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Of Liquid Dreams: A Political Ecology of Water Privatization in Buenos Aires
Of Liquid Dreams: A Political Ecology of Water Privatization in Buenos Aires
Of liquid dreams:
a political ecology of
water privatization in
Buenos Aires
Alexander J Loftus recently “Latin America is the region of open veins. Everything, from
completed a Masters degree
at Queen’s University, the discovery until our times, has been transmuted into
Canada (on which this European – or later United States – capital, and as such has
paper draws) and is a accumulated in distant centres of power.”(1)
D.Phil candidate in
Geography at Oxford
University. SUMMARY: The privatization of water and sanitation in Buenos Aires has been
Address: 33 Wolvercote
hailed by its neo-liberal proponents as an unprecedented success. This paper takes a
Green, Oxford OX2 8BD, deeper and more critical look than many of these accounts. It looks at political and
UK; e-mail: economic changes within Argentina in order to explain the troubling findings regard-
[email protected]
ing the performance of Aguas Argentinas, the private company that won the conces-
David A McDonald is sion for most of Buenos Aires. The paper begins with a brief overview of the political
Director of the and economic context in Argentina before describing the process involved in the water
Development Studies
Programme at Queen's privatization in Buenos Aires. It then discusses the outcomes, including changes in
University, Canada and is coverage and charges to end users as well as impacts on labour and the environment.
co-Director of the The paper describes how the promised reduction in water tariffs did not materialize (in
Municipal Services Project
(www.queensu.ca/msp). fact the opposite occurred) and how agreed-upon targets for expanding sewerage
connections and sewage treatment were not met. It also describes how the national
Address: Development
Studies Programme, government intervened to support the water company in conflicts with the regulatory
Mac-Corry Hall, Queen's agency and even by-passed the regulatory agency when the water company wanted to
University, Kingston, renegotiate the contract. Finally, the role of international financial institutions in this
Ontario, K7L 3N6, Canada;
fax: +1-613-533-6122; e-mail: process is discussed.
[email protected]
a. A shift to neo-liberalism
8. Ministerio de Economia y
Obras y Servicios Publicos tization by the Executive Branch, approval for which should in all cases be provided
(1993) Argentina: A Growing by a Congressional Law.”(8) Through such a decree, Menem was able to priva-
Nation, MEOSP, Buenos tize the Buenos Aires water and sewerage network, Obras Sanitarias de la
Aires, page 4.
Nacion (OSN), without public consultation, arguing that it was “urgent” to
press on with reforms. Further presidential decrees 2074/90, 1443/91 and
2408/91 stated that the privatization would take the form of a “concession”.
The programme of economic restructuring was spearheaded by the
finance minister, Domingo Cavallo, who argued that privatization had
become a necessary measure to counter hyper-inflation that had reached
4,923.6 per cent in 1989 – “a statistical record which has scarred the national
9. See reference 8, page 3. consciousness.”(9) According to Prensa Economica: “...for Minister Cavallo,
carrying out the privatization of government-run corporations in record time is a
10. “Argentina racing
against the clock” (1991), must, since the main pillar of his convertibility is a fiscal surplus and therefore rests
Prensa Economica 17 (188), on the inflow of funds arising from the privatizations.”(10)
page 35. By 1993, the World Bank and the Inter-American Development Bank had
been involved in the Argentine water sector for several years, the Inter-
American Development Bank having lent US$ 90 million to OSN in 1989.
Once the government announced its law of administrative reform, the World
11. SGBATOS is the Union Bank funded and appointed a team of private sector technical and financial
for the Water Sector
Workers of Gran Buenos consultants from the UK to advise on the future of Buenos Aires’ water
Aires which itself is a part sector. The World Bank was also responsible for recommending and short-
of FENTOSS, the National listing companies after the submission of bids. At this stage, a privatization
Federation of Water
Workers. Both are in turn
committee was formed, comprising representatives of the Ministry for the
affiliated with the CGT, the Economy and Public Works, the Privatization Board, SGBATOS(11) (the main
General Confederation of water sector union) and OSN.
