THE WATER PRIVATEERS
from the booklet
The global water crisis and the commodification
of the world's water supply
A Special Report issued by the International
Forum on Globalization (IFG)
by Maude Barlow
National Chairperson, Council of Canadians
Chair, International Forum on Globalization (IFG) Committee
on the Globalization of Water
WATER FOR SALE
Just at the time governments are backing away from their regulatory
responsibilities, giant transnational water, food, energy and
shipping corporations are lining up to take advantage of the world's
water shortage, acquiring control of water through the ownership
of dams and waterways; the development of new technologies such
as water desalination and purification; control over the burgeoning
bottled water industry; the privatization of municipal and regional
water services, including sewage and water delivery; the construction
of water infrastructure; and water exportation.
'Water is the last infrastructure frontier for private investors,"
says Johan Bastin of the European Bank for Reconstruction and
Development. Tragically, water is also the last frontier of nature
and the commons.
The Globe and Mail of Canada states that privatizing water
looms as the national mega-industry of the next decade, with potential
investment in the tens of billions of dollars. "Water is
fast becoming a globalized corporate industry." In May 2000,
Fortune magazine stated that, in a world fleeing the vagaries
of technology stocks, water is the best investment sector for
the century. The World Bank places the value of the current water
market at close to $1 trillion; however, with only 5 percent of
the world's population currently getting its water from corporations,
the profit potential is unlimited.
The world of privatized water is overwhelmingly dominated
by two French transnationals. Suez Lyonnaise des Eaux (which built
the Suez Canal and had 1999 profits of $1.5 billion on sales of
$32 billion) and Vivendi SA are referred to as the General Motors
and Ford Motor Company of the water world. Both are ranked among
the 100 largest corporations in the world by the Global Fortune
500. Between them they own, or have controlling interests in,
water companies in over 120 countries on five continents, and
distribute water to almost 100 million people in the world.
Suez's CEO, Gerard Mestrallet, says that he wants to take
a page from his country's past and develop in his company the
philosophy of "conquest" as Suez moves into new markets
around the world. Suez is more than just a water company. According
to Fortune, "its a fresh invention ...a diversified utility
that offers cities a full range of infrastructure services, from
water and sewer to trash collection, cable TV, and electric power."
The company, which projects an annual 10 percent expansion of
its water business, has just signed its first major business contracts
in China, which Mestrallet says "will be a prime market at
the onset of [this]century."
Both Suez and Vivendi are vying for the lucrative U.S. market,
estimated to be the world's largest with annual revenues at $90
billion. New U.S. Iaws have opened the way to greater private
sector involvement in the U.S. water supply and treatment business.
Until now, this sector has been almost exclusively controlled
by small public-sector operators. Now these companies are poised
to promote the massive privatization of the American water market.
In 1999, Suez paid $1 billion for United Water Resources and bought
two major water treatment chemical producers, Nalco and Calgon,
for $4.5 billion. In the same year, Vivendi purchased U.S. Filter
Corp. for more than $6 billion in cash, giving the new company
a projected revenue of $12 billion in annual sales. Vivendi also
owns 42 percent of Air and Water Technologies (AWT).
Another French company, SAUR, owned by the construction company,
Bouygues, is also emerging in a number of countries. The Spanish
transnational Aguas de Barcelona is active in Latin America, and
Great Britain's Thames Water and Biwater are acquiring water concessions
in Asia and South Africa. United Utilities of Britain has joined
up with the American construction and engineering giant, Bechtel,
to promote privatization schemes in North and South America.
Recently, a number of large pipeline and energy and electricity
companies have entered the water field, promising great stock
profits from what they are calling "convergence"-the
prospect of a single company carrying natural gas, water and electricity
to millions of customers on a for-profit basis. General Electric
has joined forces with the World Bank and investment speculator
George Soros to invest billions of dollars in a "Global Power
Fund" to privatize energy and water around the world, according
to the Guardian Weekly.
U.S. energy giant Enron, having acquired Wessex Water PLC
of Britain, is bidding for huge contracts against the established
players for newly privatized water services in Bulgaria, Rio de
Janeiro, Berlin and Panama under its new water division, Azurix.
