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abstract

The importance of water in life and health of population, especially in developing countries, justifies the comparative study of the performance of undertakings providing potable water and waste water collection. The main objective of this research is to investigate if the decentralization process has led to an improvement of the efficiency in the water industry. Using a stochastic frontier analysis, we show that technical efficiency of Venezuelan water companies remained around 84% and that decentralized companies were more efficient than the centralized ones. The main policy recommendation is that the process of decentralization in the water services should continue.

6. Conclusions

This study has quantified the technical efficiency for the services of potable water supply and wastewater collection in Venezuela by using a distance function oriented to inputs. For this, data from twelve Venezuelan water companies was employed, which were responsible for more than three quarters of the population during the 1998e2008 period.

Overall, we can state that efficiency of Venezuelan water companies has remained at around 84% in the period considered. In any case, the aim of this work not only was to measure the efficiency but to verify if the decentralization of the management of the water service allowed to improve the efficiency in the service.

We found that decentralized companies have been much more efficient than centralized ones. Their performance has been such that the global level of efficiency in this sector is high. In addition, it is possible to assert that the decentralization generates a positive effect in the technical efficiency. Decentralized firms do not receive financing from the central government, but rather are selffinanced, so they have tried to be efficient and to gradually meet the needs of the population. In fact, decentralized firms are around 20 percentage points more efficient than centralized ones. This result suggests that it would be desirable to establish a decentralization process which allows to the 10 firms that remain operating centrally to be more efficient in the water services.

Despite the improvements with regard to increase the population with access to potable water and with access to wastewater collection, a question remains in Venezuela around the issue of potable water that is supplied but is not billed in its entirety. Metered connections have shown a positive impact on efficiency frontier. So it is necessary to increase the number of micrometers, as well as the reading of these, so that companies can bill the real consumption of users. This would enable the generation of additional income to cover the real costs of the operators and, at the same time, would help to diminish the waste or misuse of water by some customers.