Macroeconomic Shocks and Regulatory Dilemmas: The Affordability and Sustainability Constraints and the Argentine Default Experience

OMAR O. CHISARI Y GUSTAVO FERRO

Urbana-Champaign, Estados Unidos

Conferencia; Conference on the Regulation of Development and the Development of Regulation; 2004

University of Illinois

Many of the customers in regulated sectors are “new poor customers”, that suffered the loss of their assets or are currently unemployed; most had been already integrated in the network of privatized sectors. Therefore though they received the positive contribution of the availability of the services, they lost access to substitutes and fell under an implicit contract with the network, obliged to pay fixed connection charges. But one of the basic consequences of the initial optimism on macroeconomic performance was the lack of social intervention programs, aimed at compensating the disequilibria for the poor, the structural and the new. Universal service obligations were oriented towards extending coverage, without necessarily addressing the needs of the unemployed and the poor with a consistent program to face a macroeconomic shock.  The aim of this paper is to discuss the current situation in Argentina and to present some of the basic challenges that it poses to regulators. We explore the limits for customers affordability and firms sustainability using a Computable General Equilibrium (CGE) model and evaluate the need of reconsidering the definition of Universal Service.