Liquidity: Privatization and the Rise of Big Water - The Ripple Effect: The Fate of Freshwater in the Twenty-First Century - page 235

water, jobs, and a better distribution system than people in countries such as Argentina,
Chile, and Peru have ever had; in return, the companies expect to turn a profit. Since
the early 1990s, tensions have grown over privatization and have occasionally turned
deadly.
The debate has been framed as a clash of civilizations, or ethnicities. Indigenous
people have traditionally viewed water as a “natural right,” a gift from the heavens,
rather than as a product. “Why should we pay for rain?” they ask.
In the first big water deal in the region, Argentina turned over the Buenos Aires wa-
ter system to a consortium composed of Suez, Vivendi, Aguas de Barcelona, and several
local companies, in 1993. The World Bank funded the project, which served about 10
million people, and used it as a model for similar deals in Australia, Indonesia, the Phil-
ippines, and South Africa. But cronyism, rate increases, and broken pipes led to wide-
spread demonstrations in Buenos Aires. In 1998 Argentina was hit by a severe reces-
sion, and many people couldn't pay their water bills. Tensions ratcheted up, and in 2005
the Europeans abandoned the project . The Argentine government was obliged to step
in; officials discovered that the public utility had been so thoroughly dismantled that it
would take years, and millions of dollars, to reconstitute it.
The most notorious illustration of the pitfalls of privatization took place in
Cochabamba, Bolivia , that country's third-largest city, located in the dry foothills of the
Andes. In 1996, state subsidies aided industry and wealthier neighborhoods, but most
of the city's populace—poor rural people, with little income—were not connected to the
municipal water system. Instead, they paid inflated prices for often polluted water sup-
plied by entrepreneurs from handcarts and trucks. That year, the World Bank offered
Cochabamba a $14 million loan to upgrade its water system. The following year, the
World Bank offered another $600 million in foreign debt relief, at a time when the coun-
try was suffering from hyperinflation. The loan package was offered under the condi-
tion that Cochabamba's notoriously corrupt and lackadaisical water utility, run by the
state agency SEMAPA, be replaced by a private company. Because of the challenges of
the situation, only one company bid on the Cochabamba concession. In 1999, Bolivi-
an president Hugo Banzer signed a $2.5 billion forty-year lease with a European con-
sortium and with Aguas del Tunari, a subsidiary of Bechtel Enterprise Holdings, a San
Francisco-based engineering company. The plan was to provide drinking water to every
citizen of Cochabamba and to spread electricity and telephone service throughout the
region.
Problems surfaced the first week Aguas del Tunari was on the job, in early 2002.
Under its contract, the company had agreed to pay down a $30 million debt incurred
by SEMAPA, and to build the long-delayed Misicuni Dam, to bring more water into the
city. To afford these obligations, Aguas del Tunari immediately raised water rates an av-