Economy & Trade, Environment, Headlines, Latin America & the Caribbean

URUGUAY: Privatisations Hit Troubled Waters

Raúl Pierri

MONTEVIDEO, Jul 27 2004 (IPS) - When Uruguayans go to the polls in October to elect a new president, they will also be asked to vote on ground-breaking constitutional reforms aimed at guaranteeing public control of the nation’s water resources.

A petition backed by 300,000 signatures was presented by the National Commission in Defence of Water and Life – an umbrella group of local non-governmental organisations (NGOs). The scale of support was convincing in a nation of 3.4 million, and the plebiscite will be held alongside the first round of voting.

This is the first popular initiative to constitutionally establish public control over water in Latin America.

If approved by more than 50 percent of voters, three articles of the constitution will be amended, and water will be classified as "a natural resource essential for life", while access to piped water and to sewage services will be enshrined as "basic human rights."

The referendum came about in response to the concept of water as an economic asset, which is prevalent in the negotiations for the creation of the Free Trade Area of the Americas (FTAA) and the multilateral trade talks in the World Trade Organisation (WTO).

The suggested reform states that water resources in Uruguayan territory form part of the public domain, and that therefore their management must be "sustainable and in keeping with the interests of future generations," while supply strategies "must be designed with social priorities coming before the economic."

According to the plebiscite, water services must be offered "exclusively and directly by state-owned legal entities," and the reform would therefore cancel all previous concessions to private companies.

In those cases, there would be no "compensation for lost future earnings, with reimbursement only on unamortized investments," according to the text of the plebiscite.

Hit hardest by the reform would be the Spanish companies Uragua and Aguas de la Costa, which have contracts to supply piped water in the southeastern department of Maldonado.

"This would mean no private company can provide water services. Control must be in State hands," María Selva Ortiz, a member of the Commission and of the local environmental group Redes-Amigos de la Tierra (Redes-AT), told IPS.

The plebiscite has become one of the hottest issues in the election campaign.

Tabaré Vázquez, presidential candidate for the left-wing Progressive Encounter – Broad Front Coalition (EP-FA) and front-runner in the polls, backs the initiative.

EP-FA Senator Danilo Astori – who Vázquez has indicated would be economy minister if the left wins the elections – made great efforts to calm the fears of Spanish companies on a recent visit to Europe.

Vázquez’s chief rival, Senator Jorge Larrañaga, the candidate for the centre-right National Party, also supports the reform, although it is rejected by other sectors within his party, who argue that it would "scare off investment."

National Party leaders are currently negotiating an alternative project with the ruling Colorado Party and the smaller centrist Independent Party.

President Jorge Batlle himself described the proposed constitutional amendment as "a silly idea," saying it would "inflict economic and financial damage and hurt (investor) confidence" in the country.

The Mercantile Chamber of Uruguayan Products complained that approval of the initiative would cast the rights of companies that sell and export mineral water into "total uncertainty", adding "this will even authorise expropriation, in the best style of other totalitarian state regimes."

But Ortiz told IPS that the changes would not affect companies that bottle water, soft-drink manufacturers or tourist establishments that make use of thermal spa waters, which are not supplied by the State Sanitary Works company (OSE) but use their own systems to extract water from under the ground, or from rivers, springs and streams.

These companies have permission from the Ministry of Transport and Public Works to extract water, and will continue to do so as long as there is no "over-exploitation" which threatens water resources, Marcel Achkar, a geographer with the Commission, told IPS.

In recent years a major proportion of the planet’s drinking water has fallen into the hands of large corporations. In a few years time it is estimated that a handful of companies will control almost 75 percent of all water for human consumption as an increasing number of governments privatise the management of natural resources.

The main concessionaires are the French Vivendi-Générale des Eaux and Suez-Lyonnaise des Eaux, which control 40 percent of the market and provide services to some 110 million people in more than 100 countries.

Governments argue that their main motivation in transferring drinking water distribution, treatment and sewage to the private sector is to improve public services. But this has not happened in many nations of the developing South, like Uruguay.

Aguas de la Costa belongs to the Spanish Aguas de Barcelona, which is in turn an affiliate of Suez-Lyonnaise des Eaux.

Since the firm set up shop in the department of Maldonado in 1992 – where it now supplies nearly 2,500 users and employs only 12 people – rates have climbed to seven times the cost of water services in the rest of the country.

"Aguas de la Costa has drained the Laguna Blanca (the White Lake in southeastern Uruguay), has increased rates, and has failed to live up to its commitments with respect to extending sanitation coverage. We do not want the situation in Maldonado to spread to the rest of the country," said Ortiz.

Uragua, which is owned by the Spanish firms Cartera Uno, Ibredola and Aguas de Bilbao, supplies piped water to Punta del Este and Piriápolis – the country’s two leading resort towns – as well as the city of Maldonado in southeastern Uruguay.

In January 2002, at the peak of the tourist season in the southern hemisphere summer, OSE recommended that the population of Maldonado boil the water distributed by that Spanish firm before drinking it, as technicians had detected fecal e-coli bacteria in the water.

Water privatisation has been widely opposed in several Latin American countries, and transnational corporations have sometimes been pushed out.

In 1997, the people of the northern Argentine province of Tucumán organised a civil disobedience movement, refusing to pay their water bills to a subsidiary of Vivendi which had won the concession for the local water and sewage services four years earlier.

The protests in Tucumán exploded after utility rates climbed by an average of 104 percent and the provincial government detected contaminants in the water supply. The company finally withdrew without fulfilling pending commitments.

In 2000 civil movements in Chile’s central VIII Region organised a plebiscite on the possible privatisation of the state-run company Essbio. The result was overwhelming: 99.1 percent of voters said the company should not be sold.

However, the centre-left government of Ricardo Lagos, arguing the country’s "need of funding for investment plans," privatised the company, which went into the hands of Britain’s Thames Water.

Uruguay also stands out in Latin America because the majority of its people reject privatisations. In 1992, more than 70 percent of voters decided to repeal the main articles of the "law on public enterprises", especially those referring to privatisation of the telephone system.