Workers, the main umbrella Once the decision to privatize had been made, there was no discussion
labour movement referred
to at the outset of this of alternatives. Alternatives within the private sector were discussed but
paper. these were restricted to questions of whether or not to divide the concession
area into competing concessions (a recommendation of the World Bank’s)
or whether to divide the network vertically into different services. The priva-
tization committee was essentially established to discuss how to privatize.
Virtually no information was provided to the public, as the committee relied
on the press publicizing the issues and taking an interest. Public input was
non-existent until a public hearing took place in June 2000, seven years after
the contract had been signed and two years after the second five-year plan
was to have commenced.
a. Co-opting labour
Labour had provided one of the key sources of opposition to initial attempts
at privatization in the mid- to late-1980s. Thirteen general strikes had been
called in order to block the progress of such reforms. However, Menem and
Cavallo recognized the levels of support that their party still had amongst
workers. This meant that union leaders had to be guaranteed a seat in the
privatization discussions. In order to ensure continued support up to and
following privatization, the law of administrative reform offered employees
a 10 per cent share in the privatized companies through the Programma de
Propiedad Participada (PPP).
The key to understanding the union’s co-optation lies in the PPP. As
Artana, Navajas and Urbiztondo argue in an article for the Inter-American
Development Bank and neo-liberal think-tank FIEL(Fundacion de Investi-
gaciones Economicas Latinoamericanas (Latin American Foundation for
Economic Research)): “Allocating 10 per cent of shares to workers through the
Programme for Shared Ownership was intended to ‘buy’ the consent of former OSN
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Environment&Urbanization Vol 13 No 2 October 2001 183
FEEDBACK
b. “There is no alternative”
Interviews with key decision makers also suggested that there was a general
sense amongst union leaders that privatization was inevitable and that fight-
ing against it was futile. Crucial to this thinking in Argentina was the hyper-
inflationary crisis which essentially disciplined the population into accepting
privatization as a solution. The Ministry for the Economy and Public Works
states in a 1993 document that “...the key to these changes [privatization] was the
realization that the economic model that Argentina followed for decades was
exhausted. The hyper-inflationary crisis was useful to make clear that it was impos-
sible to achieve growth and stability on the basis of a regulated economy closed to
the outside world, with a deficit-ridden public sector operating in many inappro-
priate areas.”(13) 13. See reference 8, page 3.
The water sector was, however, not deficit-ridden (it actually produced a
surplus in 1992) and would be considered by many to be an appropriate,
even vital, area in which the public sector should be involved. This is not to
say that Argentina’s 1980s economic model was “succeeding” or that OSN
was doing a satisfactory job. OSN was suffering from serious under-invest-
ment: unaccounted-for water (leakage) had reached levels of 40-50 per cent;
water shortages in the summer months occurred frequently; and serious
pollution resulted from too few sewerage connections and inadequate
sewage treatment. Crucially, 30 per cent of the population living in Gran
Buenos Aires had no access to the water network. The service was clearly
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184 Environment&Urbanization Vol 13 No 2 October 2001
WATER PRIVATIZATION
ripe for major reform. However, such reform was not considered outside of
the private sector. It seemed there was to be no alternative to privatization.
Several interviewees even suggested that in the few years prior to privati-
zation, the water and sanitation situation was intentionally worsened to
highlight the “inadequacy” of publicly owned services. It is certainly true
that the government increased prices in 1991 and 1992 in order to smooth
the way for public acceptance of privatization, something that we examine
in more detail later in the paper. Again, TINA-thinking (“there is no alter-
native”) was encouraged through the argument at the time that publicly
owned companies overcharged unnecessarily because of bureaucratic
inefficiencies.
Once bids for the concession were called for, and information disseminated
amongst likely bidders, pre-qualification criteria were stipulated. After this
process, five companies emerged; although this was soon reduced to four
as the two main French companies decided to submit a joint proposal. The
bidding process consisted of two stages. The first stage required the evalu-
ation of a company’s technical proposals, the second stage involved an eval-
uation of their financial proposals. One company failed to qualify at the first
stage, leaving three bidders to move into the second stage – the financial bid
– which was assessed on the basis of who could offer the largest tariff reduc-
tions. Aguas Argentinas offered a 26.9 per cent tariff reduction; the runner-
up a 26.1 per cent reduction. The third bidder’s offer was considerably lower
at 11.5 per cent.
