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Published on Saturday, July 15, 2000 in the Minneapolis Star-Tribune
World Bank Forced Water Privatization On Cochabamba
by Jim Shultz
The Star Tribune does a service to its readers by calling attention to the growing public debate over the World Bank's policies in poor countries.

The paper is also right that last April's public uprising here, in response to massive increases in local water prices, is a good chance to look at what World Bank policies actually mean in the lives of real people.

However, by eagerly swallowing the World Bank's public relations spin, the paper has left readers with a misguided picture of the true story.

In 1999, following years of direct pressure from the World Bank, Bolivia's government finally agreed to privatize the public water system of its third largest city, Cochabamba. A 40-year lease turned over control of the water to a subsidiary of the California-based Bechtel Corp. Within weeks, the company doubled and tripled local water rates.

Families earning less than $100 per month were hit with bills of as high as $20. Faced with water bills they simply could not afford, the people who live here responded with a series of massive protests, shutting their city down for a week and refusing to pay.

To protect the company's interests, the Bolivian government declared a "state of emergency," suspended constitutional rights, shut down radio stations, and rousted protest leaders from their beds in the middle of the night, flying them to a remote jungle jail to keep them away.

Military forces seeking to squelch the protest used not only tear gas but live rounds, killing a 17-year-old boy and injuring more than 100 people.

In the end, however, the people of Cochabamba stood strong and eventually the government and the company were forced to back down, suspending the contract and rolling back the water hikes.

In his June 25 defense of the World Bank policies that set these price increases and the violence in motion, Star Tribune deputy editorial editor Jim Boyd misstates some key facts and leaves others out. For example, the paper writes: "But the bank gets involved only when asked. It advises or suggests; it does not force or demand or threaten."

Actually, demand and threaten is exactly what the World Bank does, and did in Cochabamba.

In February 1996 the World Bank told Cochabamba's mayor that unless it privatized its water system the city could forget receiving any more World Bank aid for local water development. In July 1997 World Bank officials told Bolivian President Gonzalo Snchez de Losada during meetings in Washington that privatization of the Cochabamba water system was also a precondition of receiving international debt relief from the World Bank, the International Monetary Fund and others.

It was only after these threats were made that Bolivian officials agreed to privatize Cochabamba's water.

Boyd also writes: "And when rate increases are suggested, the bank emphasizes making adequate provisions for those who cannot afford them."

This was certainly not the case in Cochabamba. In the heart of South America's poorest country the water rates that resulted from bank-induced privatization went way beyond what the poor could afford. Bank officials would hardly accept a doubling or tripling of their own utility rates, but they seemed content to see that happen here.

It is absolutely true, as the Star Tribune writes, that the World Bank opposed a questionable local dam project. However, even Bechtel concedes that the costs of the dam were responsible for less than half of the increases implemented. The company also attributes the increases to the cost of paying off debt, such as that owed to the World Bank.

Rate increases were also fueled by something left out of the Star Tribune's story, the company's demand for a guaranteed average 16 percent annual return on investment, a sweet deal that put all the risks and costs onto Bolivia's poor.

Few people would dispute the need that Bolivia and other poor countries have for the foreign capital that the World Bank and other institutional lenders provide.

The real issue here is that the bank uses that financial power to write the economic rules for poor countries. In the case of Cochabamba, the World Bank forced water privatization on those who live as if it were a religious theology -- no questioning, no doubt, and no listening to local disagreement.

Cochabambinos don't want a water system hobbled by government corruption, nor one run by an international corporation over which they have no influence or control.

Cochabamba's attention is now focused on developing a constructive alternative that operates honestly and which puts first the needs of local water users.

The World Bank could play a useful role in that process, but to do so it will have to set aside its "privatize or we hurt you" theology and start listening much more closely to the people it is supposed to be helping.

Jim Shultz, Cochamba, Bolivia. Executive director of the Democracy Center. A complete exchange of correspondence between Shultz and the World Bank on events in Bolivia is posted on the center's Web site.

Copyright 2000 Star Tribune


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