The Struggle for Latin America’s Water

14 August 2004 by Maude Barlow , Tony Clarke


Water privatization provokes a political backlash as Latin Americans take the global lead in demanding water democracy.

Latin America is blessed with an abundance of fresh water. The region contains four of the world’s 25 largest rivers-the Amazon, Paraná, Orinoco and Magdalena-and their combined run-off of 5,470 cubic miles almost equals the combined run-off of the other 21. Some of the world’s large lakes are also located in Latin America, including Maracaibo in Venezuela, Titicaca in Peru and Bolivia, Poopo in Bolivia, and Buenos Aires, shared by Chile and Argentina. Twenty percent of global runoff-the renewable water source that constitutes our fresh water supply-comes from the Amazon Basin alone. With one-fifth of the globe’s water resources, Brazil on its own has more water than any other country. [1] The region as a whole has one of the highest per capita allocations of fresh water in the world-a little less than 110,500 cubic feet per person per year. Geography, pollution and social inequality, however, badly skew Latin Americans’ access to water, and very few consume anything near their full personal allocation.

As a relatively parched country, Mexico has a miniscule potential supply of approximately 13,000 cubic feet per person. Natural desert is merging with a spreading human-induced desert over much of the Valley of Mexico, the country’s cradle of pre-conquest civilization and present-day home of the nation’s capital. Once called the “Venice of the New World” due to its being built atop a lake and intersected with canals, Mexico City is now sinking in on itself as it drains the last of its accessible aquifers from the lakebed below. This is a legacy of the conquering Spanish, who used slave labor to dismantle the more sustainable water systems of the original inhabitants.

In South America, human-induced salination is causing desertification in significant parts of Peru, Bolivia and northwestern Argentina. In total-factoring in the large natural deserts of Patagonia in southern Argentina and the Atacama in northern Chile-about 25% of Latin America is now arid or semi-arid. Most of the Caribbean is also fresh water deprived, since the islands are too small to have substantial rivers. [2]

Poor farming practices, unregulated industrialization and urban poverty have massively and negatively affected Latin America’s water resources. Booming, concentrated populations in Latin America’s mega-cities are devouring and contaminating their water supplies, forcing officials to seek out increasingly distant sources. In most large cities, over 50% of the water supply is lost through infrastructure leakage. Some cities lose almost 90% through leaky pipes. [3] Mexico City now depends on aquifers for 70% of its water and is mining these underground sources up to 80 times faster than they are naturally replenished. [4] Meanwhile, São Paulo is threatening residents with water rationing. The city is relying on sources farther and farther away, hiking the cost of delivery beyond many peoples’ ability to pay for it.

Throughout the region, water basins and aquatic habitats are routine dumpsites for garbage, mining effluent, and industrial and agricultural waste. Pollution in the waterways along the U.S.-Mexico border is so bad that some refer to it as a “2,000-mile Love Canal,” in reference to an upstate New York neighborhood that was declared a federal emergency in 1978 because of chemical contamination. The region’s heaviest polluter is Brazil-the country with the most water. Brazil allows massive chemical and industrial pollution, including mercury dumping from its gold mining industry. Only parts of Eastern Europe and China exceed Brazil’s levels of waterway contamination. Most of Latin America’s wastewater still flows untreated back into its rivers, lakes and canals.

Rampant poverty is another factor. After years of structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/
imposed by the World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

and International Monetary Fund IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
, as a region, Latin America has the most inequitable income distribution in the world. Mirroring this is a pattern of tremendously unequal access to water. More than 130 million people have no safe drinking water in their homes, and only an estimated one out of every six persons enjoys adequate sanitation service. [5] The situation worsens as policies favoring industrial agriculture drive millions of subsistence farmers into the cities’ overpopulated slums every year.

The destruction of water sources, combined with inequitable access, has left most Latin Americans “water poor.” And millions live without access to clean water at all. 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]

An influx of private, for-profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. corporations into the region over the last decade has exacerbated the problems of scarcity, urbanization, pollution and inequitable access. Private water companies, determined to take advantage of Latin America’s water crisis, are operating or planning to operate in most countries of the region, including Argentina, Bolivia, Brazil, Chile, Colombia, Dominican Republic, Ecuador, El Salvador, Honduras, Mexico, Nicaragua, Panama, Peru and Uruguay.

