Struggle for a “Social-Public” Sector
by Susan Spronk, Upside Down World
In the month of February, an unusual plight fell upon the city of La Paz. Torrential rains that hit the region ruptured the water main that services the wealthiest zone of the city, leaving the residents of the Zona Sur without water for several days. While it is common for residents in poor barrios not to have access to piped water, upper and middle class residents are accustomed to hearing the gush of clean, running water every time they open the tap. Seeking someone to blame, gold-ringed fingers pointed immediately to the “incompetent” management of the public water company, resurrecting debates about privatization put temporarily to rest by the “Water Wars” of 2000 and 2005.
Bolivia has played a starring role in the history of neoliberal water privatization. Images from the Cochabamba Water War—the popular insurrection against the multinational water company run by American construction giant Bechtel in April 2000—have been beamed into screens and television sets across the planet. The defeat of Bechtel is widely credited as the first great victory against corporate globalization in Latin America. The demand for public water that emerged in the Cochabamba Valley eventually diffused to El Alto, the poor city neighboring La Paz, where a three-day civil strike organized by local neighborhood organizations in January 2005 forced then-President Carlos Mesa to cancel the contract with French multinational, Suez. Because of these struggles, the world has also looked to Bolivia for alternatives to privatization.
Eight years after Bolivia’s first Water War, however, the unsatisfactory performance of the two water companies that were returned to public control raises questions about the viability of the public-state alternative in “weak” states of the global South.
Moving beyond the Privatization Debate
In the 1990s, two opposing positions on the question of private sector participation emerged within the literature on the water sector: those who embraced private sector participation and those who defended state forms of ownership and control. The trouble with this debate is that it presents “public” (read: state) and “private” forms of provision as polar opposites. In Bolivia, water justice activists have articulated a third position which suggests that the “public”/”private” debate misses the point. According to this view, the barriers that impede access of the poor to water services—poverty and political powerlessness—are likely to persist whether the water company is publicly or privately owned. It is therefore not enough to simply return water to public hands.
Given the poor performance of many public water companies, water justice activists in Bolivia stress the importance of collective ownership and popular democracy as the means by which to improve utilities. As Oscar Olivera, one of the spokespersons from the Bolivian water justice movement argues, “the true opposite of privatization is the social re-appropriation of wealth by working-class society itself—self-organized in communal structures of management, in neighborhood associations, in unions, and in the rank and file.”
As of yet, however, the water justice movement in Bolivia has come short of achieving its goals of democratizing the water companies based upon this notion of communal ownership and control. Indeed, the struggle for “social control” within the renationalized water utilities in La Paz-El Alto and Cochabamba have provoked the negative reactions of key power holders in the local political economy, including international financial institutions, and the municipal and central governments that have impeded progress.
The New Water Company in La Paz-El Alto
While the government promised to cancel the privatization contract in the neighboring cities of La Paz and El Alto in January 2005, it took over two years for the government to follow through. The key stumbling block was the government’s fear that Suez, the French multinational that controlled the private consortia, would retaliate with a multi-million dollar lawsuit in an international investment court, similar to the one launched by Bechtel in 2002. After two years of closed-door negotiations, the government gave Suez a golden handshake and formed a temporary water company, called “EPSAS”, to take its place.
In the sweetheart deal signed in January 2007, the Bolivian state paid Suez and other shareholders US$5.5 million to compensate them for their lost investments. The government also assumed at least US$9.5 million of company debts owed to agencies such as the International Financial Corporation (the private sector lending arm of the World Bank), the Inter-American Development Bank and the Andean Development Corporation. Half of the company’s income now goes to paying debt, which has seriously impeded the cash flow.
Hence, the company had difficulty coming up with the money to make emergency reparations to solve the water problems of the Zona Sur in February. In short, having already sucked the company dry, Suez has no need to go to launch a lawsuit in international court: It has already been compensated for financial “damages” despite the fact that it made at least US$1.5 million per year during the course of the contract, plus being paid another $1 million “management fee” by the local consortium.
The EPSAS is intended to be a transitory company, but the deadline by which time it was to be replaced passed some months ago. The government struck an inter-institutional commission, which includes participation by FEJUVEs (Federation of Neighborhood Councils) in La Paz and El Alto, the two mayors, and representatives from the Water Ministry, to evaluate proposals for a new water company. As time has passed, the FEJUVE-El Alto, which was once the most militant member of the commission, has lost much of its steam.
