The Flint Water Crisis is a human tragedy of catastrophic proportions, an inexcusable case of short-sighted policy leading to irreversible consequences, and a thorough indictment of a system that silences the voices of its impoverished communities. For those following the news out of Flint, this much has been apparent for some time. What may be less clear, however, is what this crisis is supposed to teach us about the equitable and efficient distribution of water.  

via YouTubeFlint drinking water pipes show different kinds of iron corrosion and rust 

According to some, the blame for Flint’s water crisis belongs to Governor Snyder’s undemocratic appointment of “emergency managers,” and, more broadly, his crude application of austerity economics. For others, the tragedy speaks to a general truth about government ineptitude, and presents an opening to push for greater private sector involvement in water allocation.

This accountability argument mirrors an international debate about water management that has been raging for decades now. It’s a debate that occurs along familiar lines: supporters of privatization argue governments are inefficient, while supporters of nationalization contend that markets are inequitable. Yet the allocation of water resources brings its own unique set of complexities, due largely to the conceptualization of water as an essential human right. 

According to a World Bank report, the genesis of the debate on the right to water can be traced to a 1977 UN conference held in Argentina, in which a resolution was declared that “All peoples, whatever their stage of development and their social and economic conditions, have the right to have access to drinking water in quantities and of a quality equal to their basic needs.” Fifteen years later, the International Conference on Water and the Environment issued a statement proclaiming, “Water has an economic value in all its competing uses and should be recognized as an economic good.” The proclamation, according to a research report from the Internal Irrigation Management Institute, echoed the views of the conference’s economists that water should be treated as a private good and allocated through market pricing. 

We can already see the major fault lines emerging in the conception of water, decades before the privatization debate hit the mainstream. Using the terms of economists, if we consider water to be an economic good, then it should be allocated by the values of consumer sovereignty—the amount that consumers are willing to pay for it. Defining water in this way appears to directly contradict the concept of water as a human right, assuming the United Nations definition that human rights are, “inherent to all human beings, whatever our nationality, place of residence, sex, national or ethnic origin, color, religion, language, or any other status. We are all equally entitled to our human rights without discrimination.” 

On one hand, it seems difficult to reconcile the privatization of water with its conception as a human right under the above definition. Market forces are dependent on consumer income, and vast global wealth disparities would preclude the possibility of equitable distribution, despite the promise of all being “equally entitled.” On the other hand, an argument could be made that governments—especially those with long records of corruption—should not be entrusted with distributing such a precious resource, and that the commercialization of water would actually improve basic access.  

It’s possible that this realization of contradiction impacted the Kyoto Declarations of 2002, in which the world’s Water and Environment Ministers put forth a statement that included support for private sector financing and increased private sector involvement in water supply management, as well as a “conspicuous failure to refer to water as a human right.” The declaration incited a firestorm of protests from anti-globalization activists, environmentalists, public-sector unions, and indigenous peoples, who felt the supposed consensus—reached during closed-door meetings in Kyoto—was emblematic of the ‘neoliberalization of nature’ pursued by advocates of ‘top-down globalization.’

via IISD

Whether or not this is true, it remains unclear if the notion of water as a human right necessarily entails a specific system of distribution. If the claim that privatized water markets improve the quality of service is true, it would follow that disadvantaged groups are made better off by this private sector participation. So while our working concept of water as a human right does not preclude the role of private companies in distributing water, it’s fair to assume that the designation of water as a commodity in which some groups are priced out of the market is wholly incompatible with the conception of water as a human right. 

With that in mind, it’s useful to look at Chile and Bolivia, two neighboring countries with opposing experiences with water management. Taken together, these separates histories can offer an illuminating window into the best practices for conceptualizing and distributing water in the 21st-century. 

The Chilean Case

The system of water rights in Chile presents a unique case, in that it is both lauded and criticized as the most enduring example of neoliberal reform in Latin America. The country also provides a telling lesson on the difficulty of creating a self-maintaining market for water rights and the importance of establishing an open legal framework in pursuit of that goal. 

