Rudy Cuadra

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THE POSTAL SECTOR IN LATIN AMERICA
Rudy Cuadra Development Cooperation Directorate
(DCDEV) UPU International Bureau
Cooperation and research Guillermo Ronderos UPU
Regional Adviser
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General characteristics of the Latin America
region

• 19 developing countries
• 520 million inhabitants
• 20 million km2
• Huge differences between the countries of the
  region

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General postal sector characteristics
REGULATORS (7)

• 6 postal regulators attached to a Ministry
• 1 multisectoral regulator

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General postal sector characteristics
UPS OPERATORS (19)

• 10 State Enterprises
• 4 Decentralized entities
• 4 Ministerial departments
• 1 Managed by a private operator

5 under Private Law 5 under Public Law
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General characteristics of postal sector in Latin
America
REGIONAL LEGAL FRAMEWORK

• Outdated legislation
• Non-compliance with law (due to its weakness)
• Pressure of unregulated liberalization
• Scant regard for UPS commitments
• Few structural reform processes

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General characteristics of postal sector in Latin
America
MARKET

• Proliferation of operators in main towns and
  cities
• Ignorance of the nature of demand
• Decrease in international mail flow
• Prices do not reflect quality
• Strong competition, but no sectoral investment
  or development

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The postal sector in Latin America
NATIONAL DEVELOPMENT

• Network
• Volume

SECTORAL DEVELOPMENT

• Use of services
• Causes, consequences and risks of lack of
  regulation and/or hasty decisions

CONCRETE CASES

• Country case studies

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POSTAL NETWORK DEVELOPMENT
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MAIL VOLUME TREND PUBLIC OPERATORS
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Growth of the Operator
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SECTORAL DEVELOPMENT
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MAIN REASONS FOR POSTAL SECTOR DECLINE

• Limited exercise of regulatory function
• Great regulatory weakness
• Legal framework changes not backed up by economic
  or technical studies

4. National legislations do not provide for
UPS
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MAIN REASONS FOR POSTAL SECTOR DECLINE

• Lack of investment and technology
• 6. Market disorder. Non-compliance with
  legislation
• 7. Opening of market without first setting
  conditions
• 8. Excessive fragmentation of basic services
  offer

9. Incomplete reform processes
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CONSEQUENCES
UPS OPERATORS

• Low market share. Low operational capacity
• Dearth of investment. Lack of technology
• Negative results. Resources results vicious
  circle
• Reform lagging behind in terms of internal
  restructuring and modernization of services

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CONSEQUENCES
POSTAL SECTOR AND CITIZENS

• THOUSANDS OF UNREGULATED COWBOY OPERATORS
  OFFERING NO BENEFIT TO THE STATE
• DEMAND THWARTED BY A LACK OF VIABLE SUPPLY
  ALTERNATIVES
• UNDESIRABILITY OF SECTORAL INVESTMENT
• CITIZENS BASIC RIGHTS ARE AFFECTED
• NO SECTORAL GROWTH OR DEVELOPMENT

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SHORT- AND MEDIUM-TERM RISKS

• DECREASE IN UPS PROVISION
• DETERIORATION IN QUALITY OF SERVICE
• STATE CALLED ON TO SUBSIDIZE UPS PROVISION
• BANKRUPTCY OF UPS OPERATORS
• MISCONCEPTION OF THE POSTAL SECTORS TRUE SCOPE

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6 CONCRETE CASES IN LATIN AMERICA

• A-B-C-D-E-F
• Country case studies

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COUNTRY A

• Total liberalization of unregulated market
• Inability to define and formulate the UPS
  obligation (insignificant residual service)
• Failure of operational model. Liquidation of
  business assets and granting of operational
  rights
• Lack of market knowledge. Overestimation of
  demand

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OUTCOME
DEVELOPMENT OF UPS OPERATORS POSTAL NETWORK
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COUNTRY B

• Market totally liberalized without any form of
  regulation
• Regulatory body created without clear functions
  or powers
• 40 drop in operator volume
• The operator, obliged to provide the UPS without
  compensation, has responded by reducing its UPS
  provision to a minimum
• Failure of business to invest or develop

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OUTCOME
DEVELOPMENT OF UPS OPERATORS POSTAL NETWORK
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COUNTRY C

• Market liberalization law providing for the
  Operator and Regulator
• Misguided market legislation due to legislators
  ignorance
• Sustainable financing of UPS seriously
  jeopardized
• Unable to compete or invest, the Operator has
  lost over 70 of its market share
• Government staved off the Operators bankruptcy
  by standing over 25 of its costs

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OUTCOME
DEVELOPMENT OF UPS OPERATORS POSTAL NETWORK
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COUNTRY D

• Postal enterprise established (in 1993) without a
  sectoral legislative framework. Lack of
  investment. Failure of operator to modernize
• Attempt at reform by privatizing the operator
• Process funded by international financial body
• Failure and discontinuation of process
• Greater decline than under the previous set-up

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OUTCOME
DEVELOPMENT OF UPS OPERATORS POSTAL NETWORK
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COUNTRY E

• The Government totally liberalized the market
  without any form of regulation
• The business, starved of investment and unable to
  compete, lost market share
• Empresa de Correos intervened to privatize it
• The business was liquidated, and a call for
  tenders launched, which unfortunately proved
  unsuccessful
• The Government has been trying to restructure the
  Operator

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OUTCOME
DEVELOPMENT OF UPS OPERATORS POSTAL NETWORK
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COUNTRY F

• Business created as a State enterprise governed
  by public law
• Regulation not provided for
• The business failed to grow, due to a lack of
  investment and operational capacity
• The Government launched an uncoordinated reform
  effort
• The business is greatly debilitated and faces
  serious viability problems

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OUTCOME
DEVELOPMENT OF UPS OPERATORS POSTAL NEWORK
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OPTIONS AND ACTIONS

• COOPERATE WITH GOVERNMENTS IN SECTORAL
  REFORMPROCESSES
• OFFER A REAL DIMENSION TO THE UNIVERSAL POSTAL
  SERVICE AS A MOTOR FOR SECTORAL DEVELOPMENT
• INTEGRATED REFORM PROCESSES TAKING ACCOUNT OF
  ALLFACTORS (IPDPs)
• ESTABLISH A LOGICAL PROCESS INVOLVING ALL
  STAKEHOLDERS
  
• CARRY OUT IN-DEPTH STUDIES ON UPS
• STEP UP WORK ON CALCULATING BASIC SERVICE COSTS

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THE IPDP PROCESS
UNIVERSAL POSTAL SERVICE Defining the UPS
SECTORAL POLICY
REGULATORY REFORM Appropriate legal framework
MODERNIZATION OF OPERATOR AND SERVICES
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IPDP
1. Preserving the UPS
Analysis of UPS provision
UNIVERSAL POSTAL SERVICE Defining the UPS
Market study
Cost Accounting Analysis of basic services
SECTORAL POLICY
UPS proposal scope conditions of service and
financing
REGULATORY REFORM Appropriate legal framework
Specification of conditions governing regulation
of the UPS Development Plan
MODERNIZATION OF OPERATOR AND SERVICES
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MANY THANKS