Paper by Guillermo Amorebieta (October 2006), presented in the seminar ‘Campaign to Take Back Jakarta Water from Private Concessionaires’ November 8-10, 2006, Jakarta
Contents:
I.- OUTLINE OF PUBLIC WATER AND SEWER SERVICE IN THE AMERICAS
II.-MANAGEMENT MODEL CONSIDERATIONS
III.-THE CASE OF AGUAS BONAERENSES S.A. (ABSA)
I.- OUTLINE OF PUBLIC WATER AND SEWER SERVICE IN THE AMERICAS
Canada:
CUPE – Trade union of state and municipal workers – affiliated with PSI
Council of Canadians – largest NGO in the country, specialising in civil rights, environment and ecology.
With other NGOs and trade unions, in 2003 they halted efforts to privatise water service in the French-speaking region of the country. There have been no further serious efforts to shift services to the private sector.
United States:
AFSCME – Nationwide trade union of state and municipal employees – affiliated with PSI.
Public Citizen – civil rights NGO
Food & Water Watch – user and consumer rights NGO.
Formed a coalition and coordinate programmes and actions involving the community; present plans and proposals; advise citizens; and maintain national and international solidarity mechanisms.
Most water distribution services are municipal; there is state and federal regulation.
In 2002, the Atlanta city government revoked a contract with the French company, Suez, which had the concession to operate the city’s wastewater treatment plant.
En 1999, former New York Mayor Rudolph Guiliani, a Republican, had to put the city’s electric company under state control because of the constant breaches of contract and public pressure.
Mexico:
Most services are managed by the state, some are municipal and a few are privatised; they are grouped together in the National Association of Water Companies (Asociación Nacional de Empresas del Agua, ANEA). The private companies include Mexican and foreign interests. The outgoing Fox administration lobbied for privatisation because of the lack of organisation and technical capacity on the part of governors and mayors, but was unable to meet the goal by election time. The new president, chosen in a strongly challenged election, has not yet defined policy in this area, but it is assumed that he will continue the outgoing president’s efforts. The French company Vivendi (now Viola) still operates the services in Aguascalientes, Saltillo and Cancún.
There are currently two major citizen coalitions in defence of public water: Red Mexicana and Alianza por el Agua; since before the last World Water Form they have been making great organisational and political efforts to block the implementation of neoliberal policies and guarantee the public’s right to access to good-quality water.
Guatemala – Honduras – Nicaragua – El Salvador – Costa Rica – Panama:
Most water and sewer services are municipal. Some were privatised as partof so-called free trade agreements. Trade unions and NGOs have beenengaging in resistance strategies and making new proposals.
Caribbean:
Cuba has allowed minority private participation in the main companies in this sector. Aguas de Barcelona and Aguas de Valencia act as technical operators in Havana and Varadero, among other areas.
Services in the Dominican Republic are in the hands of the state; although the government has considered granting concessions, this has not been possible because of the large investment and financing that would be required.
Services in Puerto Rico are managed by the state, and there are no immediate plans to include the private sector.
St. Martin (Saint Maarten): Services are private in the French sector and state-run in the Dutch sector.
Lesser Antilles: private and state-run enterprises coexist. The French companies Suez and Viola operate on some islands.
Venezuela:
The former government dismantled the state-run company, Hidroven, and transferredservices to the states (provinces) under a plan in which the main goal was the concession of the most profitable services. The country is currently testing a plan to develop and expand services with citizen participation and technical assistance from Hidroven under a plan known as “Water Technical Groups” (“Mesas Técnicas del Agua”), and is having significant success in expanding service to impoverished Venezuelans.
Colombia:
The water companies in Santa Marta and Montería (Spain’s Canal de Isabel II), Cartagena (AGBAR) and Barranquilla (AAA) were the first to be privatised. They coexist with public enterprises that operate on a different scale. The Uribe government is encouraging further privatisation, especially inMedellín and Bogotá.
Ecuador:
Services are basically government-run at the municipal level, with the national government encouraging private participation and seeking investors to finance expansion, except in Guayaquil, where Bechtel’s Interagua won the concession in 2004.
Peru:
The administration of former President Alejandro Toledo implemented a privatisationpolicy that crystallised, toward the end of his term, in the concession of the service in Tumbes. In that case, the Argentinean company Latinaguas was initially unable to take over because the guarantee fund required by the contract had not been established, but in recent months it has begun managing the system. Two criminal complaints have already been filed against the company because of poor quality water and sewer service. There have been two unsuccessful privatisation efforts in this country: Pacasmayo and La Libertad.
