by Tony Clarke and Maude Barlow
On a cool, sunny morning in Johannesburg, South Africa, Dr. David McDonald, Director of the Municipal Services Project (MSP), calmly shared the results of an impact study he had just completed in May 2001 on the privatization of water and sanitation services in Buenos Aires, Argentina. To date, this had been the largest private concession in the world, involving the two largest global water corporations, Suez and Vivendi, with Suez as the lead operator, through its subsidiary Aguas Argentinas. Suez had also been recently awarded the concession for the city of Johannesburg. Reports had already been prepared by Suez and by the World Bank group that had helped finance the project, but this was the first independent study relating to Buenos Aires’ experience with water privatization since their project had begun in 1993. And the South African Municipal Workers’ Union, which had convened the press conference, was eager for the people of Joburg to hear the results first hand.
For several years, the Buenos Aires project had been heralded as a major water success story. In 1993, the city’s antiquated system of pumps and pipes had had all the makings of a water disaster. Then the Suez-led consortium, after obtaining a 30-year contract, stepped in to modernize and streamline the water delivery system of Latin America’s wealthiest city.
Although proponents claim that privatization ensures greater public accountability and transparency, the Buenos Aires project was dictated unilaterally by a presidential decree in 1989. In August 1989, the Argentinean government, under President Carlos Menem, quickly pushed through the National Administrative Reform Law, declaring a state of economic emergency with regard to public services. The law authorized the “partial or total privatization or liquidization of companies, corporations, establishments, or productive properties totally or partially owned by the State . . .” Based on this presidential decree, steps were taken to privatize the Buenos Aires water and sewage network known as Obras Sanitarias de la Nacion (OSN).
According to one study, the consortium did succeed in modernizing OSN’s aging infrastructure. Much of the old network was restored and cleaned up and water production increased as a result of basic repairs at one water treatment plant. And by 1999 — six years after the contract was signed — Aguas Argentinas reported that the percentage of the population receiving water service had increased from 70 percent to 82.4 percent, though the Suez-led consortium’s five-year target was less, at 81 percent. Despite these positive achievements, however, the Buenos Aires privatization project fell far short of expectations on other fronts.
While privatization, it was hoped, would bring lower water prices for people in Buenos Aires, the net effect has been the opposite. Not long after the Suez-led consortium took over from OSN, a 26.9 percent reduction in water rates was in fact implemented. Yet just after the OSN had been slated for privatization in February 1991, a 25 percent rate increase had been announced, and two months later, prices had gone up another 29 percent. Both increases, it was said, were to compensate for inflation. Further price hikes took place in 1992, and the result was much higher tariffs just before the consortium took over. Taken together, these price increases served to more than offset the initial 26.9 percent price reduction announced at the time of the privatization. What’s more, a year after the concession began, the company argued that it needed to increase its prices because the government was making new extra-contractual demands, including a requirement that very poor neighborhoods receive service immediately. This, the company said, would increase their costs by 15 percent. An additional price hike was granted — 13.5 percent in charges for consumption, disconnection, and reconnection plus a 42 percent increase in an infrastructure surcharge.
The Buenos Aires water privatization plan also allowed Aguas Argentinas to build sewage infrastructure at a slower rate than water infrastructure. By 1999 — one year after the original target date by which the company was to have increased sewage service from 58 percent to 64 percent of the population — the sewage part of the infrastructure program had only reached the 61 percent mark. In the past, the public utility OSN had committed to extending the sewage network at the same rate as the water network. But Aguas Argentina (though it had inherited the disparity between water and sewage services from OSN) maintained that the extension of the water network was more urgent because people in unserviced areas were drinking water polluted by nitrates. It should be noted, however, that removing and treating sewage cost about twice as much as providing water service, while the rates charged for both services were the same. So in the process of providing water services, Aguas Argentina had expanded the more profitable network at a faster rate than the less profitable one. And sewage not collected by Aguas was being disposed of in septic tanks or cesspools or directly into rivers and streams, which led to a risk of health hazards through the spread of water-borne diseases.
Meanwhile, this privatization plan also had its own built-in mechanisms for guaranteeing profits. Indeed, the original contract between the government and Aguas Argentinas had built-in flexibility that did much to protect the company’s profit margins. For instance, the agreement allowed Aguas Argentinas to file for a rate increase if its composite cost index (an index based on costs of fuel, labor, and other expenses) rose above 7 percent. And even more flexibility was gained through later contract negotiations. In 1993, performance targets had been set for the first five-year period, but in 1997, partly through contract renegotiation, the five-year period was extended beyond 1998, to the year 2000. A report from the Universidad Argentina de la Empresa stated that by 1995, Aguas Argentinas was garnering profits of 28.9 percent of revenues, and by 1996 and 1997 these figures were 25.4 percent and 21.4 percent, respectively. These Buenos Aires profit margins were two and a half to three times those of water enterprises in England and Wales — considered by some to be models for privatization — which averaged 9.6 percent in 1998–99 and 9.3 percent in 1999–2000. In short, this water privatization harvested substantial profits.
The root of the problem in Buenos Aires was the fact that a private corporation, whose main goal was to increase profit, was delivering a service that should have been provided by the government on a nonprofit basis. No matter how responsibly a transnational carries out its business, such commercial enterprises are simply not designed, first and foremost, to serve the public interest. Nor are they organized as sustainable enterprises to conserve resources. Since maximizing profits often means encouraging increased consumption, private water delivery enterprises will not work to reduce consumption. Meanwhile, governments are increasingly abandoning their responsibility as guardians of “the commons” — the resources essential to the common good that belong to one and all. Instead, water giants like Suez are taking over, even though their profit-making goals often clash with the needs of the community. In short, “blue gold” is rapidly becoming a big business investment, consolidated by global water markets — “an industry for the 21st century.” But who are the main corporate players in this brave new world?
Blue Bonanza
In a special feature on the global water industry in May 2000, Fortune magazine declared: “Water promises to be to the 21st century what oil was to the 20th century: the precious commodity that determines the wealth of nations.” This prediction is not surprising, since supplying water to people and industries around the world is already considered to be worth US $400 billion in business annually. And given the fact that water privatization is currently in its infancy, the industry is in a remarkable position compared to other, more established sectors of the global economy. According to Fortune’s own analysis, the annual revenues of the water industry amount to approximately 40 percent of the oil sector, and it is already one-third larger than the pharmaceutical sector.
