In 1998, the World Bank notified the Bolivian government that it would refuse to guarantee a US $25 million loan to refinance water services in the city of Cochabamba unless the local government sold its public water utility to the private sector and passed the costs on to consumers. The Bolivian authorities duly gave control over the Cochabamba water utility to Aquas del Tunari, a subsidiary of the water giant Bechtel.
The World Bank then granted monopolies to private water concessionaires, called for full-cost water pricing, pegged the cost of water to the U.S. dollar, and instructed the Bolivian government that the loan monies could not be used to subsidize the poor for water services.
When their water rates were jacked up by nearly 35%, the people of Cochabamba took to the streets by the tens of thousands, shutting down their city for four straight days in January 2000. The protest was led by Oscar Olivera, who headed the Coalition in Defense of Water and Life. Polls showed that 90% of the city's residents wanted Bechtel's subsidiary to return the city's water system to public control. After a week of escalating protests, Bolivian President Hugo Banzer placed the country under martial law and announced that the government would break it's contract with Bechtel.
When asked to comment directly on the Bolivian protests, World Bank Director James Wolfensohn maintained that giving public services away to people leads inevitably to waste and that countries like Bolivia need to have a "proper system of charging for water." He was echoing a World Bank report from June 1999 which declared: "No subsidies should be given to ameliorate the increase in water tariffs in Cochabamba," arguing that all water users, including the very poor, should be called to bear the full cost of the water system and its proposed expansion. Yet Wolfensohn flatly denied that the privatization scheme was directed against the poor.
"I'd like to meet with Mr. Wolfensohn to educate him on how privatization has been a direct attack on Bolivia's poor," replied protest leader Olivera. "Families with monthly incomes of around $100 have seen their water bills jump to $20 / month - more than they spend on food. I'd like to invite Mr. Wolfensohn to come to Cochabamba and see the reality he apparently can't see from his office in Washington, D.C."
Text taken from Barlow & Clarke, 2002, pgs. 154-155. Return to the Water Problems page.