Posted by: shipbright | September 21, 2009

Privatization, globalization and economic water scarcity

Cochabamba, Bolivia, South America…Bolivia’s third largest city, a place few have heard of and the site of a deadly conflict that intertwined issues of water and globalization in the form of privatization of a public resource. It stands as an example of “economic water scarcity” which as you know from past blog[s] is essentially a man-made problem as opposed to the issues of physical water scarcity.

Bolivia-mapCochabamba is a complex social issues story and stands as a lesson for all of us as we try and think through our solutions for fresh[water] ideas for a thirsty planet.   It shows how the issue of water and economic water scarcity can become an ignition point for other social issues.  Water is such a basic need that it elicits our “animal spirits” in our instinctual drive to survive.  The Cochabamba Water Wars quickly evolved into a large scale social conflict and it’s a story we should all pay attention to. 

BACKGROUND:  I’ve spent a lot of time reading all sides of this issue and it is truly a challenge to write a blog that distills the issues.  Here’s the essence [heavily edited] of the story from Wikipedia, it’s a bit of a long read but it’s as edited as I can make it and still have it make sense:

In 2000 the World Bank declared it would not “renew” a $25 million dollar loan to Bolivia unless it privatized its water services…The New Yorker reported on the World Bank’s motives, “Most of the poorest neighborhoods were not hooked up to the network, so state subsidies to the water utility went mainly to industries and middle-class neighborhoods; the poor paid far more for water of dubious purity from trucks and handcarts. In the World Bank’s view, it was a city that was crying out for water privatization.”

Prior to privatization the water works of Cochabamba were controlled by the state agency SEMAPA. The Bolivian government put SEMAPA up for auction for privatization but not capitalization. Only one party was willing to bid on the project.” This was Aguas del Tunari, a consortium led by International Water Limited (England), the utility Edison (Italy), Bechtel Enterprise Holdings (USA), the engineering and construction firm Abengoa (Spain) and two companies from Bolivia, ICE Ingenieros and the cement maker SOBOCE. The water network that they envisioned was projected to provide drinking water to all of the people of Cochabamba. This was set to double the existing coverage area and also introduce electrical production to more of the region.

Without regard for its weak bargaining position, the Bolivian government under President Hugo Banzer agreed to the terms of its sole bidder Aguas del Tunari and signed a $2.5 billion, 40-year concession “to provide water and sanitation services to the residents of Cochabamba, as well as generate electricity and irrigation for agriculture.” Within the terms of the contract the consortium was guaranteed a minimum 15% annual return on its investment, which was to be annually adjusted to the United States’ consumer price index.

The officials in Bolivia for Aguas del Tunari were mostly engineers lacking marketing training. They were also foreigners unaware of the intricacies of Bolivian society and economics. Upon taking control the company raised water rates an average of 35% to about $20 a month. While this seemed minuscule in the developed nations that the Aguas del Tunari staff had come from, many of their new clients only earned about $100 a month and $20 was more than they spent on food. In complete ignorance of the reality of his situation, a manager for the consortium, Geoffrey Thorpe simply said “if people didn’t pay their water bills their water would be turned off.” The poor were joined in their protest by January 2000, when middle-class homeowners and large business owners stripped of their subsidies saw their own water bills increase.

cochabamba protestStarting in early January 2000 massive protests in Cochabamba began with Oscar Olivera among the most outspoken leaders against the rate hikes and subsequent water cut-offs. The demonstrators consisted of regantes (peasant irrigators), they were joined by jubilados (retired unionized factory workers). Young men began to try and take over the plaza and a barricade across incoming roadways was set up. Soon they were joined by pieceworkers, sweatshop employees, and street vendors. Self-styled anarchists from the middle-classes came from the University of Cochabamba to denounce the World Bank and International Monetary Fund.

Protesters were able to halt Cochabamba’s economy by holding a general strike that shut down the city for four straight days. A ministerial delegation went to Cochabamba and agreed to roll back the water rates, still the demonstration continued. On 4 February 2000 thousands marching in protest were met by troops and law enforcement from Oruro and La Paz. Two days of clashes occurred with the police using teargas. Almost 200 demonstrators were arrested, 70 protesters and 51 policemen were injured.

CochabambaBarricadeIn April 2000, demonstrators again took over Cochabamba’s central plaza. When the leaders of the Coordinadora (including Óscar Olivera) went to a meeting with the governor at his office they were arrested. Though they were released the following day, some, fearing further government action, fled into hiding. More demonstration leaders were arrested, with some being transferred to a jungle prison in San Joaquin, a remote town in the Amazon rainforest on the border with Brazil. The protesters also expanded their demands calling on the government to resolve unemployment and other economic problems. Soon demonstrators had most of the major highways in Bolivia barricaded.

