Update 2005: ?No to the Privatization of Water?

UPDATE – January 31, 2005 – Managua, Nicaragua – By Sarah Romano

“No to the Privatization of Water”

“We’re the ants fighting against the elephant,” exclaimed Verónica Arjueda of the Central Mennonite Committee during an early December 2004 gathering of Action by Churches Together in Managua.  Coalition members were gathered to review a government-proposed national water law that, in theory, would determine the extent to which Nicaragua’s water would remain a public good – and in most Nicaraguans’ minds, more accessible and affordable.  Referring to an uphill struggle of consumers against the combined strength of the central government and international lending institutions, Verónica exclaimed passionately that the movement against the privatization of water is one that needs to charge forward “for all the communities of [Nicaragua].”

With still no definitive government response on water privatization expected until the National Assembly’s final vote on the water law at the end of February, the issue of control over the vital natural resource continues to be one of extreme national concern among Nicaraguans.  “Before talk of water privatization, no one talked about water,” explains Carlos Pacheco at the Center for International Studies[1] in Managua, an NGO that focuses on the dynamics of globalization and its effects on people.   Carlos, who also serves on the board of directors of the National Consumers Defense Network[2] (RNDC), concurs with other anti-water privatization movement leaders that the public has been extremely active in countering efforts to concede the “patrimonio nacional,” or national heritage, to a foreign enterprise. 

Currently, 6 years after an Inter-American Development Bank´s (IDB) massive loan package introduced the first talk of water privatization as a loan condition, the issue appears to be coming to a head: Amid public protest and a formal court order to suspend the bidding process, the state water company, ENACAL (Nicaraguan Enterprise of Aqueducts and Sewers[3]) continues to progress its “modernization” plan.


After Hurricane Mitch caused   severe damage throughout the country in 1998, the Nicaraguan government turned yet again to international lending institutions, including the Inter-American Development Bank (IDB), for financial relief and help in reconstruction.

In 1999, the IDB approved a loan package of $21 million to Nicaragua (number 1049/SF-NI) which stipulated structural reforms that essentially mandated the privatization of Nicaragua’s basic services, including electricity, telephone and water.  The portion of the loan pertaining to ENACAL carries the name the “Program to Modernize the Management of Water and Sewerage Services,”[4]and states as a specific objective the implementation of “a coherent strategy for greater private-sector participation in the provision of services.” 

To comply with the loan stipulations of the IDB, the Nicaraguan government created its “Reinforced Strategy of Economic Growth and Poverty Reduction”[5]in July 2001 which laid out a plan to privatize the state’s services (parallel to the wishes of the IDB) under the objective of “continuing transformation towards a market economy.”

The Public Reacts

In 2000, the government sold the state’s electricity company, ENEL, to Unión Fenosa of Spain.   The state telephone service provider, ENITEL, was privatized the following year.

While consumer groups report that Nicaragua has learned the negative consequences of water concessions from other Latin American countries, most citizens need only to refer to their experience with the recent privatization of electricity:   Since the 2000 concession to Unión Fenosa, electricity costs have sky rocketed, oftentimes exceeding amounts approved by the Nicaraguan Energy Institute.   (In rural areas, there have been increases of 30-40 %.)  Many citizens fear – or predict – that they will be unable to afford their basic services if water management falls into the hands of a private enterprise. 

The RNDC led efforts to denounce the attempted concession of water through public protests and written denunciations (including one that was handed over in person in 2004 to the President of the IDB in Washington, D.C., Dr. Enrique Iglesias).  In fact, the initial talk over privatization implicated multiple sectors of society – religious, family, community – and many social organizations began to direct their resources and organizing efforts towards water.

These groups argued that with no law in place allowing the concession of water or the setting up of a way to regulate foreign involvement, there were no grounds for privatization of the public good.    In response, the National Assembly passed law 440 in 2003 which formally put the brakes on any attempts to privatize water until the passing of a national water law.   The   IDB financially backed the government’s project to develop legislation, a move that could be interpreted to have undue influence on the leanings of the final law.

Government Proposes a General Water Law

On November 11, 2004, the Commission of Environment and Natural Resources of the National Assembly released a rough draft copy of the national water law, or the “Proyecto de Ley General de Aguas Nacionales,” to the general public.  The proposed law primarily drew upon two previous proposals (although there were 4[6]), one from the RNDC and another from the government’s ministry of finances, or MIFIC (Ministerio de Fomento, Industria y Comercia).   The draft asserted that water is a matter of “national security” and its “preservation and sustainability is a fundamental task of the state and of society.”  Although the draft purported that “water is a natural resource that should be primordially managed by nationals,” consumer advocacy groups convened to create revisions to the document that concerned citizens called “attractive,” but with many loop holes and too strong a focus on water extraction instead of water conservation and protection.  Additional concerns stemmed from insufficient space granted for the participation of civil society in water management, particularly at macro levels of national decision making. 

Consequentially, proposed revisions from the public focused on expanding opportunities for civil society participation, defining and strengthening support of indigenous community rights and tightening restrictions on water pollution.

