Third, some traditional substitutes for modern utility service are associated with adverse health impacts and may contribute to infant mortality. Inadequate water and sanitation may give rise to waterborne diseases, while cooking with biomass fuels has often been linked to respiratory ailments. In this sense, infrastructure could be regarded as an input into the health production function that complements hygiene practices and health care interventions.

This paper explores how the important policy changes experienced in the utilities sector in Guatemala since the Peace Accords have affected the lives of poor households. First, Section 2 examines to what extent service expansion programs have succeeded in reversing the inequities that have traditionally existed in access to modern utility services, and the barriers that remain in achieving universal coverage. Second, Section 3 looks at how tariff reforms and related subsidy policies have affected the affordability of modern utility services for the poor. Finally, Section 4 attempts to quantify the broader benefits that such services bring to poor households, in terms of improved health and productivity. A Data Annex provides a set of standard cross-tabulations of all of the basic variables of interest by geographical, ethnic and economic categories. It also gives the descriptive statistics for each of the regressions reported in the paper, as well as tabulations of the numbers underlying each of the graphics.

The analysis draws primarily on household level data collected during the ENCOVI 2000 Survey; the first survey ever to be conducted in Guatemala in accordance with the Living Standards Measurement Survey methodology. The ENCOVI covered 7,276 households, drawn from 745 census clusters of UPM (Unidad Primaria de Muestreo), and is designed to be statistically representative at the national level, and of a number of strata including urban and rural areas, the country’s eight geographical regions, and the main ethnic groups established in the 1994 census<sup>5</sup> . In some areas, it is possible to match-up the results of the quantitative analysis against subjective perceptions of poverty recorded in a parallel Qualitative Poverty and Exclusion Study (QPES), which conducted in-depth focus group interviews in nine communities selected to represent a broad ethnic cross-section of Guatemalan society. The survey data is complemented by sectoral statistics collected directly from the key policy-making and regulatory bodies, as well as a number of donor agencies active in the country<sup>6</sup> .

# **2. Recent Developments in the Utilities Sector**

This section provides a brief overview of the policy context each in the three utilities sectors: telecommunications, energy, and water and sanitation services. Two important developments are documented. First, the sector reform movement that has led to a complete transformation of the telecommunications and electricity sectors, but has yet to make any impact on the water and sanitation sector. Second, the various policies that were established to promote expansion of service coverage in rural areas.

# **2.1 Sector Reform**

# **_Electricity_**

Prior to reform, electricity was provided by two state-owned companies: EEGSA, which was responsible for electricity distribution in the metropolitan region; and INDE, which controlled the

> 5 Kiche, K’aqchikel, Mam, Q’eqchi, ‘other Maya’ and ‘other indigenous’.

> 6 Throughout the study, quintiles are based on per capita household consumption..

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