The Cochabamba Water War, also known as the Bolivian Water War, was a series of protests that took place in Cochabamba, Bolivia's fourth largest city, between December 1999 and April 2000 in response to the privatization of the city's municipal water supply company SEMAPA. The wave of demonstrations and police violence was described as a public uprising against water prices.
The tensions erupted when a new firm, Aguas del Tunari (a joint venture involving Bechtel), was required to invest in construction of a long-envisioned dam (a priority of mayor Manfred Reyes Villa), so they had drastically raised water rates. Protests, largely organized through the Coordinadora (Coalition in Defense of Water and Life), a community coalition, erupted in January, February, and April 2000, culminating in tens of thousands marching downtown and battling police. One civilian was killed. On 10 April 2000, the national government reached an agreement with the Coordinadora to reverse the privatization. A complaint filed by foreign investors was resolved by agreement in February 2001.
Economic background of Bolivia The restoration of civilian rule to Bolivia in 1982 ended decades of military dictatorships, but did not bring economic stability. In 1985, with hyperinflation at an annual rate of 25000%, few foreign investors would do business in the country. The Bolivian government turned to the World Bank as a last resort against economic meltdown. For the next 20 years, successive governments followed the World Bank's provisions in order to qualify for continued loans from the organization.
World Bank The World Bank said that "poor governments are often too plagued by local corruption", similarly the World Bank stated that "no subsidies should be given to ameliorate the increase in water tariffs in Cochabamba". The New Yorker reported on the World Bank's motives, "Most of the poorest neighborhoods were not hooked up to the network, so the state subsidies and 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."
In a 2002 publication the World Bank acknowledges that one of its loans, the "Major Cities Water and Sewerage Rehabilitation Project", included a condition to privatize the La Paz and Cochabamba water utilities. The privatization was required to allow a two-year extension of the project that was due to close in 1995. The World Bank project that began in 1990 had covered three cities, leading to sharply diverging outcomes: Access increased and service quality improved in Santa Cruz de la Sierra where a successful cooperative provided services, which enjoyed, according to the World Bank, "the reputation as one of the best-managed utilities in South America." However, results were mixed in La Paz and poor in Cochabamba. In the latter, access to piped water had actually decreased from 70% to 60%, water losses had remained high at 40% and water supply had remained unreliable at about four hours a day despite the funds made available by the World Bank to support the public utility. The World Bank did not include a conditionality to privatize water in Santa Cruz where the local utility had been able to improve services, but only in the cities where the utilities had failed to improve services.World Bank:Bolivia Water Management: A Tale of Three Cities , Operations Evaluation Department Précis, Spring 2002, Number 222, retrieved on 31 December 2010
The World Bank acknowledges that it provided assistance to prepare a concession contract for Cochabamba in 1997. However, its involvement with water in Cochabamba ended in the same year. At that time the bidding process for the concession had been declared void by the Supreme Court in response to a legal challenge by the municipality of Cochabamba. In the same year the World Bank project in the three cities ended. The World Bank thus was not included any more in the subsequent phase of the privatization.
The Misicuni dam project was later pursued by Evo Morales when he became President of Bolivia nine years later. It was justified through its benefits for hydropower generation and irrigation in addition to potable water supply for Cochabamba.Business News Americas:Bolivia, Cochabamba: work on Misicuni dam and water supply services set to start , 23 January 2009 Construction began on the dam in June 2009 and was completed in September 2017.
Aguas del Tunari consortium Prior to privatization the water works of Cochabamba were controlled by the state agency SEMAPA. After pressure from the World Bank, Bolivia 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 between the British firm International Waters (55 percent) - itself a subsidiary of the construction giant Bechtel (USA) and United Utilities (UK) - the engineering and construction firm Abengoa of Spain (25 percent) and four Bolivian companies including Befesa/Edison, Constructora Petricevic, Sociedad Boliviana de Cemento (SOBOCE), Compania Boliviana de Ingenieria and ICE Agua y Energia S.A., all involved with the construction and engineering industry. The water network that they envisioned was projected to provide drinking water to all the people of Cochabamba. This was set to double the existing coverage area and also introduce electrical production to more of the region.Nickson, Andrew and Claudia Vargas. 2002: The Limitations of Water Regulation: The Failure of the Cochabamba Concession in Bolivia, Bulletin of Latin American Research, Volume 21, Number 1, January 2002
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 implementation of Aguas del Tunari's program was set to correlate with a government plan to present a $63 million rural development package to peasants with funds for crop diversification, and extending electric and telephone services to remote areas.
Law 2029 To ensure the legality of the privatization the Bolivian government passed law 2029, which verified the contract with Aguas del Tunari. To many people, the law appeared to give a monopoly to Aguas del Tunari over all water resources. Many feared that this included water used for irrigation by peasant farmers (campesinos), and community-based resources that had previously been independent of regulation. The law was seen as "enabling the sale of water resources that had never really been a part of SEMAPA in the first place." Many became worried that independent communal water systems which had yet to be connected with SEMAPA would be "summarily appropriated by the new concession." By Law 2029, if Aguas del Tunari had wanted to, not only could it have installed meters and begin charging independently built communal water systems, but it could have also charged residents for the installation of those meters. The broad nature of Law 2029 led many to claim that the government would require a license be obtained for people to collect rainwater from their roofs. The first to raise concerns over the scope of the law was the new Federación Departamental Cochabambina de Regantes (FEDECOR) and its leader Omar Fernandez. FEDECOR was made up of local professionals, including engineers and environmentalists. They were joined by a federation of peasant farmers who relied on irrigation, and a confederation of factory workers' unions led by Oscar Olivera. Together these groups formed Coördinator for the Defense of Water and Life, or La Coordinadora which became the core of the opposition to the policy.
Law 2029 was one of the primary points of disagreement between protestors and the government. The initial intent of the law was to introduce concessions and licenses for the supply of potable water for cities with more than 10,000 inhabitants. For many Bolivians, the implementation of law 2029 and the concessions that accompanied it symbolized all the issues of the neoliberal development strategy—its obvious lack of concern for equity, its rejection of the role of the state, and in a country with a very long tradition of anti-imperialist rhetoric, the law represented a preferential attitude to foreign capital over the national interest. This opposition expressed by the community arose from across the political spectrum. The traditional left claimed that the transfer of state property to private enterprises was unconstitutional while the right opposed the denationalization of enterprises that it considered vital and strategic.
Rate hike As a condition of the contract Aguas del Tunari had agreed to pay the $30 million in debt accumulated by SEMAPA. They also agreed to finance an expansion of the water system, and began a much needed maintenance program on the existing deteriorating water system. Dider Quint, a managing director for the consortium, said "We were confident that we could implement this program in a shorter period than the one required by the contract. [To accomplish this] We had to reflect in the tariff increase all the increases that had never been implemented before."
On top of this, in order to secure the contract, Aguas del Tunari had to promise the Bolivian government to fund the completion of the stalled Misicuni dam project. The dam was purportedly designed to pipe water through the mountains, but the World Bank had deemed it uneconomic. While the consortium had no interest in building the dam, it was a condition of their contract, as it was backed by an influential member of Banzer's mega-coalition, the mayor of Cochabamba, Manfred Reyes Villa. An attempt to privatize the water system had been made without the condition of building the dam in 1997, but Reyes Villa had used his influence to quash the deal. Critics of Reyes Villa held that the dam was a "vanity project" which would profit "some of his main financial backers".
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 customers 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. As anger over the rates mounted, Reyes Villa was quick to distance himself from Aguas del Tunari.
Protests and state of emergency