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Alternatives to Privatisation:
The Power of Participation
Info Brief, March 2003, Corporate Europe Observatory (CEO).
While many of the world’s public-owned water utilities operate effectively, others have become bureaucratic and out touch with the populations which they are supposed to serve. Neoliberal elites use this as an argument for privatisation and other forms of corporate-controlled water management, while ignoring that there are dynamic, alternative models of publicly-owned water supply. Participatory and co-operative models deliver impressive results by ensuring that water utilities are accountable and responsive to the needs of the population.
Porto Alegre: Participatory Water Management
The most well-known example of participatory water management is probably the Departamento Municipal do Agua e Esgoto (DMAE), the water company of Porto Alegre which is the capital of the Rio Grande do Sul province in Southern Brazil. Water has been under public control in Porto Alegre since the Workers Party gained power in the city 15 years ago (Partido dos Trabalhadores, PT). DMAE is publicly owned, but financially independent from the state and fully self-financed through the water bills paid by the 1.4 million inhabitants. It is a not-for-profit company that re-invests profits into improving the water supply.
DMAE allows a far-reaching level of public participation and democratic control over its operations and investments. Not only does a council of local civil society representatives control the daily work of the company, DMAE’s operations and investment decisions are subject to a participatory budget process. Like many other areas of public life in Porto Alegre and other parts of the Rio Grande do Sul, community members directly decide the budget priorities of their water company. Through a process of public meetings, every citizen can have a say in which new investments should be made first.
This participatory model is one of the reasons that poor communities in Porto Alegre have gained access to clean water: their needs are prioritised because they participate directly in deciding about new projects. Some 99.5% of the residents of Porto Alegre have access to clean water, far more than anywhere else in Brazil. There are many other advantages to this system, such as awareness-raising from being involved in decision-making, and a collective sense of ownership which allows the possibility for occasional price increases structural changes which may be necessary for new projects. DMAE’s water price is one of the lowest in Brazil, but at the same time environmental information campaigns and the progressive price structure has made overall consumption go down. Water use above a basic level - such as for swimming pools - is relatively expensive.
Other Brazilian Examples
A comparable participatory model is in place in the rest of Rio Grande do Sul, where Companhia Riograndese do Saneamento (CORSAN) supplies around 6.5 million people. After the Worker’s Party won the state elections in 1998, CORSAN was re-organised to give participatory budget assemblies a strong role in the company. Partly due to the involvement of around 80 ‘committees of users citizens’, CORSAN is now considered one of the top-five most effective water companies in Brazil with an excellent record in expanding access to water. The future of CORSAN however currently looks uncertain after the state election in October 2002, where the PT was defeated by the centrist PMDB.
Participatory water management in Brazil is by no means limited to the state of Rio Grande do Sul. Take for instance the northern city of Recife, where the community successfully campaigned against privatisation of the State Water Company, which was a very badly functioning public-owned company. Following an extensive process of popular consultations, the Recife Municipal Council of Water and Sanitation was set up to improve water delivery. The results of the restructured company have improved dramatically over the course of only a few years, no doubt due to the active involvement of community representatives and NGOs.
Santa Cruz: Consumers Co-operative
Consumer co-operatives have proved an excellent way to deliver clean water in many smaller communities around the world, both in rural communities and in urban slum areas where the state fails to supply basic services. The experience in the Bolivian city of Santa Cruz proves that co-operative models can also be very successful in major urban centres. The city’s water utility has been run by a consumer co-operative since 1979 and is regarded as one of the best-managed water utilities in Latin America. All customers are members of the Cooperativa de Servicios Publicos Santa Cruz Ltda (SAGUAPAC) and have the right to vote in the co-operative’s General Delegate Assembly. The assembly elects part of the utility’s administrative board and the supervisory board. SAGUAPAC is financially independent and ensures that all costs are recovered from the water users (full-cost recovery). As part of its socially responsible approach the co-operative charges a lower price for the first 15 cubic meters of water consumed per household each month and customers failing to pay are not disconnected.
After studying the Santa Cruz experience, even the World Bank has admitted "that cooperative solutions can be superior to either public or private approaches to utility management." The Bank’s Operations Evaluation Department compared the three major Bolivian cities La Paz, Cochabamba and Santa Cruz, and concluded that the Santa Cruz model has delivered the best results. Among the co-operative’s achievements is an increase in household connections from 70 to 94% between 1988 and 1999. The study praises Santa Cruz for its "efficient and transparent administration that appears to have virtually eliminated corruption." The Operations Evaluation Department also concludes that "the Bolivia experience confirms that privatisation is not a panacea," thereby contradicting the pro-privatisation orthodoxy within the Bank.