President Banzer on April 8, 2000 declared a “state of siege”. Banzer said, “We see it as our obligation, in the common best interest, to decree a state of emergency to protect law and order.” Information Minister Ronald McLean described the rationale for the decree, saying “We find ourselves with a country with access roads to the cities blocked, with food shortages, passengers stranded and chaos beginning to take hold in other cities.” The decree suspended “some constitutional guarantees, allowing police to detain protest leaders without a warrant, restrict travel and political activity and establish a curfew.” Meetings of over four people were outlawed, and the freedom of the press was curtailed with radio stations being taken over by the military and some newspaper reporters being arrested. The police moved in to enforce the policy with nighttime raids and mass arrests. At one point 20 labor union and civic leaders were arrested. The police’s tear gas and rubber bullets were met by the protesters’ rocks and Molotov cocktails. Continuing violent clashes between the demonstrators and law enforcement led to internal exile, 40 injuries, and 5 deaths.

cochabamba armyOn April 9, 2000 near the city of Achacachi, soldiers met resistance to removing a roadblock and opened fire killing two people (including a teen-age boy) and wounding several others. Angry residents overpowered soldiers and used their weapons against military leaders. They wounded Battalion commander Armando Carrasco Nava and army captain Omar Jesus Tellez Arancibia. The demonstrators then found Tellez in hospital, dragged him from his bed, beat him to death and dismembered his body.

Also on 9 April 2000 800 striking police officers fired tear gas at soldiers. In response the government gave a 50% pay raise to the La Paz police to end the strike. This brought their monthly income up from the equivalent of $80 to $120. The police then returned to enforcement procedures against those still demonstrating.

The coca growers of Bolivia led by then Congressman Evo Morales (elected President of Bolivia in December 2005) had joined the demonstrators and were demanding an end to the US-sponsored program of eradication of their crops. Seeing the involvement of the coca growers, the Bolivian government claimed that the demonstrators were actually agents or pawns of drug traffickers. Felix Santos, a leader of the farmers refuted such claims saying “We are protesting because of higher gasoline and transportation prices and a law that will charge us for the use of water.”

cochabamba protest posterAfter a televised recording of a Bolivian Army captain, Robinson Iriarte de la Fuente, firing a rifle into a crowd of demonstrators wounding many and hitting high school student Víctor Hugo Daza in the face, killing him, intense anger erupted. The police told the executives of the consortium that their safety could no longer be guaranteed. Oscar Olivera signed a concord with the government guaranteeing the removal of Aguas del Tunari and turning Cochabamba’s water works over to La Coordinadora. On the day following Víctor Hugo Daza’s funeral, Óscar Olivera climbed to his union office’s balcony and proclaimed victory to the exhausted crowd.

On 12 April 2000 when asked about the outcome in Bolivia, World Bank President James Wolfensohn maintained that free or subsidized delivery of a public service like water leads to abuse of the resource; he said, “The biggest problem with water is the waste of water through lack of charging.”

In the end water prices in Cochabamba returned to their pre-2000 levels with a group of community leaders running the restored state utility company SEMAPA. As late as 2005, half of the 600,000 people of Cochabamba remained without water and those with it only received intermittent service (some as little as three hours a day). Oscar Olivera the leading figure in the protests admitted, “I would have to say we were not ready to build new alternatives.”

SEMAPA managers say they are still forced to deal with graft and inefficiencies, but that its biggest problem is a lack of money (it can not raise rates and no international company will give them a loan).  According to author Frederik Segerfeldt, “the poor of Cochabamba are still paying 10 times as much for their water as the rich, connected households and continue to indirectly subsidize water consumption of more well-to-do sectors of the community. Water nowadays is available only four hours a day and no new households have been connected to the supply network.” Franz Taquichiri, a veteran of the Water War and an SEMAPA director elected by the community, said “I don’t think you’ll find people in Cochabamba who will say they’re happy with service. No one will be happy unless they get service 24 hours a day.” Another Cochabamba resident and activist during the unrest summed up her opinion of the situation by saying, “afterwards, what had we gained? We were still hungry and poor.”

For anti-globalization opinion holders Cochabamba has been an icon of the evils of globalization whereby foreign corporations receive contracts from the Government to develop and deliver a good, in this case water, for profit to the populace.  This is further inflamed by the fact that The World Bank insisted on this privatization in order for Bolivia to receive any further loans with which to build up the nation’s infrastructure. All the elements for accusations of neo-colonization by wealthy countries and just the sort of actions that inflame people’s passions.

