Strengthening Regulation in Chile : The Case of Network Industries

Chile’s regulatory framework is working reasonably well. The country’s structural reforms since the 1980s, with the privatisation of utilities and deregulation of product and labour markets, have improved resource allocation and increased the population’s access to basic services, while calling for a comprehensive upgrading of regulatory institutions. At the same time, public-private partnerships (PPPs) are contributing to closing Chile’s infrastructure deficit, particularly in transport. The recurrent cuts in shipments of natural gas from Argentina since 2004 have put additional strain on regulation in the electricity sector to encourage investment in generation and ensure the security of supply. This paper reviews regulatory reform in three network industries (electricity, gas and telecoms), where further liberalisation, particularly in electricity retailing, and improvements in the regulation of telecoms would do much to further improve the business climate. The governance of public-private partnerships can be improved by increasing transparency and accountability in the concession process. In doing so, the government’s exposure to contingent liabilities can be contained. This Working Paper relates to the 2005 OECD Economic Survey of Chile (www.oecd.org/eco/surveys/chile).