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Bolivian Water Rates Hard to Swallow

By Franz Chávez*

A multinational corporation that provides water and sanitation services is at the center of tensions tearing at social seams in Bolivia. The residents of El Alto are demanding that the company leave the country.

EL ALTO, Bolivia - The combative residents of El Alto, a poor and populous city just outside the Bolivian capital, La Paz, contributed to the resignation of the nation's president amidst unrest in 2003. Now they are involved in another battle -- to push out the water and sanitation company Aguas del Illimani.

The leaders of FEJUVE, a federation of community councils in El Alto, a city set at an altitude of 3,850 meters and home to 800,000 people with deep indigenous Aymara roots, want the company, owned by the France-based Suez Lyonnaise des Eaux, out of the country. The firm is accused of denying water services to some 80,000 families.

El Alto mobilizations grew strong during the so-called ''natural gas war'' in 2003, a wave of protests against a government project to export natural gas to the United States and Mexico. The social chaos left 67 people dead and on Oct. 17 of that year forced the resignation of then-president Gonzalo Sánchez de Lozada, who fled the country in a helicopter. That popular uprising included widespread blockades of streets and highways in western Bolivia.

Last week, Sánchez de Lozada's successor, Carlos Mesa Gisbert, played the resignation card due to the water privatization protests in El Alto, but in a changed political climate: Congress did not accept his resignation, and instead ratified his presidency until August 2007.

Many of the residents of El Alto live on the equivalent of a half-dollar per day, but setting up access to water and sanitation services costs up to 450 dollars, which for the poorest is the same as more than two years of food expenses.

The first water privatization protest came in January, which prompted President Mesa to decree an end to the Aguas del Illimani contract for failure to comply with a plan for expanding services to the homes of 200,000 people in El Alto and La Paz.

The government sought a gradual and orderly withdrawal of the transnational by April, while working on how to compensate the firm for 63 million dollars invested, and transferring operations to another entity to prevent the nearly two million people in these cities from being left without water service.

But the corporation is defending the concession it was granted by the government in 1997, and wants the government water and sanitation agency to review the terms of the contract.

Suez Lyonnaise des Eaux, which controls a large proportion of the world water services market and is allied with the World Bank, argues that an agreement for the protection and promotion of reciprocal investment, signed by the Bolivian and French governments, is still in force.

In a letter to the Bolivian government last month, the company said that any omission of protection for the Aguas del Illimani concession, its installations and personnel, and passive attitude of the authorities in response to social unrest in El Alto would constitute violation of the agreement.

Earlier this month, the people of El Alto once again took up the protest with blockades and marches.

Mesa tendered his resignation saying the unrest had been politicized, that it had become part of other mobilizations promoted by the head of the leftist Movement Towards Socialism (MAS), Evo Morales.

MAS is demanding that Congress approve a new law on hydrocarbons that would increase the royalties that transnational oil companies pay in Bolivia from 18 to 50 percent.

But the president's position was consolidated as a result of demonstrations in support of his remaining in office, and the congressional ratification of his presidency on Mar. 8, based on a political accord for governability.

Pro-Mesa street mobilizations rejected the blockades, but in El Alto the protests continued to paralyze the city's main access routes, as well as the surrounding highways.

Five years ago, in April 2000, another popular uprising in the central Bolivian city of Cochabamba pushed out the company Aguas del Tunari, owned by the transnational Bechtel, in protest of its rate hikes.

If Aguas del Illimani leaves Bolivia, it would be a heavy blow to the World Bank, which has promoted privatization of water services through a program to invest in potable water projects in impoverished cities, through its International Finance Corporation.

IFC invested 17 million dollars in Aguas del Illimani, and spokesman Declan Duff said in 1999 that the concession to that company was ''the most effective way of achieving the benefits of private sector efficiencies.''

El Alto's Mayor José Luis Paredes says water utilities should be paid in Bolivian currency, as should the connection costs, in order to avoid sharp rate hikes resulting from the exchange rate fluctuations of the 'boliviano' with the U.S. dollar.

To adjust services for a city that is mostly low-income requires setting up a new company that holds social interests, says the mayor.

Privatization of water and sanitation services lies at the heart of the conflict.

''It is impossible to create a totally private company. The conditions of a market characterized by low economic income among potential clients must be taken into account,'' political analyst Vincent Gómez García told Tierramérica.

''State participation should be promoted through different financial mechanisms that contribute to the best performance by the company.''

* Franz Chávez is a Tierramérica contributor.

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