|
|
 |
|
Promoting a sustainable energy future
|
|
||||||||||||||||
|
|
 |
|
||||||||||||||||
|
|
  Nicaragua and the Right to WaterBy Sara Grusky, International Water Working Group Introduction: Global Inequities and the Right to Water Water is essential to human life and a vital natural resource for the survival of life on our planet. Yet water scarcity is increasing around the world. The world’s available fresh water – less than one-half of one percent of all the water on earth – is disappearing because of unsustainable practices, including production agriculture, urbanization, deforestation, water diversion, and increased industrial use. Governments, the international financial and trade institutions, and the multinational water companies have responded to this situation with an agenda arguing for privatization, de-regulation and commodification of water – water at a "market price." At the same time, around the world there is a growing movement of people’s organizations working to revive the concept of the global commons and to maintain water as a common resource or a public trust. In the U.S. we take it for granted that our homes have piped water and sanitation services. We have assumed that the taxes we pay our local, state and federal government will ensure that there is universal public access to these basic services at an affordable price. In many developing countries the situation is quite different. More than 1 billion people worldwide don’t have access to potable water, and 2.5 billion lack access to basic sanitation services. As a result, over 3 million people die annually from diarrheal and other diseases related to lack of access to clean water. This global injustice and inequity has been perpetrated, in part, by the asymmetrical power relations in our international political and economic systems. For example, IMF and World Bank structural adjustment programs have forced fiscal austerity, reduced social expenditures, and privatization of state-owned companies on developing country governments. Developing countries must use their limited resources to make debt service payments that ensure that resources flow to the international financial institutions (the IMF, the World Bank and the regional development banks), rather than to ensure the basic needs of people. Growing water scarcity and neo-liberal economic policies promoted by governments, the international financial institutions (IFIs) and the World Trade Organization (WTO) are likely to further exacerbate global and national inequities in the distribution of water. Nicaragua is one of many countries around the world that is facing floods and droughts related to environmental degradation and pressures from the international financial institutions to raise consumer fees for water and privatize their water services. This publication will provide some basic information about access to safe and affordable water in Nicaragua, the pressure to privatize imposed by the IMF and Inter-American Development Bank, perspectives from groups in Nicaragua about the water crisis, how some of these same issues are pertinent in the U.S. and in other countries around the world, and what we can do to change the policies of the global institutions and protect the basic needs of people and the natural environment for clean water. Access to Safe and Affordable Water in Nicaragua Nicaragua is a country with an abundance of rainfall and fresh water, especially in the Caribbean region and along the Pacific coast. Nevertheless, for many families in Nicaragua, particularly in the countryside, accessing safe water can be a difficult daily challenge. The challenge becomes even greater during the dry season. About a third of the population in Nicaragua does not have potable water. In rural areas, the number of people without potable water is much higher, about 72 percent. Many households in rural areas are dependent upon shallow hand-dug wells or natural springs and rivers, streams and lakes. However, many of the rivers, streams, and lakes are polluted with pesticides, residential sewerage and industrial waste and toxins. Sewerage coverage is very limited, serving only 800,000 inhabitants (34 percent of the urban population) and the condition of many sewerage collection systems has deteriorated. Sewerage coverage is limited to a few intermediate cities. There is no sewerage treatment in the major city, Managua. The lack of sewerage treatment causes a grave public health problem. In urban areas, most people (about 93 percent) have piped water. However, some of these connections, particularly in the marginal settlements, are informal or unauthorized and may only provide an intermittent supply of water. In a few urban areas, particularly during the dry season, the shortage of water requires shutting off the service for large portions of each day. In these cases, primarily in the central region of the country, the water utility, ENACAL, must transport water by tanker truck from other parts of the country. In Jinotega, for example, water scarcity is a serious problem during the dry season and supplies may be turned on for only an hour each day while other parts of the city may be supplied for 10-20 hours daily. Only 50 percent of the city residents have potable water. When communities are situated at higher elevations alongside volcanoes or in mountainous areas, usually women or children will have to walk several miles for water. Only a small portion of the population, about 3 percent, is entirely dependent upon tanker trucks for water. Environmental degradation, particularly deforestation, the use of pesticides, and the lack of sewerage treatment have increased the complexity and severity of the water problem in Nicaragua. The principal water sources that provide for