Global Policy Forum

By Jim Shultz

Etched deeply into the granite walls just inside the entrance of the World Bank headquarters in Washington are the words, "Our dream, a world free of poverty." Earlier this month in Bolivia, the citizens of South America's poorest country sent the bank a message once again that the poor aren't too keen on the part of that dream that involves handing their water over to foreign corporations.

Together, these two revolts over water should send an important message to officials at the World Bank, if they are willing to hear it. The people of Bolivia did not choose to privatize their public water systems. That choice was forced on them, as it has been in many poor nations around the world, when the World Bank made privatization an explicit condition of aid in the mid-1990s. Poor countries such as Bolivia, which rely heavily on foreign assistance for survival, are not in much of a position to say no to such pressures.

World Bank water officials claim all the best intentions when they make the push for water privatization. The bank has argued that poor governments are often too plagued by local corruption and too ill equipped to run public water systems efficiently. Handing water over to foreign corporations, the bank has said, opens the door to needed investment and skilled management.

However, to borrow a phrase, the road to bad public policy is often paved with good intentions. Bolivia's experience with bank-forced water privatization is a striking example of the yawning gap between World Bank theory and how things actually work in the real world for the poor families who have to live with the results.

In Cochabamba five years ago, the water contract with Bechtel and the Abengoa Corporation of Spain paved the way for rate increases of double and more for poor water users. Those steep and sudden price hikes, needed in part to finance the 16 percent annual profit demanded by the companies, led to citywide protests and eventually to Bechtel's and Abengoa's ouster. The Bolivian government declared martial law in an effort to save the companies' contract, leaving one teenage boy dead and more than 100 people wounded.

In El Alto the chief complaint about the Suez/World Bank privatization is that it left tens of thousands of poor families with no access to water whatsoever. Fortunately, no one was killed or wounded in this latest water revolt, a credit to President Carlos Mesa, who agreed that the water contract was inadequate and approved its cancellation.

Observers from all sides will try to pin exotic labels on what happened this month in Bolivia--an indigenous uprising, the work of radicals secretly trying to subvert the government, etc. None of these capture the real lesson. At their essence, the water revolts in Cochabamba and El Alto were consumer rebellions. While many Bolivians are philosophically opposed to putting the country's natural resources into the hands of private corporations--and not without good reason, given the country's recent experiences with World Bank/IMF-forced reforms--most people here are simply angry at the practical result.

When Cochabamba's privatization failed, the bank blamed bad implementation, insisting that the theory still held. In 2002 the Bank declared the El Alto-La Paz water privatization as having "achieved positive results. "When the people of El Alto took to the streets this month, it was a clear declaration that the bank got it wrong.

The promise of private investment has turned out to rely on market-rate pricing that the poor cannot afford. In El Alto the cost of getting a water and sewage hook-up exceeded a half-year's income at the minimum wage. The promise of skilled management turned out to be about corporate leaders willing to let the poor suffer and, in Bechtel and Abengoa's case, stand aside while they were shot. No one--not the Bolivian government, not the World Bank and certainly not the multinational corporations involved--ever asked the Bolivian people, "Do you want to privatize your water?" One of the most important policy choices a people can make--public or private?--was taken away and made by economists and theorists in a huge white stone building a hemisphere away.

Bolivia's second citizen revolt against water privatization in five years ought to give the officials working in that building a moment of pause, to ask why the theory that seems to work so well on paper seems to work out so badly once it hits the ground.