• Oil, Natural Gas, and Electric Deregulation



• Stopping the Nuclear Relapse



• Interactive Map of Proposed New Reactors



• The Case Against Nuclear Power



• The Case for Renewables and Efficiency



• Energy Legislation



• Press Room



• Congressional Voting Records



• Take Action!

Fiasco: Buenos Aires, Argentina

The Buenos Aires privatization deal, consummated in 1993, had been widely lauded by the World Bank, the Argentine government and the water industry, as an international success story. But, the success story turned sour after the contractual clause that permitted Suez to link water prices to the U.S. dollar, and ensured hefty profits, was overruled by the Argentine government’s emergency decree.

During the first eight years of the contract, weak regulatory practices and contract re-negotiations that eliminated corporate risk enabled the Suez subsidiary, Aguas Argentinas S.A., to earn a 19% profit rate on its average net worth. However, by 2002 Suez had to write off $500 million in losses because of the Buenos Aires concession. What did the soaring profits, sudden crash, and subsequent contract re-negotiations mean for the residents of Buenos Aires?

IMF and World Bank structural adjustment programs have long been squeezing social services and public infrastructure in Argentina. The privatization of water became an added burden on the general population. According to Fernando de la Rua, one of many presidents that have come and gone during the Argentine crisis (speaking in March 1999 when he was Mayor of Buenos Aires): "Water rates, which Aguas Argentinas said would be reduced by 27% have actually risen 20%. These price increases, and the cost of service extension, have been borne disproportionately by the urban poor. Non-payment for water and sanitation are as high as 30 percent, and service cut-offs are common with women and children bearing the brunt with health and safety consequences."

Union resistance to the privatization deal was crushed by giving the workers 10% ownership in the private company. This deal "purchased" the union’s consent to the 50% staff reduction policy that Aguas Argentinas carried out later. The weak regulatory agency, ETOSS, subordinate to both presidential and corporate power, permitted constant contract modifications and non-compliance with performance objectives. These resulted in successive increases in consumer water rates, modifications to the financing program for the expansion of service, currency exchange risk insurance for the company, and the indexation of consumer water rates to the devaluation of the peso exchange rate. For example, Aguas Argentinas reneged on its contractual obligations to build a new sewage treatment plant. As a result over 95% of the city’s sewerage is dumped directly into the Rio del Plata river.

As Suez tries to recoup is losses, the government, and the nation’s taxpayers, will be left to clean up the mess. Using an increasingly feared tactic of multinational corporations, Suez will bring claims against the Argentine government using the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID). The exact amount of Suez’s claims against the Argentine government are "secret" but they are demanding compensation for losses relating to water concessions in Buenos Aires, Santa Fe, and Cordoba.

more resources

Because Public Citizen does not accept funds from corporations, professional associations or government agencies, we can remain independent and follow the truth wherever it may lead. But that means we depend on the generosity of concerned citizens like you for the resources to fight on behalf of the public interest. If you would like to help us in our fight, click here.