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Profile: Aguas Argentinas
Aguas Argentinas was a participant or observer in the following events:
Aguas Argentinas, according to its own figures, enjoys a profit margin of between 15 and 25 percent each year. Other economists cited by the Inter-American Development Bank put the profit rate much higher—as high as 40 percent. [Santoro, 2/6/2003] According to Daniel Azpiazu, a researcher at the Latin American Faculty for Social Sciences, this rate of profit is far above the industry average. “In the United States, for example, water companies earned between 6-12.5 percent profits in 1991,” Azpiazu says. “In the United Kingdom a reasonable rate of profit for the sector is between 6-7 percent. In France, 6 percent is considered a very reasonable return on investment.” [CorpWatch, 2/26/2004]
Buenos Aires’ public water utility, Obras Sanitarias, is privatized under heavy pressure from the World Bank, the IMF, and the US government. It is taken over by Aguas Argentinas, a recently formed consortium of private companies that won a 30-year concession to manage the city’s water and sewage system (see December 9, 1992). The deal represents the largest transfer in history of a water service and watershed to the private sector. The consortium will be responsible for providing water to the residents of Buenos Aires and 14 surrounding municipalities—some 10 million people (see also 1980s-1993). Oversight of Aguas Argentinas will be conducted by the newly formed regulatory body, ETOSS (Ente Tripartito de Obras y Servicios Sanitarios). Its task will be to monitor the quality of service, represent customers, and ensure that the company fulfills the terms of its contract. [Inter Press Service, 4/13/1993; Santoro, 2/6/2003; CorpWatch, 2/26/2004; CBC News, 3/31/2004; Public Citizen, 6/14/2007]
The World Bank purchases a five percent stake in Aguas Argentinas, a consortium of private water companies that took over Buenos Aires’ public water utility in 1993. As the civil society organization Public Citizen will later note, the bank’s investment makes it “a lender in, partner in, and public relations arm of their ‘model privatization project.’” The 1993 privatization of the city’s water utility had been made under pressure from the World Bank and IMF. [Public Citizen, 6/14/2007]
Aguas Argentinas, a privately owned company that provides the city of Buenos Aires with its water supply, petitions the newly established government authority, ETOSS, for a rate increase of 13.5 percent. The company had previously agreed not to seek any rate increases for 10 years (see April 28, 1993). But according to Carlos Ben of Aguas Argentinas, “What was said in 1993, that there was not going to be an increase in rates for 10 years, was not meant in absolute terms. It was to indicate to the bidders that they should not put a speculative number [on rate reductions]. There was not a presumption of a freezing of rates.” [Santoro, 2/6/2003] The company also claims that it has suffered $23 million in losses because of “extra-contractual costs,” such as speeding up service in very poor neighborhoods. ETOSS, whose operations are financed through the collection of 2.6 percent of Aguas Argentinas’ revenue, approves the request on the condition that the company expedite expanding water and sewage service to the “villas de emergencia” (shanty towns), and that it implement a plan to eliminate the use of well water, which is heavily contaminated with nitrates. [Santoro, 2/6/2003; CBC News, 3/31/2004; Public Citizen, 6/14/2007] A decade later, Menahem Libhaber, the chief water and sanitation engineer for the World Bank in Latin America, will tell the International Consortium of Investigative Journalists that false promises are simply part of the game. “You get into the business with low rates or high commitments—all the while telling yourself, ‘When we are in we will renegotiate,’ The public sector has to be aware,” he says, that companies are disingenuously putting their best foot forward. “Sometimes it’s a game to get into the business.… And they [the companies] have leverage once they are in.” [Santoro, 2/6/2003]
By this date, Aguas Argentinas, the company hired in 1993 to provide water and sewer service to the residents of Buenos Aires (see April 28, 1993), has invested roughly 45 percent less ($300 million) on expanding services than required by its contract. The company blames the failure on bad debt, late payments, and a downturn in the Argentine economy. During this period, the company has been able to maintain a comfortable 20 percent profit margin. [CBC News, 3/31/2004]
Aguas Argentinas, a consortium of North American and European private water companies, announces an $800 water and sewer connection fee. The new fee is met with large scale protests, and thousands of demonstrators block the roads leading to the city (see April 1996). [Santoro, 2/6/2003; Public Citizen, 6/14/2007]
Residents of the suburban Buenos Aires town of Lomas de Zamora protest the new $800 water and sewage connections fees being charged by Aguas Argentinas (see Spring 1996). The movement quickly spreads and thousands of new water clients block roads into the capital. [Santoro, 2/6/2003]
An Argentine congressional commission issues a report accusing Aguas Argentinas, a consortium of private water companies that took over management of the city’s water and sewer system in 1993 (see April 28, 1993), of “serious and grave” breaches of contract, failing to meet goals regarding infrastructure development, and failing to inform its regulatory body, ETOSS, of its operations. It orders the company to suspend new connection fees for 800,000 new users in Buenos Aires. [Santoro, 2/6/2003; CBC News, 3/31/2004; Public Citizen, 6/14/2007]