After a United States-backed coup d’état replaced Salvador Allende’s elected socialist party with General Augusto Pinochet’s military government in 1973, hundreds of state-controlled industries underwent a period of rapid privatization. A group of American-educated Chilean economists known as the “Chicago Boys” implemented a vast array of neoliberal reform efforts that included opening markets to global trade, silencing trade unions, cutting tariffs, and widespread deregulation. While Washington extolled the new capitalist economy, income equality worsened appreciably under Pinochet and social services such as health, education, and social security were critically neglected

The Chicago Boys

Prior to the military takeover, water management had been codified by the 1967 Agrarian Reform Law, which established water rights as public property and gave a state agency known as the Dirección General de Aguas (DGA) the power to set technical standards on “rational and beneficial use” and to resolve water-related disputes. The controversial agrarian reform redistributed large amounts of land in order to strengthen the class of small landowners and to innovate agricultural production. 

It wasn’t until 1981 that Pinochet’s government formally took action in the field of water management. Under advisement from the “Chicago Boys,” a new Water Code was established in 1981, which relegated water rights to the free market to “an unprecedented degree.” The new code sought to encourage private investment in water use by securing private property rights and creating legal mechanisms in which a market for water rights could emerge. 

Water rights would now be governed by private or civil law, and the DGA was stripped of all administrative discretion. If a situation arose in which there was not enough water for multiple applications, a public auction would be held and the new rights sold to the highest bidder. With the exception of these auctions, private owners of water rights did not pay any sort of taxes or fees to the government. Unlike most countries, the rights holders faced no penalty for lack of use, as such punitive measures were seen as an invasion of private liberty. The unconditional nature of these rights made Chile unlike any other country in the world, and permitted unrestricted speculation for water rights. 

An unfortunate yet predictable outcome of the abrupt legal reform was that those marginalized from the government and legal system were made substantially worse off. Pinochet’s regime made no effort to promulgate information about the new laws to the general public, thereby allowing the legally adept to claim water rights before the peasant farmers had even learned of the new procedures. The fact that multinational corporations could speculate in and hoard unused water rights without penalty was especially damaging to the peasant farmers, who were (and still are) legally prevented from accessing waters that are entirely available. Additionally, an absence of state regulation forced private parties to rely on bargaining power to coordinate interests, putting those who lack economic and political power at a major disadvantage. 

The failures of the legal framework to consider the social consequences of the 1981 Water Code persist to this day. Currently, the majority of peasants and small farmers lack legal titles, and are largely excluded by a water users’ organization dominated by larger agricultural businesses. Efforts to reform the current system are hindered by the fact that the current constitution, approved by the military government in 1980, explicitly protects water rights as private property and cannot be changed without a constitutional amendment. Though a centrist government has ruled Chile since 1990, efforts to address the public concern regarding monopoly and unrestricted speculation have been blocked by conservative groups and business interests, who retain a veto power over all revisions to economic policy. 

The Bolivian Case

During the 1990s, water service in Bolivia underwent a period of managed liberalization, with a trend toward less management and more liberalization as the decade wore on. The trend in Bolivia was the result of a New Economic Policy (NEP) developed in 1985, which sought to attract investment from the IMF, the World Bank, and the United States through the privatization of state owned companies. By 1997, the transnational private sector had become heavily involved in urban water supply, with the French multinational corporation Suez securing a long-term concession contract in the capital city of La Paz. Social unrest began to mount, heightening in September of 1999 when the Bolivian government handed power from Cochabamba’s municipal water company to Aguas de Tunari, a consortium of multinational companies and a subsidiary of US-based construction giant Bechtel. 

The forty-year concession contract gave exclusive monopoly power to Aguas de Tunari for both water services (sanitation and drinking water) and water resources (irrigation for the agricultural sector and electricity generation). 

Additionally, the terms of the contract charged small farmers for use of water for irrigation, increased water prices an average of 35%, indexed water tariffs to the US dollar, permitted the metering of independently built communal water systems, and guaranteed the consortium a minimum 15% annual return on its investment. The legal framework for the privatization was dubious, resting on a presidential decree and a piece of legislation, known as Law 2029, rushed through Parliament at the time of the contract. 

As news reached the middle class that dramatic rate hikes had been caused by foreigner privatization, protests spread throughout Bolivia. In the early months of 2000, La Coordinadora, an oppositional group consisting of peasant irrigators, union workers, sweatshop employees, street vendors, anti-globalization activists, middle class business owners and others, facilitated mass protests and blockaded highways in much of the country. The water warriors—as they came to be known—demanded the removal of the foreign consortium and the establishment of ‘social control’ of Cochabamba’s water resources by an elected board that would include members of civil society. Tensions peaked in April of 2000 after the government declared a state of siege, culminating in military police firing at unarmed civilians who’d barricaded Cochabamba’s central plaza. 

