Multinational Monitor

JUNE 2000
VOL 21 No. 6


The World Bank's Revolving Door: Share Program Exchanges World Bank and Corporate Employees
by Charlie Cray

Warning: World Bank Policies Destroy Forests. Internal Report Documents Bank Contribution to Deforestation
by Korinna Horta

Death by Overwork: Corporate Pressure on Employees Takes a Fatal Toll in Japan
by Darius Mehri


The Fight for Water and Democracy
an interview with
Oscar Olivera

Damming Laos, Damning the Poor
an interview with Witoon Permpongsacharoen

Unhealthy Policies from the World Bank
an interview with Dr. Vineeta Gupta


Behind the Lines

Close Down the Masters of Reinvention: The Case for a World Bank Shut Down

The Front
Radiation: Children at Risk

The Lawrence Summers Memorial Award

Names In the News


The Fight for Water and Democracy

An Interview with Oscar Olivera

Oscar R. Olivera, 45, is the executive secretary of the Federation of Factory Workers in Cochabamba, Bolivia. He is also one of the spokespersons for the Coordinator for the Defense of Water and Life -- a coalition of workers, environmentalists, artisans, peasants, market vendors, neighborhood organizations, local governments and others struggling against the privatization of Bolivia's water system.

Multinational Monitor: How did the privatization of state-owned industries in Bolivia occur?

Oscar Olivera: In 1985, President Victor Pas Estensorro declared a famous edict known as 21060. This established profound changes in the national economy, and essentially began the process of structural adjustment. The economic objective was to put a stop to inflation -- which it did -- but at the same time 21060 was also a political decree to destroy the unions and privatize state-owned companies.

Until 1985, Bolivia had one of the strongest and most united union movements in Latin America, rooted in the extensive state structure. In 1985, the state provided at least 60 percent of the country's employment. We had many strong, state-owned industries, including petroleum, many factories, telecommunications, railroads and airlines.

Four mines produced 25 percent of the state's total revenues. So the economy was very dependent upon the mining sector. For this reason, the mining union was very strong and politically influential. The government's strategy included offering repeated bonuses to miners to voluntarily leave their jobs, and then privatizing the mines.

In September of 1986, the miners' union organized a famous March for Life, which began in the high plateau and went for 200 kilometers, ending in the capital, La Paz. The march involved thousands of miners, their families and other sectors which supported them, and was a protest against the destruction of a protective public sector which recognized a strong union.

The march was stopped by soldiers. Without a single shot being fired, the people demobilized. In reality this was a kind of abdication. The miners gave in to the state, and for us that is when a new era began in Bolivia. They began to destroy the union movement and began a new period of political repression and economic changes.

Today, not a single unionized worker remains in the mines.

We don't know where the money from the mines went after the state sold them. For example, there was an immense mine for tin and other minerals. According to one congresswoman from that area, it had a value of $57 million. The government sold it to a British multinational for at most $19 million. The government has done this kind of thing with everything.

It usually turns out that there is someone in the government, some politician or relative, who turns out to be a partner in the company that takes over the privatized enterprise. For example, the father-in-law of the vice president is a partner in the company which administers the airports. The ex-ambassador to the European Community, Alvaro Moscoso, is one of the top managers in the company that manages the privatized pension funds.

We reached a situation where the state has no more businesses, not even the petroleum company, which contributed more than $400 million annually. Now, after the privatization, they collect only about $80 million in taxes.

The privatization hasn't benefited the country much. There is little investment. There is no more employment. There are more layoffs. Working conditions have gotten worse. Services are more and more expensive.

As a result, now that the state no longer has money for public services, what it wants to do is privatize the public service sector.

MM: How did the effort to privatize the water services in Cochabamba come about?

Olivera: In Cochabamba, the third largest city in the country, we have had serious problems with water for 50 years. Not just for household consumption, but also for agricultural use. We produce a lot of vegetables in this region.

In June 1999, the World Bank issued a report on Bolivia in which it discussed the water situation in Cochabamba. The Bank recommended that there be "no public subsidies" to hold down water price hikes.

This was the perspective of people living in Washington, for whom a $30 increase in the price of water is nothing. But for many Bolivian families who earn as little as $100 per month, the resulting increases were catastrophic.

The government followed the advice of the World Bank, which recommended that the city privatize its water system.

MM: How did the government carry out the recommendations?

Olivera: In October of 1999, the national parliament promulgated law number 2029, which is the law of basic services -- drinking water and sanitation.

This law eliminated any guarantee of distribution of water to rural areas, which has happened for so long that it's considered a custom.