agricultural, domestic and industrial uses are located in the Pacific region of the country. The Pacific region is also an agricultural center and the use of chemical fertilizers and pesticides in the areas of large coffee, cotton, tobacco, and banana production has caused contamination especially by organo-clorides in many of the major rivers. In the areas around the banana plantations, the situation is most severe and the Health Ministry reports numerous cases of renal damage. The fifteen major rivers in the Pacific region are contaminated with untreated residential waste and industrial waste from food processing, cattle slaughterhouses, chicken farms, tanneries, mining and oil refineries. There is also contamination of the major aquifers in the region where saline intrusion has been documented and high concentrations of nitrates and sulfides affect the quality of the drinking water. In the Central region, water scarcity is a greater problem. Water scarcity, combined with the problem of water contamination from agricultural activities and the lack of sewerage treatment, has resulted in severe public health dangers. For example, the Rio San Francisco was recently contaminated by the cholera virus. (more details about this needed. How many people got sick? Died?) In the Caribbean region of the country, which is much less populated that the rest of Nicaragua, the primary contamination is due to mining operations. Rather than addressing the root causes of water contamination, scarcity and unequal access to potable water and sewerage services, the international financial institutions (IFIs) and bilateral donors have concluded that new investments in the water utilities should require implementation by the Nicaraguan government of the model of privatization and increased cost recovery (higher consumer fees). The water privatization process began in the municipalities of Matagalpa and Jinotega. The pilot project began in 1991 and was designed initially as part of the decentralization process that would designate responsibility for the water service from the departments of Matagalpa and Jinotega to the office of the mayors. However, in 1998, an alternative plan won favor that promoted the creation of small private businesses that would own and run the municipal water utilities in the two cities. In both cities, there are now new private water utility businesses owned by individuals who were previously high-level bureaucrats in ENACAL. The private businesses are accountable to a Board of Directors that includes representation from ENACAL, the mayors of the major municipalities in the two departments, and a representative from civil society. In both Matagalpa and Jinotega, the civil society member of the board is a member the grower’s association and part of the landowning elite. (double check Jaime Castillo’s title in Matagalpa) In both cities there is a major water infrastructure rehabilitation project funded by the German government that is upgrading the ability of the utilities to capture, treat, and distribute water. Following the privatization and new infrastructure investment in Matagalpa and Jinotega, the price of water in the two cities has increased at a more rapid rate than in the rest of Nicaragua. And, it is clear that the new investment in rehabilitation will continue to raise fees even higher. For those who can afford the "market price" of water, there will be improved and expanded services. But for the rest of the population, the situation could become even more grave. (get details of tariff structure from Suseda. Jinotega: only 50% coverage, water turned off alot). Privatization is planned next for the cities of Leon and Chinandega. The Inter-American Development Bank (IADB) promises an investment of $14 billion if the government of Nicaragua will negotiate contracts with an international water company to provide specific upgrading services to ENACAL in Managua and to fully manage the water utilities in Leon and Chinandega. In June 2001, responding, in part, to pressures form the IMF, the water utility regulatory agency (INAA, Instituto Nicaraguense de Acueductos y Alcantarillado) approved a new tariff structure for Nicaragua that required a 30 percent increase in the price of water for residential consumers, affecting the majority of the population. Such a substantial price increase for a basic human need like water caused a large peaceful protest in the country. The protest was coordinated by a broad range of organizations including human rights groups, consumer rights organizations, women’s groups and unions. The organizations also took formal legal actions presenting claims before the National Assembly, the Controller’s Office, and the Supreme Court. The legal claim argued that the tariff increase violated procedures that required 30 days prior notification for such increases and violated requirements that the tariff structure remain fixed for five year periods. The legal action also argued that the large water tariff increase violated the right to a basic service that was essential for life and good health, and represented an abuse of the principle of public service that should ensure the user of a reasonable tariff reflecting the quality and quantity of the service. To date, ENACAL and INAA have refused to respond to the legal claims. What does water privatization mean? Quote from Clemente Martinez, Centro Humboldt, Nicaragua "En cuanto a la privatizacion del agua, no puede ser ya que el agua es la vida, es super vital, la poblacion no tiene recursos para pagar, no puede ser sujeto a politicas comerciales sobre el agua. La luz electrica puede fallar por ejemplo en el campo. La gente no tiene luz y sobrevive, en cambio sin el agua nadie puede vivir, el agua es primordial para la vida. Privatizar