How Investor Portfolios Shape Regulatory Outcomes: Privatized Infrastructure After Crises

Abstract

Many developing countries privatized utilities during the 1990s. Their weak institutional environments, however, make them prone to crises that generate incentives for governments to renege on contractual commitments to investors. To understand variation in post-crisis regulatory outcomes in such contexts, scholars must consider investors' prior choices regarding portfolio structure. Investors facing high reputational costs from exit are more likely to remain following expropriation, and those holding diverse assets in their contract jurisdiction, to secure compensation. These factors account for significant unexplained within-sector and subnational variation, for which we provide qualitative and quantitative evidence from Argentina's water and electricity sectors following the 2001 crisis.

The politics of energy privatization in Latin America: Contours and directions

“…A regulatory environment with low barriers to entry, as Murillo and Finchelstein (2004) illustrate, can shape whether there is market concentration among private firms in the ownership of electricity, ensuring enough competition in the delivery of services. Moreover, governments can renege on contracts during economic hardships, affecting the quality of life for residents (Post & Murillo, 2016). While these case studies in energy privatization paint a macro-level perspective on the effectiveness of these policies, another side of the debate illustrates a granular negative side of these measures, shifting attention to the external actors that pressure governments to adopt privatization measures.…”

“…Further, there is also a notable research literature exploring the role of government and their relationship with private investors in shaping modification or suspension of contracts. Partisanship and the threat incumbents face (Murillo, 2009), the risk of governments reneging on contracts during crises (Post & Murillo, 2016), as well the role of ideological preferences (Martinez‐Gallardo & Murillo, 2011) still give politicians agency in shaping whether energy privatization is regulated and to what extent. These insights provide a nuanced image for the continuing negotiation between governments and private investors.…”

Institutions and Policy Choices: The New Left in Brazil

“…The last factor, institutional costs, is perhaps the least obvious but just as important as the other two factors (Post and Murillo, 2016). Its importance rests on the fact that institutions not only constrain choices through the mechanics of decision-making but also through the legitimacy that they can provide to policy choices.…”

Can a Water Smart Grid Help Society Achieve the Sustainable Development Goal of Water as a Human Right?

“…However, there are crucial differences between water and electricity. Water is a human right and faces provision requirements, regulations, and public pressures unseen by electricity; water is generally not a distributed resource; and water generally cannot be "shut-off or shunted" for safety reasons [18]. The "smart" in smart grid refers to autonomous engineered systems that provide two-way information flow, allowing consumers to adjust use to costs and failures in the system; for example, water meters that give hourly usage data to consumers and providers, instead of monthly meter reading by a human.…”