The government released the final draft in mid-December, which consumer groups found to contain the same flaws as the draft.   On February 3rd, with the public sitting in the assembly chambers filled with protestors, the Assembly passed the bill.   The president of the Commission of Environment and Natural Resources, Jaime Morales Carazo, has agreed to leave open a window of 15-30 days for further debate and possible changes to the law, yet he asserts that there has already been heavy input from various sectors and only “substantial” new elements will be considered for incorporation. 

Privatization Plan Progresses

Despite consistent public protest, the 2003 law prohibiting ENACAL from making concessions of any kind, and now a court order to end the bidding process, ENACAL continues its process of “modernization” behind closed doors. 

The state water company released an international call for bids to regulate water services in July of 2004 under the auspices of the same 1999 IDB loan that mandates “a strategic platform for possible privatization in the future” and to which civil society reacted against so fiercely. 

On December 9th, ENACAL received 3 bids for a contract to control the commercial sector of the state company.  While 7 foreign companies originally showed interest in a contract, the three that submitted formal proposals include Biwater International of England, Consortium Inecom of Chile and Consortium APCA of Spain.  In accordance with the bidding process, ENACAL acknowledged it would spend 30 days reviewing the offers before granting a contract to one of the international enterprises.[7] 

In the first week of January, 2005, the Managua Court of Appeals ordered a stop to the bidding process being undertaken by ENACAL and its institutional counterpart, the INAA.   Within days, ENACAL’s Debayle had issued a statement that the company, having received a “green light” from members of the Infrastructure Committee of the National Assembly, and would continue to move forward with its plan despite the court decision.

“Privatization or Modernization?”[8]

Although consumer advocacy groups have been waging a strong fight against the privatization of water, the proponents of foreign involvement – the central government and the state water company, ENACAL – claim their plan their plan has nothing to do with privatization. 

ENACAL legal advisor Ulises Somarriva claims that the state company is not privatizing, but rather permitting “a process of modernization of the company, being that we’re going to have consultants who will only be focusing in the area of management.”   ENACAL asserts that the purpose of the consulting is to make the company more “business like,” and to provide better service to consumers.   Additionally, the company claims to be operating within the confines of its own laws, the law of potable water service and the framework of the IDB loan of 1999. 

The reference to the modernization plan as falling under the auspices of the IDB loan is one reason why ENACAL's story of “modernization” carries no weight with consumer groups like the RNDC:   the loan specifically stipulates preparation for privatization and it is easily arguable that buffing up the commercial sector   – which regulates the installment of water meters, billing and all customer relations – is indeed creating the “platform” for future, more comprehensive privatization of Nicaragua’s water system as the company becomes more business-like and hence, more profitable. 

Although the national debate over control over the natural resource has been clouded by the conflicting rhetoric of ENACAL and consumer groups, the voices of the latter plus the vast majority of middle to low income Nicaraguans (over half the population) continue to unite in protest against what they are calling an attempt to privatize this vital natural resource.

No Clear End in Sight

Given a series of both setbacks and successes in recent months for the anti-water privatization movement, most Nicaraguans are expecting the worst.   “Water will be privatized” is an oft heard sentiment among citizens, who have experienced the “behind closed doors” privatization of electricity and telephone, and no doubt question their power in obstructing this next attempt “from above” to concede more of the state’s power to foreign corporations.

While pessimism may be a common spoken sentiment, few are ready to give up fighting:   The RNDC has committed itself to mobilizing civil disobedience to confront ENACAL’s actions (although it has yet to sign a contract) and the government’s support of privatization.   Managua non-governmental organizations like Centro Humboldt are keeping their focus on the issue and are actively lobbying in the National Assembly against the water law.  In what appears to be a recent breakthrough, at the end of January the Infrastructure and Energy Committee of the National Assembly agreed to propose a constitutional amendment that would supposedly ban privatization of the nation’s water.  Unfortunately for the advocates of the constitutional reform, “la Alianza” (the Alliance against Water Privatization, composed of 38 organizations), a proposed amendment will not be eligible for ratification until 2006. 

There is still no predicting what exactly will come of Nicaragua’s water management system.   The “lucha,” or fight, however, of the last several years demonstrates that Nicaraguans are keenly aware of what’s at stake in this battle for control over water. 

“‘There are no water fasts,’” shares José Angel Rodríguez of CEPAD in Managua, citing a common expression in the movement that gets at the heart of why protecting this resource can become literally a matter of life and death. 

As 2005 begins with strong and active civil society opposition to ENACAL’s unfolding plan for private sector consultation, the struggle of public vs. private interests in Nicaraguan water will no doubt remain a top civil society issue in 2005 and into the coming years.

[1]Centro de Estudios Internacionales
[2]Red Nacional en Defensa de los Consumidores
[3]Empresa Nicaragüense de Acueductos y Alcantarillados
[4]Consultoría para la Modernización y Gestión de Servicio de Agua Potable y Alcantarillado
[5]Estrategia reforzada de crecimiento económico y reducción de pobreza
[6]The other proposals came in late 2004 from el Grupo de Promoción de la Agricola Ecológica (GPAE) and Culcumeca.
[7]While a month remained before an expected move on the company’s commercial sector,   ENACAL immediately signed a contract with Biwater for the construction of a treatment plant for the residual waters of Lake Managua.
[8]Heading of a newspaper article in El Nuevo Diario on December 30, 2004: “¿Privatización o modernización?” by Valeria Imhof.


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