Thoughts on Today’s NY Times Article on Bolivia and Water

I have received a good deal of e-mail today from readers, reacting and asking for my reaction to a lengthy article in today’s New York Times, Latin America Fails to Deliver on Basic Needs. I had several conversations with the author of the article as he prepared it and am quoted near the end.

The essential message of the NY Times article is that Latin America is having a hell of a time trying to meet the basic needs of its citizens, especially on basics like water, and that the turn toward privatization to deliver the goods has ended in substantial protest and some highly visible oustings of multinational corporations – as evidenced by Cochabamba and El Alto.

I think that basic thrust is right. What are important of course are the details of why and what to do about it.

First off, a point that I wish the Times had made but didn’t is that many of these privatizations were not democratically decided but forced, as they were in the case of Cochabamba and El Alto water, by the World Bank. See my recent editorial article in The Nation for more on that.

One of the most essential policy choices that a people make is what activities to carry out through public systems and which to turn over to the market. Our readers in the US know this well from the ongoing debate over how to provide adequate heath care and the Bush-led effort to partially privatize Social Security. I suspect that US citizens would not take too kindly to any effort by the World Bank to make those decisions on their behalf.

One reader asked me a question I have been asked before, in response to my quote in the article: "Ultimately, if Bolivians are going to get real access for water it's going to have to be subsidized and it's going to have to be subsidized in some form of foreign assistance."

Can’t Bolivians finance their water themselves? Isn’t it patronizing to say they are dependent on foreign aid to do so?

Here’s a fact from our post-analysis on rates after the Cochabamba water revolt. You can pretty much run a public water system in the black with the water rates people pay once they are hooked up to the system. What you can’t fund without hiking up rates beyond what people can afford is expansion of the system to people who don’t have it. That is where the high costs are.

Speaking as the aging Harvard-trained policy analyst and university teacher that I am – what you have here is a policy problem. What are your options and how do you evaluate them?

Option one is to invite foreign investment and base water prices on the market costs of keeping those multinationals earning a profit and happy. That is the World Bank option. The people of both Cochabamba and El Alto have made it wickedly clear through public rebellions that servicing Bechtel’s or Suez’ profits needs makes water prices unaffordable. Option two is to build in cross-subsidies between wealthier water users and poorer ones. The problem is that there aren’t enough rich water users to provide all the subsidies required. Option three is to subsidize water through the national tax system, but Bolivia is already in perennial hot water with the International Monetary Fund for having high budget deficits.

So it comes down to this, we either abandon the international human rights standard that water is a fundamental right or we subsidize poor countries through aid, not loans, from wealthy ones. Is this patronizing? It is not more patronizing than the lifeline utility rate subsidies that low-income people receive in the US for water, electricity and telephone service. It is just a different country.