On May 1, 1993, Aguas Argentinas signed a contract allowing it to run
the Buenos Aires sewerage and water network for the next 30 years. The
present capital stock breakdown of the company is shown in Table 1.
* One interesting aspect of the figures is the 5 per cent share acquired by the International Finance
Corporation, a member of the World Bank group. The IFC originally lent money to Aguas Argentinas
before exchanging these debts for a share in the company. Not only does this testify to the instant
profitability of the firm (the IFC wanted a share in these profits), it raises questions about the
objectivity of World Bank research into the privatization initiative. It also makes the Bank’s aggressive
promotion of the Argentinian model abroad problematic.
Water System
Number of connections 1,170,000
Average production (m3/month) 108,950,000
Treatment capacity (m3/day) 3,640,000
Length of water pipe system (kilometres) 11,000
Total population 8,580,000 *
Served population 6,000,000
Sewerage System
Number of connections 700,000
Served population 4,700,000 **
Volume collected (m3/month) 82,232,000
Volume treated (m3/month) 3,413,000
* Quilmes became part of the concession area in 1995, raising the total population to 9,300,000.
** The figures quoted for this range from 4,663,670 (Aguas Argentinas, 1998) to 4,900,000 (Aguas
Argentinas, 2000). The concession contract (perhaps the most reliable source) states that 58 per
cent of the population was connected to the sewerage network. This works out at a population of
4,976,400 with a connection to the sewerage network.
SOURCES: Collated from Jaspersen, F (1997), in The Private Sector and Development: Five Case
Studies, The World Bank and International Finance Corporation, Washington DC, Concession
Contract; also Aguas Argentinas (2000).
The area served by Aguas Argentinas consists of the federal capital area
of Buenos Aires in the downtown core and 17 surrounding municipalities
(see Map 1). Originally, only 14 municipalities were served but expansion
has since taken place through the inclusion of the municipality of Quilmes
and the creation of three municipalities within Moron (formerly only one
municipality). (See Table 2 for a breakdown of coverage and performance
levels at the start of the concession.) Water is purified in the San Martin and
the General Belgrano plants, the former being considerably bigger and
among the largest of its kind in the world. Sewage is currently treated in
two separate plants in the south-west and the north of the city. There are
significant disparities between the levels of coverage in different areas of
the city. In general, the south of the city has much lower rates of both water
and sewerage coverage. 14. Abdala, Manuel Angel
(1996), “Welfare effects of
Of the 2,580,000 people (30 per cent of the population) not connected to Buenos Aires’ water and
the water network in 1993, 95 per cent obtained water from individual wells sewerage services
with pumped or manual motors.(14) For those not connected to the sewer- privatization”, unpublished
age network, 88 per cent disposed of sewage through septic tanks and manuscript, The World
Bank, Washington, DC.
cesspools and the remainder disposed of it directly into rivers, streams or
the ground. This latter activity, in conjunction with poor quality cesspools
and industrial pollution, has led to serious pollution of shallow ground-
water aquifers from which those not connected to the water network obtain
their drinking water. Environmental health risks in poorer areas of the city
have worsened.
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186 Environment&Urbanization Vol 13 No 2 October 2001
WATER PRIVATIZATION
a. Network expansion
Since signing the contract, Aguas Argentinas claims to have increased the
number of clients receiving water by 1,500,000. This figure includes the
expansion of the concession area to the municipality of Quilmes in 1995 and, 16. Aguas Argentinas
therefore, the addition of 650,000 new users, many of whom were already argues that prior to
connected to the water and sewerage networks (see Table 2 for the popula- privatization, water
coverage was 67 per cent
tion covered in 1993). A better measure is the percentage of the total popu- and sewerage coverage
lation covered by the network. As Table 3 shows, water coverage at the start 54 per cent, suggesting
of the concession was 70 per cent and sewerage coverage 58 per cent.(16) By even greater levels of
1999, Aguas Argentinas claims that water coverage had reached 82.4 per cent improvement.
