(unpublished) By Antonia Juhasz, January, 2001
Program Director, International Forum on Globalization
Deregulation is a “colossal and dangerous failure.” These are the words of Governor Gray Davis, but they could as easily of been spoken by any resident of California. After personally being hit with a “rolling blackout,” I am ready to lead the charge against the deregulators.
However, one good thing may yet come from the energy deregulation debacle: California will learn from this mistake before making another big one.
As early as February, the San Francisco Board of Supervisors will vote on a funding scheme to upgrade San Francisco’s aging Hetch Hetchy water system. One potential solution may lead to the privatization of the system by San Francisco's own multinational giant, the Bechtel Corporation.
Bechtel has already secured a four-year, $45 million consulting contract with the city of San Francisco. In addition to working side-by-side with Public Utilities Commission (PUC) employees and managing the upgrade, the contract calls for Bechtel to assist the city in finding the funding needed for the project. Originally, the Brown Administration quoted the cost of the upgrade at $3.5 billion. However, this fall, the Mayor upped the anti to $8 billion, while the city has secured only $400 million. The Bechtel contract was awarded over the objections of numerous citizens groups, the Professional and Technical Engineers Local 21 and the San Francisco Board of Supervisors’ budget analyst. One reason for objection to the contract is fear that the $7.6 billion shortfall will come from Bechtel, that the financing will lead to privatizing and that our water services will follow the same path as our energy services.
There is plenty of reason to believe that Bechtel would seek such a role. Bechtel is already a partner on many U.S. municipal water projects. In addition, Bechtel is positioning itself as one of the world’s leading water privatization entrepreneurs, forming partnerships with global water leaders such as United Utilities of Great Britain and investing billions of dollars to acquire interests in water privatization companies and development projects across the country and around the world.
The promises of deregulation are the same as privatization: prices will go down while services will expand and improve. We all know what happened with energy deregulation and I witnessed first hand the same results when Bechtel privatized water services in Cochabamba, Bolivia.
It late 1999, the Bolivian government privatized the water system of its third largest city, Cochabamba. The contract went to the sole bidder – Aguas del Tunari – a Bolivian subsidiary of the Bechtel Corporation.
The worst predictions of water privatization were quickly realized: before any investment was made in infrastructure to ensure improved or expanded service, rates increased for all and as much as tripled for some of the poorest users. In a country where the minimum wage was less than $60 per month, many users were hit with water bills of $20 per month and higher. While the price hikes put water out of reach of the majority of poor users, the company was receiving a predicted 16% average annual return on their investment.
The Water Warriors
After traditional methods of negotiation failed, the people of Cochabamba – young and old, students and workers, city and country dwellers – engaged in a unified uprising to take back their water. These “water warriors” shut down Cochabamba through coordinated street protests, strikes and blockades. In response, the government declared a “state of siege” – sending more than 1000 soldiers into the streets with live bullets. A 17-year-old boy was killed and dozens of others were wounded. After weeks of confrontation, the citizens refused to back down and in February 2000, the government conceded, signing an accord to end its contract with Aguas del Tunari and Bechtel.
In response, Bechtel is suing the government of Bolivia through a Bilateral Investment Treaty to reclaim its lost investment dollars and to receive payment for potential lost future profits.
When Bechtel’s local managers fled the country and the government entered into an international legal battle with Bechtel, the workers of the water company, SEMAPA (Servicio Municipal de Agua Potable y Alcantarillado), began running the water system themselves. With the help of the leaders of the citizen’s movement, La Coordinadora, the water workers have been providing water universally, fairly and reliably to all of Cochabamba. In community after community, I witnessed how they have become local heroes for doing what the privatizers and the government had promised but ultimately failed to do.
The Failure of Privatization
It was not difficult to predict the failure of Cochabamba’s water privatization experiment. The same rate increases and loss of rights to water due to privatization can be seen around the world. In turn, Bolivia had been privatizing industry after industry for years at the behest of the World Bank and the International Monetary Fund (IMF). While Bolivia’s faithful adherence to privatization has earned it a ranking as one of the World Bank’s best performing portfolios, the Bank has also noted a “fundamental paradox” in its policies. For, while Bolivia is a privatization poster child, it remains one of the poorest nations in the world with approximately 70 percent of its population living in poverty. The bank has been unable to solve this paradox because it refuses to question privatization plans that guarantee the rights of the privatizer, while trampling those of the consumer. Fortunately, the people of Cochabamba did not suffer from the same paralysis. Hopefully, the people of San Francisco will not either.
The citizens of San Francisco can learn a great deal from the “water warriors” of Cochabamba. Like them, we do not have to accept policies that promise to serve the peoples’ interest while doing nothing more than fattening corporate bottom-lines. Like the citizens of Cochabamba we can forge a new path of public ownership of our natural resources, which puts greater power into the hands of workers and citizens. Finally, we can accept the “Cochabamba Declaration” which states that water is a basic human right not to be treated as a commercial good that can be privatized or traded.
While PG&E's corporate parent National Energy Group racks up profits, the people of California are left bearing the financial burden of deregulation. We can stop the same thing from happening with water here and across the world.