Water for El Salvador -- the Cochabamba saga

Opponents of privatization of water systems frequently point to the experience in Cochabamba, Bolivia, as the prime example of why such plans harm the poor. A PBS documentary described the situation:
Cochabamba put its water system up for auction in 1999. Only one bidder showed up. The company, called Aguas del Tunari, a division of the large American construction firm Bechtel, promised to expand water service. In exchange the contract guaranteed the company a 15-17% profit.

Two months after taking over the water system, Aguas del Tunari raised the water rates. People, resentful and angry, took to the streets in protest. One of their leaders was Oscar Olivera, a long-time union activist. He and others tapped into the anger many Bolivians feel about their country's long history of political corruption and foreign domination.

"Everyone was protesting, everyone," journalist Luis Bredow tells Finnegan. "I've never seen anything like it in Bolivia. Housewives were throwing stones at the police. It really was a revolt."

Although a major American corporation was at the center of the conflict, not a single U.S. newspaper had a reporter on the scene. But news of the uprising was reaching a worldwide audience through the Internet, thanks to Jim Shultz, an American activist living in Cochabamba....

The company finally withdrew and the uprising subsided.

But did anyone really win the water war?

Aguas del Tunari filed suit against the Bolivian government asking for $25 million in compensation. The case is being heard in Washington D.C., in an arbitration court run by the World Bank.

The water warriors who ousted Bechtel took control of the water system, vowing to run it as a human right, not as a commodity. But without new investment, they have been unable to improve or expand service.

You can see clips from this documentatary at the NOW with Bill Moyers web site.
You can also read an extensive series of articles about the "water wars" at the web site of the Democracy Center.

But having a locally run municipal water system in the five years since Bechtel was kicked out, has not expanded access to water:
Today, five years later, water is again as cheap as ever, and a group of community leaders runs the water utility, Semapa.

But half of Cochabamba's 600,000 people remain without water, and those who do have service have it only intermittently -- for some, as little as two hours a day, for the fortunate, no more than 14.

''I would have to say we were not ready to build new alternatives,'' said Oscar Olivera, who led the movement that forced Bechtel out. (J. Forero, "Who Will Bring Water To the Bolivian Poor?; Multinational Is Ousted, but Local Ills Persist", New York Times, December 15, 2005).

Read another view about Cochabamba's water six years after the water war here.

There is a fundamental point here -- expanding water distribution is expensive. Whether there is privatization or government-run water distribution, the money to expand a system can only come from one of three places -- water tariffs charged to consumers, government revenues, or borrowing from international loans (to be repaid from future government revenues or tariffs).


El-Visitador said…
Tim, this was a great, well researched post. Thank you.

The Leonard article is pretty factual, too, and very good, all things considered, but I found its conclusion utterly hilarious:

"He looks to a future, rather, where municipal water systems are owned by the communities and managed through the horizontal democratic processes he learned from the Coordinadora"

I'd love to see any successful logistics operation that has been managed by "horizontal democratic processes."

To that poor deluded soul: dream on, dude.
Jorge Ávalos said…
I remember this case. I think I read it in The New York Times or saw it on CNN, so it probably did get some coverage, but focused mainly on the street revolts and not on the issue.

This is a great post. Thank you.
Anonymous said…
I remember reading about this issue. According to a source once Bachtel took over the "services improved" with the catch that there was a 200% rate increase along with a denial of subsidizing water to the poorest.

Anonymous said…
Tim, here is a link showing what can happen when governments set prices low to help the poor. http://markinmexico.blogspot.com/
Scroll down to the February 8 posting about chicken feet. I´m not maligning the motive of helping the poor, but sometimes these things need to be thought out a little better.