and sewerage coverage 61 per cent.(17) 17. Aguas Argentinas
These are significant increases and the figures for water coverage meet (2000), http://www.
the performance target of 81 per cent for the first five-year period. Sewerage aguasargentinas.com
coverage, however, has not increased at the same rate and the figures for this
fail to reach the 64 per cent coverage specified in the contract. Most impor-
tantly, the level of sewage treatment has barely increased in the first seven
years of operation. According to interviewees, the level of primary and
secondary sewage treatment is still hovering at around 5 per cent. In other
words, although the sewerage network has expanded, very little of the
sewage that is being collected is being treated. Most of it is simply being
dumped raw into the Rio del Plata via a 2.5 kilometre long outlet pipe. The
environmental implications of this neglect are serious and are taken up later
on in this paper. What is important to note here is the complete failure of
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188 Environment&Urbanization Vol 13 No 2 October 2001
WATER PRIVATIZATION
Year of Per cent of Per cent of Per cent of collected Network renovation Per cent of
concession population population sewage that is treated* (cumulative) % unaccounted
serviced by serviced by for water
water sewerage
Primary Secondary Water Sewage
treatment treatment
0 70 58 4 4 0 0 45
5 81 64 64 7 9 2 37
10 90 73 73 14 12 3 34
20 97 82 82 88 28 4 28
30 100 90 90 93 45 5 25
* Primary treatment merely involves the settling-out of undissolved solids from suspension in the form of sludge. Secondary treatment
involves bringing the effluent into contact with oxygen and micro-organisms. This breaks down much of the organic matter into harmless
substances.
SOURCES: Collated from Concession Contract, Idelovitch, E and K Ringskog (1995), Private Sector Participation in Water Supply and
Sanitation in Latin America, The World Bank, Washington DC.
Aguas Argentinas to meet its sewage treatment targets, which should have
been 64 per cent for primary treatment and 7 per cent for secondary treat-
ment by the end of the first five-year period.
The expansion of water coverage through new investments has been
18. See reference 15, page
more successful and has received considerable acclaim from lending agen-
42. cies. Alcazar et al., for example, argue that the company’s investment record
has been “impressive”.(18) They admit that investment has not met the levels
19. It is interesting to note committed to but that “...as a result of this investment, new [water] connections
the researchers’
exaggeration of connection increased by 11 per cent over the five years and coverage increased from 70 per
rates in this case. The figure cent of customers in the service area in 1992 to 83 per cent by 1997.”(19) With
of 83 per cent was not regard to the actual size of the network, Aguas Argentinas has expanded
reached until 2000.
water pipelines by 1,700 kilometres and the sewerage network by 300 kilo-
20. See reference 17. metres.(20) Much of the old network has also been rehabilitated and cleaned.
Water production has also increased through initiating some fairly basic
repairs at the San Martin water treatment plant.
Although some of these improvements are indeed impressive, there is
absolutely no reason to believe that similar reforms could not have been
made by OSN had adequate funding been available to the public sector in
the early 1990s. Moreover, most of the new investments by Aguas Argenti-
nas have come via loans from the IFC and new surcharges to consumers,
finance vehicles that could have been equally accessible to a publicly owned
water entity.
b. Cost of water
Buenos Aires.
On closer examination, however, this is not the case. In fact, the current
president of Argentina, Fernando de la Rua, speaking in March 1999 when 21. Quoted in Latin America
Press, 32 (7), (2000).
he was mayor of Buenos Aires, stated that: “Water rates, which Aguas Argenti-
nas said would be reduced by 27 per cent have actually risen a total of 20 per cent.”(21) 22. Although this cannot
The following paragraphs attempt to unpackage some of this confusion. necessarily be argued to be
In February 1991, after OSN had been earmarked for privatization, a 25 part of a strategy of
artificially increasing water
per cent tariff increase was announced. This increase, it was said, was to rates, the tax certainly led to
compensate for inflation, as was the 29 per cent increase in April of the same the further perception of
year. In April 1992, a goods and services tax was then added to water bills.(22) public service inefficiency
by increasing costs to the
Initially, it was set at 18 per cent, later increasing to 21 per cent in April 1995. end-user.
