The Cochabamba Water War and its Aftermath

This week marks nine years since Cochabamba's now-famous Water Revolt. It was during this week, in April 2000, that thousands of people – rural, urban, poor, middle class, young and not so young – took to the streets to reclaim their public water system from a foreign corporation, Bechtel.

The story of the Cochabamba Water Revolt has been retold many times in many ways these past nine years, in articles, films, book chapters, and in enough graduate theses to fill a room. The Democracy Center had the honor of writing the story first, from the middle of that violent yet inspiring April almost a decade ago.

Last year when I put the finishing touches on my chapter on the Water Revolt for our new book, Dignity and Defiance, Stories from Bolivia's Challenge to Globalization (UC Press), I knew that whatever I had to say or write about the Water Revolt I had said or written. That rule still abides.

Two Basic Facts

But because the story of the Water Revolt and its aftermath is so much more complicated than the myth of the Water Revolt, I want to use this anniversary to put the reality of that story back before our readers. And in my view that reality basically comes down to two things:

1. The Cochabamba Water Revolt was and remains a powerful David and Goliath struggle in which some of the most humble people in the world took on the forces of the World Bank, Bechtel, and a former dictator, Hugo Banzer, and took back a resource essential to life – their water.

2. Nine years later the public company reborn from that revolt, SEMAPA, is marked by an ongoing history of mismanagement and corruption which, combined with Cochabamba's rapid population growth, has left much if the city without the basic water they need and deserve.

In other words, Cochabambinos won the war in the streets but lost the battle to have honest and competent water service. In my chapter on the Water Revolt I was frank about this paradox, and have continued to be in my recent talks in the U.S.

Thanks to our publisher, University of California Press, the entirety of that chapter is posted on the Internet and can be read here. Below I am going to publish a few excerpts from that chapter to stimulate debate. But as I said, the story is complicated and if you want to know my complete analysis, you really have to read the whole chapter instead of taking bits and pieces out of context, as many might be tempted to do.

For those interested in more on the Water Revolt, here are some useful links:

The Democracy Center's full links to our work on the Water Revolt

The Democracy Center's Reports from the Street in 2000

A lengthy report in last Sunday's edition of the Cochabamba daily, Los Tiempos

The Bechtel Corporations Comments on the Water Revolt

William Finnegan's excellent 2002 New Yorker article on the Water Revolt
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Excerpts from: The Cochabamba Water Revolt and Its Aftermath in Dignity and Defiance, Stories from Bolivia's Challenge to Globalization (UC Press)

The Revolt Begins – January and February 2000

If there remained any question whether residents of the city would rise up as people in the countryside had done, those doubts were swept away quickly in January 2000, thanks to Bechtel’s Cochabamba subsidiary. Just weeks after taking over the city’s water, Bechtel’s company handed users their monthly bills, complete with a spiffy new Aguas del Tunari logo and rate increases that averaged more than 50%, and in some cases much higher. For years afterwards, Bechtel officials would continue to lie about the extent of their rate increases, claiming that the price hikes on the poorest were at most 10%.[i] An analysis using Bechtel’s own data shows that the increases for the poorest averaged 43%.”[ii]

*
For two days Cochabamba’s graceful colonial center turned into a war zone. Every block leading to the plaza was converted into a battlefield. At one end police outfitted in full riot gear blocked the streets with tear gas cannons. At the other end, protestors – young people, old people, poor and middle class – held their ground with rocks and slingshots. Many wore an impromptu uniform of vinegar-soaked bandanas over the mouth and nose, and baking soda under the eyes to protect them from the gas. The doors of middle class homes would suddenly open up and water and bowls of food would appear, an offering of support to those standing up to the government in the streets.

*
Then on the afternoon of Monday, April 10, the government made an announcement. Officials of Bechtel’s company, who sat out days of violence watching it on television in a five star hotel and insisting they wouldn’t leave, had fled to the airport and left the country. The Bolivian government declared the contract canceled, saying in a letter to Bechtel’s people, “Given that the directors of your enterprise have left the city of Cochabamba and were not to be found…said contract is rescinded.”

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Impacts on Bolivian Politics

In Bolivia, the Water Revolt ignited a chain of events that provoked historic political and social change. For almost two decades Bolivian economics had been dominated by the Washington Consensus, market-driven policies pushed by the World Bank and the IMF and carried out by national leadership that was fiercely obedient to those policies. The Water Revolt shook those arrangements to their core.

