Posted
15th May 2001
Outomes from a study of the private water and sanitation concession
in Buenos Aires, Argentina are important new information as
this is the first major English-language study of a concession
conducted outside of the World Bank Group since the concession
sell-off of public assets began in 1993. Buenos Aires is an
economic test tube as to the viability of privatisation theories
when put into practise. The major shareholder in the Buenos
Aires consortium is Suez Lyonnaise des Eaux, a large French
multinational involved in the Johannesburg water privatisation
which has also been actively pursuing contracts in other South
African cities. Buenos Aires is also one of the largest water
concessions in the world - servicing a population of 10 million
people - and has been hailed as a success story internationally.
There have been at least two trips to Buenos Aires by South
African policy makers and bureaucrats study the privatisation
as a model for South African municipalities. Some of these trips
have been paid for by the French government, with the result
that councillors and other bureaucrats have given extremely
positive but erroneous evaluations of the concession, arguing
that it has been "remarkably successful" in turning around a
"potentially disastrous situation". The Municipal Services Project
reveals, however, that the Buenos Aires privatisation has been
a major failure.
Accountability and Transparency
One
of the core arguments made in favour of privatizing municipal
services is that it generates better public accountability.
The experience of the water concession in Buenos Aires, however,
has been just the opposite. The privatisation started with a
Presidential Decree in 1989 which unilaterally declared that
the city's water and sanitation would be run by the private
sector. This announcement was made after the declaration of
an "economic state of emergency" and under pressure from international
financial institutions. All decisions about the privatization
in these sectors were made behind closed doors with no public
debate on the matter. Even the independent regulator set up
to monitor the activities of the private company was marginalized
by both the firm and national government, with the latter intervening
on several occasions to overrule decisions made by the regulator.
Rather than becoming more accountable to the public, Aguas Argentinas
has entrenched a process of secretive negotiating practices
and has made no effort to open itself to public scrutiny. Unfortunately,
the Johannesburg Metro Council seems to have followed the company's
lead. The process of privatising the city's water to Suez-Lyonnaise
was very secretive and nobody got a chance to comment on or
influence the proceedings. Although the Council is bound by
the Municipal Systems Act to open all of its committees to the
public, and offers up the full records of all meetings, it has
refused to do this and is now facing legal action from at least
one newspaper demanding full public access.
Efficiency
A
second argument made in favour of privatization is that private
companies are more efficient than the public sector, thereby
reducing costs to the end user and freeing up resources for
the state that can be used for other development needs. The
water concession in Buenos Aires has done the opposite. The
cost of water has increased by 20 percent in real terms from
price hikes and surcharges. In the run-up to privatisation,
the government artificially inflated prices in order to make
the private company look more eficient. The current president
of Argentina, Fernando de la Rua (speaking in March 1999 when
he was Mayor of Buenos Aires) said: "Water rates, which Aguas
Argentinas said would be reduced by 27% have actually risen
a total of 20%". These price increases, and the costs of service
extension, have been borne disproportionately by the urban poor.
Non-payment rates for water and sanitation are as high as 30
percent, and service cut-offs are common with women and children
bearing the brunt with health and safety consequences.
Environmental disaster
Sewerage
infrastructure development has not kept pace with water delivery
expansion. Water delivery is twice as profitable for the company
as sewage treatment. The company reneged on its contractual
obligation to build a new sewage treatment plant. As a result,
over 95% of the city's sewage is dumped directly into the Rio
del Plata river. Households with new water services are often
forced to dump their sewage into makeshift septic tanks, cesspools
or directly onto streets and open fields. The groundwater equilibrium
has been destabilized and basements have begun to flood. Buildings
and pavements are sinking, and water borne diseases are a constant
concern. Poorest households that are most negatively affected.
Massive waste of public money
The costs of this lack of sewerage investment in terms of environment
sustainability, public health and safety, and urban equity in
Buenos Aires certainly bring into question the argument that
the private company is more 'efficient' than the former public
provider. The arguments that private companies are able to generate
more capital than the public sector have been proven wrong here.
The bulk of the capital used for infrastructure development
and new connections in Buenos Aires water and sanitation have
come from surcharges to end-users and international financial
institutions - financing options that could have been available
to the public sector. Meanwhile, Aguas Argentinas has been making
record profits in Buenos Aires: up to twice the international
average and up to three times what water companies make in the
UK on average. Undoubtedly, the public sector would not have
messed up their own city as much as this private company has
done. Residents of Buenos Aires have been unable to voice their
concerns due to the lack of participatory mechanisms - something
which is compulsory in South Africa through the Municipal Systems
Act. A massive amount of public money is going to be needed
to clean up the environmental disaster in Buenos Aires. The
Municipal Services Project's research shows quite clearly that
Suez-Lyonnaise has succeeded in exacerbating the worst socio-economic
and environmental problems of the city. The company seems bent
on doing the same in Johannesburg. Although the ANC has promised
a free amount of water to all citizens, there is no indication
from the company about how they will provide this. Instead,
the company was recently touting around research agencies to
investigate how citizens in pockets of Johannesburg's townships
could get water installed as part of pilot project testing.
This does not indicate that the company is serious about providing
all Johannesburg residents with water, but rather that it is
much more concerned about only providing the service where people
are able to be reliably contributing to their profit margins
on a regular basis. It is only a matter of months before the
rest of Johannesburg starts getting much higher water bills.
SAMWU is completely vindicated in our demand that the Unicity
should deliver water directly as the public sector provider.
Suez-Lyonnaise must be removed from Johannesburg immediately
for not disclosing their bad practices during the bidding. The
union is not prepared to sit back and allow the residents of
Johannesburg to endure the same suffering as people have been
forced into in Buenos Aires. SAMWU demands an urgent meeting
with the Johannesburg Unicity Council to discuss the Buenos
Aires research report, impending water tariff increases in Johannesburg,
and the Council's implementation plan for the free water..
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