The scaffolding for water privatization

The scaffolding for water privatization

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By Gustavo Castro Soto

Turning everything public into private involves a fundamental strategy: privatization, a concept that has been changing over the last 30 years. The first generation of the concept of “privatization” focused mainly on the assets of the States, their productive agricultural or industrial enterprises.

The scaffolding for the privatization of water towards the IV world water forum (First Part)

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The neoliberal economic model applied in the last 30 years is the bridge that is preparing the conditions for the corporation-nation economic model, the last step of the capitalist system in its terminal phase. [1] This is how trade liberalization reaches all levels that, in the logic of capital accumulation, everything that exists tries to be incorporated into the logic of the market. The intrinsic beneficiary of the privatizations are obviously the private companies and in the logic of competition, the mega-Transnational Corporations (TC) that we identify -in the framework of the competition of the global market- as the Main Subject that promotes and benefits from this process of capital accumulation that goes through various economic models.

Turning everything public into private involves a fundamental strategy: privatization, a concept that has been changing over the past 30 years. The first generation of the concept of “privatization” focused mainly on the assets of the States, their productive agricultural or industrial enterprises. The second focused on the sector of some services. The third generation has focused on natural and strategic resources: oxygen (environmental services), genes (biodiversity) and water. In the case of the water privatization process, it has been quietly started for more than a decade. And it is that, as the magazine stated Fortune: "Water promises to be in the 21st century, what oil was in the 20th century: a precious commodity that determines the wealth of nations". [2] For this reason, converting water into a strategic resource with multiple uses and modes of exploitation of surplus value rethinks the geoeconomic and geopolitical conception of other commercial resources. [3]

The need for water for the planet [4], for the survival of any type of life but especially for the human being raises the need to guarantee access to all humanity. Hence its public, national, communal character and with social and environmental functions. [5] Theoretically, water reaches 20 billion people, which is equivalent to more than three times the world population. [6] However, the neoliberal economic model and the type of management that it is given does not make water a renewable resource nor does it allow it to be available for everyone. The vital liquid is now the resource of the last trenches of privatization for which new markets are disputed for the sale of large volumes of water beyond borders, including transatlantic borders, trade routes, appropriation of water sources, etc. at its various levels: urban and rural on the one hand; and agricultural, industrial and domestic on the other.

The global scaffolding

Starting in the 1970s, and in the context of the world crisis of the external debt contracted with multilateral banks by underdeveloped or developing countries, the latter began a process of determining implementation of structural adjustment policies (SAP). These policies have since had various generations, levels and processes. [7] The main global instruments used to impose the conditions that would open the economy of the "Third World" to a new model that would mainly liberate transnational capital from any investment ties and ensure its "rights" were the International Monetary Fund (IMF) and the Bank. World (WB). However, the social pressures that were unleashed all over the world against these two instruments, among other reasons, forced the economic resources and the millionaire destination of loans to poor countries to flow through other channels that did not impose limits on their investments. , or subject them to the observance of international regulations on environmental or human rights. These channels were the continental banks ( See Table No. 1).

And as Johan Bastin of the European Bank for Reconstruction and Development said, "water marks the last frontier that remains to invade the private sector." It should be noted that only 5% of the world population receives its water and sanitation services from private companies despite the exponential growth of the 90s, private investment in the sector increased by 7,900% between 1990 and 1997 in the least developed countries with contracts on all five continents. [8]

But once again the pressure exerted on continental banks to comply with international regulations on the environment and human rights led capital to slip towards regional banks that did not have binding commitments.

