However, using the number of actors as an indicator of fragmentation can be misleading, there are several examples of highly fragmented policy-making contexts (e.g. federal countries such as Argentina and Brazil) where the multiple actors and layers usually perceived as obstacles to policy coherence are compensated for by sound co-ordination mechanisms that reduce the level of fragmentation (see Chapter 3). A relevant example is Chile (Box 2.3), where eight central agencies are involved in water policy design and implementation. The role of such agencies in addressing institutional fragmentation will be further developed in Chapter 4. These characteristics consist of the following: predominance of natural monopolies, territorial anchor at the local level, large sunk infrastructure investment needs, high distribution and transport costs, many externalities in different policy areas and high demand for technological know-how and expertise.