2.1- The impact of Water Privatisation.
During the '80s came the first international recognition of the seriousness of the problem of water and sanitation in the developing world. This was called the “Water Decade” and the target was that by 1990 everyone in the world should have guaranteed safe access to water and sanitation.

A number of factors during that decade colluded to frustrate the achievement of the target. At the start of the '90s, the problem was still massive and was far from solved. So in the early '90s there was a single-minded shift to pushing privatisation plans as the only solution to improve access to water both in terms of quality and quantity, instead of considering public participation, increased funding and support to publicly owned water services or institutional reform.

The main actors in this shift were the International Financial Institutions (such as the IMF, WB and the IDB), while Trade Liberalisation and Multinational Treaties also had a role to play in advancing this process, that was well anchored in the growing influence of Neoliberalism in international politics which viewed Public Services as expensive, badly managed, unsustainable and wasteful. When it came to water, this view was backed by the Dublin Conference in 1992 which stated water to be primarily an “economic good”.

The most frequent way to privatise access to water is the privatisation of distribution networks and purifying facilities,in the form of Public-Private Partnerships (PPPs). The privatisation of management and PPPs, however, are not often openly referred to as privatisation. The global effects of the Privatisation wave has been far from impressive: after 15 years of privatisation of water services, less than 1% of the people worldwide in need of water have gained access to water. On contrast, from 1980 to 1990, during the “Water Decade”, the public sector reduced the amount of people worldwide living with no access to water from 56% to 31%. At the same time, there does not seem to be much evidence that water privatisation has helped in any sensitive way to enhance management performance or efficiency. Nor there is any evidence to assume that Public Services on water are in any way less efficient than the private sector, as derived from compared studies of the performance of both private and public water utilities.

2.2 - Experience of Water Privatisation in Latin America

The privatisation wave did not leave Latin America untouched, and since the mid Ô90s many water Trans-National companies participated in the privatisation of water services, with rather grim results. Chile is the single success story on water privatisation in Latin America and even this label is misleading, for the only reason why it was “successful” is because there was previously a healthy public funded water supply infrastructure, but in reality, it failed to improve it in any way the service. However, some worrying effects of water privatisation have manifested: increase in charges and lack of investment in maintenance.

Most other experiences not only show there has not been an improvement in the delivery of water, but that disaster usually follows after privatisation. This has been the case in Uruguay, Colombia, Ecuador, Argentina, Puerto Rico and notably in Bolivia. The common problems faced by the Latin American population when water has been privatised are:

• Lack of transparency in granting concessions and irregularities in contracts;

• Failure of private companies to meet the agreements in the contract, particularly, on the issue of extensions of water coverage. This has affected mainly the poorest sections of society which are not seen as “profitable” enough and have therefore been excluded;




• Sky-rocketing increase in water charges, making it unaffordable for the poorest majority, which has been frequently cut-off from the service. Extreme cases have been Cochabamba, Bolivia, where the increase was of 200% (with charges on average equalling 25% of a family's average income) and C—rdoba, Argentina, where in some cases reached 500%;




• Inadequate billing systems. The price of providing the service has been passed to “users” representing a burden to the lowest income families. In Bolivia, for instance, water prices were indexed to the US dollar; in Taganga, Colombia, 100% households receive the water bill while only 12% receive the service; in Guayaquil, Ecuador, billing happened without meters;




• Neglecting and under-funding of areas of low profit return. These areas include vital ones such as maintenance and replacements. In La Paz, Bolivia, most of the funding came from soft loans given by international cooperation agencies and it was still less than promised. Under-funding has resulted often in broken pipelines, poor quality water, low pressure, water cut-offs and discontinuity in service and floods;




• Environmental damage mainly through the lack of treatment of waste water. In Buenos Aires, Argentina, for instance, 95% of the city's sewerage ended up going straight into La Plata river;




• Poor sanitary conditions of the water service and consequent damage to the local population's health caused mainly by poor maintenance and inadequate treatment of waste water. In Buenos Aires, many districts had high levels of nitrate and were told to boil water for health reasons; in Guayaquil, water had insufficient chlorine levels and traces of faeces, and the poor quality and murky water has been blamed for the outbreak of Hepatitis A in June 2005;




• When contracts had been terminated with private companies for breach of contract, they have often sued governments in the International Centre for the Settlement of Investment Disputes (ICSID), a “tribunal” dependant of the World Bank, where historically a total of 70% cases have resulted in a favourable result for investors. “Friendly Settlements” have included payments of U $ 15 million by the Uruguayan government to Aguas de Bilbao; the exit package paid by the Bolivian government to Suez of U $ 15,5 million plus assuming their debts; on Buenos Aires,the Argentinian government was told by ICSID to pay U $ 165,2 million to Azurix.

 2.3 - The Latin American people reclaim Public Water

Due to the appalling record of water privatisation in Latin America, the people have reclaimed water to remain public and for the contracts with private companies to be terminated. The single most dramatic event have been the water wars in Bolivia, in Cochabamba and El Alto, which were determinant for governments to fall and which were met with overwhelming violence, which resulted in injuries and even death of protestors. Through this struggle, however, water was returned to public hands.

In Uruguay a referendum was held on October 31st, 2004, to amend the Constitution, to turn it into a fundamental human right. 64.7% of the Uruguayan voters approved that safe access to piped water and sanitation were human rights to be guaranteed by the government. This means also that privatisation of water in any form is outlawed in Uruguay.

Following this example, in Colombia, many civil society organisations have come together to collect signatures in order to push for a referendum to turn water into a Constitutional right. Similarly, in Ecuador, the undergoing process of the Constituent Assembly has taken steps to turn public water into a right of every citizen.

2.4 - Water and Trade Agreements

At present, the bi-regional trade agreements negotiated between the EU and some Latin American blocks (the Andean Community of Nations and Central America) have put forward the issue of water privatisation. This should not come as a surprise since some European TNCs, such as Veolia, Suez, Aguas de Bilbao and RWE-Thames, have been in the forefront of water privatisation in Latin America. On the WTO GATS negotiations the European Union is known to be demanding that 72 countries open up their water supply systems to foreign providers.

The EU-Andean Community (CAN) Association Agreement's first draft reads “The Parties shall agree on measures aimed at the progressive liberalisation of their respective procurement markets at all levels of public authorities and public entities in the water, energy and transport sectors as well as for information and communication networks”.

LASC believes that this is not a positive development as it fails to understand the record left behind by water privatisation and thus it fails to understand the degree of opposition of privatisations in this sector in the region. We also believe that considering the experience this demand would be in open contradiction with other stated objectives of the Association Agreement (good governance, strengthening of democracy, sustainable development, etc.)