EC435XW
Fall 2015
Cadet Name: Bennett Dotson
Help Received Statement: Only the case study
Aguas de Cartagena: The Privatization of Water in Cartagena, Colombia
Case study Homework (10 points)
(To be completed by each student for homework)
- Identify the main problem the case study focuses on.
The main problem the case study focuses on is providing clean drinking water to the capital city of Colombia, Cartagena, with the assistance of an outside private contractor; all while maintaining a proper level of control over the process and funding.
- Why did the problem arise?
The problem originated back in the early 1970’s when more and more vacationers began making Colombia a popular destination. Cartagena was a growing center of commerce, especially the petrochemical industrial center that brought ships in from all over to second largest port in Colombia. This economic growth triggered significant increases in Cartagena’s population leading to tremendous needs for an improved/extended water and sewage system. Now why was their water and sewage system so bad to begin with? City residents would collectively agree that it was due to “poor management by the public municipal company responsible for furnishing these service.”
- What was the driving force for reform?
The driving force behind reform was the agreement that the National Planning Department, the Ministry of Development, the world Bank and the District of Cartagena decided on which stated, “no funding assistance would be provided for the city’s water system unless real reform occurred.” The reform was needed badly, the department in charge of Cartagena’s sewage and water systems was the Empresas Publica Municipales de Cartagena (EPM),and its directors used their positions of authority to gain the City Council’s approval fringing on recklessness and corruption.
- The case study focuses on the decisions of three mayors. What was the main problem that each mayor tackled?
Mayor Garcia Romero decided his main task was to reform the EPM. He did this through reducing its responsibilities and in return its political power. Early on into his time as mayor, he issued a decree completely changing the nature of the EPM’s duties, now they were only to provide sewage and sanitation to the city and changd their name to EmpresasPublicasDistritales (EPD). This mayor also was the leading force behind the bid acceptance for the Aguas de Barcelona company.
The next mayor, Mayor Paniza, who absolutely despised the former Mayor Garcia, was faced with a new challenge and that was to decide to what extent Aguas de Barcelona should have control of this new process and who the stakeholders should be etc. While Mayor Paniza needed to get the project off the ground, he was concerned with the allocation of ownership. He required the project’s majority shareholder be a public entity. Aguas de Barcelona nevertheless accepted the proposal and went to work. Mayor Paniza also dealt with a unionized group of worker from the EPD bringing all kinds of charges against him, which were all dismissed.
The third mayor whose name was never mentioned and was only talked about in regards to the future problems that he would deal with. Most importantly the future mayor was going to feel some backlash from delayed system improvements and increased rates. Should the city recapitalize? That will be up to the new mayor to decide.
- Who were the other main economic actors involved in the process?
The other main economic actors involved in the process were the EPM which I have discussed aboved, the Coty Council, the World Bank, the EPD, the SINTRAEMDES union, National Congress, Aguas de Barcelona, The Board of Directors, and the International Finance Cooperation (IFC).
- Why were labor unions opposed to privatization? Were their concerns justified?
The Labor unions were opposed to privatization for fear that they would be laid off or displaced. Yes, their concerns were justified and the Mayor attempted to remedy the solution by providing all sorts of pension plans and benefits, but it did not work. Their concerns were definitely justified, as many were laid off and some received a decrease in their wage.
- Was the problem, identified in (1) resolved? If so, how? If not, why not?
Overall, the privatization of water in Cartagena was successful. Acuacar was a success largely due to their efforts to establish a positive relationship with the people of Cartagena through a large public relations campaign. Their efforts paid off most when community groups were formed within the city to detect any illegal water connections and to enforce the free flow of water to all parts of the city. This does not go to say that everything was perfect afterwards and there were no more problems, but if the problem was to privatize water in Cartagena, they were successful.