Bolivia's Water Privatization: A Battle For Basic Rights

In 2000, the privatisation of drinking water in Cochabamba, Bolivia, led to violent protests, resulting in the deaths of at least nine people. This became known as the 'Water War of Cochabamba'. In this context, it is important to ask: is water still privatised in Bolivia?

The World Bank's role in privatisation

The World Bank played a significant role in the privatisation of water in Bolivia. In the 1980s, Bolivia's economy was in a state of collapse, with hyperinflation reaching an annual rate of 25,000%. This led the Bolivian government to turn to the World Bank to prevent economic meltdown.

The World Bank's subsequent involvement in Bolivia was driven by its belief in privatisation as a means of securing capital for development and attracting skilled management. In the case of water privatisation, the World Bank argued that it was necessary to address issues of local corruption and inefficient water management. It viewed public subsidies for water as benefiting the powerful, rather than those in need.

In 1996, the World Bank informed Cochabamba's Mayor that a $14 million loan for expanding water services was conditional on the privatisation of the city's water supply. Similarly, in 1997, the Bank informed Bolivia's President that $600 million in international debt relief depended on Cochabamba's water privatisation.

The World Bank's role in the privatisation process included providing assistance in preparing the concession contract for Cochabamba in 1997. However, the Bank's direct involvement in Cochabamba ended that year due to legal challenges by the municipality. Despite this, the World Bank continued to promote privatisation as a condition for loans and debt relief.

The privatisation of water supply in Bolivia took place during the second mandate of President Hugo Banzer (1997-2001). Two major private concessions were granted: one in La Paz/El Alto to Aguas del Illimani, a subsidiary of the French company Suez, and the second in Cochabamba to Aguas del Tunari, a subsidiary of the multinationals Biwater and Bechtel.

The privatisation process faced strong opposition from the Bolivian people, particularly in Cochabamba, where protests, known as the "Cochabamba Water War" or "Bolivian Water War," erupted in response to the drastic increase in water prices. These protests ultimately led to the termination of the privatisation concessions and the return of water management to public control.

The Cochabamba Water War

The Background

Bolivia, facing economic collapse in 1985, sought financial aid from the World Bank. The World Bank required the privatisation of the country's railroads, airlines, telephone system, and oil industry, and also pushed for the privatisation of water. At the time, Cochabamba's waterworks were owned by the state agency SEMAPA, which was inefficient, costly, and unable to meet the growing demand.

In September 1999, after closed-door negotiations, the Bolivian government signed a $2.5 billion contract to hand over Cochabamba's water system to Aguas del Tunari, a multinational consortium of private investors, for a period of 40 years. Aguas del Tunari was the sole bidder for the privatisation of Cochabamba's water system and was guaranteed a minimum annual return of over 15%.

The Protests

In January 2000, protesters in Cochabamba shut down the city for four days, going on strike and erecting roadblocks. Residents protested the privatisation of their water system and the rate hikes, which in some cases doubled or tripled their water bills. The demonstrations were met with violence from the police, and one civilian was killed.

The protests continued throughout February and March, with thousands of people clashing with riot police, resulting in injuries and arrests. The demonstrators included a wide range of groups, from peasant irrigators and retired unionised factory workers to students, pieceworkers, sweatshop employees, and street vendors.

The Outcome

In April 2000, the protests spread beyond Cochabamba to other cities and rural areas. Demonstrators blocked major highways and expanded their demands, calling on the government to address unemployment and other economic issues. The government declared a "`state of siege', similar to martial law, which allowed for the arrest and detention of individuals without warrants and the enforcement of curfews and travel restrictions.

On April 9, 2000, a 17-year-old boy, Victor Hugo Daza, was shot and killed by a Bolivian Army captain who opened fire on a crowd of demonstrators. This incident further fuelled the protests, and on April 10, the Bolivian government agreed to revoke the privatisation of the water system, granting control to La Coordinadora, a grassroots coalition led by Oscar Olivera. The government also promised to release detained protesters and repeal water privatisation legislation.

The Aftermath

The victory in Cochabamba inspired similar protests in other parts of Bolivia, such as La Paz. It also gained international attention and support from anti-globalisation groups. Oscar Olivera, a key leader in the protests, became a sought-after speaker and received the prestigious Goldman Environmental Prize.

However, the struggle for water justice in Bolivia continued. In 2002, it was reported that half of Cochabamba's population remained without water or had intermittent access. The restored state utility company, SEMAPA, faced challenges due to lack of investment, graft, and inefficiencies.

The El Alto water revolt

On January 10, 2005, the citizens of El Alto, Bolivia, took to the streets to demand that their water system be returned to public hands. This marked the beginning of what became known as the El Alto water revolt. The protest was sparked by the privatization of the city's water supply in 1997, which was done under pressure from the World Bank. The World Bank had threatened to stop providing international development grants to Bolivia unless the government privatized the water supply of La Paz and El Alto.

