By Marty Logan
MONTREAL, Feb 4 2003 (IPS)

The handful of multi-national companies that have fattened themselves on the privatisation of public water systems in developing countries in the past dozen years are now eyeing nations like the United States, where they believe their profits will be safer, says a report released Monday.

The European firms now operate in 56 countries and two territories, up from a dozen in 1990, as they build revenues that have the potential to reach three trillion U.S. dollars, says the study prepared by the International Consortium of Investigative Journalists (ICIJ) from the Washington-based Centre for Public Integrity.

The companies – France’s Suez, Vivendi Environnement and Saur; Thames Water, owned by Germany’s RWE AG; United Utilities of England, and U.S. firm Bechtel – have been aided by the World Bank and other international financial institutions (IFIs) which have increasingly insisted that developing countries privatise utilities as a condition of receiving loans.

The process has left millions of the world’s poorest without clean water and facing severe health risks, including the worst-ever outbreak of cholera in South Africa, says the report, which is being released in 10 parts between now and Feb. 14.

"The investigation showed that while these companies claim to be ‘passionate, caring and reliable’, as one company states, they can be ruthless players who constantly push for higher rate increases, frequently fail to meet their commitments and abandon a waterworks if they are not making enough money," adds the study, based on a year-long investigation in South Africa, Australia, Colombia, Asia, Europe, the United States and Canada.

Now, stung by huge losses in economically embattled countries like the Philippines and Argentina, the firms are putting their money into more stable environments, such as the United States, where the multinationals have recently purchased the three largest private-sector water utilities.

They are also lobbying Congress "to pass laws that would force cash-strapped municipal governments to consider privatisation of their waterworks in exchange for federal grants and loans", notes the report.

”They have good guaranteed revenue streams here, which was the big problem in the developing countries – there was a big requirement for infrastructure investment but they didn’t want to sink (the money) there,” Sara Grusky, policy analyst at Public Citizen’s ‘Water for All’ campaign, told IPS.

”We are poised to have a big battle to keep water in the public domain.”

While the firms are already involved in the privatisation of some cities’ water supplies, a subsidiary of Suez last month lost its contract with the city of Atlanta after the project failed to generate the profits the city had calculated it would use to finance its sewage system.

But it is in the developing world where the multinationals reaped huge rewards since 1990, documents the report. For instance, Vivendi’s parent company, Vivendi Universal, reported that its water-related revenue more than doubled from 1990 to 2002, from five billion U.S. dollars to more than 12 billion dollars.

During that same period, the World Bank loaned about 20 billion dollars to water-supply projects, stipulating that privatisation take place in about one-third of them, adds the study.

"While it is clear that considerable improvements have been brought to many waterworks as a result of privatisation, in many cases the companies put in relatively little capita of their own, relying primarily on loans from the World Bank and related international financial institutions," it says.

The report describes how in South Africa the Bank worked with companies to convince municipal councils to privatise or "commercialise", an intermediate step in the process. "Urged by the World Bank to introduce a ‘credible threat of cutting service’, the local councils began cutting off people who couldn’t pay.”

”Since 1998, an estimated 10 million people have had their water cut off for various periods of time. The result has been cholera and other gastrointestinal outbreaks,” it adds.

One such outbreak infected more than 250,000 people and killed nearly 300, describes the report. ”Making people pay the full cost of their water ‘was the direct cause of the cholera epidemic’," says the report, quoting David Hemson, a social scientist sent by the government to investigate the outbreak. ‘There is no doubt about that’."

In 2002, Suez wrote off 500 million dollars in losses at its ‘Aguas Argentinas’ project after the country’s economic collapse, costing the multinational more than eight percent of its international water business, according to another report prepared in January for Public Services International (PSI).

Suez’s Philippine subsidiary has abandoned a project in Manila after the 1990s Asian currency collapse ate into its profits, adds the report, which suggests that the company plans to divest one-third of its water business in developing countries.

”It creates a difficulty for the World Bank and other IFIs whose strategies for the water sector depend on enticing the multinationals to increase their investment and participation. Instead, they are now faced with a two-year period in which the leading company is abruptly reducing its investment,” says the report, written by David Hall of PSI’s research unit at the University of Greenwich, England.

All the water firms are now demanding further guarantees before they will invest, writes Hall. ”It is no longer ‘business as usual’ with the water multinationals,” the report concludes. They ”are now clearly prepared to abandon concession contracts which do not meet the new demand for security for their investments”.

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