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PRI's Environmental News Magazine

Water for Profit

Air Date: Week of February 7, 2003

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Over the past decade, an ever-growing number of people throughout the world have been getting their water from private, for-profit companies. Now, an international group of journalists has taken a hard look at this trend. Canadian journalist Bob Carty was part of that team, and speaks to host Steve Curwood about the downsides, even dangers, of water privatization.

Transcript

CURWOOD: Welcome to Living on Earth. I'm Steve Curwood. Over the past decade there has been a sharp rise in the number of people throughout the world who get their water from private companies. Critics of water privatization say it's dangerous to put the most vital of our resources into the hands of for-profit entities. But the companies argue that they're more efficient and cheaper than public utilities.

Now, the International Consortium for Investigative Journalists has just completed a year-long probe of this issue. We're joined now by producer Bob Carty with the Canadian Broadcasting Corporation. Bob was part of that international team and is a regular contributor to Living on Earth. Welcome, Bob.

CARTY: Hi, Steve.

CURWOOD: Now, tell me, just how big a phenomenon is this move towards private companies providing water?

CARTY: What we found in our research was that in 1990 private companies were delivering drinking water in just 12 countries around the world. Today they're in 56, at least. And if you throw in wastewater or sanitation service, they're in over 110 countries. If you had a McDonald's sign over the top of this industry, you would say, "More than 300 million served". That's the number of their customers around the world.

It's been a tremendous expansion just in a decade, and mostly by just three corporations. There's about six big ones, but three really large ones: Suez and Vivendi, both from France, and Thames Water from the United Kingdom, although it's, in turn, owned by RWE of Germany. They are some of the biggest corporations in the world and they've just, in recent years, gone beyond their homelands of France and the U.K. to be global players.

CURWOOD: And this expansion, is it just into the Third World?

CARTY: No, the companies are operating on every continent, including North America, where they're still small, maybe only 5 percent of the market. But they've already won contracts in places like Atlanta, Indianapolis, and Puerto Rico.

CURWOOD: Now, tell me why this network of journalists, the International Consortium for Investigative Journalists, decided that this was an issue that warranted scrutiny? What's the concern? What's the danger of having private companies supply water?

CARTY: I guess a number of people have certain philosophical concerns, to begin with. For example, in the United States, six out of the seven major players are foreign-owned companies and there's a question about having something as vital as water to everybody's life in the hands of foreign players. And some of these companies have budgets and income that are bigger than the budgets of some of the states.

In more concrete terms, we found some positive examples of privatization around the world, but a lot of negatives, too, Steve. I'll give you a few examples. In the Philippines, we found that the companies promised to really help the poor and they didn't deliver the promises. And one of the multinationals actually walked away from the Philippines quite recently because they weren't making enough profit.

In Jakarta, in Indonesia, we found that millions--tens of millions of dollars--ended up in the pockets of some of the cronies of the former dictator Suharto, with citizens of Indonesia wondering who benefits from privatization.

Here in Canada we found that there was major privatization, with huge cuts in staff, that was blamed for one of the largest—actually, the largest spill of sewage, raw sewage-- into Lake Ontario. And in South Africa, we found ten million people, almost a quarter of the population, have over the years had their water cut off because they couldn’t pay water at market rates. Everywhere we found less accountability with privatization, including in places like Atlanta.

CURWOOD: What happened in Atlanta?

CARTY: Well, a few years ago Atlanta decided it didn't have the money to invest in the future needs of keeping up its very old water system, so it put it up for tender. There was a competition, and Suez, through its subsidiary United Water, won the contract to run the drinking water system of Atlanta.

Now, this was supposed to be a showcase of what private companies could do, but it didn't turn out as promised. As you'll hear here from a couple of women from Atlanta, Lamar Miller and Walda Lavrof.

MILLER: This summer, we had multiple times where you would turn on the faucet and nothing would happen, sometimes for a couple hours, sometimes for a couple of days. And then, when the water comes back, it looks like dirty creek water. It clogs up all the filters in your refrigerator and it destroys your laundry.

LAVROF: There was a boil advisory out for water, and we didn't get the advisory until a day or two later. Which is serious business because if the water is not safe to use, as they said, for baby formula or for elderly, ill people, and so on, we should be notified at once, not a day or two later.

CARTY: And that's Walda Lavrof, and earlier, Lamar Miller of Atlanta.

CURWOOD: So what happened with this private water company in Atlanta?

CARTY: Well, the city did an audit of the private company and found that it wasn't collecting water bills sufficiently, it was delaying in repairs, it had bad customer service. It wasn't providing the city the savings that had been promised. For its part, the company just said that it didn't realize that Atlanta's pipes were so old and in such bad shape.

In any event, just a couple of weeks ago the two parties dissolved the contract. Atlanta water goes back to the public sector and the company, Suez, I suppose, has some egg on its face. But not enough damage to its reputation to prevent it from going in search of other contracts in the United States.