“We have always repeated those slogans ‘Death to the World Bank,’ ‘Death to the IMF,’ ‘Down with Yankee imperialism,’” said Olivera. “But I believe that it is the first time that the people understood in a direct way how the policies of the World Bank, free trade, free markets, is putting us at such a disadvantage among the most powerful countries.”[iii]

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Bechtel Strikes Back

In November 2002, a year and a half after they were forced out of Bolivia, Bechtel and its co-investors struck back. In Washington, in a secretive international trade court run by the World Bank, Bechtel’s water subsidiary filed a legal demand for $50 million – a prize equal to what it costs to run the Cochabamba water company for seven years.[iv]

For Bechtel, the World Bank trade court was an ideal forum, for both its secrecy and the long distance between it and the rebellious Bolivians who had caused them so much trouble. Hearings by ICSID tribunals are strictly closed-door. Neither members of the media nor the citizens who would ultimately pay a settlement are allowed to know when the tribunal meets, where it meets, who testifies, or what they say. The process assumes that the only representation that Bolivians needed was from the Washington law firm hired by the Bolivian government.

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The campaign also took its demands directly to ICSID. In September 2002, with the legal support of Earth Justice, Water Revolt leaders formally requested legal status to join the case. That demand was backed by an International Citizens Petition endorsed by more than 300 organizations from 43 countries, calling on the World Bank trade court to open the case to public scrutiny and participation. The case that Bechtel hoped would be quietly settled in its favor behind closed doors had become a major public story.

On January 19, 2006 representatives for Bechtel and its co-investors arrived in Bolivia. Sitting next to officials of the government, they signed a formal agreement in which they abandoned their $50 million demand for a token payment of two Bolivianos (30 cents). Bolivia’s lead negotiator, Eduardo Valdivia, explained why Bechtel had finally decided to drop their case. “The CEO [Riley Bechtel] personally intervened,” he said. “He told his lawyers that the case wasn’t worth the damage to the company’s reputation.”[v] It was the first time that a major corporation had ever dropped an international investment case as a direct result of global public pressure.
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The People Take Over – But Not Really

In its first few months, SEMAPA enjoyed a wave of public goodwill. It rolled back rates to their pre-Bechtel levels and water customers quickly began paying their overdue water bills, refilling the company coffers that Bechtel’s representatives had drained during their brief tenure. Bechtel’s company left behind, among other things, an unpaid $90,000 electric bill. Coordinadora leaders also rode a wave of public popularity and received a stream of offers of technical assistance from public sector water managers across the U.S. and Canada. Public companies under privatization pressures there knew that SEMAPA’s success or failure would have a significant impact on the global water privatization debate and they wanted Cochabamba’s public company to succeed.

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The one major reform that the Coordinadora did take up and did win, partially at least, was having a portion of the company’s board of directors elected directly from the community. But when the first elections were held in April 2002 to select those community members, less than 4% of eligible voters went to the polls. In a city where, just two years earlier, people had taken to the streets by the thousands and risked their lives to take back their water, there was virtually no public interest in the nuts and bolts of running the water company.

Soon afterwards, the Coordinadora technical team disbanded, and Coordinadora leaders shifted their sights beyond SEMAPA. Some focused on working directly with neighborhoods on water development projects. Some ran and won election to Congress. Others took up new national battles such as the demand for taking back control of the nation’s oil and gas. Over time, the water company’s management and performance began to draw all the same complaints as it did before privatization – inefficiency, corruption, and the padding of the payroll by the union representing SEMAPA workers.

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Unsolved Problems

Water experts who know SEMAPA well say that the company has failed to address its two biggest problems. In a valley still deeply thirsty for water, SEMAPA loses about 55% of the water it has to leaks in the pipes and to clandestine hook-ups. And despite a steady flow of financial support from international donors and lenders, including the Japanese government and the IDB, the company still doesn’t have a sustainable financing plan in place.

One water expert familiar with SEMAPA’s internal workings blames the problems on mismanagement. “It is an organization that is completely dysfunctional. They don’t generate enough income to cover their costs and they are letting the system deteriorate.”

