Political Risk and Regulatory Risk: Issues in Emerging Markets Infrastructure Concessions

Political and regulatory risks, cause damage to countries and investors because of investment diminishing. When investments take place, those could increase services prices. Present work has as its objectives to characterize theoretically the problem, to study existent measures to face it, to know the available instruments to deal with it, and to draw some general conclusions on political and regulatory risks, and some specific conclusions referred to infrastructure concessions. The article is limited to the study of opportunistic behavior or governments.regulatory risks; Issues in Emerging Markets; Infrastructure Concessions

Options for Radical Reforms to Pension Systems: Chilean and Swedish Models Compared

Pension systems are under stress in the whole world. Demographic tendencies, informal labour markets, and distributive designs –inter alia-, coupled with the rigidity of the legislation, and implied financial imbalances, social debate and –sometimes-, reforms. These could be classified into two main categories: parametric and radical reforms. Two models have features to be classified as radical pension reforms in the last decades: Chilean (or AFP) and Swedish (or NDC) models. The central aim of this essay is to compare both radical reforms, at the level of “ideal types”. Doing that, some questions are answered, namely: In what feature do they have differences? Which are the incentives they set to human behaviour in order to meet the goals of the design? Are the models truly different? Which problems do they address and which to they set aside? Moreover, which problems remain unsolved, and what troubles do they add? Here, the intention is to concentrate in the technical aspects of the design intended to solve financial problems of the systems, trying to show the relevant trade offs.Pension systems; AFJP

On annuities: an overview of the issues

Longevity is increasing in the whole world, and savings for retirement are growing quickly. There is a potential demand for certainty in the income streams for pensioners since old-fashioned pay-as-you-go systems became financially stressed. A financial product, the annuity contract, offers longevity insurance but its market is not well developed, even in the small set of countries where it exists. The instrument, its market and its problems are analyzed, and a discussion is made in order to ameliorate the understanding of an apparent paradox: why an interesting instrument is not more demanded and supplied.annuity; insurance; pension

Are There Cost Differences in the Argentinean Pension Fund Industry? An Efficiency Frontier Analysis

The purpose of this paper is to study the existence of differences in costs between pension fund administrators (PFAs) through the estimation of an econometric cost frontier for Argentina. Like in other eleven Latin American, and some other Central Asian and Eastern Europe countries, the social security has been privatized, and the individual accounts of defined contribution plans are managed by PFAs. The issue is relevant because of its potential regulatory implications. Cost savings (efficiency gains) could be passed-through to contributors, increasing their pension funds (that is, their pensions at retirement). The concept is applied to utilities’ regulation in countries where price-caps are applied, and an X-factor is set by the regulator to distribute the efficiency gains, but it is not the practice in privatized social security systems. In Argentina a price-cap has been introduced in pension funds markets since a 2007 reform. Though it allows the regulator to modify that cap, in doing that no provision was established for a technically acceptable methodology. We show that the use of efficiency frontiers could fill the gap, because it provides a technical tool to help in that key resource allocation decision. From the empirical work, it is found that there are important differences in efficiency among PFAs. This gives some clues to the regulator for implementing sector policies.pension fund; Efficiency Frontier Analysis

Foreign direct investment. A bid for progress?

Foreign Direct Investment (FDI) is not a unique explanation for growth and progress, but is one of the more useful indicators of the open opportunities. It reveals preferences of the developed countries’ private sector, while the emerging economies seem to participate in a global bid. That bid is for capital, for the technology and know-how normally associated to investments, and for the final award, progress and development. Besides policies, politics and initial conditions, the economy matters. An estimation of economic determinants to FDI is done, and to take into account best relative results, an econometric frontier is calculated in order to determine how do the more efficient in attracting FDI. Some new perspective is added to conventional wisdom: there are countries, which are in some sense “more efficient producers” of FDI. The efficient frontier approach could shed some light of the link from sowing to reaping. Some shocking results were attained, when we tried to ask the question “Which are the best harvesters?” The more “sexiest” countries are not the more efficient producers of FDI in our ranking.Foreign Direct Investment, efficiency frontiers, growth

A Benchmarking Exercise on Latin American Water Util

The aim of this study is to estimate both stochastic and mathematical programming cost functions and frontier studies with the ADERASA’s database. ADERASA is a Latin American association of water regulators, which has done a systematic effort on data collection. Econometric and DEA techniques were employed here. This study fills a gap on the understanding of relative efficiency in the Latin American water sector., through a consistent database. Firstly we present a survey of the empirical literature related with cost and production frontiers in the water and sanitation sector. The survey shed light in order to determine the variables to choose in the models to be estimated. Secondly, some models were estimated, differing each other on the specification, and the environmental variables included. The results are satisfactory, with the expected signs and plausible values for the coefficients. Some consistency between methodologies was found.Benchmarking; cost functions; frontier; stochastic model; ADERASA

Aguas del Aconquija: revisión a una experiencia fallida de privatización

Este trabajo se propone explorar el caso “Aguas del Aconquija”, desde una óptica académica, donde interesa dilucidar qué errores no cometer en futuras privatizaciones, para no desembocar en procesos como el que se analizará. No será un objetivo del trabajo, el análisis del fallo del Tribunal Arbitral Internacional. Este escrito, está conceptualmente fundado en el concepto de inducción hacia atrás: dado que lo peor ocurrió, ¿cómo podría haber sido evitado?privatizaciones; Aguas del Aconquija; fallo del Tribunal Arbitral Internacional

Los instrumentos legales de la renegociación del contrato de Aguas Argentinas (1997-99)

Debe distinguirse el esquema regulatorio, entre el período anterior a la renegociación y el posterior a él. La renegociación del contrato original firmado en 1993, comenzó en 1997 y concluyó en 1999. No existe a la fecha texto ordenado del nuevo contrato, sino un conjunto de normas que corrigen las anteriores. Esquema regulatorio básico en el contrato original era un mecanismo ad hoc de costo de servicio, con revisión por cláusula gatillo ante evolución de un índice de costos (más o menos 7% del costo de la canasta, gatillaba una revisión no automática, sino negociada). Desde la renegociación el esquema combina un ”Price Cap”, modificado por quinquenio por comparación con la “Empresa Modelo”, con traspaso automático de la variación de costos a través del ajuste anual por índice de precios. Se usará el promedio simple entre el Producer Price Index-Industrial Commodities y el Consumer Price Index-Water and Sewerage Maintenanceinstrumentos legales; renegociación del contrato; Aguas Argentinas