The Privatization of Municipal Services Challenges and Opportunities: A Case Study of Cartagena de Indias Prepared for the City of Cali, Colombia April 24, 1998 Lisa Nagy, Ryan Black, Carlos Rymer, Elyse Hottel, Alejandro Gomez Palma

Agenda Traditional Public Ownership Public Ownership Reform Privatization: Mixed Capital Company Sustainability of Mixed Capital Company Recommendations for Cali Traditional Public Ownership Public Ownership Reform Mixed Capital Company 1961-1992 1992-1994 1995-1998

Traditional Public Ownership

Public Ownership Reform

Privatization: Mixed Capital Company

Sustainability of Mixed Capital Company

Recommendations for Cali

Traditional Public Ownership Political Interference 1961-1992 Service Inefficiencies 70% received water Untreated sewage deposited into Bay/Lagoon Fiscal Mismanagement Administrative & Operational Over-diversification

Political Interference

Service Inefficiencies

70% received water

Untreated sewage deposited into Bay/Lagoon

Administrative & Operational

Over-diversification

Public Ownership Reform Issues : Breakdown of Traditional Model Retirement buy-out and contract negotiations Liquidation of Empresas Publicas Distrales Introduction of Mixed Capital Company Analysis : Union demands Reform abandoned too quickly Bid process affected 1992-1994

Issues : Breakdown of Traditional Model

Retirement buy-out and contract negotiations

Liquidation of Empresas Publicas Distrales

Introduction of Mixed Capital Company

Analysis :

Union demands

Reform abandoned too quickly

Bid process affected

Privatization: Mixed Capital Company Issue : Quality of Service vs. “Control” Ownership redistribution 1995-1998 86% 46% 50%

Issue : Quality of Service vs. “Control”

Ownership redistribution

Privatization: Mixed Capital Company Issue : Quality of Service vs. Control Ownership redistribution Eliminated union influence Improved efficiency Analysis : Acted in public interest Service regulation 1995-1998

Issue : Quality of Service vs. Control

Ownership redistribution

Eliminated union influence

Improved efficiency

Analysis :

Acted in public interest

Service regulation

Issue : The Need to Expand Services Expansion of services - $60 million USD shortfall Conditioned IFC offer, IDB loan – $24 million Relinquishing “control” over Acuacar Sustainability of Mixed Capital Company 1998 and beyond Analysis : IFC loan Alternative Funding

Issue : The Need to Expand Services

Expansion of services - $60 million USD shortfall

Conditioned IFC offer, IDB loan – $24 million

Relinquishing “control” over Acuacar

Analysis :

IFC loan

Alternative Funding

Mixed-Capital Company and O&M contracts Need visible results before raising tariffs Professional and specialized service delivery Transparency and accountability Community outreach and empowerment Recommendations Municipality of Cali

Mixed-Capital Company and O&M contracts

Need visible results before raising tariffs

Professional and specialized service delivery

Transparency and accountability

Community outreach and empowerment

Municipality of Cali Recommendations (cont.) Medium and long-term ROI (15+) Employee training, education and incentives Continuous improvement Cooperation with state and federal agencies

Medium and long-term ROI (15+)

Employee training, education and incentives

Continuous improvement

Cooperation with state and federal agencies

Questions?