el agua seria ahogar mas a la poblacion pobre, que son las mayorias." "On the subject of water privatization…can’t you say that water is life? It is super vital and if the population doesn’t have the resources to pay, how can they be subjected to commercial water policies? Your electricity can go out in the countryside. People don’t have light and they survive, but without water no one can survive. Water is essential for life. If you privatize water, you will suffocate the poor, who are the majority." Debt and Structural Adjustment in Nicaragua It is important to understand the problem of water privatization in the larger context of debt and structural adjustment. Nicaragua, along with many countries around the world, is being forced to pay off its debt by auctioning the country’s public assets – banks, telecommunications companies, oil companies, electricity companies, and even water utilities. Nicaragua is one of the most indebted countries in the world. Much of the debt was inherited from corrupt governments ($1.6 billion was inherited from the Somoza dictatorship). Many of the loans were not used for projects that actually benefited the majority of the people of Nicaragua. Nevertheless, the burden of the current $6.5 billion debt weighs heavily upon all Nicaraguans. Desperately needed resources for housing, health, education, water, and roads are used instead to pay back the debt. In 1998, Nicaragua paid $332 million in debt service charges (according to the IFIs, $675 million was actually due). This meant that Nicaragua used about 18.6 percent of its GDP for debt service payments. In contrast, 6.7% of GDP was used for health care. In 1998, following the devastation of Hurricane Mitch, the Paris Club (the group of creditor countries that manage developing country debt) agreed to grant Nicaragua a three-year moratorium on debt service payments. However, the moratorium did not prevent the international financial institutions and creditor countries from continuing to accrue interest payments during the three years. The moratorium ended in 2001 and it is projected that about 12.5 percent of the government’s budget in 2001 will be used for debt service payments. The debt crisis has increased Nicaragua’s dependence on external financing and increased the ability of the international financial institutions (IFIs) to impose extensive structural adjustment conditions as the price of continued loans. The structural adjustment conditions are designed to open the country to the international market, increase financial stability, stem inflation, control the fiscal deficit, and promote economic growth. Instead, under the structural adjustment programs of the IMF and the World Bank, Nicaraguans have seen poverty grow, per capita income shrink, basic social services reduced, and the debt get larger and larger. Below are the general features of IMF and World Bank-imposed structural adjustment programs and some of the specific conditions of recent IMF loans to Nicaragua. IMF and World Bank Structural Adjustment Programs General features of structural adjustment programs: FISCAL AUSTERITY: The IMF sets firm fiscal deficit targets in order to reduce government expenditures. This results in cutbacks in government subsidies and social services such as health, education, and housing, cutbacks in basic infrastructure such as roads and sanitation, and cutbacks in other public services that governments can’t afford to maintain. MONETARY CONTROLS: Due to the IMF’s overarching concern about inflation, the institution places firm controls on the government’s ability to finance its deficit through domestic borrowing or domestic bond issuances. The IMF also requires that countries do not fall below a set level of international reserves (a countries’ hard currency savings) to ensure the country’s ability to pay for imports and debt servicing. TRADE AND FINANCIAL LIBERALIZATION: The IMF and the World Bank require reductions in tariffs, import controls, and trade barriers. They encourage the dismantling of programs that provide price supports to farmers. To attract capital investment and promote exports, the IFIs encourage reduction in capital controls, competitive interest rates, and "de-regulation" or removal of policies that protect workers and the environment or corporate taxes that make for an "uncompetitive" investment climate. PRIVATIZATION: The IMF and the World Bank require privatization of state-owned assets including banks, marketing boards, telecommunications, electricity, water, oil, gas, mining, and many others. PUBLIC SECTOR AND INSTITUTIONAL REFORMS: Increasingly the World Bank has focused on institutional level reforms including imposing new tax structures, such as the Value-Added Tax (VAT), and civil service reform that requires retrenchment of public employees and lowering or freezing wage levels, or judicial reform, public expenditure reform, decentalization of government functions, or the restructuring of entire sectors such as health, education and water. Key conditions in recent IMF loans to Nicaragua FISCAL AND MONETARY CONTROLS
TRADE LIBERALIZATION
PRIVATIZATION
SOCIAL SECURITY REFORM
PUBLIC SECTOR REFORM
Double Standards and the Boomerang Effect In the United States, around the turn of the 19th century, there were struggles in immigrant and poor communities in New York, Chicago and other major urban areas demanding access to basic water and sanitation services. Eventually there was government recognition that public investment in water and sanitation services yielded substantial benefits to public health, social equity, the environment and the economy. Today the United States provides a range of government subsidies, some through the federal Clean Water Act and the Safe Drinking Water Act, to ensure universal access to safe water and sanitation services. But, the U.S. and other wealthy country representatives that sit on the Boards of the IMF and the World Bank often push contrary policies on developing countries, arguing that poor, indebted country governments cannot afford to provide subsidies for water and sanitation services. IMF and World Bank structural adjustment loans include conditions requiring reductions in government subsidies for water and sanitation, increased consumer fees for water, and corporate privatization of water utilities. Recent examples include:
