Chile has long been a victim of privatization.   The Chilean government began privatizing the nation’s power and telecommunications as early as the mid-1980s – even before the Thatcher regime of privatizations in the U.K. Water and sanitation were the only public services which remained under state ownership into the 1990s.  Chile has been one of the most privatization-friendly country in Latin America, willingly privatizing the remainder of its water sector.  However with the new center-left president, Michelle Bachelet, elected in January 2006, there may be a shift in the neo-liberal policies of corporate privatization, that have governed Chile and allowed the distribution of its most precious resource to be governed by corporations for private profit.

The privatization of Chile's largest water companies began in late 1998, a process prompted by the rising demand for sewage treatment, for which the government claimed to lack funding. Three out of the five privatized utilities were awarded to U.K. water corporations, while French and Spanish investors won the remaining two. Within three years, private water companies were servicing more than three-quarters of Chilean household.  In Chile’s largest urban centers such as Santiago, Valparaiso, and Concepción, private water companies cover nearly 100 percent of the service.

The first wave of water privatization during the late-1990s was carried out using the English-style, full-asset sale model, wherein private corporations were granted ownership of the resource through perpetuity. In 2000, however, under pressure from opponents of privatization, including left-wing members of the government, Chile agreed to review the five privatizations that had occurred since 1998 to assess the need for modifications to the privatization model.  As a result, the government decided to in the future employ management concession contracts instead of the privatization of assets.

Water rates have been driven higher and higher since the privatizations. Officially, the rate hikes since 1998 were 20 percent on average.  However, the Chilean Organization of Consumers and Users (ODECU), a public interest organization in Chile’s Sixth Region, reviewed 15,000 water bills and found that in actuality the increases were by at least 100 percent and even reached 200 percent in some cases.

The millions of poor and working class Chileans have found that water rate hikes for private profit are oppressive and unsustainable. People cannot afford the new price placed on water. In April 2001, residents of poor neighborhoods in Santiago demonstrated outside the presidential palace to protest the high rates.  One hundred and twenty families in the city of Rancagua were left without water when Libertador Sanitation Services, a RWE-Thames Water subsidiary, shut off the water, claiming non-payment.  Meanwhile, employment in private water companies was slashed by more than 30 percent from public company levels.  

Total required investment in the Chilean water sector in the next 15 years is estimated to be between three and four billion dollars, which will cover major water supply and sanitation infrastructure projects, river management and cleansing, irrigation, and coastal water pollution control.  The World Bank’s 2000 - 2006 lending plan to Chile includes one or two structural adjustment loans totaling from $250 to $350 million, pushing additional water privatization.
While the country desperately needs substantial capital investment, privatization is not the answer.  As civil societies prepare to contend with staggering water rates, as well as a lack of community participation in controlling the services, privateers will continue to face vehement resistance from a fed-up and organized public.

Useful resources

Protocol of Santiago in English or Spanish.