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[Fwd: New British Empire of the Dammed]

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OBSERVER (London)  Sunday April 23, 2000
Inside Corporate America
 
Bolivia's water supply is the latest acquisition of thirsty British firms in 
the service of Uncle Sam

New British empire of the dammed
       by Gregory Palast
 
    With the front pages jammed with photos of two dead white farmers in 
Zimbabwe, the news from Bolivia â "Protests claim two lives" â was pushed 
into a teeny "World in Brief" in the Guardian, and unmentioned elsewhere.  
What a shame.  The Zimbabwe murders merely exercised a suppressed nostalgia 
for the imperial past.   But Bolivia is the story of Britain's imperial 
future.

    First, let's correct the arithmetic.  The count in Bolivia is now 6 dead, 
175 injured including 2 children blinded after the military fired tear gas, 
then bullets, at demonstrators opposing the 35% hike in water prices imposed 
on the city of Cochabamba by the new owners of the water system, 
International Waters Ltd, of London.  

    IWL, like many of Britain's multinational operators, is controlled by a 
larger US corporation, in this case, construction giant Bechtel.  San 
Francisco-based BECHTEL, known here as  builder of the Jubilee Line, recently 
set off on a quest to own and operate water systems worldwide.  United 
Utilities (Cheshire), originally co-owner of IWL, now merely "strategic 
partner" in the venture, plays Sancho Panza to Bechtel's financial Quijote.

    Following the Cochabamba killings, Hugo Banzar (once Bolivia's dictator, 
now the elected President), declared a nationwide State of Siege, setting 
curfews and abolishing civil liberties.  On April 12, just after the martial 
law declaration, World Bank Director James Wolfensohn took time out from his 
own preparations against protests in Washington to comment to reporters that, 
"The riots in Bolivia, I'm happy to say, are now quieting down."

    I contacted Oscar Olivera, leader of the protests, to ask him how he 
organized the riots.  On April 6, following the first protests against the 
price increases, Olivera, a trade union official, with a coalition of 14 
economists, parliamentarians, lawyers and community leaders, accepted a 
government invitation to discuss the IWL price hikes.  After entering the 
government offices in Cochabamba, Olivera and his collegues were arrested.  
With Olivera in chains, the riot outside the building could only have been 
directed by the leader of the 500 protesters, Cochabamba's Roman Catholic 
Archbishop.

    There is, of course, the possibility that the World Bank's Wolfensohn had 
it wrong, and that what he calls rioters were in fact innocent victims of 
deadly repression.  Olivera, one of five protest leaders released (the 
government banished the 17 others to internal exile), flew to Washington to 
try to speak with Wolfensohn.  But the Director is a busy man and Olivera 
left this Wednesday without a meeting.

    The price hikes that triggered the water war were driven by IWL's need to 
recover the cost of the huge Misicuni dam project.  Water from the dam system 
costs roughly six times that of alternative sources.   Why would IWL buy 
water from a ludicrously expensive source?  Just possibly because IWL owns a 
part of the Misicuni dam project.

    The public had one other objection with IWL's charging for the dam 
project:  there is no dam.  It has not yet been built.  

    It is a basic tenet of accounting that investors, not customers, fund 
capital projects.  The risk-takers then recover their outlay, with profit, 
when the project produces a product for sale.  This is the heart, soul and 
justification for the system called "capitalism."  
    
    That's the theory.  But when a monopoly operator gets its fist around a 
city's water spigots, it can pump the funds for capital projects (even ones 
that cost 600% over the market) from captive customers rather than its 
shareholders.
    
    Samuel Soria, the government's former consultant on the water projects, 
said he was unable to extract from IWL evidence it had put in any funds at 
all into the operation. Soria, Chairman of Chochabamba's Council of 
Economists, was told THE water system's purchasers had deposited ten million 
dollars into a Citibank account in New York but Soria found no evidence of 
its transfer to Bolivia.   Water prices, he fears, could eventually rise 150% 
under IWL management.
    
    Luis Bredow publisher of the newspaper GENTE told me, "no money was 
shelled out by anybody" for the water company.  His own investigation 
concluded the operators grabbed the entire system for nothing.  He attributes 
these exceptionally favorable terms to IWL's partnering with former Bolivian 
President Jaime Pasamora, leader of a political party allied to Banzar.  
    
