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Water supply and sanitation in Chile

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Water supply and sanitation in Chile is characterized by high levels of access and good service quality. Compared to most other countries, Chile's water and sanitation sector distinguishes itself by the fact that all urban water companies are privately owned. The sector also prides itself of having a modern and effective regulatory framework, including an innovative subsidy mechanism to protect the poor. One weakness of the sector are the relatively high water losses.

This article is part of a series of articles comparing the institutional and financial characteristics of water supply and sanitation around the world.

Access

A leaking tap.
Urban (87% of the population) Rural (13% of the population) Total
Water Broad definition 100% 58% 95%
House connections 99% 38% 91%
Sanitation Broad definition 95% 62% 91%
Sewerage 89% 5% 78%

Source: Joint Monitoring Program WHO/UNICEF(JMP/2006). Data for water and sanitation based on "Inequality in Water Access, Use, Expenditure in Latin America and the Caribbean" ("Desiguladades en el Acceso, Uso y Gasto con el Agua Potable en America Latina y el Caribe," PAHO (February 2000 using CASEN 1998).

In Chile’s urban areas access to water supply stood at 99.8% and access to sanitation at 95.1% in 2005 [1], which is one of the highest levels in Latin America.

Service quality

Service quality is generally good. Water supply is continuous, both in urban areas and in concentrated rural areas. [2] Drinking water quality complies with bacteriological norms in 99.4% of the samples, according to the regulator SISS. [3]. The sector currently undergoes a major wastewater treatment investment program with the goal of treating more than 98.8% of all collected municipal wastewater in 2010, from 73.4% in 2005. [4]

Responsibility for water supply and sanitation

Map of Chile

Service provision

Water supply and sanitation services in Chile's urban areas is provided by 53 entities, including

  • large, medium-sized and small private companies that serve 95% of the urban population and
  • some mostly small municipal companies and cooparatives that provide services to about 5% of the population.[5]

Each of Chile's 13 regions has its own private water and sanitation company. The three largest companies are

Together the three companies serve 63% of urban water customers in Chile.[9]

In rural areas cooperatives and rural drinking water committees are in charge of operating water supply systems.

Policy and regulation

Responsibility for sector policy in Chile is vested primarily in the Ministry of Public Works, which grants concessions and promotes rural water supply and sanitation through its Department of Sanitation Programs. The responsibility for regulation is shared between the Superintendencia de Servicios Sanitarios SISS, the economic regulator in urban areas, and the Ministry of Health which sets and monitors drinking water quality standards in both urban and rural areas.[10]

The water and sanitation regulatory system in Chile is considered by the WHO to be a model not only for Latin America, but also for Europe.[11] One of its innovative features is the use of a hypothetical efficient model enterprise to assist in determining if tariff increases requested by service providers are justified.

History and recent developments

Before 1977: A fragmented sector structure

Before 1977 urban water and sewer services in Chile were provided by a multitude of entities. The largest entity was the Sanitation Department (Dirección de Obras Sanitarias, DOS) of the Ministry of Public Works, which was in charge of service provision in towns outside of the two largest cities, Santiago and Valparaíso. In these two cities municipal utilities were responsible for service provision. The Ministry of Agriculture and the Ministry of Housing and Urban Development also had water and sanitation departments. The sector was thus fragemented and also heavily overstaffed, partly as a result of the Socialist policies of President Salvador Allende.

1977-1988: The National Water Company SENDOS

Santiago de Chile

In 1977 the the national public water and sanitation company SENDOS (Servicio Nacional de Obras Sanitarias) was created which had 11 regional branches. The municipal utilities in Santiago and Valparaíso were corporatized and modernized. During that time employment in the utilities was significantly reduced. Services were outsourced, but companies were required to hire a certain number of ex-employees of the public companies.[12]

The public utilities for Santiago and Valparaíso, EMOS (Empresa Metropolitana de Obras Sanitarias) and ESVAL (Empresa Sanitaria de Valparaiso), were strengthened through loans from the World Bank during that period, although the government of Augusto Pinochet privatized the electricity and telecommunications sector at the same time.[13]

Water coverage during this period increased substantially from 78% in 1976 to 98% in 1988. Sewer coverage increase from 52% in 1976 to 82% in 1988.[14]

