Thirst for Profit: Corporate Control of Water in Latin America

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Council on Hemispheric Affairs

Thirst for Profit: Corporate Control of Water in Latin America

Water for Sale: What is called for is an international code for the public’s access to a guaranteed supply of water as a basic human right.

by
Lisa Boscov-Ellen

The Corporate Crusade to Commodify Water

Water has been characterized as the oil of the 21st century. Blue gold. It is essential to life, and yet humanity faces a growing water crisis as a result of severe mismanagement in water and sanitation, which will be exponentially exacerbated in the coming decades by population growth combined with declining resources. Latin America has the greatest income disparity in the world and the population’s access to water reflects this inequality. Over 130 million people living in the region do not have access to potable water in their homes, and sanitation is in even poorer condition, as it is estimated that only one in six persons has adequate sanitation services. According to the 2007 Annual Report from the nonprofit organization Water For People, “Every day, nearly 6,000 people who share our world die from water-related illnesses – more than 2 million each year – and the vast majority of these are children…There are more lives lost each year to water-related illnesses than to natural disasters and wars combined.” It is clear that lack of access to clean water is a serious issue, one that has only started to gain international attention from a variety of organizations in recent years.

The Fifth World Water Forum took place in Istanbul, Turkey, from March 16-22, 2009, with over 25,000 people attending, representing 182 countries. The World Water Forum, the largest water policy event in the world, is held every three years. It is organized by the World Water Council, a private think-tank based in Marseille, France. The People’s Water Forum, a global water justice movement which has referred to the World Water Forum as “false” and “corporate driven,” also gathered in Istanbul to protest the Fifth World Water Forum. In the People’s Water Forum Declaration, they sharply criticize the World Water Forum, stating that it is motivated by private interests and attempts to create the misleading illusion of an utterly false global consensus on water management. The Declaration also asks that the next water forum be organized by the UN General Assembly, calls for water to be defined as a human right, and denounces all forms of privatization and commercialization of water and sanitation services. Joining the discussion, the International Water Forum, a by-invitation-only Forum sponsored by the United Nations Institute for Training and Research (UNITAR), the City of Atlanta Department of Watershed Management, and CIFAL Atlanta will be held on July 9-10 of this year to discuss global water scarcity as well as methods for establishing a sustainable water supply.

The struggle over water is certainly not a new phenomenon. Wide-scale water privatization began in the 1990s and was often stipulated as a condition for assistance from international financial aid institutions, primarily the World Bank and the Inter-American Development Bank. Since then, there has been ongoing conflict over water management, with Latin America at the center of many of the models for resistance and restructuring. These water-related conflicts, popularly referred to as “water wars,” gained international attention a decade ago. The expulsion of water giant Bechtel by the citizens of the Bolivian city Cochabamba marked the beginning of a greater resistance to water privatization and commercialization in Latin America. Given the failures of privatization and neoliberal policies in Latin America, it should not come as a surprise that the people are objecting to the commodification of this basic human need.

Privatization and Commercialization

It is worth noting that privatization and commercialization are distinct processes when discussing their implementation in Latin America. Privatization connotes reorganization and management from a source other than the public sector, and can involve a spectrum of private occupation. Commercialization entails the introduction of management institutions, such as free market competition (albeit simulated, in this case) into the process. However, privatization and commercialization are frequently concurrent processes, as was the case in Cochabamba.

There are only a few arguments commonly employed to defend water privatization in Latin America. The primary justification is that the governments of one of these countries have previously failed to adequately provide water, either because of incompetence or corruption. Organizations like the World Bank, which frequently finance privatization projects, dogmatically believe that the open market is more efficient at resource management than the state because the government is “overextended.” Furthermore, they think that the competition in private sector development will lead to higher quality and lower cost services. Another common rationale is that making water into a commercial good – thus assigning monetary value to water – makes consumers less likely to waste it. According to this argument, the commercialization of water would prevent its overuse.

These assumptions, however, are problematic. The postulation that competition is an inherent element of privatization is misguided. In fact, the corporate monopoly on water in Latin America is part of the reason that prices have been high and quality has been low. It could be wiser to address the concern about wasting water through an expansive educational program that encompasses both fundamental health issues regarding drinking water and sanitation, and information about the importance as well as preferred methods of water conservation. Another possible solution is through government regulation, which could be more effective if it were done transparently and involved community participation. The state could potentially utilize subsidies, a water tax or a credit to promote the sustainable use of water. The greatest problem with the mindset behind privatization is that while it considers water a human need, it is not deemed a human right, which essentially denies the universal right to life. Regardless, the fact is that Latin American countries that have experienced privatization of their water supply have seen little improvement, and in most cases water supply and quality have declined.