The RWE Group, Germany's largest electricity producer, is also
emerging as a major player in water and wastewater services.
A POOR TRACK RECORD
The privatization of municipal water services around the world
has a terrible track record. Since water services were privatized
in France, customer fees have increased by 150 percent. The government
of France also reports that the post-privatization drinking water
of over five million people was contaminated. For most of the
past decade, French magistrates have been investigating allegations
of corruption against executives of the two major French water
companies who have been convicted on three occasions of paying
bribes to obtain water contracts in France.
Public Services International (PSI) reports that in England,
between 1989 (the year water was privatized) and 1995, there was
a 106 percent increase in the rate charged to customers, while
the profits of the companies increased by 692 percent. The salary
of the highest paid director of North West Water, for example,
increased by 708 percent. As a result of these price hikes, the
number of customers who have had their water disconnected has
risen by 50 percent since privatization. British water corporations
have been among the worst environmental offenders in the U.K.
Between 1989 and 1997, Anglian, Severn Trent, Northumbrian, Wessex
(a subsidiary of Enron) and Yorkshire were successfully prosecuted
Furthermore, privatization is almost always accompanied by
lay-offs. In Great Britain, the private companies fired almost
25 percent of the work force, approximately 100,000 workers, when
they acquired rights to the water system. In December 1999, when
companies were ordered by the government to make price cuts, they
announced thousands of further layoffs, even though they were
enjoying wide profit margins. In central Europe, private water
companies reduced the work force of seven cities (whose rights
they acquired) by 30 percent in just a few years. In Sydney, Australia,
after the Water Board was privatized, thousands of workers lost
their jobs and prices for consumers almost doubled in four years.
When water is privatized, the public often loses its right
to access information about water quality and standards. A furor
erupted when it was discovered in the summer of 1998 that the
water supply of Sydney, Australia, now controlled by Suez Lyonnaise
des Eaux, contained high levels of the parasites giardia and cryptosporidium
and that the public had not been informed of the problem when
it was first discovered.
In Ontario, Canada, the government introduced what it called
a "Common Sense Revolution." Key to this "revolution"
were massive cuts to the environment budget, the privatization
of water testing labs, the deregulation of water protection infrastructure,
and massive lay-offs of trained water testing experts. In fact,
in 1999, just after a Canadian federal government study revealed
that a third of Ontario's rural wells were contaminated with E.
coli, the Ontario government dropped testing for E. coli from
its Drinking Water Surveillance Program and, a year later, closed
the program down entirely.
The results were catastrophic. E. coli outbreaks in a number
of communities sent waves of panic through rural Ontario. In June
2000 at least seven people, one of them a baby, died from drinking
the water in the small town of Walkerton. The town had subcontracted
to a branch plant of a private testing company from Tennessee.
The lab, A&L Laboratories, discovered E. coli in the water,
but failed to report the contamination to provincial authorities,
an option it has under the new "common sense" rules.
A lab spokesman said that the test results were "confidential
intellectual property" and, as such, belonged only to the
"client" -the public officials of Walkerton who were
not trained to deal with the tests.
WORLD BANK IN THE LEAD
The story in the non-industrial world is far worse because
international financial institutions such as the World Bank and
the International Monetary Fund are aggressively promoting the
privatization of water. As Public Services International explains,
the policies of these institutions distort nations' choices by
imposing water privatization as a condition of loans and debt
relief, financing water transnationals in preference to efficient
public enterprises, and selling water utilities to reduce national
World Bank-sponsored water privatization projects promote
monopolies and protect rampant corruption and bribery and are
often negotiated entirely in secret. The agreements are considered
"intellectual property" and the public has no access
to their terms. Collusion with dictators such as Indonesia's Suharto
are too frequent. The Bank often puts up the lion's share of the
investment while the company takes home the profits. Suez promised
to invest $1 billion to privatize the water system of Buenos Aires,
but only put up $30 million; the rest came from a World Bank agency.
When water is privatized, prices are set on the open market.
Says Suez Director During, "We are here to make money. Sooner
or later the company that invests recoups its investment, which
means the customer has to pay for it." The result in the
Third World is that millions of poor people are paying exorbitant
prices for water, while others have been cut off. Because the
companies are motivated by profit and not public service, they
have no incentive to supply the poor with affordable water.