A further 8 per cent increase was granted a few months prior to privatiza-
tion.(23) The effect of these increases was to allow the company to offer what 23. Ferro, Daniel (2000), El
seemed to the public to be a 27 per cent decrease in costs, even though in reality servicio de agua y saneamiento
en Buenos Aires: privatización
it was a manufactured reduction. As consultants to the Inter-American y regulación, CEER, Buenos
Development Bank state, this was a useful strategy for stemming possible Aires, page 10.
opposition to the privatization process.(24)
24. Wenyon, Sylvia and
A similar strategy is reported on, and recommended to other govern- Charles Jenne (1999),
ments, by Mark Dumol, a Filipino government official, in a World Bank “Water and sewerage
publication on the Manila water concession. Dumol writes, in a chapter enti- privatization and reform”
in Basanes, Federico,
tled “Need to have bids lower than the existing water tariff” that: “In August Evamaria Uribe and Robert
1996, about five months before the bid submission, the water tariffs were increased Willig (editors), Can
by about 38 per cent. This tariff increase was actually long overdue and would have Privatization Deliver?
been implemented regardless of privatization… Nevertheless, it gave us a substan- Infrastructure for Latin
America, Inter-American
tially greater chance that the bids would be lower.”(25) Dumol also states that the Development Bank,
importance of this price hike prior to privatization was learned from the Washington DC, page 198.
Buenos Aires water concession.
25. Dumol, Mark (2000), The
It is also useful to note here that the Argentine government acted simi- Manila Water Concession: A
larly with the privatization of the state telephone company, ENTEL. In this Key Government Official’s
instance, Maria Julia Alsogaray, the trustee for ENTEL, attempted to raise Diary of the World’s Largest
tariffs by 2,300 per cent in the first quarter of 1990 and guaranteed bidders Water Privatization, The
World Bank, Washington,
a net profit margin of 16 per cent for the first two years after privatization.(26) DC, page 42.
Though Alsogaray was overruled in this case, a 700 per cent increase in
charges was still permitted prior to the privatization of ENTEL.(27) 26. See reference 4, page
109.
Since the 1993 “cost reduction” in water, the cost for services increased in
both 1994 and 1998. Additional charges were added in both cases and the 27. Azpiazu, Daniel (1999),
renegotiation of the contract in 1997 allowed for a significant revenue gener- “Las privatizaciones en la
Argentina y la
ator for the company in the form of a universal surcharge, the SUMA (Servi- concentración del poder
cio Universal y Medio Ambiente, meaning “universal coverage and the económico” in Seminario
environment”). Nacional 1999, Escuela
As to why the regulator allowed these price increases is unclear. Accord- Nacional de Formación
Política, Buenos Aires,
ing to the original contract, prices can be adjusted according to a mix of page 366.
“price-cap” and “cost plus” pricing regulation, with prices subject to adjust-
ment every five years in line with the company’s investment plans. Prices
can therefore go up or down, except in the first five-year period when they
had already been fixed and also in the second five-year period for which the
contract stated that prices could only go down. This means that in the first
ten years no increases should be permitted by the price-cap system.
Between these five-year periods, however, prices can be adjusted accord-
ing to the company’s composite cost index. If costs for the company rise
above 7 per cent, then it can file for an increase. The index itself is based on
ten cost categories such as fuel, chemicals, electricity, labour, debt service
and so on, and the relative value of each of these is assigned a weight accord- 28. See reference 15,
ing to each of the five-year plans.(28) pages 28-29.
