T
here is ample consensus about the desirability of subsidizing the consumption
of public utility services because of the positive externalities
that result when they are supplied and the high public costs generated by
their absence. On that basis, most Latin American countries subsidize the
supply of services and constantly try to improve their targeting systems while
minimizing social losses associated with the subsidy schemes.
States in the region that allocate subsidies for residential public utility services
(servicios públicos domiciliarios, or SPD) have always found the targeting
and coverage of subsidies a source of controversy, debate, and criticism.1
Among the ways used in the region to reach households with SPD subsidies
are cross subsidy schemes, subsidies to supplying utilities, cash transfers, and
so forth. Because of the variety of alternatives and the socioeconomic and cultural
diversity of the countries of the region, no regional consensus exists on
how subsidies should be targeted.