Dhaka: Trade Union Co-operative
A different co-operative model has proven successful in Dhaka, the capital of Bangladesh with over 10 million inhabitants. In 1997 the proposed privatisation of the water supply in a part of Dhaka (imposed by the World Bank) was met with strong trade union opposition. In response, the Dhaka Water Supply and Sewerage Authority (DWASA) decided to contract out one zone to the DWASA Employees Union, while another zone was given to a private water company, also on a trial basis of one year. After this first year’s experiment, the union co-operative’s results were so much better that DWASA handed over the private sector’s contract to the union. The union co-operative’s achievements included a considerable expansion of the number of people with access to running water as well as a sizable reduction in water losses.
Cochabamba: Resistance and Obstacles
These examples show that participatory and co-operative models are promising alternatives to both privatisation and bureaucratic state-run water supply. As ‘participation’ is a much-abused concept, popular also within the World Bank which routinely uses it to bypass local opposition to its projects, it should be stressed that true participation involves far-reaching democratisation of decision-making. Genuine participation clearly can boost the responsiveness of the water utility and achieve remarkable results in terms of efficiency, sustainability and social justice. For communities wanting to pursue alternative models, there are however often many obstacles ahead.
In the spring of 2000, the population of Cochabamba, Bolivia, mobilised against the disastrous water management of the Bechtel corporation which had raised prices dramatically after privatisation. After forcing out the US company, community groups organised in La Coordinadora del Agua are now exploring how to build a fairer and more democratic system of water supply. La Coordinadora has rewritten the statutes of the local water company SEMAPA to include direct popular participation in the Board of Directors. In May 2002 three out seven members were elected by the inhabitants of the southern, central and northern areas of the city.
Meanwhile, the serious debt inherited from the previous owners makes the SEMAPA dependent on international financial institutions such as the Inter-American Development Bank (IADB). Like the World Bank, the IADB is pro-privatisation and instinctively hostile to the kind of changes envisaged by La Coordinadora. Also the local and national economic elite are throwing up many obstacles along the way. La Coordinadora has the support of a large majority of the population in Cochabamba, but fears that many will lose their patience if improvements in access to drinking water are not achieved in the short-term.
From Neo-liberalism to Water Justice
Communities pursuing their own democratic and people-centred models of water supply should obviously be supported and nurtured. To really allow these crucial experiments to flourish around the world, not only the policies of international financial institutions must change. Nothing less than a fundamental policy shift will do, beginning with debt cancellation to end the disastrous outflow of scarce financial means from the South. The debt crisis is arguably the single biggest obstacle to providing clean water to the world’s poorest, but the global trading system is another major cause of the impoverishment of Southern countries and communities. As long as Northern governments refuse to discuss bold moves towards a fairer global economic system, their self-proclaimed commitment to improving access to clean water for the world’s poorest remains hollow and hypocritical.
1: "Water in Porto Alegre, Brazil - accountable, effective, sustainable and democratic", Public Services International Research Unit, August 2002.
2: See for instance “Cities for People”, Daniel Chavez, Red Pepper, June 1999. http://www.redpepper.org.uk/intarch/xcities.html
3: "Water: public management success in Rio Grande do Sul - Brazil", by Dieter Wartchow, Companhia Riograndense do Saneamento (CORSAN).
4: In 2001, assemblies deciding on the priorities for the use of public resources were attended by 378,340 people in all municipalities of the state. Ibid.
5: The PT still controls the city of Porto Alegre, but lost the elections for the provincial government of Rio Grande do Sul. The defeat undoubtedly reflects frustrated expectations, after the PT state government had created expectations of major changes, while having to govern within the narrow limits imposed by the deep economical crisis in Brazil.
6: Sewage was not being treated, in summer months there was only two days worth of water per month, and water supply was regularly interrupted for up to 20 hours on a regular basis. Public Services International Press Statement, 28th August 2002.
7: The Council is controlled by a board which consists of 50% community representatives, 25% civil society representatives and 25% municipal officials. Ibid.
8: In areas without access to public services, communities in many cases have developed their own projects to ensure access to drinking water. “Going the cooperative way”, The Courier, February 2001.
9: “Public Sector Alternatives To Water Supply And Sewerage Privatisation: Case Studies”, PSIRU, August 1999.
10: "Bolivia Water Management: A Tale of Three Cities", Precis, Number 222, Spring 2002 - World Bank Operations Evaluation Department.
11: See: “The World Bank’s role and policy in water management”, in “Water Privatisation – Trans-National Corporations and the Re-regulation of the Water Industry”, Matthias Finger and Jeremy Allouche, Spon Press, London 2002.
12: “International Solidarity Strengthens the Struggle”, by Sabrina Souza and Tom Kruse.
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