The people look at water as something very sacred. Water is a right, not something to be sold. It is also tied to traditional beliefs for rural people, since the time of the Incas.

But this law prohibited traditional uses of water.

It also forbid the campesinos from constructing a collection tank to collect water from the rain. The law required them to ask for permission from the superintendent of water to collect water.

The superintendent gave a concession to the private companies for 40 years, while giving only 5 years of permission to the campesinos.

The law also eliminated the right of the townships to determine where water wells could be dug and eliminated their ability to collect water taxes.

It also dollarized the water payments. The people didn't have to pay in dollars, but if the Boliviano (Bolivian currency) dropped, they still have to pay the equivalent of a price set in U.S. dollars.

In Cochabamba, only half the population is connected to the central water system. The other half goes to cooperative water houses. Each barrio has their own cooperative. In other areas where the people don't have the money to build a well, they buy cisterns. The law says that within the area of concession, the private companies are the only ones who can distribute water. All of the autonomous water systems are handed over to them without paying anything to the people who invested in having their own system. This went so far as the wells in people's houses. If I had a well in my house, then I would have to pay the business to use it, or they could cap it.

MM: What companies did the government contract with to operate and manage the water services?

Olivera: The government signed a contract with Aguas de Tunari in September, one month before the law was passed. Of course the company didn't want to start business until the law was issued. The law came out in October, and on the first of November the company began operations.

The contract is even worse than the law. There's a clause in the contract that says that the contact itself supersedes any other contract, law or decree. The superintendent of energy signed the contract on behalf of the government. The superintendent is nominated by the congress for a 10 year term.

The companies involved in the consortium -- Aguas de Tunari -- are International Water, Bengoa of Spain, and four or five Bolivian companies. International Water, which is associated with the Bechtel Corporation, has a majority interest. Because they were registered in the Caymen Islands, to us Aguas de Tunari was a kind of phantom corporation.

The contract also said that at the end of each year, the rates would go up as measured against the consumer price index in the United States.

The contract guaranteed the company an average 16 percent rate of return per year on its investment, no matter how management performs.

Because the company has exclusive rights to water distribution, they announced the confiscation of all the water networks.

As a result, many people could only get access to the water for about two hours a day. There was no water pressure. The people had to use buckets to take a shower. In some cases, the cost of water went up as much as 400 percent. A pensioneer, a teacher who made $80 a month, saw his bill go from $5 to $25 a month. As a result, many people refused to pay.

Curiously, another thing happened, according to the company. The people all of a sudden began to consume more water. That's what the water bills said, but the people knew they were using the same amount as always. There were examples where the bills said that water usage went from 5 cubic meters to 20 or 25 cubic meters per person in one month. It wasn't possible. So not only did the price per cubic meter go up, but also the supposed use. It was very hard for people; they didn't have the money.

MM: How did the movement against the water privatization get started?

Olivera: During this time, we were in contact with the campesinos, with the people from the poorer barrios and the people within the city. These groups formed the Coordinator. All the unions joined.

Even the rich owners of the condominiums in the city of Cochabamba joined. In February of 1999, they paid about $50 in water costs for the whole building. Six months later, the costs went up to $120 dollars. After the company took over, the condominium had to pay $500 a month. So they too said they would not pay.

All of the people were united against the water company.

On December 28, we had the first mass mobilization. Many people said it wasn't a good time for it -- the end of the year during the holidays -- but we mobilized 15,000 or 20,000 people in the central plaza of Cochabamba.

The strategy of the struggle was to get the government to change the law and revise the water contract. We announced a general strike and blockade of the roads, which lasted for four days. All transportation came to a halt.

In response, the government used tear gas for the first time in 18 years. But the people stayed strong, and maintained the blockade.

Eventually, the government signed an agreement with the Coordinator. This was January 14. In the agreement they promised to revise the law and the contract. Nevertheless, they also said they would maintain the price hikes.

But the people said they would not pay. So for two months no one paid their water bills. And when they came to break the blockade, the people reinforced it with logs, so they didn't break it.

MM: Did the government follow through on its commitment?

Olivera: We knew we could not wait 45 days to see if they would live up to the agreement. So in early February, when it appeared that the promises would not be honored, we mobilized ourselves, so that the government could see that we were watching. The Coordinator called for a peaceful seizure of the plaza. It was a very symbolic event, which demonstrated our unity. But we also came with flowers. People came from the four directions. There were bands playing. It was a party. This was February 4.

The government and the elites were afraid. They were afraid the poor Indians were going to loot the city. So the government came and said they were not going to permit the plaza occupation.

The people decided they would leave. There were 30,000 people. We left in all four directions, in a well-organized manner.