Society had little knowledge of them. It is then that national governments, in order to be members of these multilateral banks and be able to have access to those resources, investment contracts and privatizations, were requesting their membership in a context in which Latin America and the Caribbean, in this case, accelerated the processes privatization in the 90's. ( See Table No. 2)

Lastly, there is a link through which the public resources channeled for financing flow, conditioning governments: the Export Credit Agencies (ACEs). This is another International Financial Institution (IFI) created by the government of a developed country to boost its foreign trade. It places public funds in the hands of large companies in its country in order to subsidize their exports. Most developed countries have some type of ACE and are now the ones that channel the most public money to their national transnational companies or foreign governments for mining, nuclear energy, oil exploration, infrastructure or dams projects in the countries of the South. They lend money to prepare feasibility studies for a project, finance high-cost electrical and mechanical components. They also provide commercial risk insurance to a private company that invests abroad, in case of losses or failure in its commercialization. Or political risk insurance in case of conflicts, expropriation or seizure of your assets by a government. They lend money to a poor country on the condition that it uses it to buy goods and services from the companies of the country that lends it. (See Table No. 3)

However, the ACEs do not comply with international standards, norms or criteria regarding human rights, a healthy and sustainable environment or fair development. They extort and pressure privatization and price liberalization so that governments do not control the profits of their companies. Their little transparency on the use of public resources makes them a hermetic entity for the public, acting as private IFIs and without paying taxes. Faced with this situation, in 1998 a coalition of Non-Governmental Organizations (NGOs) meeting in Mesum, Germany, launched the “Declaration of Mesum” as a campaign to demand international environmental standards that all ACEs should apply. But until December 2003 the ACEs accepted Common Approaches to the Environment that in many respects are more rigorous than the IDB's environmental policy. This pressure for capital to abide by international regulations has also reached private banks. [9] As if that were not enough, in 2004 the World Bank and the IDB launched a strategy to “decentralize” environmental and human rights regulations to governments.

In order to convert water from a public good to a commercial good, as in the case of other privatizations, TCs require, in addition to the instrument of the IFIs, allies that in this case are the richest and most industrialized governments in the world. who since 1975, the decade in which the SAPs of the IMF and the World Bank began, have formed the privileged club of the Group of Seven (G-7). At least five of these countries together (the United States, the United Kingdom, France, Germany and Japan) have control of approximately 35 to 50% of the votes and therefore the definition of the policies of the World Bank and the IMF. .

The imposition of conditions is also carried out in scenarios from which it is intended to legalize the rights of TCs globally and above the nations. For this reason, the new wave of privatizations in the world was accompanied by the birth of the World Trade Organization (WTO) which replaced the General Agreement on Tariffs and Trade (GATT) in 1994 and which regulated the import and export of products. With the WTO, the capacity of a world stage to impose new trade rules around goods and services, agriculture and intellectual property is expanded. However, political and social pressures and new correlations of forces did not allow the WTO negotiations in Seattle (1999) and Cancun (2003) to advance. In this way, the government of the United States puts its strategy to achieve the imposition of trade measures around the Free Trade Area of ​​the Americas (FTAA) that has been truncated by the opposition of Brazil, Venezuela, of a great social movement and the Continental Social Alliance, which limited the scope and speed of trade liberalization. This led the United States to modify its strategy to another level and focus its actions at the regional level through the Puebla-Panama Plan (PPP), the Free Trade Agreement with Central America (CAFTA), the Initiative of Regional Integration for South America (IIRSA), the deepening of the North American Free Trade Agreement (NAFTA plus), among others. But once again, to the extent that this is not achieved to the extent of the Bush administration, the United States is pushing for bilateral free trade agreements, country by country. Through these schemes, finance capital and transnational companies build the tracks and circuits for the free movement of their capital and investments, including the strategic issue of water.

The scaffolding of water privatization.

The water privatization agenda cannot be understood without global scaffolding. But in the same way it requires its own runways to land the objective of turning water into a economic resource.

The water privatization agenda began most clearly in the 1990s. It is in 1990 when the New Delhi Declaration established as a new global regulation that water management policies were based on the basins. In 1991 the UN created the International Secretariat for Water. A year later, in 1992, at the Rio Summit on Biodiversity, the year 2000 was defined as the horizon as the goal to establish new institutional and legal structures around water under the design, support and financing of the World Bank and the IMF, who would be the spurs through which governments would be pressured to modify their laws and prepare the ground for the open water market. The subsequent meeting in Dublin is only dedicated to the theme of water. These are the events prior to the creation of the WTO under which other institutions are created that would promote the privatization of water, such as the Coalition of Service Industries based in the United States, and the European Forum on Water Services. European Union. At the same time that the WTO was born and the North American Free Trade Agreement (NAFTA) was signed in 1994, the North American Development Bank (BND) was born to finance public and private sector projects in matter of water.

