Global Policy Forum

The Skirmish at the WTO Over Privatization

By Deepa Fernandes

As 146 trade ministers gather for the World Trade Organization summit, which opens here tomorrow, water privatization is on the radar screen of officials, activists and corporate executives alike. Privatizing municipal water services is a worldwide phenomenon in both developed and developing countries. However, community outcry against the practice is also on the rise.

The presence of French-based Suez, the world's second largest water company, is felt inside and outside the WTO meeting. The water giant has concessions in more than 100 countries around the globe, from the Philippines to Poland and even here in Cancun. Yet, as local residents can attest, privatizing water has actually made it much less accessible.

Don't Drink the Water

Cancun's water system is run by AguaCan, a company 50% controlled by Suez that provides drinking water, drainage and sewer services. But, don't drink the water, warns community activist Arturo Moss. "It's not good quality water, nobody drinks the water here, he explains. If you want to drink fresh water, you have to buy containers of purified water."

Moss points out that not only is the water that AguaCan provides far from usable, many people do not even have the basic services the company claims to provide. "In Cancun, in the hotel zone they have water 24 hours a day, but here in the urban areas the service is very limited: only for 2 or 3 hours a day."

The situation of an elderly couple living directly opposite a large water tank is typical. Maria, (who chose not to give her real name), explained their small house has been without basic water services for the past 17 years. "We have no water here. We don't have problems with the government, but with the rich people that come here and want to buy our land to build grand hotels."

"Official numbers from the company and the government say that almost 80% of the people have fresh water, only 80%," says Moss. "But less than 40% of the people have sewage systems. So you can imagine the waste disposal of almost 400,000 people that live in Cancun goes directly to sub-soil."

Meanwhile, AguaCan spokesperson Yajaida Davidia says the problem lies with the scarcity of drinking water. "AguaCan is here for the long-term so we need the help of the community to conserve water better."

Trade in Services

The water issue is taken up by the WTO through GATS, the General Agreement on Trade in Services. GATS is designed to open up service markets to private control and foreign investment. In many countries these services, including water, are public. And opening up the world water market means cutting public subsidies that guarantee universal service to all citizens, regardless of their ability to pay.

But there may not be any firm agreements about water privatization coming out of this round of the WTO meetings because public pressure in many countries has made complete corporate control of water services a hard sell for many governments, according to Karen Cocq, Water Project coordinator for the Polaris Institute in Canada.

But there is more than one route to private control of water services. Side deals made by corporations with individual trade ministers at the WTO round can open the door to full scale privatization. Large water companies, like Suez, just need a foot in the door, according to Madj Flynn of Public Citizen. "Where I come from in Washington DC, Suez has just won a service contract which means they're just reading the meters and giving the bills out," Flynn explained. "But if you go to the World Bank website, they say the way to get full privatization is to start out with the service contract, just do the billing and so forth, and then you talk the city into doing the whole management."

Return to Fight Another Day?

However, Suez is scaling back operations in response to tough economic times worldwide. Last year, Suez began reducing its communications related businesses and concentrating on its core water and energy divisions in an effort to reduce debt and boost profits, according to a report by the Polaris Institute. The company's Strategic Action Plan 2003-2004 focuses on streamlining projects and reducing risks.

"In short, Suez is adopting a policy of abandoning projects which are problematic, risky or not as lucrative mostly in the developing countries," the report concludes. This could mark the beginning of an exit strategy with far reaching implications, according to David Hall of Public Services International, a trade union group which staunchly opposes privatization.

"It creates a difficulty for the World Bank and other IFIs (international financial institutions) whose strategies for the water sector depend on enticing the multinationals to increase their investment and participation," says Hall. "Instead, they are now faced with a two-year period in which the leading company is abruptly reducing its investment."

World economic crisis may indeed bear out what many activists have said: that private corporations will not take on the financial risks involved in providing a universal service. In other words, taking over public services may not prove profitable in the long run.

But Suez took in more than 10 billion Euros from its water projects in 2002, according to the company. Current retrenching is an effort to boost its bottom line and expand again during rosier economic times. This means the worlds water wars are far from over, and a winner too difficult to predict.

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