We hadn't gone more than a couple of hundred meters when there were gunshots. A thousand police appeared, some with dogs. Some of the police had come from La Paz and other places to help the police of Cochabamba. The people fought for two days. It was practically a war -- 175 protesters were injured.

After it all, though, there was another agreement reached with the government to revise the law and the contract, and this time to roll back the water rates and freeze them until November.

In the course of those days, we realized during the review of the contract what I've told you about this company -- that it was a kind of front company based in the Cayman Island, with very little money.

So the people demanded that the government break the contract and return the water system to public hands. And we put into place a new law with a lot of new provisions. We eliminated the dollarization. We set up provisions to honor the people's traditional water rights. We gave participation to the municipalities. And the people's own systems were allowed to co-exist. It was an important advance in the law. But the contract remained intact.

So on March 26 we conducted a popular consultation in the Cochabamba area served by the water company. We asked the people what they wanted. Did they want the contract? Did they want the law to continue privatizing the water? Did they want increases in the water bills? Between 94 and 98 percent of the people said no to all of these. Fifty thousand people voted. It could have been more, but we didn't have the resources to make arrangements for more.

On April 4, once again an indefinite road blockade began. It was a similar action to the one before. But this time we were better prepared. The people prepared for it like for a war. They prepared molotov cocktails, barbed wire fences, things to puncture tires, masks, everything.

MM: How did the government respond?

Olivera: When April 4 came, the government didn't react. There were no police, but things were a bit tense.

Then something very serious for the government happened.

The businessmen from the Civil Committee and the Coordinator didn't have a common position, but we did have a pact. They held a meeting to see if everyone from Cochabamba had one position, in contrast to the government. Everyone was there. Businessmen, congresspeople, campesinos, everyone.

The government came and locked everyone up in the building where we were meeting for four hours.

This really energized the people even more, including the businesspeople.

People began to fight in the streets with the police. This was Thursday night. On Friday, the number of people was even larger.

The state governor, together with some of the congressional representatives, decided they wanted to break the contract. They said, "We have decided to present to the government a plan to break the contract, because we don't want any more blood." This was communicated to the bishop, who announced this in the plaza, where the people erupted into a huge party. There were 30,000 people there, everyone dancing.

Afterwards there was a big mass. But then the word came from the national government in La Paz that they would not break the contract and, moreover, that they were announcing martial law. Soldiers started appearing in the city.

On Saturday, things got worse. Although more people appeared in the streets, there was much violence. One 17-year-old was shot dead.

On Sunday the violence got even worse. The whole city was fighting. Orders were given to the military commander to shoot the people, and he refused.

On Sunday the superintendent appeared on national television and announced that "we have talked with the company and they have decided voluntarily to leave the country."

But the government also said, "We are going to go to Cochabamba, but we are not going to negotiate with the Coordinator because it is an illegal organization. Besides that, they are financed by drug traffickers."

This really got the people angry. The little old ladies who were blockading the streets were standing there scratching their heads, saying, "What us, drug dealers?" With the kid who died and the others who got shot, this really made people mad.

By Monday, there were more than 80,000 people in the streets. And the people said, if they don't change that law, we will take charge of the government.

But while the government was saying all of this in La Paz, a delegation arrived and met with us in Cochabamba. Although there were some in the government who said they didn't care how many people died in the streets, and while the opposition party may have wanted some deaths in the streets to discredit the government, we were able to reach an agreement with the government delegation. We drafted a memo for the government to break the contract, and faxed it to La Paz. After much discussion they faxed it back, signed. This was Monday.

MM: And did the government follow through this time?

Olivera: The most interesting thing was that the consortium had already disappeared. None of them were there. They had taken out all their computers, everything. The memo that the government ultimately signed said that, given that the company had abandoned the country, they were obliged to rescind the contract. This was Monday the 10th.

On Tuesday at four in the afternoon, the Congress modified the law, with all the changes we had outlined. So that same day, after eight days, we lifted the blockade. And on Wednesday, the control of the water returned to the town, with a strong presence of the Coordinator.

Out of all this, there were basically three lessons.

First, after much time, it's the common people who brought justice.

Second, I think that all the sense of individualism, the isolation and the fear of the unemployed disappeared under the spirit of solidarity. This is what came out of the self-mobilization of the people.

During the worst fighting, there were people who provided water, who provided food, who provided transportation, communication, all the elements of a well-coordinated resistance. People were afraid of the bullets, but not anymore.

The third thing is we want democracy. We want a government that takes our opinion seriously. We want a government that doesn't just take into account the interests of international financiers and their neoliberal agenda.

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