Bolivia:
There are municipal, cooperative and community services. The former are the most significant and were privatised, with La Paz - El Alto going to Suez of France (Aguas de Illimani) and Cochabamba to Bechtel, which is a U.S. company although its official address is a post office box in Amsterdam. In both cases, public resistance was decisive in forcing the foreign companies out. Cochabamba became famous for the protest and police crackdown known as the “Water War,” in which the people took back the service and a municipal company was created. In El Alto, the government will take over the service in November 2006, when the concession will be withdrawn from Suez.
Paraguay:
Service is state-run and is provided by public companies. In 2002, grassroots organisations and trade unions won a law that blocked the privatisation of public services. The current government is trying to sidestep the law and grant concessions in Asunción and Ciudad del Este, but is meeting strong resistance from grassroots organisations.
Chile:
Chile privatised all of its major regional companies, with the last ones shifting to private control during the last administration, although some municipal services remain. The system is similar to the asset-transfer model used by Margaret Thatcher in Britain, although in Chile this was accompanied by the sale of water resources to each company. This model, which has been in place since the Pinochet dictatorship, has been used by several subsequent civilian governments.
Uruguay:
The state-run company OSE is the main service provider. There were two privatisations, both in the department of Maldonado — one in the city of Piriápolis and its periphery, to a consortium consisting of Aguas de Bilbao (at the time a Spanish state-run company) and Aguas de Barcelona (controlled by Suez), and the other in the tourist city of Punta del Este, to the French company, Suez. It took Uruguayan citizens two referenda to win a significant constitutional reform that declares water to be an inalienable right and requires the state to provide services to the public. Nevertheless, Suez sought to postpone the withdrawal of the concession that provided it with huge profits while requiring almost no investment. There are several cooperatives that provide household water service in some small towns.
Brazil:
More than 3,500 municipalities have sanitation services, but many have turned them over to state control for technical or economic reasons. Brazil is the Latin American country with the greatest freshwater reserves. There is also increasing conflict in the sector because of pressure from the IMF and World Bank.
When President Lula Da Silva first took office, concessions involving the companies Embasa (Bahia) and Compesa (Pernambuco) were suspended because of strong public pressure from the National Sanitation Front (FNS), led by the National Federation of Urban Workers (a PSI affiliate) and a large group of NGOs from throughout the country. During the previous administration of President Fernando Cardoso, Ondeo (a Suez subsidiary) took control of the largest private concession in Brazil (Aguas de Amazonas) in June 2000 in the Amazonian city of Manaus (1.4 million residents). Agbar (Sociedade Generale de Aguas Barcelona, a Suez subsidiary) and Cobel Engenharia began operating the 30-year concession in Campo Grande (662,500 residents), the capital of the state of Mato Grosso do Sul, in October 2000. In 2002, the state had to take back the concession granted to Suez in the municipality of Limeira because of serious breaches of contract.
Argentina:
There are currently very few water service privatisations under way. In the 1990s, the largest water companies in 14 provinces were granted in concession. One by one, the companies were forced out by public pressure and changes in provincial and national governments. Currently, companies in certain cities or districts of the provinces of La Rioja, Salta, Mendoza, Córdoba, Corrientes, Formosa and Misiones remain in the private sector. Five other companies in cities of fewer than 30,000 residents are in private hands. The most significant concessions that were revoked were in the city of Buenos Aires and the province of Santa Fe (Suez), in 78 cities in the province of Buenos Aires (Azurix – Enron of the United States), and in the province of Catamarca (where the government would like to grant a new concession). The first privatisation to be revoked was in the province of Tucumán, where strong public pressure forced the government to rescind the contract with the French company, Viola (formerly Vivendi), and create a new state-run company.
II.-MANAGEMENT MODEL CONSIDERATIONS
Current models: a)State-run: 1.- Federal, state or municipal
2.- Centralised bodies
3.- Decentralised or autonomous bodies
4.- State-run companies
5.- Corporations in which the state is the majority shareholder
6.- State corporations
7.- Corporations run by the state and workers.
b)Mixed: 1.- State – Private
c)Other public entities: 1.- Neighbourhood Associations
2.- Development Centres
3.-Civic Associations
4.- Cooperatives
5.-Municipal initiatives with community management.
d)Private enterprise : 1.- National
2.- Multinational
3.- Mixed
a)1.- Offices or departments of the Executive Branch – internal divisions of public service, health or community action areas.
2.- Autonomous (autarchic) bodies or entities with their own management, under Executive Branch oversight. Their directors are appointed by the Executive Branch. Oversight by official state agencies.
