Bolivian Utility Regulation: Lessons for a Water Sector Agency

In a polarized political setting, public policy towards the water sector evolves in response to pressures. The Bolivian experience provides lessons for other nations. First, technical skills are necessary, but not sufficient for regulatory sustainability. In addition, those implementing policy must think politically without being political. To establish incentives for good sector performance, public authorities must be able to measure performance. Furthermore, when price is initially far below cost, citizens will perceive private participation as the reason prices go up. Finally, benchmarking water utilities is perhaps the only tool regulators have when regulating municipal or state-owned utilities. The study sheds light on the evolution of regulatory institutions.