policies for public investment



Incompatibility of privatization of public services with
poverty eradication and MDGs
Rather than crowding out investment, prudent public
spending increases the productive capacity of the
economy and can attract private investment
Increased government spending on utilities is necessary
but needs to be coordinated with adequate monetary
policies.
4.1. Appropriate fiscal and monetary
policies for public investment
Percentage of the Population with Access to Electricity
(IEA 2002)
98
100
80
60
%
68
51
51
40
20
Urban
Rural
30
7
0
Sub-Saharan
Africa
South Asia
Latin America
4.1. Appropriate fiscal and monetary
policies for public investment
Tendency of Public Investment 1980-2000
14
12
10
Share of GDP,
%
12
10
8
7
1980
2000
6
3
4
2
0
Asia
Latin America
Macroeconomic risks

Key risks in financing utilities through
international loans:
Maturity mismatches: borrowing from financial markets
on a short term for long term infrastructure investments
 Interest rate risk: difference in interest rates at the time
between borrowing and refinancing
 Exchange rate risk: international loans refinancing in
foreign currency vs. local currency revenues
 PPPs’ off-budget loan guarantees for the investor

THANK YOU!