For example, in India, some households pay a staggering 25
percent of their income on water. The water system of Manila,
in the Philippines, was divided by the World Bank into two zones
in 1997, each run by a separate consortium. One consortium included
Bechtel, the other, Suez Lyonnaise des Eaux. Only months into
the new arrangement, these consortiums sharply raised customer
rates, contrary to their proclaimed intention to keep rates low,
to compensate for revenues lost due to the regional currency crisis.
A year later, Biwater Plc. corporation increased water rates in
Subic Bay in the Philippines by 400 percent.
Labor activists in South Africa have been threatened with
legal action by British transnational Biwater for criticizing
the company on the Internet. The activists charge the company
with poor water management practices and with being involved in
the British arms-for-aid scandal in the 1 980s, a fact documented
by the British House of Commons' Foreign Affairs Committee. The
South African Municipal Workers' Union says that Biwater is trying
to stave off public criticism in the hopes of gaining the first
private water contract in South Africa's history.
The union's position is firm "Water privatization is
a crucial issue for public debate. Human lives depend on the equitable
distribution of water resources; the public should be given a
voice in deciding whether an overseas-based transnational corporation
whose primary interest is profit maximization, should control
those critical resources...Water is a life-giving scarce resource
which therefore must remain in the hands of the community through
public sector delivery. Water must not be provided for profit,
but to meet needs."
The privatization of water is wrong on many counts. It ensures
that decisions regarding the allocation of water center almost
exclusively on commercial considerations. Corporate shareholders
are seeking maximum profit, not sustainability or equal access.
Privatization means that the management of water resources is
based on the principles of scarcity and profit maximization rather
than long-term sustainability. Corporations are dependent on increased
consumption to generate profits and are therefore much more likely
to invest in desalination, diversion or export of water than in
Further, the global trend to commodify what has been a public
service reduces the involvement of citizens in water management
decisions. Private water projects brokered by the World Bank,
for example, have minimal disclosure requirements. A water corporation
executive at the March 2000 World Water Forum in The Hague, said
publicly that as long as water was coming out of the tap, the
public had no right to any information as to how it got there.
The concentration of power in the hands of a single corporation
and the inability of governments to reclaim management of water
services allows corporations to impose their interests on government,
reducing the democratic power of citizens.
Pro-privatization advocates argue that they are seeking private-public
partnerships, and give assurances that governments will still
be able to establish regulations. However, because the provision
of water services itself does not provide sufficient return, water
corporations are increasingly seeking exclusive control over water
service provision through acquisitions of infrastructure and water
licenses and closing the loop around public involvement. In early
1999, when the government of Ontario announced the break up of
the public utility, Ontario Hydro, into three new private companies,
it also made public its intention to eliminate access to information
In their support for large-scale project financing, the World
Bank and others give preference to large multi-utility infrastructure
projects that favor the biggest corporations, leading to monopolies
against which local suppliers cannot compete. To add insult to
injury, the World Bank is underwriting these giant corporations
with public money, and often incurs the risk, yet the private
company reaps the profit. And often governments, supposedly representing
their people, have to assure a return to the shareholder. For
example, Chile had to guarantee a profit margin of 33 percent
to Suez Lyonnaise des Eaux as a World Bank loan condition-regardless
Most disturbing, the close alliance between governments, the
World Bank and the water companies gives these corporations undue
influence over government policies, such as deregulation and free
trade, and preferred access to upcoming water contracts that favor
their interests. The stated goal of the World Bank water loan
to Budapest was to "ease political resistance to private
sector involvement." In the Philippines, the water corporations
can appeal government decisions and actions against them to an
international arbitration panel appointed by the International
Chamber of Commerce.
These World Bank-backed contracts gone so far that they now
actually contain a form of "democracy insurance." A
recent contract between this Azurix corporation and the Argentine
government guarantees cash payment for "expropriation"
if a future government changes its mind and wants to bring water
services back under public control.
