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Bechtel's Water Wars

by Pratap ChatterjeeSpecial to CorpWatch
May 1st, 2003

In November 2001 Bechtel sued the country of Bolivia for $25 million for canceling a contract to run the water system of Cochabamba, the third largest city in the country, after local people took to the streets to protest massive price hikes for water.

The worst clashes occurred in February 2000, when President Hugo Banzer of called out more than 1,000 police to crush demonstrations with tear gas and rubber bullets, leaving one 17 year old boy dead and hundreds injured.

Aguas de Tunari, the local water company which supplies an estimated 500,000 people in the region, was being managed at the time under a newly awarded 40 year contract by International Water Limited, a subsidiary of Bechtel corporation of San Francisco, the construction multinational.

Bechtel got the contract as a result of the World Bank's aggressive pressure campaign on Bolivia to privatize state enterprises. "Bank water officials believe in privatization - the way other people believe in Jesus, Mohammed, Moses, and Buddha," says Jim Schultz, an activist from California who lives in Cochabamba where he runs an organization named the Democracy Center.

Soaring Prices

The price hikes that triggered the water war were driven by a 16 percent guaranteed rate of return negotiated by Bechtel's affiliate and the need to pay off a $30 million debt owed by the previous public water company.

The debt works out to roughly Bechtel's revenues for half a day. "In Bolivia that is the annual cost for hiring 3,000 rural doctors, or 12,000 public school teachers, or hooking up 125,000 families who don't have access to the public water system," says Schultz.

Bechtel says that the price hikes were minimal. "For the poorest people in Cochabamba rates went up little, barely 10 percent," says Gail Apps, a spokeswoman for Riley Bechtel, the chief executive of the company.

But Jim Schultz disagrees. Copies of actual water bills show that in December 1999, before Bechtel's rate hikes took effect, Cochabamba resident Lucio Morales had a monthly water bill of 25 Bolivianos (about $4.16).

Classified "R-2" Morales' household is among the very poorest of the poor, usually with an indoor toilet, no indoor shower and maybe a water tap in the yard. Typically these families survive by selling vegetables or other items in the street and work well below the current minimum wage of $67 per month.

In February, after Bechtel's price hikes took effect, Morales' water bill jumped to 39.80 Bolivianos ($6.63), a jump of 60% not 10% as Bechtel claims. As the bill indicates, there is no meter reading, no increase in water use. This is one of many houses that have no water meter and billed based on a basic rate. This bill would amount to more than 10% of the monthly minimum wage at the time.

Bechtel's Apps says that in many cases prices were higher because service was better. "Unfortunately, water bills sometimes went up a lot more than rates. That's because as Aguas del Tunari improved service, increasing the hours of water service and the pressure at which it was delivered, people used a lot more water."

Shultz rebuts this with the case of German Jaldin, another Cochabamba resident, whose bill in December 1999, before Bechtel's rate hikes took effect, was 82 Bolivianos (about $13.67) in which he used 35 cubic meters of water. Classified "R-3" Jaldin's household is just a notch among the very poorest, meaning that they may have an indoor shower or tap in the kitchen. Typically these are households headed by workers who earn somewhere between $60 to $80 per month.

In January, after Bechtel's price hikes took effect, his water bill jumped to 157.60 Bolivianos ($26.27) for the use of 38 cubic meters of water. This means that while his water use increased by less than 10% his water bill from Bechtel jumped by more than 90%. Jaldin's monthly increase was equal to more than 20% of a monthly minimum wage salary, a typical earning for households with his water rate classification.

Closed Door Proceedings

Bechtel's legal action against Bolivia is currently being heard by the International Centre for the Settlement of Investment Disputes (ICSID), an international tribunal housed at the World Bank in Washington DC that holds all of its meetings in secret.

The company filed the case with ICSID under a bilateral investment treaty between the Netherlands and Bolivia. Although Bechtel is a U.S. corporation, its subsidiary recently established a presence in the Netherlands in order to make use of the treaty.

In August 2002, Earthjustice and the Center for International Environmental Law filed a request to open these proceedings to the public and citizen's groups from Bolivia. Unfortunately the Bechtel Corporation was handed a powerful victory this February when the ICSID announced that it would not allow the public or media to participate in or even witness the proceedings.

Oscar Olivera, a leader of the coalition of Bolivian peasants, workers and others that formed in opposition to Bechtel, said, "Now the World Bank is not only imposing its ideas and programs on us, it is also preventing the people affected from participating in a case that directly affects our lives. This is profoundly undemocratic."

Problems at Home

While Bechtel appears for the moment to have the upper hand in the Bolivian lawsuit, the corporate giant has not been as lucky in its hometown of San Francisco. The Board of Supervisors voted last June to cancel a $45 million program management contract awarded to Bechtel in 2000 by the city government to oversee the reconstruction of the Hetch Hetchy public water system.

The vote took place soon after a four month investigation by the San Francisco Bay Guardian, a local alternative weekly, showed that out of nearly $8 million paid out to Bechtel for its first year of work, at least $5 million was a complete and total waste of money.

"In some cases the waste is astonishing: for instance, Bechtel took a city database of projects, resorted the information, transformed the data into a different format - and sold it back to the city for nearly $500,000," wrote reporter Savannah Blackwell.

Other examples of Bechtel's over-billing included tens of thousands of dollars' worth of personal expenses for Bechtel employees including laundry service, numerous meals at fancy restaurants, a $54 tab at Happy Donuts, and in one case, an umbrella and a dental pick. The city is paying far more for Bechtel staffers than it pays own employees who receive no such perks, making Bechtel extremely unpopular in its own hometown.

Pratap Chatterjee is an investigative reporter based in Berkeley California.