The World Bank predicts that by 2025, two-thirds of the world’s population will be short of water. Private corporations capitalize on this imminent crisis by contracting with municipalities to provide water services. Water is redefined as a scarce commodity subject to market forces, with corporations controlling its price—and who is allowed to buy it.
Private water utilities serve 10 percent of the world’s population, 15 percent of the US population, and 22 percent of California’s. Three hundred million people across the globe now receive their water from a private source.
Water for profit is a $500 billion industry, projected to grow to $3 trillion within the next few years. In 1990, just 12 countries had private drinking water operations; today there are 56.
The three largest waterworks companies—Suez and Vivendi of France and RWE-AG of Germany—are among the top 100 corporations in the world.
The IMF and World Bank encourage water privatization, claiming that it increases water access for the poor. Through its use of “structural adjustment loans,” which stipulate specific conditions be met to receive funds, the World Bank pressures countries to privatize. In recent years, 60 percent of these loans required countries to privatize either government services or water utilities. Countries desperate for funds relinquish control of their often-troubled water systems to pay off their debts.
Rate agreements between water companies and governments ensure a certain margin of profit for the corporations, minimizing their risk but increasing the cost of water. Rates increased in Pekins, Illinois by 204 percent over the 18 years that Illinois-American, a subsidiary of American Water Works, ran that city’s water system. The CEO for American Water Works had a salary of over $2 million in 2000.
In most cases bidding for water contracts occurs behind closed doors, and the selected company signs a long-term contract, usually 25-30 years, the details of which are often not made available to the public.
When water systems go private, citizens end up financing the costs, meanwhile guaranteeing the companies’ profit margins by paying higher rates. Water companies are beholden to their shareholders—in contrast to officials’ being held accountable by citizens of a municipality.
In Buenos Aires, private water companies promised a 27 percent decrease in water rates. But after privatization rates rose by 20 percent, leading to a 30 percent non-payment rate. As a result of the private company’s failure to fulfill its contractual agreement to build a new sewage treatment facility, 95 percent of the city’s sewage flows straight into the Rio Plata River.
Unable to afford privatized tap water, residents turn to untreated sources. Ten million South Africans had their water cut off following privatization, causing that nation’s worst cholera epidemic, which infected 250,000 people and left 300 dead.
The British water conglomerate Biwater was awarded a 30-year water concession in Nelspruit, South Africa in 1999. In some townships, Biwater turns on the water for only three hours a day. People sometimes get nothing but air in their pipes for up to 90 minutes—despite the fact that the meters are running.
In Cochabamba, Bolivia, Bechtel subsidiary Aguas del Tunari raised water rates by 50 percent. Some bills rose by 200 percent. The rate hikes were to cover Aguas del Tunari’s $35-million-dollar inherited debt, future infrastructure, and a 16 percent annual profit rate.
Earning an average $67 a month, Bolivians were spending 30 percent of their incomes on water. In April 2000, five months after the signing of the 40-year water and sanitation contract, hundreds of thousands of Bolivians protested, leading to violence that injured 175 and killed one. Forced to cancel the contract, the government returned the utility to a public entity headed by the protest leader.
On January 19 of this year, Bolivians won Water War 2, forcing Suez and minor owners including the World Bank, out of El Alto, a town of 800,000. A quarter of the population had no water.
In the United States, private water industry advocates lobby Congress and the EPA to block higher water quality standards and allow the industry access to the same low interest rates public agencies can obtain. The industry group believes clean-water regulations should be based on a cost-benefit analysis: $10 million is a reasonable sum to eliminate a deadly contaminant but not one that poses a serious, non-fatal health risk.
In the United Kingdom, the Thatcher government transformed ten regional water authorities into ten for-profit ventures, selling them as 25-year concessions on the stock market. These private companies now have monopolies in all regions of the United Kingdom except Scotland and Northern Ireland.