Bechtel vs Bolivia: Riley Bechtel’s Response

After receiving more than 100 e-mails from all over the world calling on Bechtel to drop its legal action against Bolivia, Mr. Bechtel directed his public relations spokeswoman, Gail Apps, to respond. The letter contains documentably false and misleading claims about Bechtel’s water price hikes, described in detail in Jim Shultz’s response.

Thank you for your message. We cannot speak unilaterally for the seven different owners of the Aguas del Tunari consortium, but we want to respond to your note with some key facts. We also invite you to visit the Web site of International Water at www.iwltd.com

The Bolivian government turned to Aguas del Tunari two years ago for its ability to effectively manage water and wastewater systems and to deliver capital for development. The need was obvious: Cochabamba’s water systems were inadequate, unhealthful, and poorly run. The local utility had operated at a loss for years and provided ever-declining service. More than 40 percent of the population lacked water and sewage connections. The rates were inequitable — higher-volume users (mostly the well-to-do) were paying the lowest unit costs.

Aguas del Tunari increased the water supply by 30 percent during its first two months of operation and persuaded the government to reverse the rate structure, so that those who used the least water would pay the least per unit. It was the government, however, that set the rates. It was also the government that insisted that those rates be increased to cover not only operating costs, but years of accumulated utility debt as well as certain unnecessary capital projects.

It is important to understand the difference between water rates (the unit rate paid for water) and water bills, which depend on the amount of water actually used. For the poorest people in Cochabamba rates went up little, barely 10 percent. This is in contrast to the figures of 200 or 300 percent that some have claimed. Unfortunately, water bills sometimes went up a lot more than rates. That’s because as Aguas del Tunari improved service, increasing the hours of water service and the pressure at which it was delivered, people used a lot more water. Unfortunately, a campaign to inform residents of the changes and improvements to the service failed to prepare them for the shock of higher bills.

At the time the Cochabamba concession took effect Bolivia faced widespread political turmoil, including a nationwide crackdown on illegal coca production, police salary protests, and a controversial new national water law that had nothing to do with the concession. We are deeply saddened by the civil unrest that gripped much of Bolivia at that time, and the ensuing violence that occurred in Cochabamba.

Ever since the Bolivian government rescinded its concession contract last year, Aguas del Tunari has sought to negotiate a settlement while publicly reserving the option to pursue arbitration should negotiations with the government not be productive.

Aguas del Tunari applied in November 2001 for arbitration at the International Centre for Settlement of Investment Disputes. ICSID has jurisdiction over this dispute according to a bilateral investment treaty between Bolivia and the Netherlands, where International Water has been registered since 1999.

This action is not a lawsuit. Resolving this issue in an orderly way through an independent body such as ICSID preserves both the rule of law and the incentive for governments to honor agreements. Such a resolution would not only be fair to investors but would help maintain the ability of governments such as Bolivia’s to attract foreign investment that can improve the quality of life for their citizens.

Regretably, since Aguas del Tunari’s forced departure last year, Cochabamba returned to allocating inadequate and unclean supplies of water, leaving 4 out of 10 people to fend for themselves and pay water truckers 10 or 20 times as much as water distributed directly to homes in pipes.

Bechtel vs. Bolivia
The Democracy Center’s Letter to Riley Bechtel
Riley Bechtel’s Response
The Democracy Center’s Response To Riley Bechtel
Cochabamba’s Water Bills From Bechtel
Bechtel’s Legal Action Against Bolivia
The Bolivian Water Revolt