Shortly after the water war, the FEJUVE-El Alto proposed a model for a “public-social company” with a very high level of popular participation, including a popular assembly with elected delegates from all regions of the city which would formulate the policy of the water company. Facing pressure from the mayors of La Paz and El Alto and international donor agencies—all of whom favor the formation of a public-private partnership—the proposal has slowly transformed into a “light” version with a minimal level of public participation. According to Felipe Quispe (no relation to the Aymara leader, “el Mallku”), the representative of the FEJUVE-El Alto on the commission, the FEJUVE-El Alto now has a rather minimal demand: that one representative from each neighborhood organization is included on the board of directors of the new water company.
While political pressure from politicians and donor agencies is partly to blame for the FEJUVE’s decision to water down the proposal, it is also the result of internal strife that has considerably weakened the organization’s capacity for collective action since the election of the left-of-center Movement toward Socialism (the MAS) in December 2005. As a long-time observer of Bolivia social movements, Raquel Gutiérrez observed in a recent interview that social movements in Latin American countries in which left governments like the MAS have been elected are “in a bit of a gray moment.” She provides two reasons for the uncertainty which prevails amongst community leaders: “One, the governments in power and the policies that they are implementing are perceived by practically everyone as insufficient. Two, the movement’s struggles, and the emergence of what seemed like a new form of politics, of direct participation, of assembly, of a horizontal process of gaining consensus via extensive, multi-level deliberation, of virtually holding our own destiny in our hands, hit a wall.”
The politics of cooptation related to hierarchical political structures have also affected the FEJUVE-El Alto. The MAS appointed Abel Mamani as the head of the newly created Water Ministry in January 2006. Upon his appointment, Manami was immediately criticized for using the organization as a launch pad for his own political ambitions and turning his back on the social movements responsible for his fame. Carlos Rojas, who served on the same FEJUVE executive as Abel Mamani (2004-2006), comments that the legal status of the new “public” company is ambiguous: “Aguas del Illimani [the private consortia controlled by Suez] never really left. The new water company has the same administrative structure as the private company: It employs the same people; it is registered under the same number; it has the same bank account as the old company.”
Indeed, the EPSAS is a sociedad anónima (equivalent to a “limited” company in English). As such, it is not wholly “public”: EPSAS has two private shareholders and it is regulated by commercial instead of public law. Disconcertingly, the cost of a potable water connection has gone up from $155 to $175 under the new administration.
When I asked why the FEJUVE-El Alto has not kicked up much fuss about the fee hike, Rojas explained that the government has effectively neutralized the new leadership by buying them off with promises of political appointments and economic resources. For example, the FEJUVE is rumored to have purchased a new vehicle with money received from the government that is used by the executive.
Over his two year term, Mamani’s performance as Water Minister has been the subject of much controversy. In November 2007, a number of scandals implicating Mamani hit the press. He was promptly dismissed under a cloud of suspicion. The leaders of FEJUVE-El Alto immediately demanded that Mamani be replaced by another leader from El Alto. Instead, the government chose Walter Valda as interim minister, whose experience in the water sector is with campesinos in Chuquisaca. The inter-institutional commission has not met since the change of leadership in November. The question as to how or whether the EPSAS will be replaced hangs in the air.
Cochabamba Water War: “We Won the Struggle but not the War”
After Cochabamba’s Water War, “social control” was supposed to resolve the problems with corruption that have historically plagued public utilities. While the city water company’s former board of directors was staffed exclusively by professionals and politicians, since April 2002 three members elected from the macro-district sit on the board. However, the many problems that have historically plagued public utilities have remained unresolved with a minimal degree of “social control.”
Over the past eight years, the public water company in Cochabamba, SEMAPA, has gone from one crisis to the next. Since the company was returned to public hands after the Water War of 2000, two general managers have been dismissed for acts of corruption. The most recent general manager, Eduardo Rojas (2006-2007), was even worse than Gonzalo Ugalde (2002-2005). While both used the company as a botín politico (political booty), filling the company with their family members and friends, Rojas tended to hire white-collar workers (consultants and secretaries) who work at high salaries but do not provide a public service, while the latter mostly hired blue-collar workers to repair and expand the infrastructure. Due to these and other problems, the Inter-American Development Bank (IDB) cancelled the payments of an $18 million loan, the first part of which was to be dedicated to the “modernization” of the company. The utility is once again scrambling for finances in order to maintain and expand the city’s water and sanitation system.
