June 2001 Insights Issue #37

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Cochabamba: victory or fiasco?

Was the failure of the Bolivian Cochabamba concession a victory against the World Bank, globalisation, and private sector participation in urban water supply? Was the consortium anti-poor?

There is another side to the story, however:

• SEMAPA, the state-owned water utility, had been grossly inefficient for decades and had never supplied water to the poorest, who instead had to buy water from private vendors.
• SEMAPA's subsidised tariffs benefited the elite and middle-classes yet even they suffered frequent power cuts.
• The poorest stood to gain the most - short term (cross-subsidisation through the new increasing block tariff and reduced leakages) and longer-term (mandatory extension of the network to poor neighbourhoods).
• The World Bank openly opposed the project and had no involvement in the concession, preferring a lower cost water-only alternative.

Higher tariffs

Average increases were 35 percent, ranging from 10 percent for poorer households and 106 per cent for higher earners, who would have had to pay more per cubic metre for their higher levels of consumption than previously.

Improved billing helped eradicate bribery of SEMAPA officials to place luxury properties in a lower residential band or businesses in the residential category: some bills soared by 200 percent.

The fall in leakage rates achieved by AdT led to a reduction in water rationing and thus increased consumer consumption, which, on top of tariff increases, contributed to higher bills.

Irrigation charges

Rivalry between urban and agricultural consumers was rife. Small farmers tapped underground sources for irrigation based on a traditional system of property rights. As urban demand rose, SEMAPA had sunk new wells, further straining resources. A new law acknowledged traditional rights but farmers saw the law as a threat, believing, inspite of government assurances to the contrary, that they would be charged for irrigation. Local farmers thus joined the anti-AdT protests.

Exclusive rights

Powerful groups felt threatened by the exclusivity of the concession: alternative providers such as truck vendors, small co-operatives and neighbourhood associations; private companies involved in the drilling of private wells; wealthier consumers who had constructed their own wells and storage tanks.

The rejection of private sector participation, however, was justified on the basis of defending the water interests of the urban poor. Can the public sector operator provide clean and affordable water to poor communities faster than would have been the case under the concession?

The Cochabamba experience shows just how politically sensitive institutional reform of urban water supply is and how the water needs of the urban poor can be manipulated in defense of powerful vested interests under the guise of populist rhetoric. Can these hurdles be overcome?

• Private operators, especially foreign companies, should enter a frank dialogue with Civil Society Organisations, and regulatory bodies should communicate openly with consumers to explain the reasons for reform.
• Crucially, the voice of the urban poor- the stakeholder with potentially most to benefit from the new arrangement - needs be strengthened within the overall regulatory framework

Andrew Nickson
International Development Department
University of Birmingham
Birmingham B15 2TT
UK
T +44 (0) 121 414 4990
F +44 (0) 121 414 5032
R.A.Nickson@bham.ac.uk