1988-1998: Corporatization and Regulation

Valparaiso

In December 1988 the General Water and Sanitation Law (Ley General de Servicios Sanitarios) allowed the granting of 13 regional concessions to public, private or mixed shareholding companies in each of Chile’s regions. At the same time the regulatory agency SISS (Superintendencia de Servicios Sanitarios) was created through a separate law. An innovative model of tariff regulation was borrowed from the Chilean electricity and telecommunications sector: Efficient cost levels were estimated for an imaginary model company and used as a benchmark to set tariffs for the utilities.[15]

Initially the regional companies remained public, but the intent was to prepare them for privatization. During that period they achieved financial self-sufficiency, were granted tariff increases, improved their efficiency and increased coverage [16]. The regional companies were also transformed into private law companies (Sociedades Anónimas). Investments increased from less than US$ 80m annually on average during the 1980s [17] to US$ 260m in 1998.[18] However, regional utilities still did not have sufficient resources to expand wastewater treatment.

Means-tested subsidies (i.e. subsidies that are granted only to those that demonstrably have limited means) were also introduced at the same time to cushion the effect of the tariff increase on the poor.

1998 and after: Privatization

Under the government of the Christian Democrat President Eduardo Frei the law was amended in 1998 to promote private sector participation. The stated motive was to increase efficiency, to improve service quality and to mobilize capital to extend wastewater treatment. Subsequently all regional branches of ENDOS, as well as the water and sanitation companies of Santiago and Valparaiso, were privatized. Staffing was further reduced, new complaints management procedures were introduced and the share of collected wastewater treated increased signficantly.[19] The Socialist Presidents Ricardo Lagos (2000-2006) and Michelle Bachelet (since 2006) maintained the basic institutional structure of the sector established under previous governments based on private service provision, means-targeted subsidies and regulation by a public, autonomous regulator.

One factor that explains the continuity of sector policies during various administrations is the fact that all Presidents since Chile's return to democracy in 1990 belonged to the same Coalition of Parties for Democracy.

Efficiency (water losses)

Non-revenue water ("water losses") in Chilean water companies was on average 32.9% in 2005, an unusually high level for a sector that is so modern in so many other aspects. The level of non-revenue water is thus still higher than in Germany, France or the United Kingdom. (see e.g. Public water supply and sanitation in Germany#water losses)Indeed, non-revenue water in Chile increased from 29% in 1999 to the current 33%. [20] The regulator considers a level of 15% as efficient.

Tariffs

Tariffs in urban areas varied between US$ 0.61 per cubic meter and US$ 1.66 per cubic meter in 1999.[21] In rural areas, tariffs only cover operation and maintenance costs [22]

On average, the water and sanitation bill accounted for 1.14% of household income according to a 1998 survey by the National Statistical Institute. They varied between 0.77% for the lowest quintile and 2.35% for the highest quintile. [23]

Investment and Financing

Urban water and sanitation systems do not receive direct subsidies and are financed through the capital market, and ultimately through user fees. However, there is an innovative system of means-tested subsidies that allows qualifying poor households to receive a subsidy administered by the municipalities to pay parts of their water and sanitation bills. Rural water systems receive a partial investment subsidy that is defined in the Ley del Subsidio al Agua Potable y Saneamiento. [24]

Total investment in 2005 was US$ 288m [25]

External support

Interamerican Development Bank

World Bank

References

  1. ^ SISS 2005, p.7
  2. ^ OMS 2001, Situación de la prestación de los servicios and SISS 2005, p. 18
  3. ^ ibid
  4. ^ SISS 2005, p. 7
  5. ^ SISS 2005, p. 14 and SISS website Las Estructura del Sector, Concesionarias de Servicios Sanitarias
  6. ^ Aguas Andinas
  7. ^ ESSBIO
  8. ^ ESVAL
  9. ^ For a full list of companies, their size and ownership see the SISS website Categorias de Empresas
  10. ^ OMS 2001
  11. ^ OMS 2001, Fortalezas
  12. ^ Sjoedin 2006, p. 21
  13. ^ Sjoedin 2006, p. 14
  14. ^ SNISS Website Estructura del Sector, Cobertura Historica
  15. ^ Sjoedin 2006, p. 17
  16. ^ OMS 2001, Antecedentes
  17. ^ Sjoedin 2006, p. 25
  18. ^ OMS 2001
  19. ^ Sjoedin 2006, p. 31
  20. ^ SISS 2005, p. 66
  21. ^ OMS 2001, Situación de la prestación de los servicios
  22. ^ OMS 2001, Antecedentes
  23. ^ OMS 2001, Situación de la prestación de los servicios
  24. ^ OMS 2001, Fortalezas
  25. ^ SISS 2005, p.7

Sources

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