In 1998, the World Bank refused to guarantee a $25 million
loan to refinance water services in Cochabamba, Bolivia, unless
the government sold the public water system to the private sector
and passed the costs on to consumers. Bolivia, one of the poorest
countries in the world, finally acquiesced. Only one bid was considered,
and the company was turned over to Aguas del Tunari, a subsidiary
of a conglomerate led by Bechtel, the giant San Francisco engineering
and construction company.
In December 1999, before making any infrastructure investments,
the private water company, Aguas del Tunari, announced the doubling
of water prices. For most Bolivians, this meant that water would
now cost more than food; for those on minimum wage or unemployed,
water bills suddenly accounted for close to half their monthly
budgets, and for many, water was shut off completely. To add to
the problem, the Bolivian government, prompted by the World Bank,
granted absolute monopolies to private water concessionaires,
announced its support for full-cost water pricing, pegged the
cost of water to the American dollar and declared that none of
the World Bank loan could be used to subsidize water services
for the poor. All water, even from community wells, required permits
to access, and even peasants and small farmers had to buy permits
to gather rainwater on their property.
The selling-off of public enterprises such as transportation,
electrical utilities and education to foreign corporations has
been a heated economic debate in Bolivia. But this was different;
polls showed that 90 percent of the public wanted Bechtel out.
Debate turned to protest and one of the world's first "water
wars" was launched.
Led by Oscar Olivera, a former machinist turned union activist,
a broad-based movement of workers, peasants, farmers and others
created La Coordinadora de Defensa del Agua y de la Vida (the
Coalition in Defense of Water and Life) to "de-privatize"
the local water system. Between January and early February, 2000,
hundreds of thousands of Bolivians marched to Cochabamba in a
showdown with the government, and a general strike and transportation
stoppage brought the city to a standstill. Police reacted with
violence and arrests and in early April 2000, the government declared
martial law. Activists were arrested during the night; radio and
television programs were shut down in mid-program. A 1 7-year-old
boy, Victor Hugo Danza, was shot through the face and killed.
Finally, on April 10, 2000, the directors of Aguas del Tunari
and Bechtel abandoned Bolivia, taking with them key personnel
files, documents and computers and leaving behind a broken company
with substantial debts. Under popular pressure, the government
revoked its hated water privatization legislation. With no one
to run the local water company, Servico Municipal del Agua Potable
y Alcantarillado (SEMAPO), the government handed water services
over to the work force of SEMAPO and the people, complete with
The people accepted the challenge, and set out to elect a
new board of directors for the water company and to develop a
new mandate based on a firm set of principles. The principles
stated that the company must be efficient, free of corruption,
fair to the workers, guided by a commitment to social justice
(providing first for those without water), and it must act as
a catalyst to further engage and organize the grassroots.
The first act of the new company was to operationalize a huge
water tank in the poorest neighborhoods, establishing connections
to 400 communities that had been abandoned by the old company.
Then the company established an active presence in the neighborhoods,
listening to the people and working with them to solve problems.
In Summer 2000, La Coordinadora organized its first public hearings
on SEMAPA to begin a public process on building a broad, consensus-based
definition of what the company must become, and received many
proposals from civil society.
The company has also taken a strong stand against any compensation
to Bechtel for its "losses." Bechtel is suing the government
of Bolivia for close to $40 million at the World Bank's International
Court for the Settlement of Investment Disputes. It is claiming
"expropriation" rights under a t992 Bilateral Investment
Treaty (BIT) that Bolivia signed with Holland. Bechtel, an American
company, must have sensed the conflicts in Bolivia brewing. In
late 1999, it moved its holding company for Tunari from the Cayman
Islands to Holland, thereby gaining the right to sue South America's
While the Bolivian government has officially said it will
fight this challenge, there are those in the government who feel
it best to pay Bechtel its compensation to prove that Bolivia
is ready for economic globalization and will be a "good"
global player in the WTO. There is a real concern that the government
of Bolivia is now in secret negotiations with Bechtel to settle
that dispute out of court.
In the early months of 2001, a very disturbing pattern of
surveillance, infiltration, harassment and physical attacks against
members of La Coordinadora emerged. It is widely understood that
both La Coordinadora and SEMAPA have powerful enemies in the echelons
of power in the Bolivian and state governments. A failure on the
part of the citizens to run their own water company could be used
as a warning to others around the world who stand up to water
privatization and the power of the World Bank.