Remarkably, the civilian uprising was a success, and the government revoked the contract after executives from the Bechtel consortium, fearing their safety, fled the country. Control of Cochabamba’s water works was handed over to La Coordinadora and the social movement activists went about implementing their vision of a public-participatory model. The basic outline was simple enough: prioritize the usos y costumbres (uses and customs) and former traditions of territorial control, while establishing water as a collective good—separate from individual property rights—for the purpose of distributive equality and social justice. The tricky part was creating a regulatory process and legal framework for this unprecedented vision. 

The immediate goal of the activists was to increase participation in the process of water allocation. This entailed restructuring the Cochabamba municipal water company, SEMAPA, to include a transitory board composed of elected citizens, members of government, and union workers. Attention then turned to creating a new legal framework, and between 2000 and 2004 a participatory committee drafted legislation that codified the water allocation norms assumed by usos y costumbres. 

In the decade that’s followed, the micro-level changes in Cochabamba have been mixed. Prices have returned to pre-2000 levels and 57,000 more people now receive sewage service and piped water. Still, a shrinking aquifer and inability to purchase new dams and aqueducts has rendered SEMAPA unable to provide consistent water to the impoverished south end. 

On a macro-level, the success of the Cochabamba Water Wars has had major effects for Bolivia. The country’s first indigenous president Evo Morales rose to prominence as an anti-globalization leader during the protests and has enacted policies that seek to eliminate neoliberalism from Bolivia. Under Morales, a new constitution was approved in 2006 that made privatization of water illegal and codified water as a human right to all Bolivians. A Water Ministry was created and service provisions were relegated to municipal governments as well as consumer-owned cooperatives. In 2009, the government replaced the outdated regulatory agency with the Bolivian Water and Sanitation Authority to supervise activities in the water sector. Though the initial results of these institutional changes have been minor, Bolivia’s water resource management has become an iconic symbol in the fight against corporatism and neoliberalism. 

Conclusion 

The cases of water management in Chile and Bolivia provide interesting insights not only into the debate on private and public water rights, but also into the relationship between globalization, international financial institutions, and multinational corporations. As the World Bank and International Monetary Fund have increasingly assumed control of highly indebted economies in the Global South, their insistence on opening markets to private capital—“structural adjustments” in IMF-speak—has raised serious questions about the commodification of public utilities and its impact on disadvantaged populations. It’s difficult to ignore the element of colonialism in any policy that allows wealthy countries and corporations to buy up a nation’s resources and sell those resources back at a profit, all the more so when those policies are advocated by institutions founded on Anglo-Saxon conceptions of free-market capitalism. 

The potential for exploitation becomes even more immediate in the case of water—as opposed to, say, bananas or sugarcane—because it is an increasingly scarce resource on which even the most basic survival depends. But as Johan Bastin, of the European Bank for Reconstruction and Development, notes, “Water is the last infrastructure frontier for private investors.” In the eyes of those with capital, prescient warnings of a global water crisis only make privatization more attractive. And yet as we’ve seen, aggressive neoliberal policies aimed at attracting foreign investment can have devastating effects on local communities.    

The evidence from both Chile and Bolivia illustrate the need to reexamine the prevailing notion that essential services are best allocated through private property rights and government deregulation. Both countries also exemplify the importance of considering legal institutions within the context of a political landscape where national boundaries are increasingly blurred by transnational institutions. In Chile, a Cold War-era legal framework reinforces a system of water management in which business interests are prioritized at the expense of social equity. In Bolivia, the Cochabamba Water Wars of 2001 are symbolic of the larger failure of IMF-induced market liberalization to produce benefits for the working class. The legal institutions of the current Bolivian government reflect the national consensus that water is a human right and should thus be regulated as public property. 

It’s difficult to compare the efficiency of water allocation across two systems, particularly when empirical research of water access for disadvantaged populations is essentially nonexistent. However, in seeking to conceptualize water as justly distributed human right, Bolivia and Chile illustrate the inherent failings of privatization practices. While the idea of unregulated foreign investment increasing efficiency is nice in theory, the reality of these attempts in both Chile and pre-2001 Bolivia show that such efficiency fails to materialize for underrepresented indigenous peoples and others lacking economic power. It follows that any system that employs multinational, for-profit entities to commodify water at the expense of these communities is wholly incompatible with the concept of water as a human right.