    IWL's London spokesman said little more than, "How did you find out that 
IWL was involved in Cochabamba?"   (The company's Bolivian group is called 
Aguas de Altuni.)  In fact, the British company's involvement is getting to 
be, to use Bredow's term, "misterioso."  President Banzar, to quell the 
spreading demonstrationS, announced cancellation of the water privatization 
on April 5.  But the next day, word leaked that IWL was back in the saddle at 
the water company and people took to the streets again, nationwide.  On April 
10, the panicked government declared that the foreign consortium had 
"abandoned" their franchise when its British CEO supposedly fled the country. 
 But this Thursday we tracked the IWL executive to a La Paz hotel where, his 
associates told me he, they were about to open negotiations with the Banzar 
government. 

    From its US headquarters, Bechtel issued a statement flatly denying the 
upheaval in Bolivia had anything to do with its water price hikes.  Rather, 
IWL's American owner hinted darkly that the revolt was partly the work of 
those opposing a "crackdown on coca-leaf production."  Olivera responds that 
neither he nor the archbishop traffic in narcotics.

    It can't be said that the British-American operators brought misery to 
Cochabamba; they found plenty already there.   Intestinal infections leading 
to diarrheal illness is Bolivia's number one disease and child killer, the 
result of water hook-ups and sanitation reaching only 31% of rural homes.  
    
    World Bank Director Wolfensohn has a solution to the lack of water: raise 
the price.  So pay up, HE demanded of the protesting Bolivian water users in 
his extraordinary April 12 diatribe against the "rioters." 

    But WOLFENSOHN'S shut-up-and-pay-up outburst contradicts the internal 
counsel of his own experts.  In July 1997, at a meeting in Washington, the 
Bank's technocrats laid out to the Bolivians the case against Misicuni and 
even warned about social upheaval if prices rose. According to a World Bank 
insider who asks not to be named, the Bank's hydrologists and technicians 
devised a water plan for Cochabamba at a fraction of Misicuni's bloated cost. 
 The capital program would be paid off by doubling the number of families 
receiving water rather than by raising prices on current customers.  Water 
supply and distribution would be divided between two companies to avoid the 
kind of self-dealing inherent in IWF's Aguas de Tunari set-up. 

    So why DID Wolfensohn attack protests against a project the World Bank 
itself found dodgy and damaging?  There are larger plans not discussed with 
the Bank's low-level minions nor known to the latte-fueled revolutionaries 
demonstrating in Washington last week.  Long before ministerial limousines 
clogged the US capitol, the big policy decisions were settled in far-flung 
"sectoral" meetings.  In the case of water, nearly one thousand executives 
and bureaucrats gathered in The Hague last month TO review and refine a 
program to privatize the world's water systems.  
    
    But private operators can only turn profits if prices rise radically and 
rapidly  IWF secured from Bolivia a 16% real guaranteed return.  THIS profit 
boost itself enough to account for the initial 35% hike in rates.  To boost 
such "reform," the IMF, World Bank and Interamerican Bank have written 
sell-offs into what they term, national "master plans."  Consortia such as 
IWF were formed to capture these cast-off public assets.

    The justifiable basis for the sell-offs was that privateers committed to 
deliver capital for desperately needed system repairs and expansion.  But 
like a gigolo's flowers, the promises rapidly wilted.  Cochabamba's protest 
organizers knew that just across the border in Buenos Aires, the region's 
first privatization consortium eliminated 7,500 workers, the system bled from 
lack of maintenance and prices jumped, repeating the story of virtually every 
water privatization from the Philippines to East Anglia.  In Argentina, the 
new owners of the Buenos Aires system NOTABLY include Anglian Water â and the 
World Bank itself.

    Britain is re-establishing imperial reach, albeit in the shadow of 
Americans, through rapid low-capital takeovers of former state assets, 
concentrated in infrastructure where monopoly control virtually guarantees 
outsized profit.  From BG's takeover of the Sao Paolo, Brazil, gas company to 
United Utilities' buy-out of the Manila water company, it all seemed a 
riskless romp â until a few thirsty, angry peasants in the Andes decided they 
could stop the New Imperium in the streets.
gregory.palast@xxxxxxxxxxxxxx


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