Water privatization in Bolivia
Bolivia is South America’s poorest country and the site of one of the world’s most notorious and controversial water privatization programs.
Safe drinking water is a necessity for sustainable development in every country. Sanitation is as important as distribution because untreated water can contain many diseases and harm the population, defeating any distribution efforts. There needs to be distribution of water for agricultural purposes as well because farmers in rural areas do not necessarily have access to urban water sources or sanitation facilities. Therefore, Bolivia must determine how to best sanitize and allocate the scarce resource of water to people both in urban and rural areas. The World Health Organization reported in 2001 that 93% of the people in urban areas had access to drinking water and 82% had access to sanitation services; in rural areas only 55% of the people had access to water and only 38% had access to sanitation services.
In 1985 the Bolivian Government implemented the New Economic Policy which aimed to liberalize and privatize sectors of Bolivia, but these policies simply led to even more poverty, higher unemployment, expensive prices, and a deterioration of working conditions. Yet, despite these failed attempts to reduce trade barriers and infiltrate big businesses, the World Bank and IMF continued to try structural adjustment and liberalization policies. They claimed that the exacerbated social problems were not a result of the policies they had implemented, but because the policies needed more funds and better efficiency, and that their progress was being inhibited by delays. The World Bank viewed Bolivia’s poverty as a result of their privatization efforts not being properly implemented, and still asserted that structural adjustment was the key to solving Bolivia’s inability to fund programs and inefficiency of distributing services to the people.
Thus, in 1998 the IMF made privatization a requirement for Bolivia to receive loans to control inflation and help the economy, making privatization not just a suggestion but an actual stipulation if Bolivia wished to receive any aid. The Western powers were effectively forcing Bolivia to oblige by the wishes of large multinational corporations. These corporations had a great deal of money, influence, and power, so they theoretically had the funds to invest. While these companies had the monetary power and ability to assist countries like Bolivia, they did not always work with the wishes of the indigenous peoples, as was soon to be found in Cochabamba, Bolivia.
In 1999 the Bolivian government signed a forty-year contract to transfer the operation and distribution of Bolivia’s water supply from SEMAPA (the municipal drinking water and sewer services) to the company Aguas del Tunari, a multinational group owned by International Water, of which the San Francisco-based company Bechtel was the main shareholder. By signing this contract, the government conceded to the World Bank and IMF’s pressure to privatize. The immediate effect of Bechtel’s water investment and management was, as promised, expanded access to water by many previously unserved communities. However, when the company took over local wells and informal pumps as well as the public system infrastructure, many consumers were priced out of the market, unable to pay the increased rates which in some cases had doubled. In 2000 Bechtel made an annual revenue of over $14 billion, whereas Bolivia's national budget at the time was only $2.7 billion. Riots eventually broke out in Cochabamba as protestors filled the streets. Violence shook the confidence of the local government and international investors. Bechtel was forced out, resulting not only in chaos in water delivery of the area but also dealing a serious blow to foreign investment in the country.
Safe drinking water is a necessity for sustainable development in every country. Sanitation is as important as distribution because untreated water can contain many diseases and harm the population, defeating any distribution efforts. There needs to be distribution of water for agricultural purposes as well because farmers in rural areas do not necessarily have access to urban water sources or sanitation facilities. Therefore, Bolivia must determine how to best sanitize and allocate the scarce resource of water to people both in urban and rural areas. The World Health Organization reported in 2001 that 93% of the people in urban areas had access to drinking water and 82% had access to sanitation services; in rural areas only 55% of the people had access to water and only 38% had access to sanitation services.
In 1985 the Bolivian Government implemented the New Economic Policy which aimed to liberalize and privatize sectors of Bolivia, but these policies simply led to even more poverty, higher unemployment, expensive prices, and a deterioration of working conditions. Yet, despite these failed attempts to reduce trade barriers and infiltrate big businesses, the World Bank and IMF continued to try structural adjustment and liberalization policies. They claimed that the exacerbated social problems were not a result of the policies they had implemented, but because the policies needed more funds and better efficiency, and that their progress was being inhibited by delays. The World Bank viewed Bolivia’s poverty as a result of their privatization efforts not being properly implemented, and still asserted that structural adjustment was the key to solving Bolivia’s inability to fund programs and inefficiency of distributing services to the people.
Thus, in 1998 the IMF made privatization a requirement for Bolivia to receive loans to control inflation and help the economy, making privatization not just a suggestion but an actual stipulation if Bolivia wished to receive any aid. The Western powers were effectively forcing Bolivia to oblige by the wishes of large multinational corporations. These corporations had a great deal of money, influence, and power, so they theoretically had the funds to invest. While these companies had the monetary power and ability to assist countries like Bolivia, they did not always work with the wishes of the indigenous peoples, as was soon to be found in Cochabamba, Bolivia.
