Puerto Rico ? Guinea Pig for Water Privatization

Britt Fremstad, Public Citizen, Water for All

Puerto Rico is no stranger to the failures of water privatization. During the past decade, two of the world’s largest water corporations—Vivendi and Suez—have treated Puerto Rico as a guinea pig in attempts to further their own profits.

In 1995, the Puerto Rico Aqueduct and Sewer Authority (PRASA) signed a contract with the French conglomerate Vivendi, now called Veolia. PRASA had serious problems with its infrastructure and hoped a private company would have the ability to invest in water services for the island’s four million residents. These hopes quickly turned hollow.

In August of 1999, the Puerto Rican Office of the Comptroller produced a reported severely critiquing Vivendi’s services. It noted “deficiencies in the maintenance, repair, administration and operation of aqueducts and sewers, and required financial reports that were either late or not submitted at all.” Moreover, the health of people in communities still not connected with pipes was poor. There were higher incidents of skin allergies, gastroenteritis, and muscle spasms. Naturally, buying water filters, bottled water and cisterns also stressed family budgets. Puerto Ricans complained that Vivendi workers didn’t know where to find aqueducts and valves in need of repair, but that they were always able to find a way to bill their customers for unconsumed water. Despite the higher bills, Vivendi had already put PRASA’s operational deficit at $241.1 million, and the Government Development Bank had to contribute emergency funding on multiple occasions.

In May of 2001, another report came out charging Vivendi with 3,181 deficiencies in infrastructural administration, operation, and maintenance. The U.S. Environmental Protection Agency (EPA) also fined PRASA $6.2 million for non-compliance with U.S. law. The operational deficit had also increased almost threefold, to $685 million. Vivendi had to go, but its replacement was no better.

Ondeo, Suez’ water division, happily accepted a 10-year, $4 billion contract with the Commonwealth of Puerto Rico. Suez was eager to expand its business in North America, and this was the largest O&M [operation and maintenance] contract of its time. After a mere two years, however, the contract was cut prematurely short. Citing “economic realities very different from initial projections,” Ondeo asked for an additional $93 million. Disappointed with Ondeo’s failure to 1) improve access to water in all communities, 2) meet EPA standards, 3) improve infrastructure, and 4) balance the budget, PRASA asked them to leave instead.

Political commentator, David Noriega, sums up the effects of water privatization in Puerto Rico: “Outsourcing has… been a disaster.”