March 15, 2005

Bechtel Perspective on the Aguas Del Tunari Water Concession in Cochabamba, Bolivia

Below are some of the most commonly misrepresented and underreported aspects of the Cochabamba water concession, which was terminated in April 2000.
For a more detailed account of the Bechtel perspective, please access the Fact Sheet.

• The Bolivian government turned to the private sector in the late 1990s to operate the city's water and wastewater system because the local utility had rendered it a shambles. The utility's financial losses had led to mounting debts and declining service. Service was unavailable to 40 percent of the city's population. What water came out of the tap wasn't healthy–and typically wasn’t available for much of the day.
• Most of those without connections resorted to buying unhealthful water from the operators of tanker-trucks at exorbitant rates–several times higher than what they'd pay if they could hook up to the system.
• Residents who had connections suffered an inequitable rate system. Low-volume, poorer users paid more per unit than high-volume, wealthier users. High-volume users had little incentive to conserve scarce water resources.
• Aguas del Tunari began operating the city's water and wastewater system November 1, 1999. The consortium did not buy and did not own Cochabamba's water utility or water resources.
• The government raised water rates in Cochabamba by an average of 35 percent, effective in January 2000. Half the rate increase was necessitated by such government requirements as paying down more than $30 million in debt accumulated by the public utility that had previously operated the system so poorly. Rate increases were also needed to finance proper maintenance and expansion of the water system. Even these rates were comparable to those in other major Bolivian cities.
• To minimize the impact on the poor and improve efficiency, the consortium had convinced the government to adopt a rate structure that had most of the increase fell to larger, wealthier users.
• Aguas del Tunari only charged for water provided through the network it operated. It did not charge for water from private or cooperative wells. It did not lease or own the aquifer. The contract was for potable water supply and sewage within urban Cochabamba–not for agricultural areas.
• Aguas del Tunari managed to increase the availability of water by 30 percent in its short time managing the system. For billings in the month of January (2000), increased water usage amplified for many customers the effect of higher rates.
• The higher rates didn’t last long. Responding to public criticism, the government rolled back rates in February. Customers who had paid the higher rates were refunded the difference.
• Subsequent unrest in Cochabamba was sparked by multiple causes, including unrelated national groundwater legislation that left even citizens outside the service area believing incorrectly that their water resources might be expropriated by a concessionaire. The unrest peaked in April 2000, two months after rates had been rolled back to preconcession levels.
• In April, the Bolivian government rescinded its contract with Aguas del Tunari. For months afterward it was unwilling or unable to engage Aguas del Tunari in substantive discussions about resolving their contract dispute.
• Aguas del Tunari pursued arbitration through the International Centre for Settlement of Investment Disputes (ICSID) to seek compensation for the Bolivian government's having illegally terminated its contract and expropriating the concession.
• In January 2006, the international shareholders of Aguas del Tunari reached a satisfactory settlement with the Bolivian government.

 
*Bechtel owns 50 percent of International Water, and International Water owns 55 percent of Aguas del Tunari; hence Bechtel's 27.5 percent interest in Aguas del Tunari.

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