When Water Corporations Sue Countries, It’s Time to Fix What’s Broken

(Photo caption: The 10 year anniversary of Cochabamba, Bolivia’s successful fight against water privatization by the Bechtel Corporation.) 

The stories are always uncomfortably similar: a cash-strapped local government turns to an international development organisation, like the World Bank, looking for a loan or expertise to help it deal with its infrastructure woes. Pipes might be leaking, contamination scares might be commonplace, and public utilities might lack the resources or training needed to fix some of these problems.

Faced with a well-dressed group of international development experts and financiers, the choice seems obvious: take a loan from an organisation dedicated to “ending extreme poverty” and “improving water resources management”1, fulfill its conditions, and build a path toward a cleaner, more efficient water system. What could go wrong?

Everything, it turns out. In each instance, the financier’s promise falls flat. Instead of cost savings, these conditional loans requiring privatisation have delivered steep price increases and service shutoffs. Rather than promote public gain, they have produced private profit. Instead of sustainability, they have created monopolies and dependence. From Bolivia to Nigeria to The Philippines to India, communities all over the world are finding out that when companies like Suez, Veolia and Bechtel take control of the tap, citizens — especially the poorest and most vulnerable — are the ones who lose out.

It’s tempting to look at the numerous stories of failure — the Guardian recently covered the long and problematic history of water privatisation globally — and blame individual companies or governments. But as members of the Story of Stuff community, we know that’s not enough: we know we need to look at the systems that hurt people and the planet, identify the actors that set up the rules of the game, and as we demand and create game-changing solutions.

That’s how our investigation of the ‘blue gold’ rush — private companies aggressively expanding around the world, seeking control over precious freshwater resources — led us to the World Bank, the International Finance Corporation (IFC), and similar international development institutions. Water privatisation has many causes, but research strongly suggests2 that the main reasons for the wave of privatisation we’ve seen in the Global South are linked to conditional loans imposed by the development banks beginning in the 1990s: the World Bank (and its financial division, the IFC) and the International Monetary Fund.

Regional development banks like the Asian Development Bank (ADB) also played a prominent role in pushing countries to adopt the kind of “structural adjustments” that made it easier for British, French and Spanish companies like Thames Water, Suez and Veolia to enter markets in developing countries. These ‘adjustments’ typically include terms like “mandated cost recovery,”;  “guaranteed rates of return,” and “risk protection” alongside other conditions to strengthen private control over water.3 These are big terms, and many of them are framed to sound intuitively correct — what’s wrong with recovering costs, anyway? But it’s important to unpack the jargon.

In this context, cost recovery translates into passing down the full costs of water infrastructure investment onto consumers. The consequences of full cost recovery have been deeply unjust: operators like SAUR in Zambia have repeatedly raised costs far beyond what poorer users can afford, causing severe water shortages that undermine the human right to water.

Ideas like ‘guaranteed rates of return’ and ‘risk protection’ also ensure that local governments cannot hold companies accountable with regulations to curb pollution or prevent worker exploitation, for example. Instead, they’re held hostage to corporate bottom lines, risking litigation if profits are threatened.

When locals in Argentina refused to pay for water contaminated by Vivendi’s mismanagement, the French conglomerate sued the country of Argentina in an international court, claiming that the Argentinian government’s actions had threatened its profits. Outrageously, the company Vivendi won over the country of Argentina — and the trend of private companies suing countries for huge amounts of money continues today, because of these built-in guarantees of profit (no matter what) baked into these loans and trade deals. Oh, and guess who runs that international court we mentioned above? You guessed it — the World Bank.

So we know the problem: we’ve got an international system to dispense “aid” that is stacked in favour of large, multinational corporations, and this system has a particularly destructive track record when it comes to people and water. If this seems familiar, it’s because — in a way — we’ve been here before.

When we made The Story of Citizens United v. FEC, we explored how corporations within the United States managed to take control of its democracy, and how we can fight back. But what we’re dealing with here is corporate power on a global scale, underpinned by a system that gives private companies legal standing akin to that of an entire sovereign state. This won’t be solved by a single amendment, or by one organisation passing a resolution.

So what can we do to push for solutions?

One of the clearest, most important ways to bring power back to local communities and governments is to mobilise against unfair trade deals. These are precisely the kinds of closed-door negotiations that enable companies to take over water systems without fear of any consequences, and have demonstrably negative effects on communities, no matter their ideological leanings.

When people exercise their citizen muscles, we can defeat these unfair trade deals. The battle to stop the Trans-Pacific Partnership (TPP) saw local resistance movements holding elected officials and negotiators accountable around the world from the United States to Peru, Japan, New Zealand, and many more Pacific Rim states.

As members of the Story of Stuff community, we have to stay vigilant — these attacks on workers’ rights, local control, and on public water have to be stopped. And when organizations like the World Bank and IFC try to push their pro-privatisation agenda, we’ll stand together with the local communities leading the charge against them, from municipal water employees in Nagpur, India to the water protectors of Bolivia.

Our community is powerful, and we’ve won victories in the past. This is a different kind of struggle — one that’s going to demand our attention, our thoughtfulness, and our resources — but it’s one that cuts to the heart of putting people and the planet over profits, restoring power to communities, and creating game-changing solutions. Let’s flex those citizen muscles.


About the author: Feroz Khan served as Campaigns Intern at The Story of Stuff Project during the summer of 2017. He is a proud Singaporean and a senior majoring in Environmental Studies at Yale-NUS College. Before joining the Story of Stuff Project, Feroz co-founded Yale-NUS Divest, Singapore’s first fossil fuel divestment campaign.

Additional sources:

1. Siregar, P. Raja. “World Bank and ADB’s Role in Privatizing Water in Asia.” Committee for the Abolition of the Third World Debt, 2004. http://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan023345.pdf.

2.Bakker, Karen. “Neoliberal Versus Postneoliberal Water: Geographies of Privatization and Resistance.” Annals of the Association of American Geographers 103, no. 2 (March 1, 2013): 253–60. doi:10.1080/00045608.2013.756246.

3. Conca, Ken. “The United States and International Water Policy.” The Journal of Environment & Development 17, no. 3 (September 1, 2008): 215–37. doi:10.1177/1070496508319862.

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