Insight - David Lloyd Owen
- From: Vol 6, Issue 2 (February 2005)
- Category: Analysis
- Region: Americas
- Country: Bolivia
- Related Companies: Bechtel, Edison, International Water (IWL), Suez and United Utilities
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Gasping for breath in Bolivia.
Although connoisseurs of Lhasa and Leh may beg to differ, Bolivia’s La Paz is, at 11,000 feet above sea level, the world’s highest capital.
The national football team’s near invincibility in home legs of the World Cup qualifiers is little surprise when faced with such a breathtaking venue.
Unlike a footballer (who has no time to acclimatise) or a trekker (in Leh, go straight from the plane to bed for a day, spend another day doing much about nothing and take a stroll on day three...), utilities tend to fare less well as time goes by in these rarefied climes.
Remember Cochamamba back in 2000? A poorly framed deal by Bechtel and Edison’s International Water (United Utilities had the good sense to hold back from this contract) was only terminated when the rioting turned fatal.
Despite being hailed as a victory for “the people”, there is little evidence of any subsequent service extension under public operation.
Now it appears that Suez is being obliged to hand back its Aguas del Illimani concession. This contract, awarded in 1997, covers more than 800,000 people in La Paz and El Alto, its poorer neighbour, and is one of the most successful examples of a private sector company providing genuinely affordable service extension to poorer households. The contract’s termination has occurred because of political activism rather than any deficiencies in Suez’s services.
Suez has been accused of not connecting people who it was not asked to connect, with an influx of some 200,000 people into a shanty town area next to the El Alto service area.
In fact, since 1997, some 52,000 new connections have been made in El Alto, giving effective coverage of all the settled habitations in the contract area.
This includes 35,000 condominial connections made with local labour and branching off the mains system using smaller pipelines for both water and sewerage services at an appreciably lower cost. Complaints about the high connection charge for both systems missed the point, as these tariffs are set by the state.
This all ties in with the World Bank paper mentioned in January’s GWI which highlighted Bolivia as being the most fiscally draining market for utilities in Latin America.
Bolivia is rapidly gaining a reputation for belligerence towards the outside world. Having lost its seaboard to Chile in the nineteenth century, the country maintains its navy on Lake Titicaca, which is by common consent of as much utility as a barge in the Gobi Desert.
Since Peru declines to indulge in a navy, Bolivia’s has nothing to wage war against. Exceptionalism would be a wonderful thing were it not for the fact that Bolivia’s people are among the poorest in Latin America and are falling behind those in Chile at an alarming rate.
Mind you, this hasn’t stopped Bolivia from maintaining a war of words with Chile over access to water rights in a common watershed for a mining operation in the latter country.
Why did 200,000 people leave their lives of rural destitution and head towards a slum future near El Alto? Presumably not because they wanted to be adjacent to the city so that they could complain about not being connected to a service that they regard as too expensive in the first case.
Perhaps addressing the root causes of poverty and economic migration would be more effective. However, it is much easier (and perhaps more thrilling) to demonstrate against than it is to provide for. Simon Bolivar would have rather mixed feelings about these developments.
In the meantime, rather than facing a compensation claim from Suez that according to reports may range from $12 million to $70 million, it would perhaps have made more sense to see if Suez could have set up a new contract aimed at serving these people in an affordable manner.
Financing part of the capital costs would certainly appear to be a more equitable way of spending money than settling contract claims. Challenges have their charms, especially when they also carry a moral force.
It is little surprise to learn that Bolivia’s football team has a feeble away record. That is the problem about level playing fields; they tend to expose a leaky defence.