Benchmarking in the Latin American water sector: the case of Peru

In their process of decentralization, deregulation and privatization of the infrastructure industry, Latin American countries are facing serious difficulties, particularly in the water sector. In Peru, 50 percent of water companies were experiencing financial losses at the time of this research. Management culture and political interference were detected as important issues having an impact in this industry. This study describes alternative measures of efficiency and the implementation of a benchmarking scheme by the sector’s regulatory agency. After estimating a regression model for operating costs, a cost frontier is obtained. Results may offer some guidance for future regulatory action in this emerging market