However, industry analysts note that the short-term projections for the water industry are much higher. In 1998, the World Bank predicted that the global trade in water would soon be a US $800 billion industry, and by 2001, this projection had been jacked up to one trillion dollars. This kind of phenomenal growth rate is being projected because the industry’s current annual revenues are based on the fact that only 5 percent of the world’s population are now receiving their water supplies from corporations. The potential for market growth, in other words, is substantial. At this rate, water could become a multi-trillion dollar industry in the future. What if city after city privatizes its water services? Fortune conservatively estimates that the industry would then grow at a rate of 10 percent a year, and at the same time, the economic value of water has been escalating. In some parts of the world, reports Global Water Intelligence in its monthly analysis of the global water market, water now commands the same price as a barrel of oil. In other places, like the Rocky Mountain Front Range in Colorado, high demand has caused the price of water to triple in one year. Between June 1999 and June 2000, the price of water there shot up from US $4,000 per thousand cubic meters to over US $14,000 per thousand cubic meters.
Given the rising tide of demand for fresh water services in cities around the world, investment strategists are beginning to target the global water industry as “the best sector for the next century.” “If you’re looking for a safe harbor in stocks,” advises Fortune’s investment analysts, “a place that promises steady, consistent returns well into the next century, try the ultimate un-Internet play: water. ”After all, the economic performance of the major corporate players in the industry to date shows that cash flows are stable because they are locked into long-term contracts. As Suez CEO Gérard Mestrallet puts it: “Where else can you find a business that’s totally international, where the prices and volumes, unlike steel, rarely go down?”
As the huge U.S. market begins to open up, water corporations are beginning to establish a toehold on Wall Street. In 2000, there were more than US$15 billion worth of acquisitions in the U.S. water industry alone. The Wall Street Journal reports that European-based giants Suez and Vivendi are expected to list their stocks on Wall Street markets by the end of 2001. “Water stock fundamentals,” says Schwab Capital Markets’ analyst Debra Coy, “look good, and over time, the stocks should continue showing gains as they have in recent years, if not outperforming the market . . .” With investors fleeing from declining computer and high-tech stocks, double-digit growth in water shares looks more promising to some. But not all water companies have been enjoying an easy ride on Wall Street. Enron’s former water subsidiary, Azurix, is a case in point. In making its debut on Wall Street, says Global Water Intelligence, initial expectations about Azurix were high, and the company’s stock traded at US $24 a share in June 1999, but “promising a lot and delivering a little,” Azurix shares took a nose dive to the point that they were valued at only US $8 the following year. While the North American division of Azurix, now owned by the American Water Works Company, still has a chance to recover its lost stock value on Wall Street, its recent journey indicates that U.S. investors are still getting used to the idea of putting their capital into water corporations.
Online trading, however, could eventually change the way that water companies raise capital. Already, several dot-com companies have been set up to buy and sell water on the Internet. WaterBank.com’s website, for example, is designed to provide a “virtual market for water.” Other sites like iAqua.com and WaterRightsMarket.com serve as electronic bulletin boards where water buyers and sellers can advertise their products and services. And as Global Water Intelligence reports, the Azurix project Water2Water.com has advanced Internet trading by establishing an electronic trading floor that allows buyers and sellers to conduct their transactions directly. A mock trading floor has been set up for the Texas Lower Grande water market as a pilot project.
The Lords of Water
Today’s global water industry is dominated by ten corporate players, which fall into three categories, or tiers. The first tier is composed of the two largest water titans in the world, Vivendi Universal and Suez (formerly Suez-Lyonnaise des Eaux), both based in France. Unlike most countries, which have traditionally entrusted the delivery of water services to their governments, France began to privatize water delivery as early as the middle of the 19th century, under Emperor Napoleon III. As profit-making enterprises, both Suez and Vivendi pioneered the building of the water industry, learning the trade and expanding their operations through their home-based markets. Together, they have monopoly control over 70 percent of the existing world water market. Suez operates in 130 countries and Vivendi in well over 90. While Vivendi is the larger of the two water giants, posting bigger annual sales than its rival mainly because of its diverse operations and large customer base in France, Suez serves far more people (approximately 110 million) around the world. Of the 30 water contracts awarded by big cities since the mid-1990s, 20 went to Suez.
The second tier consists of four corporations or consortiums with water service operations that are (or have been) best positioned to challenge the market monopoly of the two titans: Bouygues-SAUR, RWE-Thames Water, Bechtel-United Utilities, and Enron-Azurix. Based in France, the first contender, Bouygues, currently operates in 80 countries through its water subsidiary, SAUR. The second contender, the German electrical giant RWE, has purchased Thames Water and has thus moved into a position where it could begin to challenge both Suez and Vivendi. Similarly, the partnership between Bechtel, the U.S.-based engineering conglomerate, and United Utilities of the U.K., which provides water services to over 28 million people, could expand both companies’ operations. And until its recent divestment of its U.S. water holdings in Azurix, the American energy corporation Enron looked as if it would pose an effective challenge.
The third tier is made up of a group of smaller water companies that have developed considerable capacity and expertise but are not in a position to become the leading corporate players in the global water industry on their own. This tier includes three British companies and one U.S.-based enterprise. The British group consists of Severn Trent, Anglian Water, and the Kelda Group, which was previously known as Yorkshire Water. All three took root after Britain’s water system was privatized under Margaret Thatcher in the 1980s. Along with Thames Water and United Utilities, they have cornered the market in the U.K. The fourth company in this tier is the American Water Works Company in the U.S., which recently enlarged its operations by purchasing Azurix.
The corporations that make up the first and second tiers have several other major industrial components, ranging from electricity and gas to construction and entertainment. Only the third-tier companies are focused almost exclusively on water services. Yet they all see themselves as multi-utility providers, their range of expertise as water corporations generally covering four types of services: (1) water and wastewater services; (2) water treatment facilities; (3) water-related construction and engineering; and (4) innovative technologies such as desalination of sea water. In order to build their capacity on these fronts, the corporate players in the water industry have used a series of strategies, including the acquisition of subsidiaries with expertise in these areas, formal partnerships with other companies, and joint ventures with other corporations on specific projects.
At the same time, each of these providers is working internationally to develop a market presence. Suez and Vivendi’s transnational operations have already been described; Bouygues services over 25 million people in more than 30 countries through its water subsidiary SAUR; and Enron has held water assets in Mexico, Brazil, and the United Kingdom, as well as the United States and Canada. By purchasing Thames Water, RWE has expanded its operations into the U.K. and Australia, as well as several countries in Asia, the Middle East, Latin America, and parts of eastern Europe. And even though national regulations in the U.K. have curtailed the international operations of the British water companies to some degree, Anglian Water provides water services to over 7.2 million people on five continents while the Kelda Group continues to operate in China, Germany, Canada, and the Netherlands.
