Q and A
Bob Carty, CBC Radio | Feb. 4, 2003

Around the world, private companies are taking over public water utilities. In a lot of places it's happened without much public scrutiny. But it did come to the attention of the International Consortium of Investigative Journalists (ICIJ). The group spent a year probing the trend towards water privatization.

CBC's Bob Carty, who was part of the study, answers questions about what the ICIJ found – how water privatization has worked and how it has failed.

Listen to the interview (Runs 16:59)

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What is the International Consortium of Investigative Journalists?

It is made up of about 80 journalists from about 40 countries. It was started about five years ago by the Center for Public Integrity.

The group is based on the idea that everything is global these days – crime, war, the environment, the economy. In a globalized world, you can't just sit inside one country and try to touch one part of the elephant. To get the true picture of the elephant you have to do investigative work globally.

That's what we do with the water project. We had seen some indication of a massive takeover of public water utilities by private corporations so we launched a one-year project in nine countries. CBC Radio decided to join the effort by mounting a companion radio series.

Vivendi Water's headquaters in Paris are across the street from a Jaguar car dealership and just down the street from the Arc de Triomphe

How big of a phenomenon is the move to privatize water?

In 1990, or 12 years ago, there were private operations in the drinking water field in 12 countries. They are now in 56 countries. If you throw in waste water services, sanitation as well as drinking water, they're in more than 100 countries now. That's a tremendous expansion in just 12 years.

If there was a McDonald's sign over this industry, it would read "300 million served." That's the number of people who get their water from private utilities.

The companies have been quite successful in promoting themselves as the providers of water that is cheaper and more efficient. That's how they sold themselves around the world.

What that means is that in places like Africa, Asia, Latin America, you were formerly paying your water bill to a public utility that was controlled by elected politicians. When it goes private, you're paying it to a private company. There's less transparency, less accountability, and part of the profits each time you flush the toilet or open the tap are going off to places, most likely Britain and France.

Is this expansion just in developing countries?

No, it's also happening in North America. Actually, North America is a prime target, the crown jewel for the water industry. Right now, in Canada and the United States, only five per cent of the water market is private, most is public. But we have seen major contracts in places like Atlanta, Indianapolis, Puerto Rico and, here in Canada, in Moncton, Halifax and Hamilton.

When you think about big business expanding around the world, you think of much sexier industries such as high-tech, you don't think about water. Why is water so attractive as a business?

Ever play Monopoly? You know the strategy – everybody wants to get Boardwalk. But there's another strategy – you buy up the railways and the utilities and everybody who goes around the board is going to land on one of those. Those utilities, although they're not very sexy, they just rake in the money, turn after turn of the dice.

That's basically the idea of the water companies. They call this the great unopened oyster. Some call it blue gold or the petroleum of this century. The market we're talking about here is currently about $500 billion a year and could grow in the next few years to $3 trillion.

Clip: Gerard Payen of Suez, Yves Picaud of Vivendi and Peter Spillett of Thames Water explain why water is an attractive investment (Runs 1:55)

Thames Water head offices in Reading, England on the Thames River, 40 minutes west of London by train

Tell me about the major water companies. How many major players are there?

When we started this research, we had 10 companies on our list and now there's six, so there's been tremendous concentration just within the year. Really there are three giants – Vivendi and Suez, both from France, and Thames, which is based in England but owned by a German conglomerate RWE.

We're talking big here. These three companies combined employ twice as many people as the entire Canadian government. Their annual sales, for example, one company in Bolivia, it's annual sales are twice the size of the Gross National Product of the entire country.

They're big, yes, and they go back a while. In France, the companies go back to the Suez canal, and that's where the name comes from. Then they got in the water business in France and had a lot of relations over many decades with the French government, with French political parties and politicians. One of our chapters talks about how that relationship has become mired sometimes and we've seen in the last decade or two politicians and water managers jailed for things like illegal political donations and bribes and price fixing.

