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					Regional multi-stakeholder consultation on
“Financing access to basic utilities for all”

   (Lusaka, Zambia, 23-25 April 2007)
Outcome of the first regional multi-stakeholder
 consultation on “Financing access to basic
               utilities for all”

         in Brasilia, Brazil, 11-13 December 2006


 Meeting report and background information is available at:

                http://www.un.org/esa/ffd
                    Overview:

I.     Mobilizing finance: Stable and predictable
       financing mechanisms for utility providers at the
       sub-national level
II.    Ensuring sustainable access for the poor through
       internal revenue generation – electricity
III.   Ensuring sustainable access for the poor through
       internal revenue generation – water and
       sanitation
IV.    Macroeconomic factors to be taken into account
           Section I

       Mobilizing finance:
 Stable and predictable financing
mechanisms for utility providers at
      the sub-national level
   1.1. Sub-national bonded debt

 Municipal bonds as financing mechanisms

Few issues in Latin America despite heavy
 promotion by World Bank, USAID and others (Mexico
 is exception)
Fiscal Responsibility Laws limit debt of
 municipalities
Fiscal transfers from central government remain
 most important source of finance
              1.2. The role of financial
                    intermediaries
   Some success with pooled financing arrangements
    through municipal development funds:
     Colombia: Financial   institution “Findeter”
     South Africa: Infrastructure Finance Corporation Limited


   Getting international credit rating is a challenge
             Section II

Ensuring sustainable access for the poor
  through internal revenue generation –
                electricity
                2.1. Pre-conditions for
               Successful Sustainable
               Investment into utilities
   Importance of local institutions and local context for
    sustainable investment into basic utilities
   ”LUZ PARA TODOS” (LIGHT FOR ALL)-initiative aims
    to extend electricity to the whole population in Brazil
    by the year 2008
     Supply options: grid extension (urban areas) as well as local
      renewable energy systems for more isolated rural areas,
      such as palm oil, photovoltaic (PV) cells for community and
      domestic use, and micro and small hydro plants
             Section III

Ensuring sustainable access for the poor
  through internal revenue generation –
          water and sanitation
           3.1. Raising internal revenue
                generation through
             participatory approaches
            The experience of Porto Alegre, Brazil

   Attempts to privatize public services in Porto Alegre were
    rejected; public provision has been successful

   Residents of Porto Alegre take part in financial decisions of
    municipality through a participatory budget process

   Financing through:
        Cross-subsidies from rich to poor households
        Multilateral loans
          3.2. Applying cross-subsidies

    The experience of Buenos Aires and surrounding
                municipalities in Argentina
 9,6 million people, 38% below the poverty line

 “Social rate for water” is financed through cross-
  subsidies
   To identify the target groups for social rates correctly a
    social survey was undertaken, assessing data on income,
    health and consumption related variables
   Users of social rate had to take part in the social survey
             3.3. Increasing internal
           revenue generation through
               minimizing losses
               The experience of Mexico City
   Inequitable distribution of water
   Ineffectiveness of consumption subsidies
   Problems: 35% of leakages, 50 years old distribution
    network, tectonic movements
   2001-2006 efficiency-enhancing measures:
      822 km of secondary networks (6,7% of the total) were
      substituted with High Density Polyethylene
      Collaborative effort between state and central government
      (“Fideicomiso 1928”) increased the efficiency of the water
      and sanitation system.
            Section IV


Macroeconomic factors to be taken into
                account
         4.1. Appropriate fiscal and monetary
             policies for public investment

   Incompatibility of privatization of public services with
    poverty eradication and MDGs
   Rather than crowding out investment, prudent public
    spending increases the productive capacity of the
    economy and can attract private investment
   Increased government spending on utilities is necessary
    but needs to be coordinated with adequate monetary
    policies.
       4.1. Appropriate fiscal and monetary
           policies for public investment

Percentage of the Population with Access to Electricity
                     (IEA 2002)
          100                                 98

          80
                                68
          60       51                              51
      %
                                                           Urban
          40
                                     30                    Rural
          20
                        7
           0
                Sub-Saharan   South Asia   Latin America
                   Africa
           4.1. Appropriate fiscal and monetary
               policies for public investment

         Tendency of Public Investment 1980-2000

                14
                                    12
                12
                     10
                10
Share of GDP,   8            7
                                                   1980
      %         6
                                                   2000
                4                          3
                2
                0
                      Asia        Latin America
               Macroeconomic risks

   Key risks in financing utilities through
    international loans:
        Maturity mismatches: borrowing from financial markets
         on a short term for long term infrastructure investments
        Interest rate risk: difference in interest rates at the time
         between borrowing and refinancing
        Exchange rate risk: international loans refinancing in
         foreign currency vs. local currency revenues
        PPPs’ off-budget loan guarantees for the investor
THANK YOU!

				
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