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190 Environment&Urbanization Vol 13 No 2 October 2001
WATER PRIVATIZATION
has become increasingly sceptical about its continued access to services. Information
in the media suggests that some users are abandoning essential privatized utilities 33. Pirez, Pedro (1998),
such as water; it is estimated that 30 per cent of the population which was incorpo- “The management of urban
services in the city of
rated following the recent expansion of the network has stopped paying”.(33) Buenos Aires”, Environment
Aguas Argentinas’ inability to collect these fees from the poor quickly led and Urbanization Vol 10, No
them to call for a renegotiation of the contract. The company argued that 2, October.
revenues after three years of the concession were US$ 217 million lower than
expected, in large part because of the non-payment of the infrastructure
charge. They also demanded that the regulator, ETOSS, suspend some of the
fines for its failure to meet the 1994 accelerated investment targets. 34. OFWAT (2000),
“Financial performance and
It must be remembered at this point that Aguas Argentinas was reaping expenditure of the water
large profits from the concession. A report from the Universidad Argentina companies in England and
de la Empresa stated that profits in 1995 were 28.9 per cent of revenues, in Wales 1999-2000”, accessed
1996 they still reached 25.4 per cent and in 1997 they were 21.4 per cent. This 15 February, 2001 at
http://www.ofwat.gov.uk/
compares with average profit rates in the water sector in England and Wales pdffiles/capex2000.pdf.
(often cited as the model of privatization) which averaged 9.3 per cent in According to Americo
1999-2000 and 9.6 per cent in the preceeding year.(34) Yet, Aguas Argentinas García, Jr’s submission to
the public hearing in June
still argued that it was necessary for its contractual obligations to be weakened 2000, the figures for
and for new tariffs to be introduced in order to increase revenues. In this England and Wales are as
instance, the government assumed responsibility for the negotiations and a low as 6-7 per cent and the
international average
team of engineers was appointed around the Minister for Natural Resources between 6.5 and 12.5
and Human Development, Maria Julia Alsogaray. Alsogaray’s appointment per cent.
was justified by the government by claiming that it wanted to use the rene-
gotiations to address environmental concerns, including measures to reduce
contamination of the Matanza and Riachuelo rivers.(35) However, the team 35. See reference 15,
of engineers assigned to the project lacked both experience and the close page 37.
knowledge of the concession that ETOSS had developed over the previous
four years (and before that working within OSN). The government was
therefore seen to be directly snubbing the independent regulator and the
consequences proved serious. 36. Hardoy and
A new agreement was eventually reached in 1998 with the introduction Schusterman put the figure
of a universal surcharge, the aforementioned SUMA. This US$ 3 surcharge at US$ 8 bi-monthly. See
(US$ 6 paid every two months) is divided into two parts, with US$ 1 going Hardoy, Ana and Ricardo
Schusterman (2000), “New
to environmental clean-up and US$ 2 going to extending services to new models for the privatization
users. (Since its introduction, it too has increased).(36) Although allowing for of water and sanitation for
cross-subsidization, the SUMA came as a shock to many consumers, being the urban poor”,
Environment and
regarded as the equivalent of a water “poll tax”. This led to the defensor del Urbanization Vol 12, No 2,
pueblo (ombudsman) for Buenos Aires challenging the charge in court. At pages 63-75.
first, the court conceded that the introduction of this surcharge was illegal
but Minister Alsogaray appealed and the charge stayed in effect. Since the
introduction of the SUMA, expansion of the network has continued, albeit
at a much slower pace, and the environmental clean-up is scheduled to take
place in the company’s integral sanitation plan (PSI).
The introduction of the SUMA raises some other troubling questions. In
his submission to the public hearing on the concession in June, 2000,
Americo García, Jr (son of the late Senator García and a member of the
senate's administrative staff) pointed to some inconsistencies in the SUMA
and the expansion plans presented by the company. Within five years, the SU
element of the SUMA (i.e., the universal coverage component of the
surcharge) will raise US$ 312.8 million. A further charge on members of the
public to be incorporated into the sewerage network (the CIF) will bring this
total to US$ 340.4 million. The company’s investment plans, however, are
only in the order of US$ 450 million, meaning that the company is only going
to invest US$ 100 million of its own money over the five-year period. (This,
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192 Environment&Urbanization Vol 13 No 2 October 2001
WATER PRIVATIZATION
d. Corruption
Many of the people interviewed for this research suggested that attempts to
buy the support of both the regulator and the government were not uncom-
mon. The fact that the minister in charge of the 1997 tariff renegotiation,
Maria Julia Alsogaray, has been tried for accepting multi-million dollar
bribes in the privatization of the Buenos Aires port system only raises suspi-
cions further. Several interviewees suggested that the cost of the 1997 rene-
gotiation was in the multi-million dollar range. Others stated that the
support of local councillors had been bought with free trips to World Cup
football matches in France in 1998. Although no concrete evidence was
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Environment&Urbanization Vol 13 No 2 October 2001 193
FEEDBACK
provided to this effect, there would appear to be growing concern around the
issue of corruption. Furthermore, as Alsogaray’s name becomes increasingly
tarnished with other scandals, several interviewees stated that it is only a
matter of time before the anti-corruption office links her to improper deal-
ings with Aguas Argentinas.