The privatization led to a significant increase in water costs, with the company Aguas del Illimani, a subsidiary of the French corporation Suez, raising the cost of connecting water and sewage systems to homes in El Alto to more than $445 per year, a 35% increase. This increase placed a significant financial burden on the residents of El Alto, who were already among the poorest in Latin America, with most making an average of only $750 per year.

The protest was led by the Federation of El Alto Neighborhoods, known locally as the Fejuve, and was joined by rural peasants, urban vendors, unionists, and Aymara from rural and urban areas. The protesters congregated and demanded their right to clean water at a decent price. One protester, Yolanda Saliz, an Aymara woman, affirmed that "there is no life without water," highlighting the fundamental nature of the issue.

The role of Bechtel Corporation

The Bechtel Corporation, a US-based multinational engineering and construction company, played a significant role in the privatisation of water supply and sanitation in Bolivia. During the second mandate of Bolivian President Hugo Banzer (1997-2001), the country underwent a process of water privatisation, which was presented as a requirement by the World Bank and the International Development Bank to retain ongoing state loans.

Bechtel, through its subsidiary Aguas del Tunari, secured a 40-year concession to manage the water system in Cochabamba, Bolivia's third-largest city. This concession was awarded in September 1999, following a privatisation process that drew only one bidder. Bechtel's involvement in the privatisation of Cochabamba's water supply was met with widespread criticism and sparked intense protests from the local population.

The Bechtel-Led Consortium:

Bechtel partnered with other multinational companies, including Biwater and Abengoa of Spain, to form the Aguas del Tunari consortium. This consortium was awarded the concession to manage Cochabamba's water supply and sanitation services.

The Privatisation Process:

The privatisation process in Cochabamba was marked by a lack of competition, with Bechtel's consortium being the sole bidder for the concession. This raised concerns about the transparency and fairness of the privatisation process.

Rate Increases and Public Backlash:

Within weeks of taking over the city's water supply, Bechtel's subsidiary, Aguas del Tunari, significantly raised water rates. In some cases, rates increased by more than 50%, placing a significant financial burden on residents, especially those from lower-income backgrounds. This rate increase sparked widespread protests and civil unrest in Cochabamba, with residents arguing that access to clean water is a human right and should not be subject to excessive profiteering.

Social and Economic Impact:

The rate increases implemented by Bechtel had a detrimental impact on the population of Cochabamba, particularly the poorest neighbourhoods. Many residents, who were already struggling financially, found themselves unable to afford the increased water rates. Additionally, these neighbourhoods were often not connected to the formal water systems and were forced to rely on lower-quality water from trucks and handcarts, further exacerbating the inequality and social tensions.

The Cochabamba Water War:

The protests against water privatisation in Cochabamba escalated into what became known as the "Cochabamba Water War." The protests were met with a strong government response, including the declaration of martial law and the arrest of protest leaders. The unrest culminated in the tragic death of Víctor Hugo Daza, a 17-year-old student who was shot in the face by the Bolivian Army during a protest in April 2000.

Legal Disputes and Withdrawal:

Following the civil unrest and the termination of its concession in April 2000, Bechtel and its partners filed a legal case against the Bolivian government, seeking $50 million in damages and lost profits. This case was filed at the International Centre for Settlement of Investment Disputes (ICSID), a World Bank trade court. However, after four years of international public protests and pressure from citizen groups, Bechtel ultimately abandoned its legal demands and agreed to a token settlement.

The impact of privatisation on water access

The privatisation of water supply and sanitation in Bolivia took place during the second mandate of Bolivian President Hugo Banzer (1997–2001). It was done to retain ongoing state loans from the World Bank and the International Development Bank. However, the privatisation process did little to address water access and, in some cases, made it worse.

Many of the poorest neighbourhoods were not connected to the network of water systems and had to pay more for lower-quality water from trucks and handcarts. When the Bechtel subsidiary took over the local wells, many consumers were priced out of the market, unable to pay the increased rates which had doubled in some cases. In El Alto, residents say that by pegging rates to the US dollar, the company raised water prices by 35%. A water and sewer hookup for a single household exceeded $445, while many Bolivians earn about $2.50 a day.

In early 2000, protests against the raised price of water due to privatisation had been growing, and martial law was declared. The protests culminated in the Cochabamba Water War, where Víctor Hugo Daza, a seventeen-year-old student, was shot in the face by the Bolivian Army while protesting. The discontent was so great that the contract with Aguas del Tunari was cancelled and more than 30 articles of the Act No. 2029 were modified.

Following two popular uprisings against water privatisation, the first in Cochabamba in April 2000 and the second in La Paz/El Alto in January 2005, the two concessions were terminated. It is argued that the increase in water prices following privatisation was met by an approximate 2% increase in levels of poverty.

Overall, the privatisation of water in Bolivia had a negative impact on water access, particularly for the poorest communities. The increase in water prices led to protests and social conflict, and ultimately resulted in the cancellation of privatisation contracts and a return to public water utilities.

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