Privatization of Water Management in Argentina

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I. Identification

The Issue

With a serious depletion of the planets water we are facing a new era that will be marked by a serious necessity to conserve the water available to us while simultaneously establidhing more effective ways of managing our water use. Currently many communities, including those in Argentina, have turned to outside sources to produce ways of managing their water. The introduction of private sector interest in a substance necessary for the existence of life has led to new complications and benefits. New systems of water management are finding their way into both impoverished and wealthy areas. Those parts of the world that are able to pay for a change in infrastructure are feeling fewer of the negative effects and more of the benefits of this new system. On the other hand, those communities that are unable to support the cost of renovating and improving infrastructure are left with a choice, that seems to challenge their basic human rights: that is, do they maintain the status quo, knowing that this may result in a grave envirornmental crisis in the near future or do they trade other basic necessities to cover the incrementally rising costs of improving their management systems?

Description

The growing costs of water management and the increasing in government deficits being faced by many of these countries has resulted in the serious consideration of privatizing utility programs. At the forefront of this is the water management industry. In many cases the need stems from the inability of the current regimes (public) to fund improvements and repairs on the existing infrastructure of the water delivery system. Also prompting the debate are human rights issues. The United Nations Declaration of Human Rights states that every human should have access to clean water. Not only is this a basic human right, but it is also critical in the reduction of water-borne diseases. In the last century this basic need has been neglected by many nations that have found they lack the financial resources to maintain and improve water delivery and preservation infrastructure. As a result privatization of water management has been explored by moany of these countries. Although water has been thought of as an economic good in the past, scrutiny is now being placed on the extent of privatization efforts and the problems associated with it. What has attracted the attention of international organizations, such as the World Bank and the World Water Council, is that the public sectors of water management have been unable to fill the basic needs of their citizens along with the expansion of major multinational corporations making up for the public markets incompetence. More recently the public’s eye has been drawn to a number of failures that these multinational corporations have incurred in their endeavors. Such failures serve to further publicize the issue and encouraging more international involvement. On the largest scale, these multinational companies move into regions, build, own and operate the water systems and generate approximately $300 billion in revenues ("The New Economy of Water") while poorer individuals suffer discrepancies in service. Opposition has developed in many Latin American countries in response to this emerging water crisis. Such opposition gives voice to fears of the economic implications of this development, the corporate role in the privatization, more specifically that the companies moving in are foreignas opposed to locally owned and operated; the inequities in access to water; and the exclusion of local involvement in decisions about water resources. What arises is the identification that principles are required for the successful privatization of water management. The irony of this situation is that the countries that are in the most desperate need of new water services are the same countries that have the weakest public sector and have experienced the highest privatization failure rate. The principles that have been proposed would need a strong central government monitoring their adherence, which if a country had a strong public sector the need for privatization of their utility systems would not be needed. Argentina is a prime example of the struggles governments, private industries and consumers are having with privatization. In the country, which is currently facing economic hardships, infrastructure problems and a lack of available funding has created problems that adversely effect the forward motion of privatization and utility reform. The poorer regions of Argentina (as will be illustrated below) tend to suffer the greates hardships as they are faced with incomplete renovations, an increase in the cost of water and a lack of politcal pull to influence change in the process. Their struggle involving battling with a multinational corporation headquartered over 6,000 miles away and interested less in the well-being of the Argentine people highlights a key point in reforms that will soon need to be made on the global scale. Using Argentina as an example it becomes clear that in order to develop a system that will better manage the world's water supply one must also keep in mind basic human needs and available resources. As seen in the peri-urban settlements of Argentina the communities that are most adversely affected by the lack of good water works are those that have very little political pull and even less money. The former leads to a neglect by the central government, abandoning their responsibility to provide for the needs of their people. The latter limits the ability of the multinational corporations. In the Tucuman province of Argentina as well as the suburbs of Buenos Aires the communities have fallen prey to the negative side of privatization.   