HIGH-TECH WATER GUZZLERS
Similar water conflicts are growing in the computer industry,
where big corporations are claiming unfair shares of local water
supplies. Computer manufacturers use massive quantities of de-ionized
freshwater to produce their goods and are constantly searching
for new sources. Increasingly, this search is pitting giant high-tech
corporations against economically and socially marginalized peoples
in a battle for local water sources.
Electronics is the world's fastest-growing manufacturing industry,
according to the Silicon Valley Toxics Coalition. Giants such
as IBM, AT&T, Intel, NEC, Fujitsu, Siemans, Phillips, Sumitomo,
Honeywell, and Samsung have annual net sales exceeding the gross
domestic product of many countries. Originally thought to be a
"clean" industry, high-tech has left a staggering pollution
legacy in its short history. In 1980, the U.S. Congress set up
the Superfund program through the EPA to locate, investigate and
clean up the worst sites in the nation. Presently, the Silicon
Valley has more EPA toxic Superfund sites than any other area
in the U.S. plus more than 150 groundwater contamination sites,
many related to high-tech manufacturing. Close to 30 percent of
the ground water beneath and around Phoenix, Arizona, has been
contaminated, well over half by the high-tech sector.
There are currently about 900 semi-conductor manufacturing
plants, or fabrication facilities (fabs) making computer wafers
(used for computer chips) around the world. Another 140 plants
are now under construction. These plants consume a staggering
amount of water. For example, Intel Fab, a software company located
on the high desert near Albuquerque, New Mexico, is permitted
to use nearly 6 million gallons (18 million liters) of water per
day, or enough to supply a small town. At this rate (including
the new plants under construction) the industry will be using
over 500 billion gallons ( 1,500 billion liters) of water and
producing over 100 billion gallons (300 billion liters) of waste
water each year. Much of the new construction for high-tech manufacturing
is in water-poor countries or in the desert, but as local activists
say, 'Water flows uphill to money."
The question is: where will the water come from? The Southwest
Network for Economic Justice and the Campaign for Responsible
Technology explains "In an arena of such limited resources,
a struggle ensues between those who have traditionally enjoyed
these resources and those newcomers who look at these resources
with covetous eyes."
High-tech companies are engaging in mechanisms to capture
traditional water rights water pricing, whereby industry pressures
governments for subsidies and circumvents city utility equipment
to directly pump water, thus paying much less than residential
water users pay for water; water mining, whereby companies gain
rights to deplete the aquifers while driving up the access costs
to smaller users such as family farmers; water ranching, whereby
industry buys up water rights of ranches and farmers; and waste
dumping, whereby industry contaminates the local water sources
and then passes the costs on to the community.
Despite increasing industrial demand, conservation programs
aimed at ordinary people are not applied to industry. "While
some residents tore out their lawns last year [ 1996] to save
water," the Albuquerque Tribune wrote of a city conservation
project, "it poured with increasing volume through the spigots
of industry." While residents had to decrease their use by
30 percent, Intel Fab was allowed to increase its use by the same
amount. In addition, Intel pays four times less than the city's
residents for its water. Perhaps the most disturbing trend, however,
is the deliberate destruction of a local pueblo traditional acequia-a
collective system of agricultural water distribution-to feed the
voracious appetite of the high-tech giants.
Under the new commercial system, water is separated from the
land it belongs to and transported great distances; this is anathema
to the local indigenous ways. Says John Carangelo, a mayordomo
of the La Joya Acequia Association, "In New Mexico, where
the total finite supply of water is allegedly fully appropriated,
the location of a high-tech industry is dependent on the purchase
of existing water rights. This high demand for water and their
vast financial resources makes water a valuable commercial product."
He warns that water trading could hollow out rural America.
Local sources, however, will clearly not be sufficient to
meet industrial needs, given the aquifer depletion taking place
in many high-tech-intensive areas. The companies are starting
to look farther afield within their own countries or abroad for
new sources of water; the global trade in water provides a possible
new source. Given the rapid growth of high-tech companies in the
non-industrial world, particularly China, it is entirely possible
that current bulk water exports are being negotiated to feed the
voracious water appetite of the global technology industry.