In the U.S. we have taken for granted access to basic water and sanitation services. However, policies promoting privatization and increased cost recovery are creeping into the wealthy countries as well. Recent tax cuts and the U.S. "War on Terrorism" will make in unlikely that water and sanitation infrastructure will receive the public subsidies sufficient to maintain operations and hold the line on consumer water fees. According to the U.S. Water Infrastructure Network (WIN), an additional $23 billion a year is needed in the U.S. to meet environmental and public health mandates, and to replace the aging infrastructure. Relying just on utility rate increases will cause consumer bills to double or triple, according to WIN. As a result, cash-strapped municipal, country and regional water system managers will likely have to face hard choices, including the temptation to sell or contract operations to private multinational water corporations. In addition, new rules proposed by the World Trade Organization (WTO) services agreement may help private investors access government subsidies and ease the entry of foreign private water companies into the U.S. market. The policies of water privatization and increased cost recovery may soon begin to hit home in the U.S. The IMF and the Inter-American Development Bank Push Water Privatization on Nicaragua Since 1997, the International Monetary Fund (IMF) has imposed structural adjustment loan conditions on the government of Nicaragua requiring increased cost recovery for water (higher consumer fees) and water privatization. The policy conditions attached to IMF structural adjustment loans are negotiated in secret, closed-door meetings between the Finance Minister and IMF officials -- without the knowledge or consent of the citizens of Nicaragua who later will bear the burden of the new policies. Too often, the governments of developing countries, cash-strapped and indebted, feel unable to oppose the dictates of the IMF, the World Bank or the Inter-American Development Bank. The asymmetrical structure of the international financial system creates governments in developing countries that are more accountable to the IFIs than to their own domestic constituencies. People are effectively disenfranchised – their votes overruled by IMF policies. The IMF is the most powerful organization in the hierarchy of the international financial institutions. The power of the IMF comes from its ability to grant or withdraw its "seal of approval" based on whether a country is implementing the prescribed neo-liberal agenda of fiscal austerity, privatization and liberalization. The IMF’s "seal of approval" is necessary in order for a country to gain access to multilateral and bilateral loans, commercial capital investment, Paris Club debt restructuring efforts, or IMF and World Bank debt relief programs. Openly flouting fundamental IMF prescriptions can cause a country to be cut-off from major international capital flows. The "big stick" power of the IMF’s seal of approval means that the conditions attached to IMF loans become important political priorities in a countries’ domestic policy agenda. In this way, raising water tariffs and privatizing water became part of Nicaragua’s domestic policy agenda. IMF policies to cut government subsidies and impose increased cost recovery for water are driven by the institution’s focus on cutting government budget deficits. Public health problems, such as the lack of clean and affordable water, are outside of the IMF’s policy framework. From the IMF perspective, increasing consumer water fees to match "market rates" will improve the revenue generating capacity of the government and reduce the budget deficit. At the same time, the economic philosophy of the IMF holds that the efficiency and cost-effectiveness of the private sector is greater than that of the public sector. This results in a "one size fits all" IMF prescription promoting increased cost recovery and the privatization of public services. The IMF approach reflects little understanding of the fact that increasing "cost recovery" for water services can leave people unable to afford water – a substance that is essential to life. It may force families to make difficult trade-offs between food, water, health care and education. Promoting privatization and increased cost recovery can undermine the commitment and responsibility of governments to ensure universal access to basic water and sanitation services. The private sector, focused on profit ratios, has little incentive to expand services to poor communities or to subsidize services in communities that cannot pay a "market price." In theory, the public sector or governments should recognize the huge social costs – the cost of increased water-borne illnesses, reduced labor productivity, and gender inequity -- when people do not have access to basic water and sanitation services. It is true that many governments around the world have not fulfilled their mandate to promote the public interest. However, there is little empirical evidence that privatization will provide a solution to the problem. Experience across the world has shown that privatization of basic services such as