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Conclusion

Water privatization should not be held out as a matter of economic theology, something unchallengeable, by either its proponents or its critics. Privatization in general is not inherently good or evil. The debate is in the details. In Bolivia, there is a spiritual objection, among many, to ever putting water, the blood of the earth, into corporate hands. But in the case of water, that spiritual opposition to privatization also happens to be backed by experience and analysis. As a practical policy, water privatization suffers four huge problems.

The first is the natural way in which it prices water beyond what low-income people can afford. The World Bank is an advocate of “market pricing” of water and in the Cochabamba case it directly argued against subsidies that might have made water affordable for the city’s poorest families.[vi] In nations both impoverished and wealthy, people with low incomes cannot afford the actual market cost for basic services. In the U.S., states commonly provide “lifeline rates,” subsidizing everything from electricity to basic phone service. In Cochabamba, privatization and Bechtel’s profit demands priced water out of reach for many families.

The second problem is the distance that privatization puts between water users and those who make the real decisions. How is a teacher, or seamstress, or a farmer in Cochabamba supposed to have any measure of influence on a major foreign corporation a hemisphere away? For all of the public company’s faults, at least in Cochabamba today, when people want to complain they know where to go and they get attention. Bechtel proved immune even to bloodshed.

Third, privatization opponents are justified in worrying about the protection of workers rights. While there is certainly, in Cochabamba, a clear record of the water company union taking too much control, labor rights still matter and private companies are by nature, far less interested in those rights than public companies.

Lastly, it is important to note that while World Bank officials evidently deemed the Bolivian government insufficiently competent to run its public water systems, it acted as if that same government was sufficiently competent to negotiate a handover of its water to a huge foreign corporation and to capably regulate that corporation’s work. This too proved false theory.

Photo by Thomas Kruse.

[i] “Cochabamba and the Aguas del Tunari Consortium,” Bechtel Corp., San Francisco, CA, March 2005, p. 3, http://www.bechtel.com/pdf/cochabambafacts0305.pdf
[ii] See, “Bechtel Vs. Bolivia the Water Rate Hikes By Bechtel’s Bolivian Company,” at: http://democracyctr.org/bechtel/waterbills/waterbills-global.htm
[iii] “Leasing the Rain.”
[iv] The $50 million figure comes from a January 10, 2007 interview by the author with Eduardo Valdivia, the Bolivian government’s chief negotiator on the case.
[v] Interview with the author, Cochabamba, January 2006.
[vi] “Bolivia Public Expenditure Review, executive summary,” World Bank, Washington, DC, June 14, 1999, p. 1.

Bechtel to Drop World Bank Trade Case Over Water Revolt

It is official. On Thursday, representatives of the Bechtel Corporation and its co-investor, Abengoa of Spain, will be in Santa Cruz to sign an agreement ending their four year effort to sue Bolivia over the Cochabamba water revolt. Bechtel and Abengoa have been seeking $50 million in damages and lost profits before a secretive trade court (International Center for the Settlement of Investment Disputes) operated by the World Bank, the same institution that coerced Bolivia to privatize its water to begin with.

Bechtel and Abengoa will sign an agreement dropping the case for a token payment of 2 bolivianos, about 30 cents. For a couple of weeks I have been communicating back and forth between Bechtel, the Bolivian government, and water activists here in Cochabamba, trying to force disclosure of the agreement details. As of last night, we have the last of those in hand.

This is a huge victory for activists worldwide who have fought this case on five continents. It is a huge precedent for the growing Web of legal cases in which the world’s most powerful corporations seek to tie the hands of people and governments to shape their own economic futures. We know of no other case in the world where a major corporation like Bechtel has dropped its action in response to global citizen pressure.

To reporters just tuning into Bolivia, this is a story well worth your attention. Here’s a link to the background. You can get more information by contacting us by email. The Democracy Center will have much more to say about this on Thursday. Keep watching.

Update on Bechtel vs. Bolivia -- A Settlement in the Works?

For months, Bolivian government officials negotiating with the foreign corporate consortium suing Bolivia over the Cochabamba water revolt, have been saying privately and publicly that they are nearing an accord with the companies. Under the agreement, the corporations – Bechtel of the US, Abengoa of Spain, and Edison of Italy – would drop their case in exchange for a symbolic payment of a few dollars.

