The Limitations of Water Regulation: The Failure of the Cochabamba Concession in Bolivia

Abstract

This article examines the limitations of governmental capacity to regulate private sector participation in urban water supply in developing countries through an analysis of the most dramatic failure to date of a major franchise contract for supplying water and sanitation services to a large city – the 40‐year concession awarded in September 1999 to Aguas del Tunari (AdT) in Cochabamba, Bolivia. Five months later, the population rioted against water tariff increases and the contract was cancelled. The paper analyses the background, context and factors that explain the failure of the concession and seeks to draw lessons for the regulation of future concessions.