health, education and water, has created new barriers to access, promoted unequal classes of users, and increased costs to users. The government of Nicaragua has been responding slowly to IMF and Inter-American Development Bank pressures to increase cost recovery and privatize water services. There are a variety of domestic political obstacles, from the role of water utilities in the political patronage system to popular resistance to increased water fees, that have slowed the externally imposed water sector "reform" program. Gaining popular political acceptance of the water privatization agenda will not be simple. There is tremendous resistance and social opposition to increased tariffs for water and social anxiety about relinquishing control of major portions of the country’s water system to foreign multinational corporations. Water, like food, air, or land, is basic to human survival. The basic injustice of water fees that are unaffordable to the majority poor population is very clear to most Nicaraguans. IMF and Inter-American Development Bank Loan Conditions: Water Sector
The Water Sector Reform Agenda and the IADB The IMF sets the over-arching policy agenda, but it is often the World Bank or the regional development banks that are responsible for the nuts-and-bolts implementation of the prescribed sectoral reforms. In Nicaragua, the Inter-American Development Bank (IADB) is responsible for developing and implementing the institutional, legislative and regulatory reforms that form an integral part of the water sector restructuring process. The IADB loan, Modernization of the Management of Water and Sanitation Services, was approved by the Board of the Inter-American Development Bank in December 1999. However, very little of the loan has been disbursed. The credit contract for the loan requires that the government of Nicaragua sign a service and management contract with an international operator (multinational water company) prior to disbursement of resources in excess of $600,000. The privatization clause has blocked disbursement of the loan. Key features of the water reform program required by the IADB are described below. Decentralization and unbundling. The Nicaraguan Water Utility (Empresa Nicaraguense de Acuaductos y Alcantarillos or ENACAL) is a national, centrally-operated public water utility that is designated to serve all of Nicaragua. The IADB loan is designed to "unbundle" or separate the parts of ENACAL that are attractive to the major multinational water companies from the parts that would not provide sufficient profit-making potential. The "unbundling" of water utilities is often part of the privatization process. The public sector remains responsible for the unprofitable sections, such as rural water systems, water delivery in poor and marginal settlements, infrastructure rehabilitation and expansion, and sewerage treatment. The IADB loan proposes to select the most lucrative piece of ENACAL’s operations for privatization by multinational corporations. Currently, the wealthier regions of ENACAL’s operations subsidize the rural areas and marginal settlements. This is known as a progressive cross-subsidy. It is likely that the IADB proposal to "unbundle" and privatize the more lucrative portions of ENACAL’s operations will reduce the utility’s ability to subsidize operations in the poorer areas. Privatization: Management and Service Contracts. There are many forms that privatization can take. The classic form of privatization is a concession or full-asset sale where the private company gains full control over the purchased public enterprise. Increasingly, the major multinational water companies prefer leases, management or service contracts to full-asset sales. The major water companies do not want to make fixed capital investments in water infrastructure, nor do they want to subsidize poor or unprofitable sectors of the water system. A management or service contract enables the water company to interface with the key source of profit – proceeds from customer billings – without the risks inherent in a full asset sale. The IADB loan requires that the government of Nicaragua negotiate a contract with an international water company to manage the Leon and Chinandega water utilities and provide specific services to the water utility in Managua. According to the records of ENACAL and the analysis of the IADB, Leon and Chinandega account for only 16 percent of all potable water users in the country. However, they generate a considerable amount of ENACAL’s operating surplus, providing resources used to finance urgent investments in other regions. As mentioned above, the privatization in Leon and Chinandega could undercut ENACAL’s ability to subsidize services in other regions. The privatization in Leon and Chinandega and the service contract in Managua are viewed as pilot projects that would be attractive to multinational water companies as a "strategic platform" for further privatization in the future. Developing an independent regulatory agency. In Nicaragua, a previous IADB loan, Public Enterprise Modernization Program, laid the legislative framework for the water sector restructuring. New legislation was drafted and passed that created an autonomous regulatory agency, INAA. (Actually, the Nicaraguan water utility used to be called INAA and the new legislation transformed INAA into the regulatory agency and created a new national utility called ENACAL.) Many critiques of the failure of privatization focus on the lack of adequate institutional and regulatory structures prior to the privatization. In the water sector, this analysis has resulted in World Bank and regional development bank proposals for water sector restructuring that include the development of an independent regulatory