Most of these companies are local subsidiaries of the three largest multinational water service companies-Suez and Vivendi of France, and RWE-Thames Water of Germany (the “Big-3”). A decade ago, the Big-3 serviced only 51 million people in just 12 countries. Together, the three now deliver water and wastewater services to almost 300 million customers in over 130 countries. Suez and Vivendi control over 70% of the existing water service market worldwide. Their revenues have kept pace with their growth. Vivendi, for example, earned over $12 billion in 2002 compared with just $5 billion a decade ago. All three are ranked among the wealthiest 100 corporations in the world with combined annual revenues in 2002 of almost $160 billion and an annual growth rate of 10%, outpacing many of the national economies in which they operate. [7]

Often, the World Bank and the Inter-American Development Bank (IDB) facilitate the aggressive entry of these companies into Latin American markets. Both Suez and Vivendi use their considerable clout among multilateral lenders to make private water delivery a “condition” for debt relief or new loans. According to Public Citizen, the IDB alone holds about $58 billion of debt in the region, giving it tremendous power to impose water privatization on desperate municipalities. The IDB’s current projects have slated more than $1 billion in funding for privatized water and sanitation services. In fact, some of the largest IDB loans of the last decade went directly to transnational water companies for the operation of private water concessions in countries like Argentina, Bolivia and Honduras.

Meanwhile, the World Bank has decided to triple its annual financing commitments to global private sector water projects. After a decade of lucrative assistance from the World Bank, the Big-3 are now demanding guaranteed financing to insulate themselves from foreign currency fluctuations before making any new investments in developing countries. At the same time, the major water privateers are facing mounting and fierce public opposition to their operations in many parts of Latin America. As in the rest of the world, the damaging effects of water privatization are well-documented: rate hikes, cut-offs to customers who can’t pay, reduced water quality, huge profits for corporate investors, secret contracts, bribery and corruption.

In the Maldonado province of Uruguay, water prices soared and supplies became contaminated when Uraqua, a subsidiary of the Spanish water company Aguas de Bilboa, received the concession to deliver water on a for-profit “full cost-recovery basis.” Uruguayans successfully launched a binding national referendum, scheduled for October 2004, seeking the constitutional protection of water as a human right, a public good and outside the reach of for-profit companies.

In Puerto Rico, where Suez holds a 10-year, $4 billion contract to deliver water services, Solicitor General Carlos Lopez decried the company’s performance. Lopez claims Suez has paid much attention to improving billing and fee collection, but has made “no improvement” in the delivery of potable water to consumers.

Arguably, the best-known reaction to water privatization occurred in Cochabamba, Bolivia when the engineering giant Bechtel set up its subsidiary, Aguas del Tunari, in early 2000 and immediately raised the price of water beyond the reach of the vast majority of the population. Its contract even gave the company the right to charge people for the water they took from their own wells and to send collection agents to homes to charge for rainwater collected in cisterns on roofs. Consumers were hit with up to 200% rate increases as the company planned for annual profits of $58 million. [8] Public protests forced the government to reverse this privatization effort, but Bechtel is now suing Bolivia for $25 million in lost profits. Despite the fiasco in Cochabamba, the Bolivian government is still pursuing several other privatization schemes, including plans to export and sell bulk water to neighboring Chile for use in its mining industry. If last October’s attempted exportation of gas through Chile is any indication, this plan is bound to provoke a negative response from the Bolivian public.

The nudge towards water privatization in mexico provides yet another alarming example of how governments, the international financial institutions and private water companies work in concert, with little regard for public well-being. The government of Mexico, along with others in the Global South, is laying the groundwork for the corporate takeover of the country’s water system.

Back in the 1990s, a series of constitutional and legislative changes already started shifting water services to private hands in Mexico. In 1992, for example, the Salinas administration modified the Constitution to allow foreign-based corporations to obtain water contracts and concessions and introduced a new national water law permitting global corporations to invest in Mexico’s water utilities. Later, as part of its national development agenda, the Zedillo government handed over responsibility for water and sewage services to municipal governments.

As a result, the past decade saw 20% of Mexico’s water system privatized. The main corporate players have been the two leading French-based water giants, Suez and Vivendi, along with U.K.-based United Utilities and the Spanish company Agua de Barcelona. For these corporations, the prime targets for takeover have been water services in larger tourist areas and urban centers, leaving the smaller, less populated and less lucrative municipalities to governmental stewardship.

Current Mexican President Vicente Fox, a former Coca-Cola executive, has been even more aggressive in pursuing privatization. In the wake of September 11, his administration declared water a matter of national security. This allows the full powers of the state, including military operations and anti-terrorism measures, to be applied, if necessary, against anyone seen as opposing the government’s plans for restructuring and privatizing the water sector.

Also in 2001, the Mexican government created the Program for the Modernization of Water Management Companies (PROMAGUA) to advance privatization. The World Bank and the federal government provided the $250 million needed to jumpstart the project. [9]

PROMAGUA coordinates the massive restructuring of Mexico’s water systems by providing generous subsidies to projects and attracting private investment. It facilitates the corporate takeover of public water utilities by authorizing contracts or concessions-valid for periods ranging from five to 50 years-between local governments and private water companies, targeting urban centers with a population of 50,000 or more. By 2002, PROMAGUA had coordinated the signing of agreements with 28 of Mexico’s 30 states, including 687 municipalities encompassing 70% of the country’s urban population.