These geographical expansions take different forms. In some cases, they involve either public-private partnerships or private joint ventures with other institutions in the region where the water services are to be delivered. In 1999, for example, Vivendi and RWE formed a consortium to take over half of Berlin’s water system, the largest privatization ever in Germany’s water sector. Another strategy deployed by the big water players is to buy shares in a company already operating in the region, acquire a controlling interest in it, and gradually turn the company into a wholly owned subsidiary. This is what Suez did when, in 1999, it bought the remaining 70 percent ownership of United Water Resources in the U.S. after initially acquiring 30 percent control in 1994. And some water majors buy up small companies outright to develop new technologies such as R & D programs in water purification and water filtration.
Using some or all of these methods, the global water industry has recently been going through a period of unprecedented growth and expansion. Several common motivating factors are at work in this phenomenon. The constant demand of shareholders for increasing profits and dividends is the prime inducement to grow. It has prompted the water majors not only to expand their marketing operations internationally but also to gain new value-added business opportunities by acquiring more companies. Secondly, in financing the operations of water corporations in the non-industrialized countries of the South, the World Bank’s financing criteria call for the formation of joint ventures or partnerships with other companies where there is a need to strengthen a corporation’s multi-utility capacities. Finally, big water corporations are also motivated to grow because of their wide-ranging, international links with governments, political parties, the banking industry, and international financial institutions like the World Bank and the International Monetary Fund.
Suez Conquests
Defending the worldwide expansion of Suez into new water markets, CEO Gérard Mestrallet recalls the “philosophy of conquest” that initially formed the foundation stones of Suez as a corporation. Suez was the company that undertook the 19th-century mega project of building the original Suez Canal, and company founder Ferdinand de Lesseps embraced and advocated this approach as the company’s mission. Almost one and a half centuries later, Mestrallet urged that de Lessep’s philosophy be resurrected as the corporation’s mission in the new global economy. “If we succeed,” said Mestrallet, “we shall be in harmony with our world history and follow our culture.”
In March 2001, the transnational corporation known as Suez-Lyonnaise des Eaux officially changed its name to Suez. The name change was designed to reflect the corporation’s new image as a global multi-utility service provider, and its new structure is based on four core businesses: water, energy, communications, and waste management services. Most of Suez’s EUR$34.6 billion in annual Eurodollar revenues comes from its energy, water, and waste management divisions. Energy — mainly gas and electricity — accounts for 57.4 percent of Suez’s revenues and is concentrated in France and Belgium. Water services constitute 26.4 percent of total revenues, with close to three-quarters coming from international markets. Waste management makes up most of the remaining revenues at 14.5 percent, with communications accounting for 1.7 percent.
Water services, however, are clearly Suez’s largest growth sector, scoring a 44 percent increase in revenues between 2000 and the previous year. For this reason, Suez consolidated all its water service operations in March 2001 under a new brand name, ONDEO. The new water conglomerate has three divisions: ONDEO Services, specializing in water supply and sanitation; ONDEO Nalco, specializing in water treatment and process chemicals for U.S. industries; and ONDEO Degrémont, specializing in water treatment and turnkey engineering. In making the announcement, Suez boasted that ONDEO would be the “world’s strongest and most comprehensive water solutions group.”
At the same time, Suez declared that the new ONDEO water company would be “a key step [in] an aggressive growth strategy to increase revenues 60 percent between 1999 and 2004.” In addition to their operations in the rest of the European Union, Suez has been securing major water concessions and contracts in Latin America, Asia, and North America — the U.S., for example, being targeted as one of Suez’s major growth markets for water services. And in July 2000, Suez had already begun to establish a presence in the United States by purchasing United Water. Operating in 17 U.S. states, United Water will be a key factor in ONDEO’s new water marketing plans.
In spite of all these ventures, experience has shown that privatizing public water utilities is of questionable value. For instance, in La Paz, Bolivia, despite receiving a US $40 million loan in 2000 from international financial institutions, Suez was party to a contract that, according to a 1999 World Bank study, did not provide adequate financial incentives for the company to extend water services to some areas. This suggested that service to the poor should be determined by the “ability to pay,” rather than as a matter of public policy. Meanwhile, the Public Services Interna-tional Research Unit (PSIRU) based at the University of Greenwich in the U.K. alleged that Aguas de Limeira, a Suez subsidiary operating in São Paulo, Brazil, had invested only Real 18 million (US $7.2 million) of the Real 36 million (US $14.4 million) that was part of the concession agreement. (According to the company, however, any alleged underinvestment was due to a lack of increase in rates.)
In Europe, the municipal council of Budapest, Hungary, rejected the business plan for water services presented by a consortium of Suez and RWE in July 1999, because they observed that it would result in large losses for the city while reaping huge premiums for management at both companies in the consortium. Plagued by constant wrangling since the contract was first signed, one senior Budapest city official reflected: “It is now clear that this kind of privatization was a mistake.”
In the United Kingdom, the government’s drinking water inspectorate announced in July 1999 that the Suez subsidiary Northumbrian Water had the second-worst operational performance in England and Wales. The main reason was poor water quality: high levels of iron and manganese were found in the water Northumbrian was delivering. And in Potsdam, Germany, city officials terminated a contract with Suez when the company discovered that water consumption levels were lower than predicted and demanded that much higher water rates be charged. While Suez’s actions may have been perfectly legal, a public water system would not need to have sharply increased water rates due to reduced consumption levels, because it would not have been driven by the imperative to maximize profits.
According to the Public Services International Research Unit, Suez’s takeover of water contracts and concessions has also sometimes resulted in major worker layoffs. In Manila, PSIRU reported heavy job cuts and selective rehiring — a measure that the corporation would likely defend as a move toward greater efficiency. In Buenos Aires, the water service workforce was cut nearly in half, from 7,600 to 4,000 jobs, when Suez took over, largely through voluntary retirement schemes jointly funded by
the government and the Suez-led consortium Aguas Argentina. While Aguas Argentina contends that it has since created thousands of new jobs, studies show that those have been short-term contract jobs (three to six months) with little or no benefits. In Jakarta, Indonesia, water workers went on strike in April 1999, demanding equal pay for all water workers as well as an end to privatized water concessions in the city. In the wake of this, the governor of Jakarta, Mr. Sutiyoso, fired the president of the Water Authority PDAM Jaya. Although transnationals would view these and other wage-saving measures as appropriate means of retaining and increasing profits, such layoffs — as in the case of Jakarta — can result in social disruptions and a lack of continuity in service. This need for uninterrupted service is yet another reason why public utilities like sewage and water delivery operations should remain just that — public.
