Monday, March 16, 2009
By David Bonnardeaux
WASHINGTON, DC — Water privatization is often portrayed as morally wrong but if we look beyond ideology and sentimentality this doesn’t add up. Poor countries, where lack of water and sanitation kills nearly two million people a year, need to get water supplies right.
One billion people lack clean drinking water but only three percent of the world’s water is privately managed, so the campaign against privatization conceals many public failures.
The prime example is the so-called Cochabamba Water Wars, when residents of this large Bolivian city took to the streets in 2000 to throw out the private water consortium when prices rose.
For activists, it has everything: World Bank involvement, higher prices, angry citizens and the happy ending where water is "returned to the people." But it was actually a story of political corruption and poor governance, with a tragic but largely ignored ending.
In 1997, the World Bank gave Bolivia US$20 million, on condition of privatizing SEMAPA, Cochabamba’s heavily-indebted municipal water network. SEMAPA supplied only 60 percent of the population with water and only 50 percent with sewerage. While industries and the wealthy got preferential treatment, the poorest areas had bad water and sanitation and had to pay three to five times more for water from vendors. After a decade of underinvestment, the system was leaking about half its water.
In addition to privatizing SEMAPA, the World Bank wanted Bolivia to get Cochabamba’s extra water from the existing Corani dam. This would have cost US$70m and had to come from private funds.
But the Mayor of Cochabamba preferred creating a new reservoir, in the Misicuni Project, costing US$175m, needing about half from public subsidies.
While the World Bank said Corani was cheaper and quicker, other interests prevailed and the Misicuni Project went into the privatization contract. There was only one bid, from the Aguas del Tunari (AdT) consortium which, after difficult negotiations, got a 40-year contract in September 1999.
AdT’s complicated new prices favored the poor but still raised prices for everyone, from about 10 percent for the poorest to more than 100 percent for others.
Protestors under the Coalition for the Defense of Water and Life took to the streets and, following widespread protest and several deaths, the AdT contract was cancelled in April 2000 and handed back to SEMAPA.
To its detractors, this case embodies all that is wrong with privatisation. Cochabamba was indeed a failure but not for the reasons put forward by anti-privatization activists.
Firstly, the sharp increase in water prices was not just a rip-off. The company needed to cover the high costs of the Misicuni Project, repair derelict infrastructure and extend to new areas. In fact, many higher water bills were due to households using more water as a result of better service. AdT also had to charge the real cost of providing water.
Poor governance laid the foundations: SEMAPA had charged ridiculously low prices, falling US$35 million in debt, while municipal authorities failed to explain the changes to the public.
Dissent was already high before privatization. The eradication of coca plantations had forced many farmers to migrate to Cochabamba, adding to high unemployment.
In addition, the Water Services Law of 1999 posed a threat to long-established "irrigators," private well owners and water cooperatives. It would have given AdT control over any local ground water and made private trading illegal.
Then there were vested interests. Aguas del Tunari included four Bolivian companies, all involved with construction and engineering. Outwardly, it was the Mayor who opposed the Corani project but the pressure came from these politically-influential firms expecting lucrative contracts from the Misicuni Project.
What anti-privatization activists also avoid is Cochabamba’s water today. Around half the city’s 600,000 inhabitants remain unconnected, while the rich still get preferential treatment and SEMAPA goes from one corruption scandal to another.
The lesson here is not about privatization: it is about corruption and vested interests.
Using Cochabamba as the poster-child of anti-privatization is counterproductive. It has discouraged private investors in regions which badly need technical assistance and investment to create essential services for the poorest.
Events like the tri-annual World Water Forum, held in Istanbul this month, seek real ideas for really helping the poor. Shamefully, this gathering of common sense is overshadowed by noisy activists who oppose private solutions to the world’s water woes. Cochabamba shows we need more pragmatists and less rhetoric.
David Bonnardeaux is a freelance consultant on rural development and natural resource management for the World Bank, USAID, CARE and others in many parts of the world.