7. Water Pricing in Colombia: From Bankruptcy to Full Cost Recovery

Despite having one of the largest water resources of the world, in the early 1990s, the Colombian water and wastewater sector was in a deep crisis, with low coverage, low investment, and financial infeasibility of most of the companies responsible for the provision of these services. Rates were not consistent with the needs of maintenance, operation, management, and investment, and providing companies were almost totally dependent on state resources. The enactment of Law 142 of 1994 and regulations issued by the new (CRA acronym for Comisión de Regulación de Agua Potable y Saneamiento Básico) completely changed the landscape of the sector. In 1995, CRA set a clear methodology for the calculation of costs and charges for water and sewerage services, which aimed to cover the full costs of administration, operation, and investment. The law defined specific levels of subsidy only applicable to the basic consumption of poor families. Implementation of the new tariff scheme began in 2006 and lasted for several years, finally achieving financial viability of most businesses.