However, there are three key global water institutions - supported and promoted by the World Bank, the IMF and the United Nations (UN) - in charge of designing the global water privatization agenda and imposing the necessary conditions on governments, conditioning loans and legal modifications, pressure to achieve private concessions, create an infrastructure and culture of water payment, grant loans by indebting public institutions in charge of making the necessary changes and investments before auctioning off the infrastructure and the water business. These institutions are made up of the IFIs, large private corporations and governments:

1) World Water Council (WWC). Created in 1996 in order to design the privatization strategy for water management worldwide. Its financing comes from the IFIs, multinational corporations, multilateral organizations and governments.

2) World Water Association (GWP). Created in 1996 by the World Bank, by the United Nations Development Program (UNDP) and by the Swedish Agency for International Development. He directs the strategy to promote water as an “economic good” and to promote reforms in the public drinking water, drainage and sanitation systems. It is financed by the ACEs, the Ford Foundation, the UNDP and the World Bank whose Vice-president Ismail Serageldin is the first president of the GWP Steering Committee.

3) World Water Commission for the XXI Century. Created in 1998. It is financed by the ACE’s of Canada and the Netherlands as well as multilateral organizations of the UN (UNDP, FAO, UNICEF and UNESCO). It supports and promotes the agenda designed to open water to markets and is made up of 21 personalities from around the world, including Director William J. Congrove who was an advisor to the World Bank and currently works for Vivendi; and Ismail Serageldin who served as President of the Board of Directors.

Immediately after the creation of this institutional framework, the setting for the imposition of the water privatization agenda was established in 1997, creating the World Water Forum (FMA) where the large TCs and their allied governments set the agenda to be followed around the resource. Water. The FMA brings together the main TCs interested in the economic resource of water, the IFIs, multilateral organizations, representatives of governments and scientists and specialists who, together with some “Non-Government” Organizations that echo neoliberal policies. In the FMA, the previously discussed agenda, the conclusions, the diagnoses and the future strategic lines are carried only so that they are formally endorsed even by the illusion that civil society has been consulted. Around each FMA, a strong campaign is intensified by governments and companies regarding the need for private investment and the corresponding payment that the population must make to have access to water. All the voices that criticize this process and claim water as a human right are even singled out by specialists and intellectuals of "paternalism", a discourse that was not justified in the past.

Since 1997 and every three years the FMA has been carried out. The first took place in Morocco, then the Netherlands, the third in Japan and the fourth in Mexico. (See Table No. 4). In the 3rd FMA, the TCs proposed the creation of risk insurance and guarantee programs for their investments covered by the World Bank and the IMF, ACE's and other IFIs. For many years, the World Bank has been preparing its diagnoses on water to justify the protection of private investments [10]. At the same time, in 1998, the IDB reported on other actors involved in water market strategies. Among them the World Meteorological Organization and the Global Water Partnership among others. [11]

After the 1st FMA, the IDB defined in 1998 the strategy for the water resource that synthesized as follows:

“(…) The Bank will support and encourage the participation of the private sector and a public sector with fluidity and regulation capacities in all activities and services related to water; as important components of expanded actions for the modernization of the water supply and sanitation, hydroelectric and irrigation subsectors, as well as the water resources sector as a whole ”. [12]

In that same year, ECLAC diagnosed the water privatization agenda:

“(…) Almost all the governments of Latin America and the Caribbean have announced a policy of increasing private participation in public services related to water (…) only in some countries has the function of managing water resources been transferred to the private sector. water supply and sanitation services, although other functions within these services, of a more technical nature, have effectively been transferred in many countries ”. [13]

In this framework, the constitutional modifications that have been imposed on countries since the 1990s to date to create new water laws have the following constants:

1) The concept of "public good" and "natural good" is legally and constitutionally modified to "commercial good", "economic good", "private good" or "strategic good".

