32 thus 95 of guatemalan households and 85 of

32
Thus 95% of Guatemalan households and 85% of Honduran
households are eligible for the social tariff, so that 60-65% of subsidy beneficiaries are not poor,
and 80-90% of subsidy resources are captured by the non-poor. Moreover, only around 50% of
31
In a handful of cases additional eligibility criteria are applied based on household characteristics (some
Argentine provinces), neighborhood characteristics (Colombia), or whether the family is a beneficiary of
other welfare programs (Brazil.)
32
Average household consumption is 102 kilowatt-hours per month in Guatemala and 108 kilowatt-hours
per month in Honduras.

31
poor households in Guatemala and Honduras have an electricity connection, and consequently
55-60% of the poor fail to benefit from the social tariff. However, lower errors of inclusion and a
less regressive distributional impact are evident in social tariff programs that employ additional
eligibility criteria, such as the socio-economic characteristics of the household (e.g. Argentine
provincial social tariff schemes) or its neighborhood (e.g. Colombian cross-subsidy scheme.)
Badly designed cross-subsidization and other social tariffs that cover too many people imply
more public support of utilities. This is indeed the case for Colombia (Box 6). In that country,
80% of residential water customers qualify to benefit from cross-subsidies. Thus, despite the
progress made towards the cost recovery tariff objectives established in the 1994 Public Services
Law, the water sector continues to make substantial fiscal demands. The Colombian government
transferred an average of US$240 million per year to municipally operated water utilities over the
period 1998/01, which accounted for 80% of the resources available for investment in the sector.
More generally, a narrow base of cross-subsidizers who are over-taxed results in an erosion of the
revenue base as the cross-subsidizers opt for self-service (auto-generation or own wells). This is
particularly true in the case of water where only about 10% to 15% of the client base is industrial
users (as opposed to about 50% in electricity).

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KEY CHALLENGES
The key challenges include improving the social and economic returns from infrastructure, better
leveraging the private sector, through a better management of PPI, but also raising new financing
for infrastructure. These, and the many underlying steps required are discussed in turn.
Improving the social and economic returns from infrastructure
Finding better ways to extend affordable service to the poo
33
r
Most countries employ considerable subsidies and other programs to promote service
expansion, but too many people, especially among the poor, still lack basic services. Access
rates have been improving, especially among the poor. But growth rates are slow: on current
trends providing safe water to more than 90 percent of the region’s population may take another
15 or 20 years. Speeding up service provision to the poor does not necessarily require additional
state resources.