Revisiting Private Participation, Governance, and Electricity Sector Performance in Latin America

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May 2020
This paper revisits the relationship between private participation, regulatory governance and the performance of the electricity sector in 18 Latin American countries over the last five decades. Private investment flows have been consistent overtime, providing around 55% of total electricity investment in the region. We examine the nature, and resultant performance outcomes, of increased private-sector involvement in electricity sub-sectors, including generation capacity, non-conventional renewable energy (NCRE), electricity access, electricity losses, and affordability. The results suggest that private investment and the quality of regulatory governance are positively associated with better performance of the electricity sector. Our long-term examination suggests that private investments strongly contribute to enhancing the quality and efficiency of the electricity sector's performance by increasing generation capacity, increasing the share of renewable energy, increasing access, and reducing electricity losses. Results regarding regulatory quality also indicate a positive association with respect to per capita capacity, electricity coverage, and affordability. Affordability of electricity services also improved in countries with high private participation, while subsidies to the electricity sector declined considerably. These outcomes seem to be enabled and reinforced by independent regulatory governance.