For Free Marketers’ Cochabamba stands as an example of political corruption and long-term local government mismanagement of the water system having its chickens come home to roost when much needed change was attempted to be implemented.  They point out that after the deadly protests there are still people without water who are paying more [reportedly up to 10X more than what the wealthy pay] and without further investment in the delivery of clean potable water.

Are the anti-globalization people right or wrong?  Are the Free Marketers right or wrong?  The answer is YES to all of the above and none of the answers are simple nor black and white.  Like Darfur, Cochabamba had internal issues that were bubbling up and water, fundamental to life, became the flashpoint.

Much like religion, a few extremists on either end of the political spectrum can hijack an issue and get people up in arms who would otherwise be able to more calmly and reasonably work through an issue.

Here are some links to give your perspective from the Left and the Right:

From the Left:

From the Right:

And here’s one that I like that seems to be about down the middle:

Water once again became the flashpoint for other social ills, the disintegration of a civil society ensued and people died.

Water%20ProjectsCOMMENTARY:  So in the end, the poor still suffer economic water scarcity.  We have before us in Cochabamba the intersection of globalization and privatization.  Privatization can be a solely domestic matter and we’ll talk about that in another post as we look at boutique water bottlers and companies.  But Cochabamba gives us a case study for the Big Picture when privatization attracts a global consortium of investors and influence. 

Globalization isn’t the problem in and of itself in Cochabamba;  lack of cultural sensitivity and knowledge of social issues was the problem for the foreign investors.  What were they thinking by jacking up prices by such a huge percentage of local per capita income?  Dollar amounts seemed low to the foreign contractors because they were in the mind set of their own country and they were ignorant of the reality out on the street.  This is a legitimate issue around globalization and its oftentimes insensitivity to local culture, tradition, identity, and reality.

On the other side, the problem falls right back into local abuse of power, greed, and corruption.  The fact still remains that Cochabamba lacks the technical skill and expertise to develop and deliver water to everyone and not just the politically connected.  Globalization and privatization allows access to expertise and innovation that local people may not have.  Globalization can help advance society and mankind IF those who bring the expertise from afar can open their eyes, minds and hearts to the uniqueness and diversity of the culture before them.  One of the axioms of environmental policy is that we need to “keep all the parts” and that goes for mankind especially.  Just because we don’t understand the need for something now doesn’t mean we won’t as we evolve and get smarter.

Having worked in both the Public and Private sectors I am often left shaking my head that one or the other sector ‘doesn’t get it” when they attempt to address an issue. I think everyone needs to do a “tour of duty” in both the private and public sectors because I am stunned by the arrogance, which is born of ignorance, of both sectors sometimes in what it takes to run a business or a run a government.  I am reminded of the cartoon of two guys in the stern of a boat watching a guy up in the bow furiously trying to bail out the sinking boat and one says to the other, “I’m sure glad that’s not my problem!”

Privatization is a good idea in order to bring to bear expertise, capital, and innovation to address a need, BUT left unregulated it is easily seduced to increase the enrichment of the few at the expense of the many—especially in the case of a basic survival need such as water.  In the case of Cochabamba leaving water development and delivery to “government” opens the door to political corruption and favor among the ruling party, economic elite or ethnic group [which is often a mix of the three].

Decisions on water development and delivery need to be inclusive of all groups, democratic and transparent in the decision making with a baseline of minimal water needs per person established at low or subsidized cost with a scaled water price over and above basic need.  Thus everyone can have access to clean water for life [hydration, cooking, and sanitation] and those who wish to use more [i.e. water a lawn, run a fountain, fill a pool, water a golf course], will pay an increased cost per unit of water [i.e. liter or gallon].

Leaving people out of these decisions and not meeting basic human needs opens those that do decide to charges of abuse, favoritism, corruption, or hoarding and then the wheels start coming off society.  Flash points begin to ignite, mob mentality takes over and people die that shouldn’t have died.

No water…no civility…no civilization




  2. […] Bolivian military confront Cochabamba citizens during the 2000 water riots (Ship Bright)     /* […]

  3. I don’t know If I said it already but …This blog rocks! I gotta say, that I read a lot of blogs on a daily basis and for the most part, people lack substance but, I just wanted to make a quick comment to say I’m glad I found your blog. Thanks, 🙂

    A definite great read..Jim Bean

  4. Very well written article, gives really good insite into the challanges of Cochabambas but also into how the basic survival needs of a society can be used as bargaining chips in the political arena to gain power and control over people.
    Your summary was excellent.

  5. finally someone who can write and explain this stuff for all the rest of us!

  6. There are a large number of Cochabambas in the developing and uder developing worlds

    • Thank you for your comment! I do invite guests to post on my blog…if you are interested in doing a guest blog please contact me at Thank you.

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