Like many transnational corporations, Suez is a political machine in its own right. CEO Gérard Mestrallet has held positions with the French government ministries of transport, economy, and finance and has acted as advisor on industrial affairs to the minister of finance. Suez Director Jérôme Monod was chief of staff to ex-Prime Minister Jacques Chirac and currently sits on the board of directors for RWE. Suez’s own board of directors includes CEOs and former corporate executives from three major banking institutions in France, a former CEO of Nestlé, and a current director of Shell, as well as Paul Desmarais, Jr., CEO of Power Corporation Canada. Through its U.S. subsidiaries, Suez has also made modest Political Action Committee donations for congressional campaigns and US $141,150 in soft money (unrequested) donations during the 1999-2000 election cycle. Suez is also a key player in the European Forum on Services, the big business lobby machine that pushes for new rules favoring the privatization of public services, including water, at the World Trade Organization.
Vivendi’s Empire
Few people in North America paid much attention to Vivendi until it merged with Seagrams and Canal+ in December 2000, to form the largest multi-utility service provider of its kind in the world. At this point, the new corporate conglomerate took on a new name, Vivendi Universal, reflecting its status as a fully integrated water, media, energy, telecommunications, and transportation enterprise.
In France, says sociologist Jean-Pierre Joseph, Vivendi Universal has been like an octopus, spreading its tentacles everywhere. In a paper dated January 2001, he wrote: “Picture a teenager from Saint-Etienne or Marseilles, who after drinking a glass of water from the tap, phones a friend . . . then settles down to do his homework, using Nathan or Bordas handbooks and looking up a word in a Larousse dictionary. He . . . then turns off his Bob Marley, Zebda, or Nirvana CD, and for a break, goes to see Schindler’s List or Gladiator at Cinema Pathé. Or he might play computer games like Diablo or Warcraft. At the same time, his father . . . is listening to a concert performed by the Three Tenors, Duke Ellington, [or] . . . U-2, then turns on ‘Canal Plus’ and . . . connects to AOL (France) to look for work on line . . . [then] he takes out the garbage, to be collected by Onyx. Meanwhile, his wife, who is a doctor, reads some articles in [two medical journals], Vidal and Quotidien . . . Then she calls a colleague on her portable SFR before helping her young daughter, who is . . . [reading] a book purchased at France Loisirs. This family, in all of their activities, never left Vivendi Universal.”
Today, the Vivendi Universal empire is composed of two major divisions, Vivendi Environment and Vivendi Communications. Vivendi Environment, ranked number one worldwide in environmental services, has four subdivisions — water, energy, waste management, and transportation services. Vivendi Communications, ranked number two worldwide in communication and audiovisual services, consists of six subdivisions — television and film, publishing, telecom equipment, and Internet services. In 2000, Vivendi Universal’s combined revenues amounted to US $44.9 billion, with Vivendi Environment accounting for close to 60 percent of total revenues. Characteristic of its global reach, 58 percent of Vivendi’s revenues are now generated outside of France — 18 percent of those in the U.S. alone. The conglomerate’s next largest revenue generators are its water companies — notably, Générale des Eaux (Vivendi’s main international water company) and U.S. Filter (the largest water services company based in the United States).
In building its empire, Vivendi Universal is now pinning its hopes on its communications division, connecting phones, television, and computers to high-speed Internet services. “We are starting as the No. 2 global world media company,” said Vivendi’s CEO, Jean-Marie Messier, following a meeting with investment analysts in New York. “We have one step in front of us to be the No. 1 global company. We want it, we dream it, and we’ll do it together.” But despite the corporation’s steadily rising revenues and profits, investment analysts warn that Vivendi’s high debt-to-capital ratio poses a major obstacle to fulfilling these dreams. Vivendi Environment, especially its water consortium, has become the “cash cow” that supports Vivendi Universal. In January 2000, Vivendi unloaded its entire debt onto its environment division and its lucrative water companies, so that its communications division could go debt free. In other words, Vivendi Water holds the key to the empire’s future.
Vivendi Universal’s marketing strategy is therefore based on privatizing water services and securing water concessions all over the world. And since 1999 alone, Vivendi has successfully acquired an impressive array of long-term water contracts with cities in Asia (Tianjin, China; Inchon, South Korea; Calcutta, India), the Middle East (Tangiers and Tetouan, Morocco; Beirut, Lebanon), eastern Europe (Szeged, Hungary; Prague, Czech Republic), Europe (Berlin, Germany, with RWE), Africa (Nairobi, Kenya; the entire country of Niger; and Chad); and Latin America (Monteria, Colombia). After purchasing U.S. Filter in May 1999, Vivendi also secured a series of concessions in the U.S. and Canada (Onondaga County, New York; Wilsonville, Oregon; Goderich, Ontario; Floyd River, Kentucky; Plymouth, Massachusetts). As the largest water and wastewater company in the U.S. with a market 14 times larger than its nearest competitor, U.S. Filter promises to be a key player in Vivendi’s future water expansion plans.
But as in the case of Suez, Vivendi has encountered some difficulties delivering its water services. In 1999, for example, Vivendi’s management of Puerto Rico’s water authority, PRASA, through its subsidiary Compania de Aguas, was strongly criticized by a Puerto Rican government report in August 1999 for failing to adequately maintain and repair the state’s aqueducts and sewers. According to Interpress news agency, “The Puerto Rico Office of the Comptroller [Contralor] issued an extremely critical report on the PRASA-Compania de Aguas contract. The document lists numerous faults, including deficiencies in the maintenance, repair, administration and operation of aqueducts and sewers, and required financial reports that were either late or not submitted at all.” The Interpress account of the comptroller’s report went on to say, “Citizens asking for help get no answers, and some customers say that they do not receive water, but always receive their bills on time, charging them for water they never get. A local weekly newspaper published reports of PRASA work crews who did not know where to look for the aqueducts and valves that they were supposed to work on.” What’s more, the 1999 comptroller’s report showed that under private administration, PRASA’s operational deficit has kept increasing and has now reached US $241 million. As a result, the Government Development Bank (Banco Gubernamental de Fomento) has had to step in several times to provide emergency funding.
