Foreign and Domestic Investment in Argentina: The Politics of Privatized Infrastructure

This book sets out to investigate why concessional contracts in Argentina’s water and sanitation sector perform differently in terms of their long-term viability, specifically considering the changing institutional environments before and after the economic crisis in 2001.

Readers will find detailed an empirical analysis of concession contracts on long-term privatization in this sector with a focus on the main interest group, namely firms. Concession contracts mean that investment and maintenance responsibilities are assigned to private operators for 20–30 years, but assets remain under government ownership. Data was generated from archives and from interviews with e.g. provincial regulatory agencies and firms.

The basic argument is that organizational structure matters strongly in terms of the ability of firms to maintain politically viable long-term contracts in the face of weak institutional environments, which were prevalent in the Argentine state during its crisis. The cases reveal that sub-national contracts with domestic conglomerates have a medium- to long-term advantage over multinational, foreign ones due to their following characteristics: strong local presence, more patience, informal and formal ties, knowledge regarding local dynamics and establishments, opportunities for cross-sectoral work and strong cultural understandings. This is particularly relevant considering the political pressures that shape contract negotiations, such as electoral periods, short-term demands of governments, their need to please consumers, and governments’ access to financial resources. Thus, the book advocates that domestic management be the main alternative to the public provision of water and sanitation services.

The author employs an interesting angle in assessing this topic by combining studies of political economy –e.g. regarding firm asset management and corporate preferences using insights from game theory literature on bargaining– with economic sociology –e.g. cultural and structural embeddedness. This makes the book attractive to readers from different disciplines with an interest in organizational structures, contracting and privatization in the context of crises. As well as contributions to the topic, the book features conceptual innovations in politics of public policy in weak institutional environments, as well as in the behaviour of large firms based in the developing world. By adding cross-country comparisons and testing alternative explanations of the findings, Alison E Post provides a rigorous study that can serve as a useful foundation to further explore contracts in infrastructure sectors in developing countries and compare and contrast them with existing political economy theories that explain the relations between investor structures and contractual resilience. Rather than engaging in discussions on public versus private sector service provision, the book argues for a more nuanced understanding of different private sector providers and for the exploration of sources of variations in the performance of different investors.

               Booknote prepared by Julia Wesely.