3.- Companies with state capital and with the restrictions imposed by laws that regulate state action. Legally established enterprises overseen by independent state auditing bodies. Their directors are appointed by the executive branch.
4.- Mixed enterprises (private corporations) in which the state is the majority shareholder and overall manager, in which private enterprise plays a role. In some countries, there are mixed enterprises in which the majority of shares are in private hands with a golden share (veto power) held by the state’s representative on the Board of Directors, as well as corporations in which the state has a formal presence without decision-making power and merely exercises oversight of private management.
5.- State-run privately established companies. Their directors and/or managers are appointed by the Executive Branch and there is public sector oversight of these private entities. In some countries, the legislative branch must also approve appointment of managers and the company’s budget.
6.- This model has been implemented after the state has regained control over privatised companies; it encourages participation in shareholding and representation of workers on the Board of Directors.
b) These companies, known as mixed companies, are private corporations in which the state contributes a substantial part of the capital to set up the company, while the private sector is responsible for comprehensive management. While the Board of Directors includes representatives of the state, most members represent the private sector. Oversight is difficult because of political implications and the possibility of corruption.
c) 1.- These models are generally ambiguous; they have simple by-laws and broad participation by users of the services, and are not for profit. They are overseen by the executive branch of the municipal government and play a specific role in precisely defined geographic areas.
2.- Established by a group of neighbours, they are legally established and offer one or more services to the community where they are located. There can be dual oversight by the municipality and the body that grants recognition. It is managed by assemblies of the system’s beneficiaries. The members of the Board of Directors of such entities may or may not receive remuneration, generally depending on the scope of the service.
3.- This model is implemented in various ways: agricultural water users may organise in this way, as may small consortia for expansion and maintenance of community or household services. There is dual oversight by the executive branch of the municipal government and the agency responsible for licensing the entity. Such entities are subject to the specific laws and regulations of the municipality and the water or public service regulatory agency.
4.- Cooperatives are a model in which the recipients of a service that includes a certain number of household connections are shareholders. They have their own by-laws and are overseen by a licensing agency and the regulatory body responsible for overseeing water and sewer services. They are managed by a board of directors that is paid and directly elected by the cooperative members at an assembly or by secret ballot. In some countries, works are financed and coordinated by the state (with public funds or through external loans), and once they are completed a cooperative is formed among the residents who will receive the service; they then take over integral management of the service. Loan repayment is part of the rate structure, and there is dual oversight: by the public service regulatory agency and the cooperative system’s development and oversight body. Such systems can be small or large, in terms of number of connections or geographic area. While cooperatives are considered non-profit entities, they can generate revenue and their assemblies can establish remuneration for their directors, as well as significant reinvestment of revenues. Some cooperatives have funded the development and expansion of their services with contributions from their members. In general, they provide more than one service to the community and in some cases they manage all services in the city, including some delegated by the municipal government. In general, they include regional and national federations and have relations with international organisations.
5.- There are isolated neighbourhoods in a community that receive assistance from municipal authorities to implement small units that provide basic water services whose costs are subsidised by the municipality; the unit is responsible only for operation of the system. This fully subsidised model is common in rural communities.
d) 1.- There are domestic economic groups in several countries that entered the water sector as junior partners of multinational companies that won concessions. In other cases, they were construction companies that received special treatment even though they had no experience in operating or managing public services. The best known examples operating in several Latin American countries are Latinaguas (of Argentina, with concessions in that country and Peru) and SANEPAR (Brazil, state-run and with operations in Argentina).
2.-The major multinationals are:
Ondeo (Suez), which operates services or has contracts for public works or the sale of technology in more than 100 countries. Efforts are currently under way to privatise the French gas company through a strategic merger, so as to avoid a takeover by the German company E.ON. Corruption scandals in Grenoble (France) affected the company, however, and it had to accept legal responsibility.
Viola (formerly Vivendi): This is the oldest consortium that has benefited from water privatisation; its original owners were French aristocrats, and it is currently in the hands of a group of banks that managed its finances and became its main creditors through a business policy of investing in the European and US media and film industries. The company has been accused of various acts of corruption and faces legal proceedings in several countries.
RWE (Thames): This German company controls many of the privatised services in its home country. With the purchase of Thames Water (England), it added several concessions in the United Kingdom, Latin America and Africa. In Chile, in particular, it is selling its assets to companies in that country.
Bechtel (USA, with formal headquarters in Holland): This company gained worldwide notoriety during the “Water War” waged by grassroots movements in Cochabamba, where it was embroiled in a privatisation effort that became scandalous because of its characteristics.