In May 2001, the Puerto Rico Office of the Comptroller issued another report about PRASA’s performance, identifying 3,181 deficiencies in the administration, operation, and maintenance of the water infrastructure. Among these, the Comptroller reports that PRASA’s operating losses had increased from US $241 million in August 1999 to US $695 million in May 2001, and that the agency had not collected US $165 million in bills. The report also noted that the U.S. Environmental Protection Agency had fined PRASA a total of US $6.2 million since it had been privatized through Vivendi’s Compania de Aguas (i.e., during the period between 1995 and 2000). According to Comptroller Manuel Diaz-Saldaña, the privatization “has been a bad business deal for the people of Puerto Rico.” “We cannot keep administrating the Authority (i.e., PRASA) the way it has been done until now,” he said.
Elsewhere, Vivendi took the Government of Argentina before the International Centre for Settlement of Investment Disputes (ICSID), a division of the World Bank, claiming that it had violated a Bilateral Investment Treaty by not preventing the City of Tucumán from taking action against the company over its water contract. Tucumán officials had charged Vivendi for poor performance in the running of its water system, citing multiple cases of brown water. The court dismissed the claim, saying there was no evidence that “the Argentine Republic failed to respond to the situation in Tucumán and the requests of Vivendi in accordance with the obligations of the Argentine government under the BIT “ (the Bilateral Investment Treaty between France and Argentina).
Meanwhile, Vivendi’s joint venture with Sereuca Space to manage the water billing and revenue system for Nairobi, Kenya, has become the subject of a major public controversy. Peter Munaita, writing in the East African, reported in August 2000 that Sereuca Space, in a joint venture with Vivendi’s subsidiary Générale des Eaux and Israel’s Tandiran Information Systems, “will not invest a single cent in new water reservoirs or distribution systems during the ten years the contract will be in force. Instead, the company will spend an undisclosed amount on installing a new billing system at City Hall and, for that, reap 14.9 per cent of the [estimated] Ksh12.7 billion [$169 million] collected over the period.” Says Munaita, “Nairobi deputy mayor, Mr. Joe Aketch, has opposed the deal, saying it will lead to a loss of 3,500 jobs in exchange for 45 staff, four of them expatriate, who Sereuca proposes to employ.”
In response to widespread public criticism of the proposed project, Vivendi said later it would invest another $150 million in expansion, repair, and maintenance to minimize water loss. In August 2001, however, the Kenyan government announced that it was suspending the water billing project until the World Bank had completed a privatization option study. According to World Bank officials, the proposed water billing contract was too expensive and was not tendered for through commercial bidding procedures. Says World Bank officer Peter Warutere, “The study will achieve cheaper alternatives.” According to reports by Munaita, Vivendi maintains the contract’s suspension will “jeopardise prospects of Nairobi getting a reliable water service before 2008, with shortages becoming rampant in two year’s [sic] time,” because “World Bank projects take between four and seven years before implementation starts.”
In Berlin, the German Green Party launched a court challenge claiming that Vivendi’s water prices and guaranteed dividends (assured 15% profit regardless of productivity) were unconstitutional. The Constitutional Tribunal court agreed. Vivendi responded that they would renegotiate the contract to put themselves in accordance with the court’s judgment. And in the United Kingdom, a joint venture between Vivendi, Suez, and Bouygues was publicly condemned when it laid off 3,200 workers after the British government ordered the consortium to reduce its water prices.
In attempts to guarantee an ever-expanding market for its services, including water, Vivendi Universal has been busy carving out a political role for itself, promoting a new set of global rules for cross-border trade in services. Vivendi is one of very few transnational corporations in the world that sits on both of the two most powerful big business lobby groups — the U.S. Coalition of Service Industries and the European Forum on Services — currently involved in the negotiation of the General Agreement on Trade in Services (GATS) at the World Trade Organization. (See Chapter 7.) Vivendi’s CEO, Jean-Marie Messier, has also been playing a leading role in building a new consensus among governments and corporations concerning a set of global rules for the promotion of electronic commerce on the Internet. And the political links have been strengthened by the fact that Vivendi’s board of directors includes several high-profile business leaders with significant political connections like Dick Brown of Electronic Data Systems (EDS) (which boasts former U.S. Secretary of Commerce William Daly on its board). During the 1999–2000 election cycle, various U.S. components of the Vivendi empire — including Universal Studios, U.S. Filter, and Philadelphia Suburban — contributed a total of US$186,000 to Political Action Committees and another US$40,110 in soft money donations.
Enron’s Gamble
At the dawn of the 21st century, the potentially lucrative global water market was monopolized by two France-based giants, Suez and Vivendi. Between them, they had captured over 70 percent of the worldwide market, with operations in over 130 countries. The market, however, was still in its very early stages, so the question on the minds of many market analysts was “Who will break their stranglehold?” Most predicted that it would be the corporations in tier two of the global water industry. After all, these were the enterprises with the capital and global market reach needed to mount an effective challenge to Suez and Vivendi. But to do so, any contender from tier two would need to fortify itself with the more specialized skills and experience of the water companies in tier three. Enter Enron, the global energy services giant, accompanied by newly formed water company Azurix.
Enron had been growing at a spectacular rate. Its online energy marketing system had become the largest e-commerce website in the world, and its wholesale energy services division was delivering twice the natural gas and power volumes of its closest competitor. Enron Transportation Services had been formed to carry on with the company’s gas pipeline operations while Enron Energy Services became the retail arm focusing on commercial and industrial users of energy. With this growth, Enron’s revenues reached record levels. Between 1999 and 2000 alone, Enron’s total revenues increased by a whopping 151.3 percent, from US $40.1 billion to US$100.8 billion. During this period, the corporation’s electricity sales doubled while its sales in natural gas rose by a third — most of these gains resulting from the California energy crisis which Enron was well positioned to exploit. By 2000, Enron’s total revenues were more than those of Suez and Vivendi Universal combined, and the company was not saddled with a huge debt load.