In 1999 the Bolivian government signed a forty-year contract to transfer the operation and distribution of Bolivia’s water supply from SEMAPA (the municipal drinking water and sewer services) to the company Aguas del Tunari, a multinational group owned by International Water, of which the San Francisco-based company Bechtel was the main shareholder. By signing this contract, the government conceded to the World Bank and IMF’s pressure to privatize. The immediate effect of Bechtel’s water investment and management was, as promised, expanded access to water by many previously unserved communities. However, when the company took over local wells and informal pumps as well as the public system infrastructure, many consumers were priced out of the market, unable to pay the increased rates which in some cases had doubled. In 2000 Bechtel made an annual revenue of over $14 billion, whereas Bolivia's national budget at the time was only $2.7 billion. Riots eventually broke out in Cochabamba as protestors filled the streets. Violence shook the confidence of the local government and international investors. Bechtel was forced out, resulting not only in chaos in water delivery of the area but also dealing a serious blow to foreign investment in the country.
Undeterred, the French water giant Suez Company picked up a lucrative concession to provide water to the El Alto area of the Bolivian capital La Paz. In 2005, however, residents of El Alto also took to the streets to protest high water rates, forcing the government to cancel the Suez contract. In the wake of the protest, tens of thousands of households were left with no water while the local government attempted to regroup on water delivery.
The Nation magazine featured the El Alto Water Revolt as a quintessential “consumer rebellion” against the principle of water privatization, against the results of water privatization (high prices), and against the anti-democratic nature of water privatization.
The Nation magazine featured the El Alto Water Revolt as a quintessential “consumer rebellion” against the principle of water privatization, against the results of water privatization (high prices), and against the anti-democratic nature of water privatization.
There are several reasons why this water privatization project failed. First, the government, World Bank, and IMF, despite failed attempts at structural adjustment in Bolivia in the past (as well as failed attempts at structural adjustment in other countries), decided to implement their private-market-led policies anyways. They required privatization as a condition for aids and loans, and claimed that privatization would lead to development success. Bolivia is a small, poor economy so the government undoubtedly felt pressured to side with the powerful transnational corporations who had the ability to leverage power and money on projects. However, these foreign investors never sought the input of the indigenous peoples or considered the impact of their policies on them.
There was also a basic clash of goals and development models. The World Bank and IMF, along with the government of Bolivia, obviously promoted a liberalization model for development (the Washington Consensus), with regulated services and distribution, but the people themselves supported a more social model where water is viewed as a basic human right rather than a commodity that can be commercialized. The people of Cochabamba, for instance, saw the privatization project as violating a sacred right, while big businesses saw water as a profitable service. In Cochabamba, the people did not think in terms of “regulations” and “rights,” but rather looked to their own community’s history to develop rules based on their own culture.
Bolivia’s example illustrates the complex problems inherent in applying private market solutions to what are essentially public sector problems. The most successful solutions as water stress spreads globally will probably be those to which the public and private sectors both contribute.
There was also a basic clash of goals and development models. The World Bank and IMF, along with the government of Bolivia, obviously promoted a liberalization model for development (the Washington Consensus), with regulated services and distribution, but the people themselves supported a more social model where water is viewed as a basic human right rather than a commodity that can be commercialized. The people of Cochabamba, for instance, saw the privatization project as violating a sacred right, while big businesses saw water as a profitable service. In Cochabamba, the people did not think in terms of “regulations” and “rights,” but rather looked to their own community’s history to develop rules based on their own culture.
Bolivia’s example illustrates the complex problems inherent in applying private market solutions to what are essentially public sector problems. The most successful solutions as water stress spreads globally will probably be those to which the public and private sectors both contribute.
Sources
- Bechtel vs. Bolivia: The Bolivian Water Revolt http://www.democracyctr.org/bechtel/
- Letter from Bolivia: Leasing the rain http://www.newyorker.com/archive/2002/04/08/020408fa_FACT1?currentPage=all
- The politics of water in Bolivia http://www.thenation.com/article/politics-water-bolivia
- Natural Resources Defense Council. “Bringing Safe Water to the World.” NRDC, 7 March 2008. http://www.nrdc.org/.
- Lohan, Tara. “Blue Gold: Have the Next Resource Wars Begun?” The Nation, 31 March 2009. http://www.thenation.com/.
- Water Privatization: Will You Trust the Water That comes From Your Taps? www.socialjustice.org/subsites/privatization/pdf/waterprivate.pdf
