commissioner.org
| Source | Eubulides |
| Date | 05/11/29/21:09 |
| The trickle-away effect
Multinational water companies once beat a path to buy up privatised operators in Argentina. Now they are desperate to get out, writes Oliver Balch Oliver Balch Monday November 21, 2005 Guardian Unlimited www.guardian.co.uk More than 1 million residents in the rural Argentinian province of Santa Fe are facing an anxious wait to discover if their taps will still flow or their toilets flush over the next few weeks. Since 1995, the province has had its water supply and sewage services provided by a consortium led by the French multinational Suez; now the giant utility wants out, and plans to leave within the month. The decision, which follows the high-profile collapse of other water privatisation schemes in countries including Tanzania, Puerto Rico, the Philippines and Bolivia, has again raised questions about the viability of privatising utilities in the developing world. Suez is also preparing an early departure from its formerly lucrative concession in the Argentine capital, Buenos Aires. The deal, struck in 1993, marked the largest water privatisation project in the world. In both cases, the French utility is terminating its 30-year contract a third of the way through. Suez cannot get the concessions to turn a profit - at least not under the terms of its current agreements. The company has being trying to renegotiate the tariffs it is permitted to charge ever since 2002, when Argentina's national currency was devalued. The original rates were set in pesos, when one peso equalled one US dollar. After the devaluation, rates were suddenly worth a third of what they had been. With regulators showing no signs of budging on a rate increase, Suez has decided to pack its bags. The government is looking to reprivatise Suez's 39.9% stake in the operating company, Aguas Argentinas, but no deal has yet materialised. "Aguas Argentinas is no longer in a position to assume the risks and responsibilities linked to the water and waste services operations provided to the city of Buenos Aires," said Suez in a prepared statement. The French utility giant snapped up both service agreements in the mid-1990s when Argentina was undergoing a massive reform of its public sector, largely at the behest of the World Bank and other lending agencies. The logic was that private companies would bring technology, management know-how and investment to the failing public water operators. According to Suez and its backers at the World Bank, the plan worked well: World Bank figures show that Aguas Argentinas expanded the delivery of water services to more than 1.5 million inhabitants and sanitation to 800,000. But critics argue that much of the promised investment - $4bn (£2.3bn) over three decades - never took place. According to the environmental group Friends of the Earth, price rises prevented poor people accessing the network while underinvestment in the sewage system led to 95% of the city's waste being dumped into the Rio del Plata. "Aguas Argentinas refuses to make the promised investment to expand the infrastructure, while continuing to charge high consumer rates and cutting off citizens unable to pay," the international campaign Stop Suez says. Olivier Hoedeman, of the Corporate Europe Observatory, an Amsterdam-based research group, notes that all the case studies used in the 1990s to prove the success of water privatisation are failing one by one. "There's often a real problem with making these concessions profitable," he said. "In the cases where they are not profitable, the companies do not invest as much as they promise." The problem of underinvestment was evident across Argentina even before the 2001-2002 economic crisis. In 1998, Veolia Environment (then Générale des Eaux) had its 30-year concession to supply the northern province of Tucumán rescinded after failing to deliver on an agreed investment package. Locals accused the company of doubling tariffs while turning the water brown during the three years it managed the region's water supplies. Another celebrated case is that of Azurix, a subsidiary of Enron. The Houston-based utility, now disbanded, won a $439m bid to service 70 districts in the province of Buenos Aires in 1999. Complaints of low investment and subsequent water contamination temporarily led the authorities to recommend that residents drink bottled water. Disappointment with the privatisation process is not just confined to consumers: private sector operators in Argentina have their own list of complaints. Chief among these are ad hoc government policy, the lack of legal or contractual security and the absence of a truly independent regulator. Suez has made its feelings clear in the World Bank's court of arbitration, where it has filed a multimillion-dollar compensation claim against the Argentinian government. It is not only in Argentina where multinational water operators are disinvesting: Suez also left its contract (albeit forcibly) to supply a low-income region of La Paz, in Bolivia, last year. "Across Latin America, we are seeing a tendency of large companies to leave," says Daniel Nolasco, a Latin American water expert. "And we don't see them bidding for new concessions either." He anticipates that Latin American investors are likely to pick up the concessions left by the departing multinationals. In Santa Fe, for example, a local consortium consisting of a ceramics firm, a livestock company and the water union group has put its name forward to take Suez's place. Whether these new players in the market will have the necessary expertise or financial clout to sustain Argentina's water infrastructure is an issue that worries local authorities. The Argentinian public is worried, too. · Oliver Balch is a freelance journalist based in Argentina who specialises in sustainable development |
Copyright (c) 1998, Joongpil Cho