Simon Kuznets reportedly singled out Argentina and Japan as two unique economies in a world where all others can be grouped into two categories (developed and developing). Following his logic, legitimate questions arise as to whether a book on Argentina can be used to explain the political economy of privatization and investment. However, the country’s early experimentation with utility privatization and its centrality in investor-state dispute settlement (ISDS) beg for at least an attempt to do so.

President Carlos Menem oversaw a neoliberal turn that led to a strict currency board, increased emphasis on foreign investment, and privatization of many utilities. Argentina’s 2001 crisis reversed many of those reforms, and the country served as the respondent in dozens of different investor-state arbitrations, many of which involved privatized utilities with similar sets of facts. Despite the similarity in cases, arbitration rulings varied significantly, and the government of Argentina contested negative rulings until recently. Given the importance of Argentina’s water and sanitation contracts to the system of investor-state dispute settlement, it is surprising that no one has systematically examined the politics surrounding those cases until now.

In this book, Alison Post investigates 14 privatized water and sanitation utilities in Argentina. She compares concessions won by foreign investors with others won and operated by domestic investors, and she separates the latter into firms with diverse local holdings and those without. Her theory posits continual bargaining between concessionaires and host governments, usually provincial governments rather than the central government since decentralization in 1979. She expects local firms with diverse holdings to be the most patient in bargaining and ultimately to extract better deals from host governments. Foreign investors offer some advantages to host governments because they can bring more resources to bear and can invest significantly immediately after privatization, but their bargaining power diminishes once the deal is struck. Most domestic investors are unwilling to borrow at the same rates and invest mostly from retained earnings, so their bids are not as competitive but they are better able to manage change. Thus host governments weigh short- and long-term trade-offs when awarding contracts, and their preferences are determined by political competition at the provincial level, which (according to Post’s theory) reduces the willingness of local officials to allow rate increases, to crack down on illicit connections to water infrastructure, and to accept the political fallout of privatization.

The research design combines 140 interviews with a considerable number of primary sources, including company financial reports, and far-reaching incorporation of local media accounts. Despite a potentially overwhelming amount of information, the book treats each concession systematically, focusing on a few key variables and not losing sight of the case’s relevance for the theory. After an overview of water privatization in Argentina, she examines pre-crisis concessions in districts with high and low political competition, then post-crisis concessions distinguished in the same way. Given the magnitude of the crisis and its effects on all kinds of firms, grouping cases together in this way is not only appropriate but also surfaces some cases, like Saur/Azurix in Mendoza, that were troubled from the beginning and not just a casualty of the crisis. Her finding that domestic firms managed concessions better even before the crisis is persuasive, although the post-crisis difference between foreign and domestic firms is more pronounced. After the case studies, Post expands the analysis beyond Argentina using the PPIAF-World Bank data set and some qualitative elements.

To explain differing outcomes in post-privatization dynamics, Post focuses on informal elements of bargaining in weak institutional environments, and she touts the merits of this approach as being able to “explain variation among developing countries” (p. 15). Although she clearly circumscribes her argument’s scope conditions (pp. 35–37), she understates the importance of formal institutions in some cases. In one of the most successful privatizations in Misiones, the World Bank played a key role both in financing and in encouraging the local government to maintain the privatized concession. In another, the government of France appears to intervene on behalf of one of its companies that is involved in an Argentine concession, but we get little attention to home state interventions on behalf of MNCs in the other cases. Likewise, in several cases local legislatures or judiciaries exercised key influence on the bargaining trajectories, but their importance is generally downplayed.

These omissions may seem small but become more important if the book is read as a primer in managing political risk: A straightforward lesson would be for MNCs not to bother trying to manage foreign concessions in institution-poor environments. Post is clearly aware of the typical tools for managing political risk, such as creating a joint venture with a local partner, choosing debt over equity methods of financing the operation, and even gradual changes in ownership via a real options approach. It is therefore striking that virtually all such efforts appear to fail in these cases, and it would be nice to understand which firm strategies were closest to being effective rather than viewing all foreign investors as equally short-sighted in assessing and managing risk. Have privatizations in other countries and/or sectors witnessed the inability of virtually all concessionaires to hit required levels of investment (e.g., p. 114)? If not, perhaps Argentina’s water privatizations are unusual.

As with any case studies, causal inferences are open to question—the 2001 crisis cannot really be viewed as an exogenous shock, due to the fact that it was precisely the expansion of spending at the provincial level that ultimately undermined the Argentine currency board. A provincial government’s willingness to subsidize water for the poor was directly linked to the origins of the crisis, for example. Additionally, the cases are also not independent observations. To her credit, Post does not soft-pedal interdependencies across cases, but neither does she use them to her advantage. For example, both French company Suez and Argentine company Sielecki Group were the main concessionaires in multiple cases, some of which had different outcomes. Post acknowledges some of these limits to generalization by explaining that her argument “applies best to regulated network industries” that have specific assets, economies of scale, and significant government regulation (p. 15). Her arguments would therefore not apply to mining and only weakly to oil extraction.

Overall, Post’s book documents an important set of cases that ultimately challenge existing political economy theories about the bargaining power of firms and the benefits of formal mechanisms of dispute resolution. Neither threats to use ISDS nor other tools for managing political risk seem to help foreign firms once they won privatization contracts in Argentina. But is the conventional wisdom wrong, or did it not work in Argentine water privatization due to unusually high politicization of regulatory politics? The book necessarily leaves open this question but provides a useful template for similar analyses in other times and places.