In both of these cases the communities are poor and unable to afford the rising cost of water. In the Tucuman province (pictured to the left) water bills increased 70% and the bill collection rate diminished to 10%. What the multinational corporations, in this case, Vivendi experienced is a gross miscalculation when bidding for contracts. Vivendi claimed to be in the process of improving conditions of the infrastructure in the region, although locals have seen no improvement or investment in that area since the beginning of the Vivendi contract. In 1996, the public protested Vivendi Environment when manganese deposits in the water became so great that the tap water ran brown. In 1992 Suez, another major multinational water provider negotiated a 30-year contract to manage the water around Buenos Aires. What followed was an increase in the quantity of water available to the region but a neglect of sewage capacities which has lead to major flooding of the region. In Lomas de Zamora, the community experiences street and low-level flooding even during times of drought. Pathogens in sewage-contaminated waters can cause a wide range of ear, nose, and throat problems, gastroenteritis, dysentery, hepatitis, and respiratory illness. Suez responsed that due to the downturn of the Argentine economy they were unable to maintain the level of service they wished to provide and had to eliminate a few projects from their initial budget. The contract has since been renegotiated and the company has provided 1,500 pumps to the region to temporarily compensate for the lack of drainage. In some instances the inability of individuals to pay the increased water bills has resulted in discontinued service. This completely defeats the entire goal of privatizing the water management and leaves the populace in an even worse condition than that in which thy began. A debate has also surfaced on the efficiency of for profit organizations managing water. It has become clear that for profit companies have little interest in maximizing efficiency of water consumption if doing so so threatens to minimize their profits. It also goes hand-in-hand with the neglect of Argentina health problems. The companies are also discouraged from identifying potential low pollutants in the water by a lack of financial gain to them. If pollutants are identified there is nothing stopping the companies from misrepresenting the effects and impacts that could potentially occur. In essence what one is presented with is conflicted at best. The present situation of waterworks in developing countries - specifically Argentina - leaves room for improvement. These countries currently have eroding infrastructures and insufficient funds to improve them, but the current alternatives are focused more on profit than the well-being of the people. While the introduction of multinational corporations and the expertise they bring present a logical solution to the existing problem, they also pose new threats and potentially more fatal dilemmas. Thus, the question becomes one of whether water is to be seen strictly as an economic good meant to be monitored and conserved or whether water is a natural resource that should be equally available to everyone. Key Player: The largest private water companies is Vivendi SA (Vivendi from here on). This company combined with Suez, the second largest privatization firm, they own or have interest in more than 120 countries and each individually claims to provide water to around 100 million people. Vivendi, is part of the larger Vivendi Universal group, which was created in December 2000 when it merged with Seagram Company and formed a large international media and telecommunications company. Just to illustrate the diversity of Vivendi, take note that in spring of 2001 it bought MP3.com. The total annual revenue form the interlocking subsidies of Vivendi in 2001 exceeded $37 billion, more than 25% of that came from their water division. The breakdown of the service division of the company is best described as they quote themselves in their annual statement "it provides water services to over 110 million people, collects and treats more than 50 million metric tons of waste, carries over a billion passengers by road and rail, and provides energy in thousands of buildings for industrial, municipal and residential customers." It is self claimed to be the number one provider of water and it’s revenues are 56% from outside of France (of that 30% are from the US and 16% from the rest of Europe and 10% from other countries). In 2000, manufacturers represented 21% of Vivendi Water's turnover ($2.8 billion). Working with local level agencies and support from experts they deal in the sale and management of drinking water and waste management. The following shows a breakdown of populations served in 2000:   The water industry alone has over 69,000 employees. As a water industry it not only prides itself on seeking the best use of existing infrastructure and improving means of measurement, but it is also among the leading players in the international scientific community specializing in water. The company has a network of over 350 researchers worldwide and agreements with over 100 universities, companies and ministries all dedicated to the improvement of overall water quality. Their two main foci are improving existing processes and inventing new technologies that will change the water market in the future. Under them are the social and environmental cases of disinfection of municipal and industrial water, seawater desalination, and membrane filtration. Its customer base includes clients in the food and beverage industry, pharmaceuticals and oil. Its residential/commercial clients fall primarily under another of their divisions, Culligan. (I am sure the phrase "Hey Culligan man!" rings a bell). Although Culligan accounts for merely 7% of Vivendi’s overall revenue they are felt much stronger than the 72% which came from municipal water business and the 21% that came from industrial business. Culligan serves an estimated five million households around the world and has over 140 bottling facilities. It has also broadened its network of dealers to include supermarkets. Vivendi leads the market in privatization, largely due to its US conglomerate USFilter. However it also has a stronghold in the rest of the world, including Europe, Asia Pacific and Latin America. As I further discuss in the case study, it faced problems in Latin America, specifically Argentina, in the late 90’s. It ended up developing a new regionally based subsidiary, Proactiva, which is working with the Spanish firm FCC (Fomento de Construcciones y Contratas) to rectify the discrepancies. As an industry the water division has become the leading designer and manufacturer of water treatment equipment and systems. They have diversified to treat ground water, surface water, salt water and wastewater. Along with engineer customized systems to eliminate a wide range of water impurities they also specialize in the use of reclaimed and recycled water. As an interesting fact: Vivendi was chosen to monitor the water quality of all the pools used during the 2000 Sydney Olympics and was used to equip Sydney’s Olympic Village with a water treatment plant.

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Author and Date: Jason Bricker, December 2002

II. Legal Clusters

Rothfeder, Jeffrey. Every Drop for Sale: Our desporate Battle for Water in a World about to run out. Tarcher/Putnam 2001

Shiva, Vanda. Water Wars: Privatization, Pollution and Profit. South End Press 2002

Tagliabue, John August 26, 2002. As Multinationals Run the Taps, Anger Rises Over Water for Profit. New York Times

http://www.developmentgateway.org/node/130652/

http://www.thewaterpage.com/SolanesWaterMarkets.html

http://www.vivendienvironnement.com/en/index.asp

http://www.worldbank.org/html/fpd/risk/papers.htm

http://vester.com.ar/argentina/