Regulatory reform and competition policy

Economic Survey of Chile 2005: Strengthening regulation in network industries

 

The following OECD assessment and recommendations summarise Chapter 4 of the Economic Survey of Chile 2005 published on 4 November 2005.

The investment climate can be strengthened through further regulatory reform, particularly in network industries

Chile’s strong performance, and in particular the step up in productivity over the past decade, is due to a large extent to the strengthening of pro-competition regulation since the early 1990s. But these achievements do not obviate the need for further reform. In particular:

  • It is too soon to evaluate the impact on competition of new legislation approved in early 2004 for the electricity sector (Ley Corta I). New legislation (Ley Corta II) has also been approved to ensure the security of supply, against a backdrop of recurrent cuts in shipments of natural gas from Argentina. These are steps towards removing regulatory obstacles to the expansion of generation capacity. Further liberalisation of electricity retailing would be welcome to allow retailers to design efficient price schedules adapted to consumer preferences.
  • In the telecom sector, the emergence of competition has been instrumental in reducing prices and facilitating access by the population to affordable services. The central regulatory issue in the sector is how to foster competition while simultaneously setting efficient prices for dominant firms. Further network unbundling, if pursued, should therefore be consistent with the regulation of dominant firms. Because entry is decided on the basis of average costs, unbundled parts of a network should also continue to be priced at average cost and the remaining cross-subsidies would need to be eliminated.
  • Public-private partnerships have contributed to reducing Chile’s “infrastructure deficit” over the years. But, as this deficit is closing, the social rates of return on new projects are likely to decline. This calls for even more judicious project evaluation and enhanced governance to strengthen independent checks and balances and safeguard the budget from undue exposure to contingent liabilities.

The cost of telecommunication services fell over time, 1995-2003


 

Source: Based on Galetovic and Sanhueza (2002). 

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Return to the Economic Survey of Chile 2005

A printer-friendly Policy Brief (pdf format) can also be downloaded. It contains the OECD assessment and recommendations, but not all of the charts included on the above pages.

Este es el enlace con la versión española de las recomendaciones del Estudio Económico de la OCDE sobre Chile.

To access the full version of the OECD Economic Survey of Chile:

  • Readers at subscribing institutions can go to SourceOECD, our online library.
  • Non-subscribers can purchase the PDF e-book and/or printed book at our Online Bookshop. 
  • Government officials can go to  OLISnet's Publication Locator.
  • Accredited journalists can go to their password-protected website .

For further information please contact Chile Desk at the OECD Economics Department at webmaster@oecd.org.  The OECD Secretariat's report was prepared by Luiz de Mello and Nanno Mulder under the supervision of Silvana Malle.

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