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Fiascos: Cochabamba, Bolivia

In April 2000, after seven days of civil disobedience and angry protest in the streets, the president of Bolivia was forced to terminate the water privatization contract granted to Aguas del Tunari, subsidiary of the giant Bechtel corporation. The Bolivian government had granted a 40-year contract to Aguas del Tunari in 1999. But the terms were so draconian that within months the entire region rose up and drove them out.

Water rates increased immediately - by 100 to 200 percent in some cases. Small farmers and the self-employed were especially hard hit. In a country where the minimum wage is less than $100 per month, many families were paying water bills of $20 or higher. Unable to survive under the burden of the new water prices, the citizenry began a campaign to drive out the private water company. In January 2000, a four-day general strike over the water price hikes, organized by a coalition of community, labor and human rights leaders, left the city at a total standstill. The strike culminated with a mass march to the city’s central plaza where protest leaders and city officials were negotiating. It soon became clear that the negotiations were moving nowhere. In February, the Bolivian government sent a thousand army and police officers from outside Cochabamba, declared the protest marches banned and illegal, and imposed a military takeover of the city. During the ensuing protests, strikes, and marches 175 people were injured, two youths blinded, and one killed. Finally government officials promised a full rate rollback and a review of the water company contract. But, the movement leaders held fast to their demand to have the contract terminated. Protests continued and in April the government finally agreed to terminate the contract.

The privatization of water was the latest scheme in a long series of World Bank-backed proposals to sell Bolivian public enterprises to foreign private investors – including the airline, the train system, and the electric utility. Cash-strapped and indebted countries like Bolivia rarely reject IMF and World Bank advice, because they don’t want to risk being denied future loans and international aid. Privatization deals, while making fast cash for the government – money usually used to pay debts to the IMF, World Bank and other foreign creditors – are generally a bad deal for the public and rift with secrecy and corruption. In this case, Bechtel and the British-led consortium of investors put up less than $20,000 of up-front capital for a water system worth millions. Consumers suffered rate increases, while the company was expected to earn an annual income of $58 million.

The Bolivian water privatization fiasco holds another warning for governments considering similar schemes. Bechtel is determined to make the government of Bolivia pay for canceling the water contract. In 2001, Bechtel filed suit against the Bolivian government, demanding $25 million in compensation for lost future profits resulting from the cancellation of the company’s contract. Unfortunately the laws of international trade and investment, becoming more stringent and widespread with WTO and GATS negotiations, are rigged to place corporate needs and profits above sovereignty and democracy. If the World Bank arbitration court decides to take $25 million from one of the poorest and most indebted countries in the Western hemisphere and award it to the corporate coffers of Bechtel, it may be a warning signal to governments around the world to beware of signing such contracts in the future.

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