To be clear, such a settlement would be an enormous victory for the years of effort by thousands of people worldwide who have fought this case.

Our news conference in Cochabamba on Tuesday, warning that the case had been taken by the World Bank and could cost local families as much as $250 each, provoked a reaction from Bolivian officials. An agreement is just weeks away, they claim, and they warned that our campaign aiming pressure anew at the corporations could jeopardize that. Jeopardizing such an agreement is not the aim of The Democracy Center or the leaders of the water revolt and we have told the government that we will give them time to complete a deal.

We would have kept this development private, except that the government itself released the news this morning in an article in today's edition of Opinion. This explains to our readers and friends around the world why we have held off initiating our global action campaign. To be clear, if this news from the government proves to be incorrect or if these negotiations drag out too long, an international action campaign is exactly what we will launch.

We will obviously have more to say about this in the days ahead.

Launching the Final Battle in Bolivia's Water War

Yesterday I broke eight years of practice of not appearing before the Bolivian media. I joined with the head of the Cochabamba water company (SEMAPA) and the Coordinadora for the Defense of Water to announce the last battle against Bechtel and its corporate partners in their efforts to sue Cochabamba for $25 million. Here's the article in the daily Opinion.

As long-time followers of our work know, in January-April 2000 the people of Cochabamba took to the streets to take back their public water system which had been privatized six months earlier into the hands of three foreign corporations – Bechtel of the US, Edison of Italy, and Abengoa of Spain. The corporations raised rates astronomically for the city's residents. One seventeen-year-old boy was killed and more than a hundred people were injured when the government of former dictator Hugo Banzer sent out troops to stop the protests. Here's the link to our reports on the water revolt.

In November 2002 the three corporations filed their multi-million demand before a closed-door trade court at the World Bank (ICSID) and shortly afterwards The Democracy Center and its allies in Bolivia and around the world launched a massive citizen effort to fight them. More than a thousand people wrote emails to the heads of the companies demanding that the case be dropped. Three hundred organizations from 43 nations endorsed a legal petition to the World Bank demanding that the case be opened up to public scrutiny and participation. Direct actions have been held at Bechtel's headquarters in California and Holland.

On October 21 the tribunal in the case ruled that it has legal jurisdiction to hear the corporations' demand and put the people of Cochabamba on trial. If the corporations win they could force the people of Cochabamba to pay an amount equal to what it costs to run the local water company for three years. Funds that would otherwise be used to provide water to families who have none would be used to pay off three of the wealthiest corporations in their respective countries.

So today The Democracy Center and the Coordinadora ready an international action campaign to send a message to the heads of these three corporations. That message is that the cost of their continued assault against Cochabamba will be a furious citizen campaign taken to their offices, their homes, and their public reputations. Just as international solidarity work demonstrated two weeks ago that President Gonzalo Sanchez de Lozada is not beyond public reach, so it is for the heads of these companies.

[Note: Watch for an action alert on this blog within a few days.]

This is a case with wide repercussions, beyond water and beyond Bolivia. As this country seeks to recover its oil and gas (a position that even the conservative candidates for President proclaim on television), the biggest threat is not finding investors it is fighting off potential trade court cases just like this one. This point was made by Joseph Stiglitz in the Sunday New York Times magazine article:

"They could do it." If Bolivia abrogated its existing contracts, he said, some of the non-Western oil giants would gladly negotiate new deals on better terms. "Petronas" - the Malaysian state oil company - "would come in, China would come in, India would come in." If Morales did nationalize the country's oil and gas, the multinational oil companies that currently hold the Bolivian concessions, including Repsol, a Spanish company, and British Gas, would probably sue Bolivia in an international court and try to organize an international boycott. But Stiglitz dismisses that threat: "If you had three, four, five first-rate companies around the world willing to compete for Bolivia's resources, no boycott would work."

These closed-door trade courts are being used by international corporations to attack everything from California environmental laws to Bolivian demands for affordable water rates. Corporations worldwide are watching this case. If powerful Bechtel can be beaten by Bolivians, then other corporations will take extra caution before following in its footsteps.

In April of 2000, when Cochabambinos took to the streets, they called it la ultima batalla (the last battle). In reality that last battle begins now. It is one that citizens everywhere in the world have a huge stake in winning.