Antonio Castillo (adapted from Ojarasca, December 2002)

Mexican President Fox is following in the footsteps of those who ruled before him.  Like former Presidents Salinas and Zedillo, Fox is committed to a privatization policy which focuses on privatizing the public supply of potable water and sanitation.  Once public services are privatized, this type of policy often extends to the control  and management of the tributaries and aquifers.  What's happening in Mexico mirrors what's occurring on a global scale.  So, who's driving these structural changes?  It's the multilateral credit agencies such as the World Bank, the Inter-American Development Bank, and the Japanese Bank (JBIC).

President Fox’s National Water Plan and the Program for the Modernization of Water Utilities ((Programa para la Modernizacion de Organismos Operadores de Agua – PROMAGA) focuses on the participation of the private sector in the delivery of water services through contracts – mixed businesses (public/private partnerships) or titles for concession.  Fox's water agenda complements the National Development Plan (2001-2006), which utilizes international finance and foreign investment as the motors of change.  The government is obliged to deepen deregulation and administrative simplification in order to secure foreign investment. 

Essentially, the plan works like this: the state and municipal authorities, together with the water utility operators, sign an agreement with the National Water Commission (CNA) and Banobras (Mexico's national development bank) committing themselves to modify the legal framework to ensure the participation of the private sector.  In addition, they raise consumer water rates to include the costs of operation, management and recuperation of investment.  When these requirements are met, support credits are available from the Infrastructure Investment Fund (el Fondo de Inversion en Infraestructura -- Finfra), from Banobras and from the resources of the National Water Commission’s life annuity fund, sometimes amounting to as much as 75 percent of needed investments.

In 1992, former President Salinas changed the Mexican Constitution to permit the concession to individuals and foreign firms for the use and exploitation of natural resources.  Furthermore, the National Water Law also considers private participation to be in the public interest: the National Water Commission (CNA) can grant concessions for 5 to 50 years to operate the infrastructure constructed by the government or to construct it, and in both cases to grant loans for water services .

On the heels of those changes, former President Zedillo then proposed the decentralization of functions and resources in the National Development Plan of 1995-2000.  The State Water Commissions then assumed obligation of reforming state water laws to conform with the generic proposals of the water laws proposed by the National Water Commission (CNA).  By September 2000, the new water laws had been promoted in 22 states backed by the Municipal Boards of Potable Water and their water utilities with a water vision for 2025.  This is how the private sector was slipped into water services.

What is intended with these changes?

(I would like to put this differently – France and the UK are two different models – and where privatization has taken off, most other Europeans countries have been reluctant in terms of water….) The water privatization model began in France and was implemented in the beginning of the 1980s in Britain (and other developed countries). The European private water companies and their capital migrated to various countries like Chile, where Anglian Water, through their local subsidiaries ESVAL and ESSEL, operate with the resources of the development banks and the multilaterals (World Bank and Inter-American Development Bank).  Thus the monies of the government and the national and international private sector work together to deregulate the national laws.  The British estimate the global market in water services as amounting to 440 billion (British pounds) for the years 1995 to 2005 (a market the French and German multinationals dominate….)

The 1994 General Agreement on Trade in Services (GATS) of the World Trade Organization (WTO) estimated the lucrative world market in services as $3.5 trillion in health, $2 trillion in education, and $1 trillion in water services.  Currently 15 percent of the population (in developed countries) consumes 56% of the total water available while the poorest 40 percent of the world population consumes 11 percent.  In other words, 800 million people have access to potable water, 1.1 billion lack water services, and 2 billion people suffer from water scarcity.  This lack of water services and scarcity of water has been converted into a lucrative world business in the less developed and transitional countries.  This is the reason that the World Bank loans $1.3 billion for water services in Latin America and the Caribbean using the formula of World Bank + government + private sector + regulatory reform (all to please a few owners of the multinational corporations….).

What awaits us

During a 1999 meeting in Antigua, Guatemala, the Latin American Economic System (SELA), the World Bank, the Spanish agency AECI (this is Agencia Española de Cooperación Internacional – the Spanish equal of USAID) and 16 countries, including Mexico, agreed to privatization and reform of the regulatory framework in the following sectors: highway infrastructure, airports, electricity, telecommunications, and potable water services.  Any bilateral accord can be applied to all member countries of the WTO under Most Favorable Nation status.  Any countries’ social, labor and environmental regulations can be viewed as obstacles to free trade.

In 2000, the U.S corporation Bechtel sued Bolivia for $25 million for the loss of its water concession due to a large popular upraising that threw them out.  The company Metalclad sued the Mexican government for suspending permission to dump waste in San Luis Potosi.  President Fox’s negotiations to place services in the free market: health, education, water, environmental services and others, in the Free Trade Area for the Americas (FTAA) and in the General Agreement on Trade in Services (GATS) of the WTO will likely subject Mexico to more such lawsuits as local governments attempt to maintain environmental, consumer, health, safety and labor protections. (why…..). (this whole paragraph seems really random and the sentences don't seem related to one another - can we cut this?)

In Mexico, from 1990 to 2000, 24 states reformed their state laws on potable water.    Three others (others or 3 of the 24?) changed the laws again to remove the reforms.  In Acapulco, the new laws and regulations resulted in the consequent(??) increase in water rates and six cases of private sector participation. 

In Cancun, an aqueduct was constructed by an Argentine company Desarrollos Hidraulicos and Aguakan del Grupo Mexicano de Desarrollo (GMD) and the state government through the Association in Participation.  In 1993, GMD leased the potable water concession for 30 years.  GMD also has the tourist development at Isla Mujeres and administers the bidding for the highway at Venta de Carpio.  In 1999, GMD sold 49.9% of their participation to Azurix.  Enron, the parent company, held 50% of Azurix.  Enron also acquired 49% of Holdings Industrias de Agua that provides the water service for Mexico City.  Since 1999, four companies -- French, British, Canadian and U.S. – have worked in the CNA in Mexico City dividing and exchanging pipe networks.  These same companies are negotiating with the current government and deputies and now there are four new proposed water laws for Mexico City calling for full private sector participation.

In July 2002, the water subsidiary of Suez, known as Ondeo, in a 50-50 joint venture with Peñoles, took over all the contracts of Enron/Azurix in Mexico.  This included the potable water concession in Cancun, one quarter of the network in Mexico City, and three smaller contracts in Leon, Torreon, and Matamoros.  The French corporation Suez, one of the largest water multinationals in the world (number 99 on the Global Fortune 500) now claims to serve 7.5 million people in Mexico (and is thereby the largest private water operator in Mexico…..).