Seymour is a senior policy analyst with the Frontier Centre for Public Policy.
Experts who gathered this spring in Istanbul for the World Water Forum were trying to work out solutions for the billion people who struggle every day just to find clean water to drink.
Simply getting fresh water to drink and cook with can take hours for people from developing countries, leaving little time for other needs. Because of the difficulties, disease is endemic.
Two recent South American case studies reveal the difficulties to getting water to people. One was a failure, the other a success but, by looking at both, we can see how well-defined water rights coupled with less political interference can make the difference.
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The Bolivian city of Cochabamba has become a poster child for how not to privatize water. While some will argue that privatization threatens poor people’s access to water, the reality is that, in Cochabamba, both public and private water management have failed spectacularly because of corruption and a lack of secure property rights.
In 1997, 60 percent of Cochabamba’s population was connected to a municipal water supply. The unconnected were mainly in poor suburbs and had to buy water piecemeal at three times the “connected” price.
The city considered issuing a private contract to inject the necessary investment for development of its water infrastructure but political interference undermined a proposal to use a nearby hydro dam as a source of water.
In 1999, the city added a sweetener to entice a consortium of private contractors to develop its water infrastructure: it gave the consortium exclusive rights to use and supply water in the area.
Unfortunately, to recoup its investment meant the consortium had to increase prices by an average of 35 percent.
Furious citizens took to the streets and drove the private consortium out of town. The abrupt price increases seemed illegitimate because the regulatory body had both failed to moderate or explain them.
By April 2000, the private contract was cancelled and privatization was over. The World Bank has since described the Cochabamba project as a “forecasted failure” given these underlying institutional problems.
A decade of public ownership, however, has done no better. Connection rates today are only marginally better than in 1997, and infrastructure investment is as chronic as ever.
Chile, on the other hand, shows what a good framework can mean for people desperate for water.
In 1981, Chile’s water code separated water rights from land ownership and made the rights tradable. There is no political interference in these trades; only a willing buyer and a willing seller are required. The framework has survived different ideological governments because it works.
Selling water to the highest bidder horrifies many people, a sentiment The New York Times recently tapped into when it lamented the lack of available water in Quillagua, a town whose population peaked at 800 in 1940.
The Times said the town’s fortunes had dwindled because its water had been diverted elsewhere. But it failed to appreciate that water is scarce almost everywhere in Chile, and that diverting it from areas of lower to greater need is what a healthy market should do.
Urban connection rates are near universal in Chile, while rural connection, at 72 percent, is high by South American standards.
Because they now must pay the market price like everyone else, thirsty industries that previously hogged water by lobbying for it have economized their use. Low-income households get a special grant.
Chile has allowed private and public water companies to succeed. All 13 regional water companies have gradually been either privatized or had their services contracted out for 30-year concessions.
During that process, public/private comparisons found private companies offer similar prices plus greater infrastructure investment and better infrastructure performance.
Reliable and affordable clean water is an urgent need for a billion people. Although private companies have marginally outperformed public ones in Chile, privatization is a sideshow.
The challenge is creating a marketplace with secure water rights where infrastructure investment is safe and willing buyers and sellers can decide water’s most valuable uses.
