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The Water and Sanitation Sector

Several actors play a role in Peru’s water and sanitation sector. Among them the most important are the central government, represented by the Housing, Water and Sanitation Ministry, the regional governments, the municipalities, the private sector, and the municipal WSPCs. Within the Housing, Water and Sanitation Ministry is the Water for All Program that is responsible for financing water projects by transferring resources to regional and provincial governments. Table 4.1 summarizes the roles played by different actors.

By law, the WSPCs have the status of public companies subject to private companies’ law, governed by the Comptroller, and are obliged to present their investment projects to the National System of Public Investment, and include a General Board of Shareholders composed of the provincial and district mayors of the local governments in the jurisdiction of each company.

Law 27972—Municipalities Organic Law—in its Article 4 establishes that the local governments are responsible for regulating public services provision in their jurisdictions. From the interviews it was observed that some of the local governments’ main roles concerning water services are (i) to propose water projects to the WSPCs in locations where the service is not available, (ii) to elaborate water projects to be presented to the Housing, Water and Sanitation Ministry in order to request funding from the Water for All Program, (iii) to manage and execute the projects financed by the Water for All Program that are not executed by the regional government, (iv) to evaluate and prioritize the projects presented by the WSPCs to the local PB, and (v) to supervise the execution of the projects financed with PB resources. Interviews also showed that the local governments can assign resources to the WSPCs to implement projects through two mechanisms: (i) through the PB, and (ii) through the execution of water projects recommended by the companies themselves.

Investment in the water and sanitation sector comes from several sources. Every government level has a share, but thanks to the decentralization process, regional and local governments have increasingly more participation. The central government allocates resources to investment in the water sector through the Water for All Program. These resources may be transferred to the regional governments, local governments, and/or WSPCs. Also, sub-national governments may present water and sanitation projects to the Housing, Water and Sanitation Ministry for evaluation, and if approved, they receive resources through the Water for All Program.

Table 4.1 Actors in the water sector





Water for All Program, main investment





Resources for regional important

Has a set on the Executive Board of the


projects, co-financing with Water for All, local governments, and WSPC.


Allocate resources for large-scale projects

Supervise agreements and execution of

requested by the WSPC.

important projects for the region, financed by private entities.


PB/Institutional Budget.

Mayors are part of the Executive Board of


the WSPC.

The local government proposes water projects to the WSPC in locations where coverage needs to be expanded. Coordination with other local governments.

Evaluation of the projects presented by the water and sanitation providers in the PB.

Coordination with the WSPC and supervision of executed project by these providers in the locality.

Private sector

Resources for big scope projects9



Network renewal and expansion,

Responsible for the local water service.

reservoirs and plants projects

Determines the feasibility of the projects proposed by the local government.

Source: Authors’ elaboration

Concerning local governments, it is clear that potentially they are a very important source of water and sanitation coverage and service quality improvements due to the high percentage of resources under their responsibility. Nonetheless, some of the resources are not executed for various reasons, mainly lack of political will or technical capacity to meet the requirements of the National System of Public Investment (SNIP), as shown in Table 4.2.

It is important to note that although the share of investment budget in the hands of local governments is quite large, given also the very large number of municipalities, the average investment budget per district is only S/.1,320,696. This is why regional and national governments sometimes assume large-scale projects through the Water for All Program.

Table 4.2 Investment in the water and sanitation sector,1 2009



Budget (soles)

% of execution

Central government level




Regional level




Local level (districts and provinces)




Source: Finance Ministry, Financial Administrative Integrated System—SIAF aDoes not include planning activities, management, and public health activities

A condition for these specifications to identify the effect of PB is that PB is indeed exogenous. We examine the following measures of PB involvement and then argue why we believe that measure (i), our preferred proxy, fulfills the condition of exogeneity:

Percentage of the total amount of investment executed by the sub-national government that was allocated through the PB mechanism in the period 2007-2010 (PB intensity).

Percentage of the total number of investment projects prioritized by PB in the sub-national government in the period 2007-2010.

Number of organizations participating in PB over the period 2007-2010.

Number of individuals participating in PB as a percentage of total district population over the period 2007-2010.

Based on the information collected in the qualitative fieldwork, we observe that these constructed measures are good approximations to the situation of PB in local governments. Specifically, regarding our PB intensity measure, in most cases the qualitative evidence confirms the empirical validity of the proxy. We only found the pertinence of indicator (ii)—the percentage of PB-approved projects to the total number of municipal projects—problematic, because for officials and actors involved in the PB, this indicator is irrelevant if the amount of resources allocated to each of the projects undertaken, with or without the participatory budget, is not taken into account. Note that (iii) and (iv) are indicators of participation, while (i) is an indicator of the effectiveness of the participatory process in influencing the local government’s budget. Ultimately we want to evaluate the latter indicator in relation to the provision quality of services, since this is what potentially may have an impact. However, indicators of participation also provide useful information about the process and, consequently, we incorporate them in sections of the analysis.11

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