Aguas Argentinas and the regulatory body that governs it, ETOSS, come to an agreement on the controversial $800 water and sewer connection fee (see Spring 1996). The company will lower the connection fee to $200, but create a new “Universal Service” fee that all of its customers must pay. In agreeing on the fee, ETOSS essentially allows the company to impose a fee that had not been specified in the 1992 concession agreement (see December 9, 1992). An investigation by the International Consortium of Investigative Journalists will later point out, “The real winner was Aguas Argentinas. It had succeeded in imposing fees not described in its contract.” [Santoro, 2/6/2003]
Aguas Argentinas begins pushing hard for revisions to its 30-year contract to manage Buenos Aires’ water and sewer system. The World Bank, which has invested hundreds of millions of dollars in the project and has a five percent stake in it, sends Ventura Bengoechea, one of its senior water managers, to join Aguas Argentinas. The manager stays with Aguas Argentinas until a new contract is signed in 2000. During that period he remains on the World Bank’s payroll. [Public Citizen, 6/14/2007]
The head of ETOSS, the regulatory agency that oversees the management of Buenos Aires’ privatized water and sewer utility, tells Congress that Aguas Argentinas has only built a third of the new pumping stations and underground mains it promised to complete by 1997. Moreover, it has only spent 9.4 million of the promised 48.9 million in improving the sewage system. Citing the supposed need for “further investigation,” the company has put off construction of the Berazategui wastewater treatment plant. As a result, sewage is being dumped into rivers and cesspools, raising nitrate levels in the water (nitrates reduce the flow of oxygen to the brain in infants) and increasing the risk of various waterborne illnesses. According to the World Bank, by delaying the project, Aguas Argentinas is saving $100,000 dollars a day. [Inter Press Service, 4/13/1993]
Aguas Argentinas, the private company that is managing Buenos Aires’ water and sewer services, asks ETOSS, a government regulatory agency, to raise water rates by 11.7 percent. When ETOSS approves only a 1.61 percent increase, the company turns to Secretary of the Environment Maria Julia Alsogaray, who then persuades President Carlos Menem to authorize a 5.1 percent rate hike. It eventually turns into a 17 percent increase. When a judge freezes a portion of the rate hike, the government successfully appeals. [Santoro, 2/6/2003] Aguas Argentinas’ original 1992 contract with Argentina had stipulated that the company could not raise rates for at least ten years (see December 9, 1992). This is the second such increase in rates (see also (Early 1994)).
Aguas Argentinas signs a new contract with Argentina for the management of Buenos Aires’ water and sewer services. In negotiating the new contract, the company enlisted the support of Argentine President Carlos Menem. Additionally, it threatened not to invest any more funds into expanding water and sewer access to poor neighborhoods until the new contract was signed. The new agreement significantly reduces the company’s obligations to Buenos Aires. The original 1992 concession agreement (see December 9, 1992) required Aguas Argentinas to invest $1.4 billion in the system, and connect more than 4,200,000 people to water and 4,800,000 to sewage systems, which the company has failed to do. While the company says it currently collects 62 percent of its customers’ sewage—just shy of its commitment of 64 percent—the actual percentage of sewage that it treats is only 5 percent. The rest is dumped untreated directly into the Rio de la Plata (River of Silver). The new contract allows the company to delay construction of the crucial Berazategui wastewater treatment plant as well as a fourth sewer main. It also eliminates the requirement that rate increases be tied to investments and waives $10 million in fines that were imposed for alleged contract violations. Additionally, the contract pegs rate increases to fluctuations in the US inflation rate, calculated in pesos. [Santoro, 2/6/2003]
In the midst of a massive financial collapse, the private water company Aguas Argentinas—struggling to pay its external debts—insists that Argentina either implement a fixed peso-dollar exchange rate for its debt payments or allow it to increase water rates by 42 percent. When the Argentine government refuses, Aguas Argentinas threatens to take the country to the International Center for the Settlement of Investment Disputes. The ICSID is part of the World Bank, which owns a five percent stake in the company (see (Early 1994)). Argentina attempts to block Aguas Argentinas from going to the ICSID, but France, where the consortium is based, acts to permit it. [Santoro, 2/6/2003; Public Citizen, 6/14/2007]
The Argentine government approves Aguas Argentinas’s request for another hike in water rates (see also (Early 1994) and May 1998). This time the rates increase by 9.1 percent. In exchange, the company says it will expedite its plan to spend $1.1 billion expanding services to Buenos Aires’ poorer neighborhoods. [Santoro, 2/6/2003]
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