Bolivia’s Water War

Bolivia is the classic example of a situation in which the water privatization and commercialization process was disastrous. Two concessions to private, corporate control in Bolivia – part of a condition of a World Bank loan of US$20 million to the Bolivian government in 1997 – have now been rejected through popular uprisings. The first was in Cochabamba in 2000 against Aguas de Tunari, a subsidiary of the enormous U.S.-based Bechtel Corporation (which was the only bidder). The second uprising occurred in La Paz/El Alto, where a subsidiary of the French company Suez, called Aguas de Illimani S.A. (AISA), was thrown out in 2005. In Cochabamba, after Bechtel was installed, it quickly raised rates by an average of 35% (and in some cases as much as 200%), which was far outside the budget of the city’s poor and would have left many without access to water. Licenses were even required for individuals to collect rainwater from their roofs, and people were charged for water taken from their own wells.

Protests escalated to the point that the Bolivian government declared a state of martial law, and eventually the company was forced to abandon their operations in the country. Supporters of privatization in Bolivia argue that these tariff increases were necessary to improve the existing infrastructure and expand the service area. Furthermore, some have suggested that antecedent economic and social factors, such as political corruption and pre-existing anti-privatization public sentiment, contributed to the tinderbox complexity of the situation in Cochabamba and were responsible for the failure of water privatization.

After Bechtel was driven out by public outrage, the international attention given to Cochabamba’s “Water War” faded, although problems still remained. Marcela Olivera, the Latin American Coordinator of Food and Water Watch’s Water for All Campaign, writes that,

“the other battle that’s still going on, that we’re fighting now in the form of the struggle over water rights, has to do with our not being able to put together an effective, participatory popular alternative with social controls to serve as a counter to privatization, to private control of resources. This is a battle that’s still being waged in Cochabamba, but it’s less romantic and not so easy to talk about, because there are a lot of problems with the water company. Things have not been resolved now that the company has been reclaimed. I think this is where the true work lies - -work that is harder, unrecognized, and still involves an entrenched battle.”

The withdrawal of Bechtel left SEMAPA, Bolivia’s municipal water service, in charge of distribution. This service was also inadequate and left the poorer southern districts without water. After Evo Morales was elected in 2005, in part due to the social protest ignited by the Cochabamba incident, he created a Ministry of Water in Bolivia with the goal of achieving equal and universal access to water. While Bolivia has approved a new constitution that considers water a fundamental right and bans private appropriation, little progress has been made towards the country’s goal, as only US$800,000 was appropriated for the water budget in 2008.

Models for Change: Bolivia, Venezuela, and Peru

The town of Sebastian Pagador, in southern Bolivia, has become an example of community-based innovation. In 1990, they formed a collective called APAAS (Association of Production and Administration of Water and Sanitation), in which the 390 families in the area formed a committee, and every member family had the monthly responsibility of digging six meters and paying one boliviano for supplies. By 1993 they had built an entire distribution system. It was a long and rigorous process, but today, around 600 houses in the area have access to potable water seventeen hours a day, and each household only has to pay US$3 a month. The members of the water collective are proud of their ability to provide service from a system they built by hand, but also of their management style that gives control to the people rather than to administrators. There are, however, still issues with this system. Financial restrictions make it impossible for them to expand to meet increased demand, they have not been able to construct a water treatment system, and the wells that they currently use are expected to dry up in approximately a decade.

Venezuela provides another case study of effective restructuring of water management. Mariela Cruz Salazar of the Technical Water Committee in Camancitos, Venezuela discusses Venezuela’s alternative for community management. The Venezuelan government created “technical water committees” and “community water councils” where all of the technical water committees can meet to discuss their problems and ideas. The government helps to finance these projects, and has educated people in environmental issues and in the conservation and administration of water. If an issue concerning water arises in the community, a citizen’s assembly convenes to discuss the problem and then communicates with the State Institute for Water Resources. Together, Water Resources and the community plan and prepare future projects. Salazar writes that, “We’re managing the water as an organized community, not just by receiving the water, but by training the community in how to use it rationally and conserve it for the future.” Although the figures are debatable (the WHO/UNICEF Joint Monitoring Program and the Andean Development Corporation [CAF] project lower estimates), the Ministry of Environment says that in 2008, 93 percent of the population had access to water supply and sanitation. This would mean that Venezuela is one of the few places to achieve the UN Millennium Development Goals for water and sanitation.