In 1998, Enron, according to one of its own press releases, made its bid to “exploit the worldwide move to the privatization of water.” After the company purchased Wessex Water of the U.K., the stage was set to establish Azurix as a subsidiary that could become a major player in water and wastewater services. Rebecca Mark, an emerging star in the Enron ranks, was made president and CEO of Azurix. Once declaring that she “would not rest until all the world’s water had been privatized,” Mark turned Azurix into a company that could provide a wide range of business services such as managing municipal water delivery, constructing water plants, developing wastewater distribution systems, and disposing wastewater treatment by-products. Building on Wessex Water’s experience, Azurix acquired water companies or concessions in Argentina, India, Bolivia, Mexico, and Canada, and it formed a joint venture in Brazil. In 1999, for example, Azurix took over the Canadian-based Philips Utilities, which manages a variety of water and wastewater projects in the United States and Canada. As all these initiatives were being carried out, Enron’s own marketing expertise and contacts in the electricity and natural gas industry helped the company carve out a niche in the global water market.
Enron’s extraordinary political connections were also a key asset. During the former presidencies of George Bush and Bill Clinton, Enron’s political reach into the White House was well known in Washington circles, and with the election of George W. Bush, the political ties appear to have become even stronger. Enron’s CEO, Kenneth Lay, is especially well placed. During the 2000 presidential campaign, Lay was part of Bush’s Pioneer Group, composed of the four hundred or so people who had personally contributed US $100,000 or more to his election drive. Certainly, Kenneth Lay has been a key player on Bush’s Energy Advisory Panel and Vice-President Dick Cheney’s newly formed Energy Policy Development Group. Enron has also made substantial cash donations, including US $300,000 for George Bush’s inauguration party and a total of US $2,387,848 for candidates during the 2000 election cycle. Beyond this, Enron has played an influential role in the major big business lobby networks such as the U.S. Coalition of Service Industries, the board of the National Foreign Trade Council, and the U.S. Council for International Business.
Yet even with all of Enron’s economic and political clout as its parent corporation, Azurix was unable to make the breakthrough it needed to become a major player in the global water market. From the outset, Azurix had difficulty competing effectively in bidding wars with Suez, Vivendi, and other global players for lucrative water concessions. Expected to be the main revenue source for Azurix, Wessex Water’s performance turned out to be disappointing. The company’s revenues declined after a cap was placed on water rates in April 2000 by the Office of Water Services (Ofwat), the water-industry regulator in England and Wales. At the end of 1999, the price of Azurix shares plunged 40 percent in a single day and never recovered. On several occasions, Enron stepped in to bail Azurix out with loans. But following a court battle with the water company’s shareholders, Enron announced on December 21, 2000, that a deal had been reached to buy back Azurix’s stock market shares for US $325 million, and this set the stage for Enron to evaluate its future role in the water industry.
In its short experience, Azurix had encountered numerous setbacks, notably with its water concession in Bahia Blanca, a city 420 miles southwest of Buenos Aires in Argentina. During the year 2000, residents launched numerous complaints about poor water quality and low water pressure in the city’s system, which was being managed by Azurix. Early that year, authorities had warned residents that their tap water was contaminated with bacteria due to an algae outbreak in the city’s reservoir. For months, the water had a bad odor and taste. Said public health chief Ana Maria Reimers: “I’ve worked here for 25 years and I’d say this is the worst water crisis I’ve ever seen here.” “The situation is not of Azurix’s making,” declared Richard Lacey, Azurix’s managing director of technical operations, in May 2000. “It’s a result of the poor quality of water supplied by the provincial government’s reservoir and dam.”
When a public water system is privatized, the chain of responsibility becomes exceedingly murky. A water concession, like that of Azurix in Bahia Blanca, working at arm’s-length from the government, becomes much more difficult to regulate directly than a public water agency. In January 2001, it was reported that Provincial Governor Carlos Ruckauf was going to ask provincial legislators to consider canceling the 30-year contract with Azurix altogether. But later news reports showed that the Public Works Minister, Julian Dominiquez, preferred to negotiate improvements with the concession rather than seeking cancellation. Then in February 2001, Azurix agreed to spend $30 million on improving its water and sewage services in response to the public complaints. But in July 2001, Azurix wrote to the provincial government of Buenos Aires saying that the concession was not economically feasible, and in September 2001, Azurix’s Latin American CEO, John Garrison, met with Governor Ruckauf and Minister Dominiquez to lay the groundwork for the company’s withdrawal from the concession. At the same time, it was reported by the daily El Dia newspaper that the company would sue the province of Buenos Aires for a sum of up to $400 million.
Meanwhile, in April 2001, Enron had announced that its troubled water company, Azurix, would be broken up and its assets sold. Enron’s gamble with Azurix had not paid off. The energy services giant had become “frustrated with the water sector,” reported Global Water Intelligence, and did not have the “patience” required to build a water company capable of competing for markets in this industry over the long haul. Instead, according to this article, Enron had become too accustomed to “the kind of high velocity money” that the energy sector had been delivering recently. Four months later, American Water Works Company announced that it had bought the assets of Azurix in North America. With this acquisition, American Water Works would strengthen its water market presence in the southeastern and northwestern U.S. and in three Canadian provinces.
Yet Enron’s breakup of Azurix merely foreshadowed its own dramatic collapse. Eight months later, the global energy services giant was filing for bankruptcy protection, as creditors, regulators, and politicians moved rapidly to tighten the noose around the debt-ridden Enron. Instead of being the financially healthy, rapidly rising corporate star on the Global Fortune 500, Enron suddenly faced a mountain of debt totaling at least $13 billion in December 2001. As the U.S. Securities and Exchange Commission stepped up its investigation of Enron’s accounting practices and potential conflicts of interest, the energy colossus that had spearheaded the drive toward the privatization and deregulation of public services was now becoming known for having filed the biggest bankruptcy claim in history.
New Contenders
Enron will not be the last of the challengers to enter the world water market. The prospects of a multitrillion-dollar blue bonanza is too great to be left in the hands of a few corporate conglomerates, and there are signs that new contenders are emerging. Some of them may, in the coming years, be in a position to take on the water empires of Suez and Vivendi. Once again, a series of acquisitions and/or mergers are in the works which, if successful, could break up the global water market monopoly and unleash more forces of privatization. Two that have recently begun to surface involve German-based corporate players.
The first has to do with the multi-utility giant RWE, which acquired Thames Water to establish its global water market base. In Germany, RWE is currently the second-largest electricity company and one of the largest waste management operators. With annual revenues averaging well over US $40 billion, RWE has consistently ranked high in the Global Fortune 500, and recently, RWE has been trying to restructure its operations to become a multi-utility corporation supplying energy, water, waste management, and telecommunication services to urban centers around the world. In the water delivery market, RWE had begun to enter the big leagues through its joint ventures with Suez in Hungary and Vivendi in Berlin. And its September 2000 takeover of Thames Water, then the leading third-tier player, was meant to consolidate RWE’s international presence in the water sector. “Thames gives us the scale and the technical expertise to become a worldwide player,” said RWE’s CEO, Dietmar Kuhnt.