agency. Two of the key obstacles to privatization are the water utility’s function as a political patronage machine, and popular resistance to increased consumer fees for water. An independent regulatory agency, mandated and funded by the international financial institutions (IFIs), can help address both of these problems. The "independent" regulatory agency is likely to have more allegiance to the IFI reform than to the public sector utility due to the fact that it is essentially an IFI creation. The independent regulatory agency can be used to break some of the utility’s political power. In addition, the allegiance of the regulatory agency to the IFI reform agenda enables it to be used to rationalize and impose the "full cost recovery" agenda. Full cost recovery. Once INAA was recreated as a regulatory body, it then passed new decrees and resolutions to mandate a reformed tariff structure. INAA uses the World Bank-proposed methodology, long run marginal cost methodology, as the mechanism for setting water rates. "Marginal costs," a term used by economists, means the added cost of consuming each additional unit of water. Marginal cost theory tends to favor large volume usage, as the marginal cost decreases with volume, and this reduces incentives for conservation. The "costs" that are reflected in a water tariff or fee generally include the operation and maintenance costs, but not the "capital costs" or costs of installing or expanding the water infrastructure. However, in the case of Nicaragua, INAA has been implementing a fee adjustment that plans to increase rates to levels where "average" costs are covered. This means that consumers will pay the cost of operation, maintenance AND the capital costs of expanding or installing new infrastructure. In other words, there is virtually no role for state subsidy. Unauthorized connections. The IADB loan provides $6 million to address water and sanitation service deficiencies in the marginal settlements around Managua. It is estimated that about 400,000 people live in illegally occupied settlements surrounding Managua in conditions of extreme poverty. A major focus of the IADB program is directed at "regularizing" the "unauthorized connections" and reducing the high levels of leakage in the marginal settlements. There is also a grave lack of sewerage facilities in the marginal settlements that causes serious problems with gastrointestinal illness, malaria and dengue fever. There is some concern, however, that the IADB program could make a difficult situation worse. The IADB program proposes to regularize property titles, and replace unauthorized connections with official ENACAL water and sanitation services. It is unclear what the new costs would be for households, and whether there would be a connection fee in addition to a charge for water and sanitation services. The loan program includes an NGO-managed micro-financing plan to help households to cover the new costs of regularized water and sanitation services. However, poor families don’t need the burden of extra debt to pay the cost of basic services. Too often poor families are forced to make trade-offs between basic needs for food, water, health care or clothing. Many families may wish to regularize their property titles and enjoy the benefits of official ENACAL water services, but the program will only be beneficial to the marginal communities if the tariffs are truly affordable to the poor. Privatizing and commercializing water. The IADB loan, Public Enterprise Modernization Program, promoted revisions of the legal framework in Nicaragua in order to permit service concessions (including water services) to private operators under the same conditions that apply to public providers. In this case the IADB loan became a mechanism to further the World Trade Organization (WTO) negotiations on global trade in services, known as the General Agreement on Trade in Services (GATS). GATS seeks to remove all government "barriers" to international trade and commercial competition in the services sector. A basic clause in the GATS agreement, known as Article XVII on National Treatment, requires governments to provide foreign service providers with the most favorable treatment it accords to its own service providers. A related portion of the new legislative framework for water has faced some political obstacles and has yet to be approved in Nicaragua. (CONFIRM THIS) This legislative proposal would require that water service operators, public as well as private, be organized as corporations subject to common commercial law. INAA would then have the authority to award concession contracts to both public and private providers for a maximum of 25 years. FIVE GOOD REASONS TO STOP WATER PRIVATIZATION 1. Water is a public trust, a common resource, not a private commodity. Water is essential to human life and to all life on our planet. Each member of the human community has the right to water in quantity and quality sufficient to life and basic economic activities. Our dwindling freshwater resources are part of the global commons, a collective resource that should not be owned as a private commodity to be bought, sold or traded for profit. The private corporation has been organized to generate profit for its shareholders and is not the appropriate institution to manage water resources. Decisions related to water provision must consider public health, social equity, and environmental sustainability and should not be driven primarily by economic, or profit, considerations. 