PROMAGUA established a national data bank to help foreign corporations decide where to invest in Mexico’s water utilities. It achieved this with help from the World Environment Center (WEC), a New York-based non-profit organization that promotes industry-government partnerships and is supported by some of the world’s largest transnationals. The WEC works closely with PROMAGUA to obtain the information and intelligence required for this data bank. At the same time, PROMAGUA set up a center on the outskirts of Mexico City to train people for work in water systems. Co-sponsored by some 40 companies based in France, the center has prepared over 3,000 people for work in Mexico’s revamped and privatized water system. Suez and Vivendi, of course, are among the most prominent and active supporters of PROMAGUA’s training facility.
In addition to government funding, PROMAGUA receives hefty support from international financial institutions including the World Bank, the IDB and the European Bank for Reconstruction and Development. In 2003, for example, the World Bank announced it would pump $5 billion into Mexico over the following two years. Although earmarked for a variety of infrastructure development projects, a considerable portion of the loan will fuel the corporate takeover of public water utilities through the Bank’s International Finance Corporation.

Mexico City illustrates vividly what happens when for-profit corporations collude to carve-up public water utilities. In 1993, the government divided the city’s water delivery system into four administrative quadrants. Suez and Vivendi each took control of one quadrant, while the U.K.-based companies United Utilities and Severn Trent captured the remaining two. The companies then proceeded to charge Mexico City residents different and, therefore, inequitable water rates. Furthermore, when the Democratic Revolutionary Party (PRD) assumed municipal office and called for a uniform water rate across the metropolitan area, the corporations initially protested. They later relented so as not to risk losing these valuable concessions.

Beyond unjustified billing rates, privatized water services in Mexico City and elsewhere in the country have brought countless other problems. Those residents who are unable to pay escalating water bills face frequent service cut-offs as well as long delays from company officials in dealing with their complaints. In 2001, for example, Vivendi increased its Mexico City rates by 60%, which led to payment defaults and, consequently, service cut-offs mostly effecting poor residents in that quadrant. Flooding has dramatically increased due to neglect of pipes and infrastructure. For the most part, the big water corporations have been unwilling to make substantial investments to improve water infrastructure, though they seem eager to pass on mounting debts to municipal governments.

All across latin america, fierce resistance to this theft of public water is growing. In communities large and small, citizens are taking to the streets, organizing referenda and petitions, and fighting for their right to water. Latin American activists and academics are on the front line of the global water justice movement, speaking at international conferences, protesting World Bank policies and organizing for a binding UN Convention on the right to water.

On August 22, 2003, 47 grassroots organizations from 16 countries in the Americas met in San Salvador where they launched a new movement called RED VIDA. This Inter-American network of water activists issued the San Salvador Statement for the Defense of and the Right to Water. Many of the member groups of this new network played pivotal roles at the World Water Forum in Kyoto, Japan in March 2003, where the World Bank and the big water companies tried unsuccessfully to sell their privatization “consensus” to the world. When the Big-3, the World Bank and their allies tried to convince the Forum participants in Kyoto to adopt “public-private partnerships” as the best model for the delivery of water services, civil society organizations and water activists from around the world formed an alliance to obstruct this agenda. Calling themselves “water warriors,” alliance members went on to effectively challenge the predetermined “consensus” as it applied to nine other theme topics of the Forum. RED VIDA also played a prominent role in launching the Peoples’ World Water Movement, which took place at a summit in New Delhi on the eve of the 2004 World Social Forum in Mumbai, India. RED VIDA members forged strong alliances with Indian groups that are also battling the invasion of private water companies.

For almost 20 years, the people of Latin America have been combating neoliberalism, with varying degrees of success. But the move to commodify their water for the benefit of faraway investors has injected new life into this effort. It is as if a line in the sand has been drawn. Because people cannot live without water, there is a distinctive urgency and tenacity to this struggle. Their demand for water democracy will not be silenced.




Source: NACLA.org, july 2004.

Footnotes

[1de Villiers, Water (Toronto: Stoddart Publishing, 1999).

[2Armando Chávez, “Latin America: Poor Distribution of Water and Even Worse Use,” in 2004 Express, citing the Economic Commission for Latin America and Caribbean.

[3World Resources, 1998-99 (New York: Oxford University Press, 1998).

[4Mario Osava, “Mega Cities Squander Water Resources,” Inter Press Service, March 19, 2004, citing the Global Environment Outlook study by the UN.

[5Press Release, Pan American Health Organization, October 3, 2002.

[6World Resources, 1998-99 (New York: Oxford University Press, 1998).

[7“The Water Barons,” Center for Public Integrity, 2003, http://www.icij.org/water/default.aspx.

[8Maude Barlow and Tony Clarke, Blue Gold: The Fight to Stop the Corporate Theft of the World’s Water (New York: New Press, 2002).

[9The following paragraphs on PROMAGUA in Mexico are based on research conducted by Alejandra Peña of the National Autonomous Univeristy of Mexico (UNAM) while on a study assignment at the Polaris Institute in Canada, 2003-2004.

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