The circumstances in Peru are very similar to those in many other Latin American countries. In 1992, their constitution was modified so that the country’s resources and production were open to multinational corporations and a neoliberal economic agenda. Although they managed to stop water privatization in 2006, Peru continues to struggle with creating an alternative proposal and implementing a system that guarantees more permanent rights to water. Although coverage of the recent protests that began in early April and the violent conflict that occurred on June 5th has focused on the issues of new laws, free trade, and the extraction of oil and natural gas, water is also an important part of this conflict. The series of laws approved by President Alan Garcia would remove indigenous control of land and natural resources. It would also likely lead to substantial amounts of development in the rainforest. According to Reuters reporter Dana Ford, “Law 29833 creates new public agencies to oversee water management and distribution. Small farmers fear the changes will drive up costs, reduce their access to water while giving more of it to corporate growers, and eventually lead to the privatization of the water agencies.” Additionally, deforestation that would be part of development in the rainforest contributes to flooding, droughts and the melting of glaciers as a result of global warming. This environmental perspective that is brought to the water issue is distinctive. Nelly Avendaño of the Front for the Defense of Water, in Peru’s Junín region, expresses a remarkably comprehensive understanding of the necessary action which must be taken:

“…it’s a question of maintaining, conserving and protecting our water sources, of providing drinking water that is safe for human consumption, of modernizing agricultural irrigation methods. Ultimately, all this needs to be followed by the construction of water treatment plants for sewage and wastewater, so that this develops its own cycle and is converted into clean water for agricultural or industrial use. If our policies don’t integrate the issues of water resources, sanitation, and the environment into one, then the system will undoubtedly continue to fail us.”

The Front for the Defense of Water recognizes that the privatization of water is a complex issue, which concerns both environmental sustainability and the natural rights of humankind.

Turning the Tide

Civil society has made strides against the runaway process of privatization and commercialization of water, but there is a formidable challenge ahead. While transnational companies have experienced setbacks in their attempts to privatize water in Latin America, they have had to change their strategy, but privatization still persists in the region. Since privatization has become such an anathema, corporations use different terms to describe their ventures. The appropriation of a territory or bioregion, as is the case in Peru, allows for control over the resources in that area. Large companies, with total engineering capacities at hand, can divert whole rivers as part of their production projects, or end up making water unusable for local inhabitants, which essentially is privatization, but through contamination. Bottling water and monopolizing technology for extraction and purification are other forms of privatizing water and vending it to the highest bidder.

In addition to using these methods to gain control of water, corporations normally see to it that they benefit from the wording and intent of free trade agreements. NAFTA considers water to be an “investment,” the WTO General Agreement on Trade in Services and the proposed FTAA call it a “service,” and in both NAFTA and the WTO it is regarded as a “good.”

Privatizing and commercializing water guarantees that the focus on its management and distribution will be profit, not what is best for people or, for that matter, the planet. Profits from the bottled water industry are so high that the infrastructure necessary to provide the world’s population with potable water could be created by applying the profits accumulated over just one year. The US$100 billion that people spent on bottled water in 2005 is three times what would be needed to achieve the UN goal of making water available to everyone by 2015. The terrible situation that the lack of a proper water supply and sanitation creates for so many is avoidable and, as of now, is largely a product of poor resource management. A NACLA report by Maude Barlow and Tony Clark states that, “While the region’s available resources could provide each person with close to 110, 500 cubic feet of water every year, the average resident has access to only 1,010 cubic feet per year. This compares to North America’s annual average of 4,160 cubic feet and Europe’s 2,255.6.”

To ensure equality, water must be considered a human right and not just a need, privilege or commodity. However, the issue requires a broader vision that goes beyond simply an evaluation of the failures of privatization and includes a consideration of alternatives. The community-based programs that have included village-based education have been very successful in making water available to the communities they serve. While this is a valuable model, it has limitations when applied in bigger cities. Even though there have been problems with government management in the past, advocates of public access insist that privatization is not the answer. A water management system that includes public and community cooperation has great potential when combined with a more comprehensive educational program and increased transparency. However, the focus must shift to include not only alternative models, but also preventative planning. As the world population increases and water sources grow more scarce, the World Bank expects that by 2025, more than two-thirds of humanity will not have a reliable source of potable water, and adequate sanitation will probably become even less common. The Intergovernmental Panel on Climate Change predicts that the figure of those without water in Latin America would include somewhere between 7 million and 77 million people. The growing movement surrounding water rights must tackle these predictions by addressing the less immediate, yet equally important concerns of restructuring agriculture and irrigation, minimizing pollution, and working to protect the environment before providing this vital resource becomes an issue of true scarcity rather than mismanagement, as now is the case.

This analysis was prepared by Research Associate Lisa Boscov-Ellen

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