A year after the takeover, RWE was registering a 29 percent increase in total revenues, at EUR$62 billion, and a 35 percent increase in operating profits. RWE’s water division, based on the strength of Thames, accounted for 20 percent of the profit increase, and during this first year in the RWE fold, Thames had already begun to extend its market reach. After setting up a water treatment plant at Shanghai in 1995 — the first foreign-based company to set up such an operation in China — Thames secured a contract to jointly manage the city’s water supply system with the state-owned Pudong Tap Water Co. in 2001. In Thailand, Thames won a US$240 million contract to supply water services in two provinces, the largest Asian water concession signed to date in 2001. And shortly after the RWE takeover, Thames secured a controlling interest in a Chilean water and sanitation company, ESSBIO, which provides services for the 1.5 million people in Chile’s second-largest city, Concepcíon.
In spite of these corporate gains, Thames Water’s performance record has drawn negative public comment in the United Kingdom. On July 27, 2001, U.K. Environment Minister Michael Meaker said, “I am extremely worried by Thames Water’s performance. Its inability to cut leakage, or even to account for where all the water in its pipes goes, is totally unacceptable. I fully support the firm action that [the U.K. water-industry regulator] Ofwat has proposed, and Thames has accepted, to rectify this situation.” Between April 1999 and April 2000, Thames lost enough water to fill three hundred Olympic-size swimming pools a day, according to Ofwat. In August 2001, Thames pleaded guilty in court and was fined GBP26,600 for allowing raw sewage to pollute a stream located within yards of houses in a British community.
In September 2001, RWE took another step in fortifying its position as a new contender. RWE bought the American Water Works Company and its water service operations in the U.S. This included the Azurix holdings in the U.S. recently sold by Enron.
The German energy giant E.ON is another contender in the battle to build an effective counterweight to the corporations that currently have a stranglehold on the world water market. To diversify its operations as a multi- utility corporation, E.ON went on a shopping spree in 2000, looking for a water company to buy so that it could become a player in the growing business of private water distribution. After initial talks with Suez and Enron failed to produce a deal, E.ON made a bid to buy SAUR, the water company wholly owned by the French construction and telecommunications enterprise Bouygues. After Vivendi and Suez, SAUR is recognized as the next-largest water services company in the world, albeit a distant third. But with the backing of a conglomerate like E.ON, which had extensive capital to invest, SAUR could get the boost it needed to make significant gains. To date, however, the E.ON bid for SAUR has not been accepted by Bouygues.
By 1999, SAUR had already established operations in as many as 80 countries around the world and especially in Latin America. In September 2000, SAUR joined with the Spanish water company Aguas de Valencia and formed a new consortium to open new markets in Latin America for water privatization. A year later, reports indicated that SAUR was negotiating with Enron to pick up the remaining Buenos Aires assets of Azurix. At the same time, SAUR secured a contract to become the main operator of the water supply and treatment facility for the country of Mali in northeast Africa. The Mali contract adds to a string of water and electricity operations that SAUR International has already opened up in Africa, including operations on the Ivory Coast and in Senegal, Guinea, the Central African Republic, Mozambique, and South Africa. And in Poland, SAUR beat out Vivendi for a 25-year contract to manage and modernize the water and drainage system in Ruda Slaska.
Regardless of whether RWE-Thames or E.ON or any other alliance of corporate players from tiers two and three are able to mount an effective challenge to Suez and Vivendi, the competing forces will undoubtedly unleash increasing waves of privatization. Unless these corporate armies of privatization are checkmated, water as the essential ingredient of life itself could easily become almost completely commodified and commercialized by the end of the first decade of the 21st century.
Privatized Fiasco
Continued widespread privatization of water will also be a recipe for an inequitable and non-sustainable future. The model of privatization presents a disturbing picture as the commons and society are being assaulted from new angles. In particular, we need to take a closer look at the track record of the global water corporations and their implications for labor, quality of life, and the environment.
In making his pitch on privatization at an industry conference in 1997, Jeffrey Skilling, President of Enron, provided the following advice: “You must cut costs ruthlessly by 50 to 60 percent. Depopulate. Get rid of people. They gum up the works.” Notwithstanding Skilling’s blunt rhetoric, his words reflect the philosophy that motivates many transnationals as they seek substantial profits. Since the name of the game is to maximize those profits, cutting costs means laying off workers while raising water rates to generate more revenues.
Suez’s takeover of water concessions in Manila and Buenos Aires, as well as Enron’s labor difficulties in Argentina and elsewhere, illustrate these methods of privatization. In Manila, Suez and United Utilities promptly cut jobs in water services when they took over the concession. In Buenos Aires, the water workforce was slashed from 7,600 to 4,000 after Suez took over. Enron has also actively opposed union positions in the U.K., Argentina, Guatemala, and India. Unless governments negotiate strict and enforceable conditions regarding job protection as in the Berlin water concession, then it is predictable that jobs will be lost and workers’ rights placed in jeopardy. Indeed, many privatization plans often lead to large-scale layoffs as corporations focus on their main goal — increasing financial returns to their investors.
Perhaps more disturbing is the health and safety record of some of the major corporate players in the world’s water markets. In 1985, for example, Bechtel was fined by the U.S. Nuclear Regulatory Commission’s Office of Investigations for deliberately circumventing safety procedures during cleanup operations at the Three Mile Island nuclear reactor in Pennsylvania. And in 1995, Enron was fined by the U.S. Occupational Safety and Health Administration for numerous safety violations pertaining to the 1994 explosion that occurred at its methanol plant in Pasadena, Texas. These are examples of past violations of health and safety standards in other sectors of industrial activity, but they are still cause for concern, since these same corporations are involved in, or plan to be connected with, water delivery operations.
Similarly, the environmental track record of many corporate players demonstrates that privatized water management is itself non-sustainable. In the United Kingdom, the U.K.’s Environment Agency has cited many major water companies as being among the worst environmental offenders in the country. Between 1989 and 1997, Anglian, Northumbrian, Severn Trent, Wessex, and Yorkshire Water were successfully prosecuted 128 times for violations ranging from water leakages to illegal sewage disposals. And between 1990 and 1997, according to the U.S. Environmental Protection Agency, Bechtel is reported to have been responsible for 730 spills of hazardous materials while Enron was listed as responsible for 76 spills, some of which were very large.
