Water institutional reforms in Chile

Abstract

This paper provides a review of the recent institutional changes observed in the water sector in Chile. This review is then used to reflect the Chilean experience in the light of the results concerning institutional change found in existing literature on both institutional economics in general and water institutional economics in particular. These results relate to factors explaining institutional change and the role of endogenous institutional features, such as path dependency and institutional linkages during the reform process. Against a brief description of the main features of the water sector in Chile, the paper provides an overview of Chilean water management institutions and the reforms process ongoing since the 1980s. The factors that motivated institutional changes in Chile's water management include ideology, transactions costs, interest-group behavior and path dependency. While the already observed institutional changes, such as the transferable water rights, water markets and urban water reforms, are all significant, further reforms are delayed by the deliberate legislative process required for changes as a result of the 1980 Constitution. Future water reforms in Chile, therefore, depend on a very difficult process of political reforms needed to change the 1980 Constitution and the 1981 Water Code.