2. Privatization undermines universal access to water and sanitation services. The trends toward water privatization, bulk sales of water, and water at a "market price," have contributed to the growing phenomena of "water apartheid." Those who can afford it are provided with water services and those who cannot afford a "market price" are left to their own coping devices. In wealthier countries, water and sanitation services are often taken for granted – until privatization strikes. In developing countries, access to safe and affordable water is a daily struggle for the majority poor population. More than 1 billion people lack access to potable water. In many countries, World Bank policies promote privatization and "full cost recovery" for water and, when subsidies are not available, those who cannot pay are cut-off from the water system. In Nelspruit, South Africa, a cholera outbreak was linked to the government policy of turning off taps due to non-payment. In Cochabamba, Bolivia, a massive uprising was necessary to overrule the contract with the private water company, Bechtel and to stop the soaring water fees and company cut-offs for non-payment. Universal access to water and sanitation services must be upheld as a public and government responsibility. It is inappropriate for a private business enterprise to provide water services at "market prices" only to those who can afford them. 3. Privatization leads to rate increases. Cash-strapped and indebted governments around the world are pressured, through IMF and World Bank policies, to raise consumer fees for water (increased "cost recovery"). Increased cost recovery provides new revenues for indebted governments. In addition, it becomes necessary to raise consumer water rates in order to attract private sector investment in the water services. In general, multinational water corporations require higher profit margins (returns on investment) than public sector management of the water utility. It is the water consumer that must bear the burden of this additional profit extraction. 4. Privatization undermines water quality, conservation, and environmental sustainability. The major water companies work nationally and internationally to undermine water quality regulations and environmental standards when they are perceived as increasing the costs of doing business. In addition, market-cost pricing or marginal cost theory tends to reward increased consumption, because the marginal cost becomes lower as the volume increases. Instead of a progressive tariff structure that would encourage conservation by charging higher tariffs to higher volume users, market cost pricing tends to flatten the rate differential in the tariff structure and reward the higher volume users. Encouraging consumption is a typical strategy of any private corporation driven by the profit motive. The privatization and commodification of water also promotes bulk water sales that can have disastrous ecological consequences. Many private water companies are seeking permits, licenses, easements and ownership rights in a mad dash to obtain access to fresh water that they can sell at huge profits. Mass extraction of water from its natural sources can result in ecological imbalances such as aquifer depletion and groundwater contamination. Once aquifers are depleted or contaminated, they are almost impossible to restore. 5. Privatization reduces accountability and local control. The corporate water industry is highly concentrated. The top five water companies have a combined sales income of …….Major water companies are multinational conglomerates with operations spread across the globe. The largest water companies have an annual sales income larger than the GDP of the small developing countries where they operate. It is virtually impossible for citizens to exercise a public oversight function or enforce accountability to local concerns. Multinational corporations are accountable to their shareholders rather than to the citizens in the countries where they operate. In contrast, it is easier for citizens to exercise oversight or to enforce accountability when water utilities are publicly-owned by municipal, regional or national governments. Water Privatization: Where It's Happening in the U.S. Today, over 80 percent of Americans receive their water from public utilities, usually managed by city or municipal authorities. Many public providers are managing systems that desperately need repair and upgrading. Without the help of the federal government, which has not placed the rehabilitation of aging water systems high on its list of priorities, cities and counties are in a bind. To the major multinational water companies, the American market looks like a new frontier with exciting possibilities. The major water companies are poised to take advantage of the public financing problems of the local water utilities by offering to buy, manage or operate their water or wastewater systems. Below are some of the "privatized" water and wastewater systems in the U.S. Boonville, Indiana. Signed a 10-year, $13 million contract with PSG for the operation, maintenance and management of the city's sewer system, a water filtration plant and the distribution network. Bridgeport, Connecticut. Also signed a deal with PSG for five years O&M (operation and maintenance) of a wastewater treatment and collection system. Buffalo, New York. A five-year contract operations deal with American Anglian. American Anglian has a five-year renewal option at the end of the contract. Burlingame, California. Started the O&M business going in 1972 when it contracted with Wheelabrator EOS to provide full O&M services for a 5 million gallon per day wastewater and treatment plant. The original contract has consistently been renewed and now extends well into the 21st century, Charleston, West Virginia. Contract with West Virginia-American, a subsidiary of American Water Works Co., for water and sewer services. Chattanooga, Tennessee. 