Suez's main headquarters are in a modern building that surrounds an old mansion. It's located just a block from the Elysee Palace where the president of the French Republic works. Above: interior view. Below: exterior view

But the international expansion happens after the Thatcher privatizations in England. In the 1980s and through the 1990s we've seen this expansion around the world aided largely by institutions like the World Bank.

Why the World Bank? What was its role in all of this?

For most of its history, the World Bank has given aid to help the development of poor countries, which used to mean helping them build their own waterworks. When Reagan came and Thatcher was in in England, the World Bank got a lot of criticism for being too liberal, being an agency that gave aid, that gave subsidies, that gave welfare to the poor. And so the Bank was pressured to adopt a more neo-liberal ideology and they did so wholeheartedly, saying corporations can do what governments can't, and they put out documents in favour of water privatization.

Jamal Seguir, director of water and energy for the World Bank Group, says the World Bank supports both public and private water services, but there's a clear commitment to business.

Clip: Jamal Seguir explains how the World Bank has changed its focus in the past decade (Runs 0:50)

How does the World Bank get countries to go the privatization route?

Through something they call conditionality. This is the old idea of tied aid, or tied loans – if you want our money, you have to do what we prescribe. In our research, we found that in recent years almost 60 per cent of what are called the World Bank's "structural adjustment loans" have such conditions, implying that governments have to privatize part of the state or part of the water utilities. The World Bank justifies this by saying it's just trying to get water to poor people. Critics call it a strong-arm tactic that's designed to pry open markets for business. The Bank likes to say, for example, that local governments are the ones deciding to privatize, not the bank.

But put yourself in the position of a poor country. You're offered $200 million if you privatize. You get nothing if you don't privatize. Those countries certainly see it as pressure. Even the private sector recognizes this as pressure. I did five interviews with the Bank and they're very coy about this conditionality. But you talk to the privates and they say of course there's World Bank conditionality and it's vital to their expansion in the southern countries.

Clip: Yves Picaud, managing director of Vivendi in Africa, talks about conditionality (Runs 0:57)

From that it sounds like the World Bank is subsidizing the private sector's expansion around the world.

That's exactly what the critics say, and in a sense Yves Picaud admitted that to me. When we had our conversation in South Africa, he told me they, as private companies, can do a service and can make profit when they're serving the middle class, even in Africa, Asia and Latin America. But they have trouble making a profit on the poor so that's where they need kind of a soft money flow, or loans, or, if you want, subsidy from the World Bank. And I suppose that's one of the reasons why even some of the internal evaluations by the Bank suggest the results of water privatization have not all been that good.

What about your findings about privatization around the world?

Mixed – some good, some bad. Over all I'd say the benefits were outweighed by the negatives. There are patterns we came across in many countries, many times the private companies would promise the moon to get a contract – we're going to help the poor, we'll save you money – and then quickly after they get the contract and get control, they renegotiate the contract. Even the World Bank is concerned about this particular trend.

In the Philippines, for example, we did find communities that received water, but most people say they're not satisfied with privatization. In Jakarta, millions, tens of millions of dollars were pocketed by the cronies of the former dictator Suharto. In Hamilton, Ont., we found that staff cuts had been blamed by some for the worst sewage spill into Lake Ontario. In South Africa, we found 10 million people whose water was cut off because they couldn't pay at the market rates.

Are there good public institutions to be supported?

Indeed, and that's interesting. In Bogota, we found a fascinating utility that's won awards for the best utility in Latin America year after year, and they do it by having the rich subsidize the poor. But you know what happened to them a few years back? They went to the World Bank to get a loan to help extend more services to the poor and the World Bank said no, we will not give loans unless you privatize and dismantle your subsidies. The Bogota people said no. They didn't take the money and they did it themselves.

What about the other side of the equation? Are there privatizations that work?

It depends how you evaluate them. The private companies cite Casa Blanca and Moncton, Ont., where people are reported to be quite happy with the clean water coming out of a plant put out by Vivendi. The union down there though says that could have been done for about $14 million less with government money. So there's always different ways to evaluate this.

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