CURWOOD: Bob, when you think about big business expanding around the world, you think of sexy, high-tech industries, not something as humdrum as water utilities. I mean, it's the ultimate plain commodity, isn't it? What makes water such an attractive business?

CARTY: Have you ever played Monopoly, Steve?

CURWOOD: Oh, yeah.

CARTY: Okay. You know the strategy where you go after Boardwalk? You've done that. Get a hotel on it. There's another strategy, though, which is to buy up the utilities and the railways. They don't get as good a rent from the competitors going around the board, but people land on them all the time, every time around the board, and so you just keep raking in the money. It's stable and consistent.

Well, the water companies recognize this as a great long-term investment. Water is called the great unopened oyster, blue gold, the petroleum of the 21st century. The potential market, according to some estimates we found, is that the current market of about half a trillion dollars a year could grow to three trillion dollars a year.

And I have some tape from the water companies explaining their interest in water as a business. We'll hear first from a senior executive of the British company, Thames Water. He's Mr. Peter Spillett.

SPILLETT: Water is essentially a utility. Utilities are much safer than the high-risk stocks and shares. There's huge growth potential. We are worried about water resources in the future, about public access. We think there'll be world wars fought about water in the future. It's a limited, precious resource. So, the growth market is always going to be there, so it's a very reliable place to put your money.

CARTY: And those are the views of Peter Spillett of Thames Water. Views, Steve, that are very similar to those of Yves Picot. Yves runs the African operations for Vivendi, a French company. And Yves Picaud also feels water is a good business bet for the future.

PICAUD: I think it's because it's a stable one. It's a long term one, you have no surprise. One thing we are sure: everybody drinks water every day, or use water every day.

CARTY: And that's Yves Picaud for the Vivendi Corporation.

CURWOOD: Now, how have these water corporations been able to expand their presence around the world?

CARTY: Well, one way we found was that they got a lot of help from the World Bank. The World Bank as a development institution used to help poor countries build their own public waterworks, but they got criticized under the Reagan and Thatcher administrations for subsidizing the poor, for welfare mentalities. And the World Bank adopted, about ten years ago, a fairly free market approach.

And I have some tape on this from one of the World Bank's top water specialists. He is Menachem Lieberberg. He says the bank does support both public and private water services, that it's not ideologically in favor of one or the other, but you'll hear here there's a clear commitment to business. He's Menachem Lieberberg of the World Bank.

LIEBERBERG: I’ve found from my experience that ailing public utilities, it's basically impossible to improve them. You can put in all the money. The only way to get an ailing utility to work is through private sector. It's better handled by private companies because they have this business approach.

CARTY: And that's Menachem Lieberberg of the World Bank.

CURWOOD: Bob, how does the World Bank actually get countries to go the privatization route for water?

CARTY: Well, they use leverage through what they call conditionality, or tied loans. If you want our money, you have to do something in return. That kind of conditionality, we found in almost 60 percent of recent structural loans from the bank that it required privatization initiatives. The World Bank says it's just trying to get water to people, that it doesn't force itself--it doesn't force governments to privatize. But if you're a poor government and you get an offer of $200 million dollars to privatize and you get nothing if you don't, they see it definitely as a lot of pressure.

CURWOOD: Are there good public institutions to be supported here?

CARTY: Well, yes there are, and we found an interesting one in Bogotá. The utility there actually has won awards year after year for its water services. They provide really good services. They're helping more and more poor people, and they're doing it by getting the rich to subsidize the poor.

A couple years ago, they went to the World Bank in Washington to get a loan to help extend those services to more people, and the World Bank said no. They wouldn't loan them money unless they privatized and dismantled their subsidies. The Bogotá people, for their part, said no, and told the World Bank to keep the money.

CURWOOD: Now, what about the privatizations? Are there privatizations that work?

CARTY: Well yes, there are interesting examples we've seen in places like Cartagena, Colombia, and Casablanca, Morocco. Even in Manila, more poor people have some more water, though they haven't met the targets that were originally set down. Everywhere, though, we found people asking the question whether or not this could have been done, still, with a public utility. Did it have to go into private hands? Couldn't it have been done just as well by the public sector if it got some help?

CURWOOD: What are the business strategies for water corporations in the future, Bob?

CARTY: I talked to each of the three big companies about this over in Europe and they all have the same strategy, interestingly enough. They're going to keep their foundations in Europe. They're going to target two new areas. One is China and the other is United States, seen as the crown jewel for the private water industry.

CURWOOD: Bob Carty is a producer with the Canadian Broadcasting Corporation and a frequent contributor to Living on Earth. Hey, thanks, Bob, for filling us in.

CARTY: You're welcome, Steve.

CURWOOD: For more information on water privatization go to our website loe.org. That's www.loe.org.

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Links

The International Consortium for Investigative Journalism water reports

CBC water series

 

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