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Water Transnationals Backing Off |
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By Diego Cevallos*
Private
investment in water management is on the decline in Latin America
because of the high political and financial risks, say experts.
MEXICO CITY - Water rights groups say transnational
corporations are increasingly sinking their teeth into Latin America's
water services, but studies by the United Nations and other experts
point to the contrary: these companies are backing off, and may
not come back any time soon.
Demands by governments and social movements as in recent years in
Argentina and Bolivia, the impossibility of charging for water services
in some countries, and the implementation of legislation that prevents
their participation in the water sector, as in Uruguay, have discouraged
the transnationals.
So now they are withdrawing from the region, or narrowing the scope
of their services, because of what they see as high political and
financial risks, says the latest UN World Water Development Report,
presented ahead of the 4th World Water Forum, to take place in the
Mexican capital Mar. 16-22.
In the 1990s, the water transnationals invested some 25 billion
dollars in developing countries in projects related to water management,
especially in Latin America and Asia, says the report. But in recent
years investment has been on the decline.
It's difficult for private water companies to make money when consumers
cannot pay for the service, says Gordon Young, coordinator of the
World Water Assessment Program, which produced the report.
Although the study acknowledges that the performance of the private
sector has not met the expectations of the donor countries or the
governments of developing countries, in a conversation with Tierramérica
Young argued that it would be a mistake to rule out private participation
in water management.
Observers consulted by Tierramérica said the retreat of the foreign
companies from the Latin American water sector, where they arrived
in the 1980s and 1990s encouraged by the privatizing reforms of
the governments, could be definitive.
"I don't think they'll be back. They're in the middle of a corporate
reorganization and shifting their resources to the much more lucrative
energy sector," said Sara Grusky, researcher with the Washington-based
non-governmental group Food and Water Watch.
Powerful firms like the French Suez Lyonnaise des Eaux and Veolia
Environnement (previously known as Vivendi), the British Thames
Water and Spain's Aguas de Barcelona made a path for themselves
in the water markets of the developing world.
According to Ralph Daley, director of the Canada-based International
Network on Water, Environment and Health at the UN University, the
private companies are leaving South America and other regions because
the risks are too high.
But water rights activists say that the wave of water privatization
is unstoppable, and they are preparing a series of actions parallel
to the World Water Forum, an event they charge is promoting transnational
participation in water management to the detriment of community
participation.
Water is a public good and a basic right that must not be subject
to "the logic of cost-benefit", which is why it should remain under
management by the state and with community participation, Javier
Bogantes, director of the non-governmental Latin American Water
Tribunal, told Tierramérica.
In Latin America, where there are huge water resources, for the
most part it has been governments, municipalities and local authorities
that have controlled water services. However, they were not able
to ensure that everyone had access to the precious resource.
Several studies indicate that around 77 million people in Latin
America and the Caribbean lack adequate access to potable water,
and just one out of six inhabitants has access to adequate sanitation.
The Forum in Mexico is the fourth global water meet, following Morocco
in 1997, Netherlands in 2000 and Japan in 2003. The main purpose
is to define appropriate strategies to ensure universal and sustainable
distribution of water resources, say the event's organizers.
Hosting the Forum are the Mexican government of President Vicente
Fox and the World Water Council, which was founded in the mid-1990s
by representatives from the private, academic, scientific and civil
society sectors.
Miguel Solanes, regional adviser for legislation on water and public
services for the Economic Commission for Latin America and the Caribbean
(ECLAC, a UN agency), told Tierramércia that the time has come to
recognize that there is "a certain prudence with respect to privatization"
of water services in the region.
This cautious attitude is seen not only in the governments, but
also in the transnationals, "which did not much enjoy the situation
they faced in Argentina or Bolivia," said Solanes.
In the former, the company Aguas Argentinas, controlled by the France-based
Suez, became enmeshed in 2002 in a dispute with the government,
bringing a suit before the World Bank tribunal for not allowing
adjustment of the high rates charged for potable water services.
Although the firm -- accused of doubling its rates in the 1990s
without improving or expanding potable water and sanitation services
-- has withdrawn the lawsuit, it is steadfast in its decision to
withdraw from Argentina.
In Bolivia, the Suez transnational ran into problems in 2005. The
Bolivian government rescinded the contract for providing services
after the company faced massive protests by impoverished residents
against the high rates and poor service.
Suez sued Bolivia in the World Bank tribunal, known as the International
Center for the Settlement of Investment Disputes.
In Uruguay, however, voters approved a 2004 referendum on a constitutional
reform that defines water as a public good and establishes that
water for human consumption should be provided "exclusively and
directly by state agencies."
In the case of Mexico, the presence of the private sector in water
services "has remained more or less the same," said Jesús Campos,
assistant director of water infrastructure for the government's
National Water Commission.
Private companies are involved in water distribution in just three
Mexican cities, and a dozen more handle wastewater treatment, Campos
said.
He warns against demonizing the private sector. "We shouldn't be
fighting against the idea of partnering with a private firm when
it may be beneficial."
ECLAC's Solanes agrees. There is "no problem with someone (private
company) making money, even if it's providing a public service."
However, he recommends that governments establish the necessary
regulations for private participation in water management, and that
they take into account the economic and social contexts of their
countries.
"In and of itself, privatization is as good or as bad as the economy
in which it occurs, the care with which it is done, and the society
around it," he said.
Solanes pointed to cases like that of Chile, where private companies
control 100 percent of the potable water market, and where privatization
"has been more or less successful."
Chile has achieved nearly total coverage of potable water and sanitation
services. Operating in the water sector with broad freedom are transnationals
and local economic groups alike.
* Diego Cevallos is an IPS correspondent.
With reporting by Stephen Leahy in Canada and María Cecilia Espinosa
in Chile.
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