Regulatory Support Is Powering Latin America’s Utilities
S&P Global Ratings views the electric utilities’ regulatory framework in Latin America as supportive, overall. Regulations in most of countries allow for timely recovery of operating costs and capital. We consider such frameworks as predictable and transparent, which we view as credit supportive. During the short and medium term, we believe regulators will focus on raising the share of non-conventional renewable energy in the electricity matrix; improving the transmission systems and connectivity to new industrial and/or urban areas; and using additional investments and digitalization efforts in order to improve efficiency.
- – Chile’sregulatorhasasolidandlongtrackrecord.Theframeworkhasnotonlybeen resilient to economic expansionary cycles, but more importantly, to recessions. Similarly, Colombia’s efforts to ensure the stability of electric utilities has spanned almost 30 years.
- – Inourview,Brazil’sregulatoryframeworkisgraduallyimproving.Ratesarebetter reflecting electricity costs which, in turn, is bolstering the financial stability of the sector’s companies. That said, the industry experienced some political interference during the previous administration.
- – ArgentinahasmadeseveralmodificationstoreducemarketdistortionssincePresident Macri took office in late 2015, but we believe there’s still a long road ahead before regulations catch up with those of neighboring countries.
- – WebelieveMexico’sregulatoryframeworkhasbeenslowlyimproving,withtherising transparency in the electricity rate setting and share of private investments in the generation sector. However, there are substantial uncertainties over the new administration’s approach to the electricity sector.