2) A public and private advertising campaign is created in various directions: “there is a water crisis”; “Millions of people in the world die from lack of water or its poor quality”; "The water is running out and in the future it will be uncertain for humanity"; “The indigenous people are to blame for cutting down trees, and the general population for not taking care of it”; "The government no longer has money"; "Climate change and water pollution aggravate the situation"; “It's fair that everyone pays for the service”; "The subsidy is paternalism"; "Only private investment can save the situation"; "Private investment will improve the service, guarantee it to the entire population and reduce its costs"; "It is necessary to legislate on water."

3) The State allows the concession of the water management of a country in private national or international hands. The concession can be up to 30 years and with the possibility of renewal. The concessions are linked to laws for the privatization of land, forests and jungles.

4) The concession includes the entire service cycle: ownership of beds, wells, rivers and other aquifers (associated with ownership of land); property on the extraction of the liquid from where it is and its transportation; ownership over storage (reservoirs); ownership of infrastructure (irrigation canals and systems, dams, pipelines, urban pipelines and sewers); ownership of the distribution and commercialization or collection from the user (public, domiciliary or urban or agricultural industrial); ownership over the recycling systems and the sale of water treatment before returning it to the basin.

See second part:

Gustavo E. Castro Soto

] To see a proposed analysis of the corporation-nation model, see Bulletin “Chiapas al Día” No. 463, April 27, 2005, CIEPAC,
] Fortune Magazine, USA, May 2000, quoted by Delgado, Gian Carlo, “Water and National Security. The natural resource against the wars of the future ”, Ed. Debate, 1st edition, Mexico 2005.
] Gian Carlo Delgado Ramos, "IIRSA and the Political Ecology of South American Water", Published in Alternative Approaches. Argentina. July 2004.
] The hydrological cycle from the perspective of thermodynamics is fundamental for the maintenance and renewal of the planet as an “open system” of water and air. The planet is seen as a unit. See: 1) Murota, T. And Tsuchida, A., “Fundamentls of the entrophy theory of the water cycle, ecocycle, and human ecology”, York University, Toronto 1985; 2) Murota, T. “Environmental Economics of the Water Planet Earth”, Pille, G. and T. Murota (editors), ‘Environmental Economics, The Analysis of a Major Interface’, Geneva 1987.
] According to Pedro Arrojo "Traditionally, from the regenerationist coherence and its historical inertia, there has been a tendency to value water as a simple productive resource, relegating many other environmental and social values ​​to oblivion." Arrojo Agudo, Pedro and Bernal Cuenca, Estrella. “Economic Rationality in the New Culture of Water”, Department of Economic Analysis, Faculty of Economic and Business Sciences, University of Zaragoza. Economic Notebooks "School and Pantry", Number 12, 2001.
] Equipo Maíz, "Drop by Drop, the Water Runs Out", Asociación Equipo Maíz, El Salvador, 2001, p.10.
] For an understanding of the generations of Structural Adjustment Policies (SAP), see "What is Structural Adjustment?" by Luis Ignacio Román Morales, ITESO, July 2000.
] Muñoz, Alberto, Union of Users and Consumers-CTA Provincial Assembly for the Right to Water.
(Taken from, December 2003).
] By July 2004, at least 23 of the world's largest banks had signed the “Equator Principles” that are subject to some investment criteria of the World Bank. Among them are: ABN Amro, Bank of America, Barclays, BBVA, CIBC, Citigroup, Credit Suisse Grp, Calyon, Dexia, Dresdner Bank, Eksport Kredit Fonden, HSBC, HVB Group, KBC, ING, Mediocredito Centrale, Mizuho Corporate Bank, Rabobank, Royal Bank of Canada, Royal Bank of Scotland, Standard Chartered, Unibanco, WestLB, Westpac. See
] Independent Water Entrepreneurs in Latin America-The other private sector in water services [Independent water providers in Latin America - The alternative private sector of water services]. For more information on World Bank activities related to water and sanitation in the Latin American and Caribbean region, visit:
] IDB, “Strategy for Integrated Water Resources Management” (ENV-125), Washington, December 1998, pp. 15-16.
] IDB, Op. Cit., P. 19.
] ECLAC, "Progress made in the privatization of public services related to water: review by countries of Mexico, Central America and the Caribbean", (LC / R.1697) Restricted Document, February 1998, p.4

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