Bolivia's Natural Resource Crisis Foreshadows Worldwide Situation
Attempts to Make a Water Monopoly Result in Violence
There's a water revolt in Bolivia, caused by corrupt bureaucratic plans to make natural resources into an artificial monopoly. Here is a thorough piece of commentary from the London Observer that summarizes the situation so far.
by Gregory Palast
New British empire of the "dammed"While Zimbabwe is partially about an imperial past, Bolivia is the story of Britain's imperial future.
First, let's correct the arithmetic. The count in Bolivia is now six dead after the military fired at demonstrators opposing the 35 per cent hike in water prices imposed on the city of Cochabamba by the new owners of the water system, International Waters Ltd of London.
IWL, like many of Britain's multinational operators, is controlled by a larger US corporation, in this case San Francisco-based construction giant Bechtel. Best known here as builder of the London Underground Jubilee Line extension, Bechtel recently set off on a quest to own and operate water systems worldwide. United Utilities, originally co-owner of IWL is now merely 'strategic partner' in the venture.
Following the Cochabamba killings, Hugo Banzer (once Bolivia's dictator, now "elected" President), declared a nationwide state of siege, abolishing civil liberties. On 12 April, just after the martial law declaration, World Bank director James Wolfensohn told reporters: 'The riots in Bolivia, I'm happy to say, are now quieting down.'
I contacted Oscar Olivera, a trade union official and leader of the protests, to ask him how he had organised the riots. On 6 April, Olivera - with a coalition of 14 economists, parliamentarians, lawyers and community leaders - accepted a government invitation to discuss the IWL price hikes. After entering the government offices in Cochabamba, Olivera and his colleagues were arrested.
With Olivera in chains, the riot outside the building could only have been directed by the leader of the 500 protesters, Cochabamba's Roman Catholic Archbishop.
There is, of course, the possibility that Wolfensohn had got it wrong, and that the people he called rioters were in fact innocent victims of deadly repression. Olivera, one of five protest leaders released, flew to Washington to try to speak with Wolfensohn. But the director is a busy man and Olivera left without having a meeting.
The price hikes that triggered the water war were driven by IWL's need to "recover" the cost of the huge Misicuni dam project. Water from the dam system will cost roughly six times that of alternative sources. Why would IWL want water from a ludicrously expensive source? Just possibly because IWL owns a part of the Misicuni dam project.
The public had one other problem with IWL's charging for the dam project: there is no dam. It has not yet been built.
It is a basic tenet of accounting that investors, not customers, fund capital projects. The risk-takers then recover their outlay, with profit, when the project produces a product for sale. This is the heart, soul and justification of the system called 'capitalism'. That's the theory. But when a monopoly operator gets its fist around a city's water spigots, it can pump the funds for capital projects from captive customers rather than shareholders.
Samuel Sora, the Bolivian government's former consultant on the water projects, said he was unable to extract from IWL evidence of it having put any funds at all into the operation. Water prices could, he fears, eventually rise by 150 per cent.
Luis Bredow, publisher of the newspaper Gente told me 'no money was shelled out by anybody' for Cochabamba's water company. His own investigation concluded that the operators grabbed the entire system for nothing. He attributes these exceptionally favourable terms to IWL's partnership with former Bolivian President Jaime Paz Zamora, leader of a political party allied to Banzer.
IWL's London spokesman said little more than an embarrassed: 'How did you find out that IWL was involved in Cochabamba?' (The company's Bolivian group is called Aguas de Altuni.) In fact, the British company's involvement is getting to be ' misterioso '. President Banzer, to quell the spreading demonstrations, announced cancellation of the water privatisation on 5 April.
But the next day, word leaked that IWL was right back in the saddle at the water company and people nationwide took to the streets again.
On 10 April, the panicked government declared that the foreign consortium had 'abandoned' its franchise when its British chief executive supposedly fled the country. But last Thursday we tracked the IWL executive to a hotel in La Paz where, his associates told me, they were about to open negotiations with the Banzer government.
From its US headquarters, Bechtel issued a statement denying that the upheaval in Bolivia had anything to do with its water price hikes.
It can't be said that the British-American operators brought misery to Cochabamba; for they found plenty already there. Intestinal infection leading to diarrhoeal illness is Bolivia's number one child killer - the result of water hook-ups and sanitation reaching only 31 per cent of rural homes.
World Bank director Wolfensohn has a solution to the lack of water: raise the price. So pay up, he demanded of the protesting Bolivian water users. But this contradicts the internal counsel of his own experts. In July 1997, at a meeting in Washington, the Bank's technocrats laid before the Bolivians the case against Misicuni, and even warned about social upheaval if prices rose. According to a World Bank insider, the Bank's hydrologists and technicians devised a water plan for Cochabamba at a fraction of Misicuni's bloated cost.
So why did Wolfensohn attack protests against a project that the World Bank itself found dodgy? Because there are larger plans not discussed with the Bank's low-level minions. Long before ministerial limousines clogged the US capital, the big policy decisions were settled in far-flung 'sectoral' meetings. In the case of water, nearly 1,000 executives and bureaucrats gathered in The Hague last month to review and refine a programme to privatise the world's water systems.
But private operators can turn profits only if prices rise radically and rapidly. IWF secured from Bolivia a 16 per cent real guaranteed return. This profit boost is itself enough to account for the initial 35 per cent hike in rates.
To assist such 'reform', the IMF, World Bank and Inter-American Development Bank have written sell-offs into what they term national 'master plans'. Consortia such as IWL were formed to capture these cast-off public assets.
The attempted explanation for the sell-offs was that privateers committed to deliver capital for desperately needed system repairs and expansion. But the promises rapidly wilted. Cochabamba's protest organisers knew that just across the border in Buenos Aires, the region's first privatisation consortium eliminated 7,500 workers, whereupon the system bled from lack of maintenance and prices jumped. (The new owners of the Buenos Aires system notably include Anglian Water.)
Britain is re-establishing imperial reach through rapid low-capital takeovers of former state assets, concentrated in infrastructure where monopoly control virtually guarantees an outsized profit. It all seemed a riskless romp - until a few thirsty, angry peasants decided they could stop it.
Is private monopoly the best system for allocating natural resources? What would a better system look like? Tell The Progress Report:
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