On a more positive note, there are two important signs of that things might improve. First, there are signs of renewal in the water workers’ union. For over twenty years, the SEMAPA union was controlled by a “union mafia.” Union leaders were suspected of running a system of clandestine connections that was estimated to cost the utility almost $100,000 a month in lost revenue. A small group of employees have been working to democratize the union. Largely thanks to their efforts, the head of the union was fired in October 2005 for organizing an illegal strike that aimed to protest the dismissal of the corrupt general manager. For the first time in over twenty-five years, the elections that were held to replace him were conducted using secret ballot. Members also had a choice between two platforms of candidates. Nine out of ten members turned out to vote; over 70% of the members voted for the new leadership who expressed their commitment to union democracy.
Second, the association of community water systems of the poor, southern zone of the city (ASICA-Sur) has made a lot of progress in the past few years. ASICA-Sur has temporarily withdrawn from the struggle to reform SEMAPA, instead dedicating itself to the task of building water systems in poor areas that lack networked water services. Recently, ASICA-Sur has secured financing from the European Union to build secondary water networks in Districts 7 and 14. According to Abraham Grendydier, these systems will be administered by independent user groups, which will buy water in bulk from the public water company. In the short term, the initiatives of ASICA-Sur risk furthering fractioning the system, which is more accurately described as an “archipelago” than a network. In light of the numerous problems with SEMAPA, however, ASICA-Sur has made tactical decisions that will eventually help achieve the goal of “water for all.”
Given the problems confronted by SEMAPA in the past years, the local perception is that if SEMAPA serves as a model for anything it is for what can go wrong in a public water company. As Norma Barrera, one of the employees who have been working to reform the utility, put it, “The whole structure of the company needs to be changed from top to bottom. Putting a few good people at the top is not going to change anything when the structure is rotten to the core.” Amongst activists, opinion is divided regarding the main culprit. For some, it is the fact that the mayor controls the budget. For others, it is the problem of corruption and the lack of capacity of the citizen directors. Efforts to outline alternatives and debate the future of the public water company continue.
While the local results of the Cochabamba Water War may have been disappointing, its impact on the private sector rippled across the globe. Beginning in 2002, large multinational water companies announced that they were retreating from the poor countries of the global South, preferring instead to focus their investments in more lucrative markets. Indeed, the majority of privatization loans approved by the World Bank in 2006 for the water and sanitation sector were located in China. In the face of this global market shift, water justice activists in Latin America, widely considered to be both a birthplace of neoliberalism and its alternatives, can afford to be less defensive and critically scrutinize the failings of both private and public water companies.
It is undeniable that reform of the local state and public utilities are required in order to extend universal services. Examples of public water utilities suggest that there are several factors that help to determine success which have thus far been lacking in Bolivia. Public companies are more likely to perform well when they are subject to pressure from well-organized user groups, but as the Cochabamba example demonstrates, this is not enough. The presence of democratic trade unions with a “public service ethos” is also important, since it is ultimately the workers who execute the decisions. Perhaps most importantly, however, quality water services require large amounts of public investment. The progressive municipal government of Paco Moncayo in Quito, Ecuador, for example, expanded potable water services from 65% to almost 98% within only seven years thanks to a cash injection from the government and international sources. The water company, EMAAP-Q, is publicly owned and operated and considered one of the five best public water companies in Latin America.
Since most social movement efforts have necessarily focused on the problems with privatization, the factors that determine quality public management are poorly understood. Now that the multinationals are in retreat, however, there is more political space to discuss real alternatives.
Susan Spronk is currently conducting research on the role of trade unions in water companies in Bolivia, Ecuador and Peru.
This story first appeared April 29, with footnotes, on Upside Down World.
See related story, this issue:
Santa Cruz Votes for Autonomy
by Ben Dangl, Upside Down World
BOLIVIA: NEW “WATER WAR,” VIOLENT LAND CONFLICTS
from Weekly News Update on the Americas
World War 4 Report, January-February, 2005
From our daily report:
Bolivia: Bechtel surrenders
WW4 Report, Jan. 24, 2006
Bolivia: Evo appoints rads to cabinet
WW4 Report, Jan. 24, 2006
Reprinted by World War 4 Report, June 1, 2008
Reprinting permissible with attribution