The model of privatization itself creates enormous disparities in power between corporations and the local governments that usually deal with them. For the most part, water concessions involve a transfer of concentrated power into the hands of private corporations. As a result, governmental power is greatly reduced, making it difficult, if not impossible, for them to establish minimum access and quality requirements. Nor can governments always be effective in penalizing corporations for failing to meet water quality standards while continuing to raise water rates. In one instance, Britain’s water regulator, Ofwat, responded to public complaints about rate increases and poor water quality by requiring water companies with U.K. operations to reduce their water rates and improve water infrastructure. But Suez, like other global water corporations, had a considerable amount of maneuvering room to offset this measure. It announced that it would slow down its environmental investment programs and it would not comply with a schedule set down by the E.U. to adopt certain environmental standards.
Instead of facilitating greater efficiencies and ensuring equitable distribution, the model of privatization is designed primarily to enhance corporate profits. Another U.K. example illustrates this point: the Suez subsidiary Northumbrian Water. Between 1989 and 1995, Northumbrian’s water rates increased by 110 percent; the CEO’s salary increased by 150 percent; and the company’s profits increased by 800 percent. The built-in fallacy of this model is that it is ultimately non-sustainable. It demands increasing consumption while contributing little to the conservation of resources.
Meanwhile, the landscape of the global water industry has been marred by a number of legal problems. One of the more celebrated cases involves Suez and the city of Grenoble in France. After an investigation into allegations of corruption, a team of magistrates concluded that Grenoble’s water service had been privatized in 1989 in exchange for donations totaling 19 million francs, made by Suez-Lyonnaise des Eaux to the election campaign of the city’s mayor, Alain Caigon. In 1996, both Caigon (who by then was minister of communications in the central government of France) and Jean-Jacques Prompsey (who by then was chief executive of Suez’s international waste management division) were convicted of accepting/paying bribes and sentenced to time in prison. Subsequently, the courts also ruled that the citizens of Grenoble had been damaged by the corrupt deal and gave them the right to claim compensation.
Another case of bribery had to do with Vivendi and the city of Angoulême in France. In 1997, Jean-Michel Boucheron, former mayor of Angoulême (and later a junior Cabinet minister in the central government) was convicted and sentenced to two years in jail (plus two suspended years) for taking bribes from companies that were bidding for public service concessions in Angoulême. In yet another case, reports David Hall of the Public Services International Research Unit (PSIRU), executives of Générale des Eaux were convicted of bribing the mayor of St-Denis on the Ile de la Réunion in France in order to obtain a water contract. And in 1998, the Oregon Court of Appeal ruled that Enron’s subsidiary Portland General Electric had been overbilling its customers US $21 million a year.
Finally, the construction units of Bouygues, Suez, and Vivendi have all been the subject of a major judicial investigation in France over allegations that they participated in a corrupt cartel between 1989 and 1996. According to PSIRU reports, the three corporations are alleged to have shared contracts worth approximately US $500 million for the building of schools in the Ile de France region surrounding Paris, to the exclusion of other bidders. In addition, it has been alleged that a 2 percent levy was to be charged on all contracts for use in support of political parties in the region. This arrangement (assuming it is proven) was described in Le Monde as “an agreed system for the misappropriation of public funds.”
Though supporters of privatization have claimed, incredibly, that for-profit corporations are likely to be more publicly accountable and transparent than elected governments, the exact opposite tends to be the case. Transnational water delivery enterprises around the world are making substantial profits while water rates have risen in many privatized jurisdictions — too frequently out of the reach of the poor. This has come about because the main goal of a private enterprise is not to serve the public or to make sure water is distributed equally to all users whether at profit or not. Its main goal is to serve its shareholders — to increase profit for a select few. And the concentration of power represented by the huge profits to be gained from the worldwide water business has resulted in some company officials misusing that power.
In effect, “corruption is a systemic feature of privatization processes,” concludes PSIRU, “in water as in other areas.” Furthermore, this view is confirmed by no less than the World Bank itself in a report called The Political Economy of Corruption: Causes and Consequences, which states: “. . . the privatisation process itself can create corrupt incentives. A firm may pay to be included in the list of qualified bidders or to restrict their number. It may pay to obtain a low assessment of the public property to be leased or sold off, or to be favoured in the selection process.” The World Bank report goes on to say: “. . . firms that make payoffs may expect not only to win the contract or the privatization auction, but also to obtain sufficient subsidies, monopoly benefits, and regulatory laxness in the future.”
One of the operating assumptions behind the privatization agenda is that public service providers are inefficient. While this may be true in some cases, it is by no means universal. Take, for example, the case of Chile. Since 1998, most of the public water services in Chile have been partially privatized, mainly through the sale of shares to private water giants. Yet prior to this privatization, the public water utilities were recognized as being highly efficient operations. In a 1996 comparative study of six developing countries, the World Bank underscored Chile’s public water companies, especially EMOS, as model examples of efficiency. As the Public Services International Research Unit points out, financially efficient public water undertakings provide profitable opportunities for the private sector. “Where one of the motives is raising money to finance the public authority’s budget,” says David Hall of PSIRU, “then there is in fact a perverse motive to privatize the most efficient water undertakings, because they will obtain a higher price.”
What’s more, the world’s largest public water utility, SABESP, in the state of São Paulo, Brazil, has undergone extensive restructuring since 1995 to make its operations more modern and efficient. Serving the majority of the state’s 22 million inhabitants, SABESP has been reorganized in such a way as to expand its revenue generation on the one hand and to cut excessive costs and inefficiencies on the other. In 1995 alone, reports PSIRU, “the population in the service area supplied with treated water increased from 84% to 91%, the population receiving sewage services increased from 64% to 73%, and non-functioning accounts plunged to 8%.” Overall, the operating costs of the public water utility were reduced by 45% and SABESP is now in a position to finance its investment programs through loans and its own funds (although the Brazilian currency devaluation of 1999 did have a negative impact on the company’s finance capacities). At the same time, SABESP has expanded its environmental responsibilities, including participation in the cleanup of the Tiett River, considered to be the largest environmental project of its kind in Latin America.
In spite of the efficiencies of public utilities such as this, however, the privatization juggernaut is rolling on, and the global water lords are not only taking over local water distribution systems. They are also lining up to conquer the domain of bulk water export.
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