Corruption charges also haunt most of the world’s top ten water corpo-
rations, with Suez Lyonnaise des Eaux, Vivendi and their subsidiaries being
amongst the worst offenders (both of them and their subsidiaries being
involved in Buenos Aires). Vivendi, for example, has faced no less than six
separate corruption cases. Suez Lyonnaise and one of its subsidiaries have
39. Council of Canadians
been charged with tampering with water-pricing in Indonesia, illegally intro- (2000), “Corruption charges
ducing “...entrance fees in St. Etienne in France and having paid the mayor of haunt the world’s top ten
Grenoble up to US$ 6 million in ‘gifts’ during a period in which the town’s water water companies”, accessed
bills went through a three-fold increase.”(39) Sue Hawley writes that: “If corrup- 15 February, 2001 at
http://www.canadians.org
tion is growing throughout the world, it is largely a result of the rapid privatization /blueplanet/pubs-fact2.html.
(and associated practices of contracting out and concessions) of public enterprises
worldwide. This process has been pushed by Western creditors and governments and 40. Hawley, Sue (2000),
“Exporting corruption:
carried out in such a way as to allow multinational companies to operate with privatization,
increased impunity.”(40) Many of those interviewed felt this to be the case in multinationals and bribery.
Buenos Aires. Corner house briefing 19”,
accessed 20 January, 2001 at
http://cornerhouse.icaap.
e. Environmental effects org/briefings/19.html.
In spite of arguments from the World Bank and the IFC that privatization 41. See, for example,
Idelovitch, E and K
would ensure the necessary investments for environmental clean-up oper- Ringskog (1995), Private
ations, very little has been invested in this critical area.(41) In field interviews, Sector Participation in Water
the environmental situation in Buenos Aires was continually cited as the area Supply and Sanitation in
Latin America, The World
most ignored by Aguas Argentinas. One of the main concerns is the lack of Bank, Washington DC; also
sewage treatment. As noted earlier, at the start of the concession only 4 per Rivera, D (1996), Private
cent of collected sewage was going through primary and secondary treat- Sector Participation in the
ment and this has barely increased, to 5 per cent. Perhaps even more worry- Water Supply and Wastewater
Sector: Lessons from Six
ing is that only 58 per cent of the population of Buenos Aires were connected Developing Countries,The
to the sewerage network at the start of the concession and this too has only World Bank, Washington
increased nominally, to 61 per cent. Uncollected sewage is being disposed DC; and Jasperson, F (1997),
“Aguas Argentinas” in The
of in septic tanks, cesspools or directly into rivers and streams. As a result, Private Sector and
surface water supplies (especially the Matanza and Riachuelo rivers) are seri- Development: Five Case
ously contaminated, posing a substantial health risk. Studies, The World Bank,
Washington DC and
As outlined in Table 3, an ambitious plan was set out in the original International Finance
contract for the expansion of the sewerage network and for rapid increases Corporation.
in primary and secondary treatment of sewage. Since signing the contract,
however, Aguas Argentinas has failed to provide concrete plans for sewage
treatment investments and has failed to meet any of its first five-year targets
for sewerage network expansion. One interviewee described how the
company had provided the regulator with four revisions of its environ-
mental plans (in the form of the PSI) within the space of one month. This, he
said, meant that they had become “a moving target”, virtually impossible
for ETOSS to regulate.