130 year-old contract with Tennessee-American, a subsidiary of American Water Works. Cranston, Rhode Island. One of the first long term privatizations in the United States, in which Cranston leased its entire wastewater treatment and collection system to Triton Ocean State for 25 years. Evansville, Indiana. Has a five-year contract with EMC for the operation and maintenance of two water filtration, sewer and distribution networks. Fairbanks, Alaska. Pursuing a 20-year leasing arrangement. The city would lease its water and wastewater utility to Golden Heart of Fairbanks as part of a deal that includes three other city utilities. At the end of the contract, the city would have the option to sell the utilities. Currently awaiting EPA approval. Franklin, Ohio. In 1995, the Miami Conservancy District in Ohio sold a 4.5 million gallon per day wastewater and treatment plant to Wheelabrator EOS as part of an EPA demonstration project. Fulton County, Georgia. Recently renewed a contract with JMM Operational Services (now United Water Services) for the operation and management of three wastewater treatment plants. Two other treatment plants are privatized in Fulton County: Johns Creek and Little Creek. Gary, Indiana. Poised to sign a deal for operation and maintenance of wastewater treatment facilities and the city sewer network. Looking for $30 million worth of savings over the duration of the contract. Hingham and Hull, Massachusetts. Massachusetts-American, another American Water Works subsidiary owns the water systems. Hawthorne, California. Leased its water system to the California Water Service Company for 15 years in return for a one-off payment of $6.5 million and annual payments of $100,000. The city will not have to pay for capital improvements to the system during the term of the contract. Hoboken, New Jersey. In 1994, Hoboken negotiated a public/private partnership with United Water Services which now operates and manages the city's water system. The contract is for 10 years, but renewable for up to 40 years. Howell Township, New Jersey. Raised $35 million by selling its municipal water system to the New Jersey-American Water Company, a subsidiary of the American Water Works Company. Houston, Texas. Signed a five-year contract with JMM Operational Services for the operation and maintenance of its Southeast Water Purification Plant. Huber Heights, Ohio. Sold the city’s water system to American Water Works in 1993. Indianapolis, Indiana. Recently extended an existing O&M contract it has with the White River Environmental Partnership (a group of private firms) for a further 10 years. Jersey City, New Jersey. Signed a five-year contract with United Water Services for the the management, operation and maintenance of its entire water system. The agreement is designed to enable the city's public utility to reduce its long term indebtedness by $14 million over the contract's term. Lee County, Florida. ST Environmental Services has a contract to operate and maintain the water and sewerage system. Milwaukee, Wisconsin. The Milwaukee Metropolitan Sewerage District recently signed a 10-year O&M contract with United Water Services. United Water will manage two wastewater treatment plants and the city's sewer system as well as a 30-megawatt power plant. New Orleans, Louisiana. Signed a 5-year contract with PSG to operate and maintain two wastewater treatment plants, including one with a capacity of 122 million gallons per day currently the largest wastewater treatment plant operated by PSG. Oklahoma City, Oklahoma. One of the largest public/private/partnerships in the country. Now into the ninth year of a contract it signed with PSG to operate, maintain and manage four wastewater treatment plants and a large pumping station. Pasadena, Texas. Awarded a five-year contract to STES for the operation and maintenance of three wastewater treatment plants. Pekin, Illinois. In 1982, Illinois-American, another subsidiary of American Water Works, acquired Pekin’s water system from a local private owner. Santa Teresa, New Mexico. This city in southern New Mexico signed a 10 year contract with Eco Resources for the operation and maintenance of its entire water and wastewater system. Seattle, Washington. Signed a 25-year contract with CDM Philip for the design, construction and operation of its water treatment facility. The General Agreement on Trade in Services (GATS): How GATS promotes and supports the privatization of water services A whole new set of World Trade Organization (WTO) talks on global trade in services began in February 2000 with formal negotiations beginning in Geneva at the end of March 2001. The existing GATS regime, initially established in 1994, is already comprehensive and far reaching. The current rules seek to phase out gradually all government "barriers" to international trade and commercial competition in the services sector. The GATS defines services very broadly, including publicly-provided services, and covers such areas as drinking water, health care, education, social security, transportation services, postal delivery, and services related to the environment, culture, and natural resources. Its constraints apply to virtually all government measures affecting trade in services, from labor laws to consumer protection to subsidies, grants and licensing protections. However, the current GATS agreement wasn’t sufficient to the major corporations vying to provide services in the fastest growing sector of the global economy and determined to expand their commercial reach. The new round of GATS negotiations taking place now in Geneva are designed to further facilitate the corporate intrusion on public services by:
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. |
|
Join | Contact PC | Contribute | Site Map | Careers/Internships| Privacy Statement | |||||||||||||||