One of the starkest examples of Aguas Argentinas’ environmental
mismanagement lies in the problem of the napas. This refers to the problem
of rising water tables, which has had some serious consequences for low-
lying areas since the start of the concession. A report prepared for the public
hearing on the concession in June 2000 cites three primary causes of the
problem: the influence of hydrological cycles; human settlement in low-lying
areas; and the transfer of water from the Rio del Plata to the aquifers on
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194 Environment&Urbanization Vol 13 No 2 October 2001
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f. Labour
Since the concession came into operation, the workforce in the water sector
has been roughly halved, from 7,600 employees to 4,000. These layoffs were
largely conducted through voluntary early retirement schemes, the first
being jointly funded by the government and Aguas Argentinas, the second
being paid for solely by Aguas Argentinas. The company argues, however,
that 15,000 new jobs have been created around the concession on a sub-
contracting basis and in other sectors. This figure has been criticized as a
wildly ambitious company estimate but it does serve to demonstrate the
importance of sub-contracting or, as Cieza puts it, “the proliferation of
44. See reference 6. ‘garbage contracts’” (short-term contracts for the now desperate workers).(44)
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Such jobs are non unionized and do not have to conform to the same health
and safety standards fought for by the main water sector union. These new
jobs have also been criticized for contributing to a general weakening of
union organizing across Buenos Aires. Whilst the main water sector union,
SGBATOS, is struggling to ensure the unionization of these jobs, it seems an
impossible task, with many contracts lasting only between three and six
months.
The actions of SGBATOS have also become somewhat problematic, acting
as it was as a full supporter of the privatization process, and with the head
of the union holding a key position within the privatization committee. Since
privatization, the union has itself become something of a neo-liberal “success
story”, co-editing publications with the World Bank and visiting other coun-
tries whose water systems have been targeted for privatization, in order to
promote its benefits for labour.
Representatives from both SGBATOS and FENTOSS argued, in field inter-
views, that their role shifted in the 1990s from being antagonistic to capital
to fulfilling a more “social position”, in which they provide health care plans,
retraining programmes and private pension plans for their members.
Indeed, it would appear that both health and safety standards and other
benefits for unionized workers have improved under the private company.
But with official unemployment hovering at around 15 per cent (and unof-
ficial employment as high as 40 per cent) the union’s claim that the tradi-
tionally antagonistic relationship to capital had to be shelved in order to
serve the “wider community interest” rang hollow for some of the people we
interviewed, who see the union as solely serving the interests of a narrow
working élite.
SGBATOS has become a good example of what is termed in Argentina a
sindicato-empresa or union-business. Its headquarters are based in a glass-
fronted, air conditioned building in a wealthy residential area of the city. Its
training facilities are impressive, a result of the union’s ability to garner
funds through the PPP. (During our visit, the “training” session consisted of
a six-hour audiovisual display on the legacy of Peron.) When asked if they
were distinguishable from the private company anymore, the vice-secretary
of SGBATOS argued that, “...yes, meetings were often heated” and “...doors
would be slammed”. Whether these differences constitute a genuine strug-
gle for collective rights on the part of the union or merely a “lover’s tiff” (as
implied by some of our interviewees) is a moot point. What is clear is that
the union representing workers in the water sector has been fundamentally
transformed by the privatization process.
g. Community organizations
And what of community organizations? What has been the political impact
of water privatization in Buenos Aires on these groups and what, if anything,
have community organizations done to address service failures in low-
income neighbourhoods?
For the most part, community groups have had little interaction with
Aguas Argentinas. There is a mechanism for “consumer groups” (as they
are called) to register complaints with the independent regulator but rela-
tively few organizations and individuals have made use of this option. This
lack of public activity may be due to the logistical difficulties of lodging a
complaint with ETOSS (e.g. transportation, literacy), a lack of public aware-
ness about the existence of the regulator or perhaps a lack of faith in the
ability of the regulator to act on a complaint. Whatever the reasons, the
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V. CONCLUSIONS
TO CLAIM, AS Aguas Argentinas does, that the water concession has aided
in the alleviation of poverty in Buenos Aires is misleading. Although there
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