Struggles against Accumulation by Dispossession in Bolivia: The Political Economy of Natural Resource Contention - Part II

Susan Spronk and Jeffery Webber


Accumulation by dispossession

Water companies tend to be among the last to be dispossessed because it takes a long time, if ever, to make profits selling water. Throughout the post–World War II period, water was considered a public good to be provided by public utilities, since the private sector was considered incapable of providing adequate services. The World Bank extended major infrastructure loans to aid the development of public water resources because it believed that investment in public utilities and infrastructure would lead to developmental “takeoff.” With the neoliberal revolution of the past quarter-century, however, the World Bank began making loans to governments conditioned on the privatization of public water utilities in an effort to improve the management of “scarce” water resources (Public Citizen, 2004; World Bank, 1993). Increasingly, it has been argued that water should be treated as an economic good and priced in such a way as to recover the full costs of production directly from its users (Budds and McGranahan, 2003). According to neoliberal arguments, consumers will waste water if they do not have to pay its true cost. In a twist of logic, privatization has thus become a quick-fix solution to what is depicted as an impending ecological crisis—the global scarcity of freshwater. As water pollution and the growing specter of climate change have brought the issue of water scarcity to center stage, large transnational corporations have increasingly seen water as a resource worth possessing. The cases of water privatization in the cities of Cochabamba and La Paz–El Alto are exemplars of accumulation by dispossession, but they demonstrate that not all accumulation strategies work as planned. Despite fears that water will be the “blue gold” of the twenty-first century, the growing number of failed experiments with water privatization suggest that trying to sell water for a profit to poor people in the Third World is much more difficult than originally predicted.

The World Bank was clearly the driving force behind the privatization of water utilities in Bolivia. In the mid-1990s it extended a US$4.5 million loan intended to improve the efficiency of the public water and sanitation utilities in the main cities of Bolivia and thus make them more attractive to private investors. The municipal water utility that served the neighboring cities of La Paz and El Alto was granted in a 1997 concession to Aguas del Illimani, a consortium controlled by the French multinational Suez. In 1999 another concession transferred control over Cochabamba’s municipal utility to Aguas del Tunari, a consortium controlled by the San Francisco–based construction giant Bechtel. The privatization of the water utility Servicio Autónomo Municipal de Agua Potable y Alcantarillado (SAMAPA) in La Paz–El Alto can be counted as a modest success from a business point of view. The water system in La Paz–El Alto was a fairly attractive investment at the time of its privatization. Water was available for about 19 hours a day, and fairly high coverage rates had been achieved. Tariff increases of approximately 35 percent introduced a year before privatization doubled the utility’s income and were expected to bring in US$27 million per year, greatly improving the utility’s financial prospects (Guillermo Arroyo Rodriguez, personal communication, May 20, 2005). The central government further sweetened the deal by assuming SAMAPA’s US$50 million debt and guaranteeing the company a 13 percent rate of return. Thanks in part to the role played by the state in facilitating capital accumulation, during the first seven years of the concession the company declared profits of US$12 million (in current dollars).

Compared with the water utility in La Paz–El Alto, the public utility in Cochabamba was in poor shape. Citizens received water for an average of four hours per day, and the system served only about 57 percent of city residents. The contract awarded to Aguas del Tunari included commitments to expand water production through the construction of Misicuni, a dam and tunnel project estimated to cost over US$300 million (Assies, 2003). Recognizing the risks involved, the contract guaranteed Aguas del Tunari a real return rate between 15 and 17 percent for the 40 years of the contract. Since the World Bank (1999) “recommended” that none of this money come from the public purse, the most immediate source was the users themselves. The company hiked users’ water tariffs, and this triggered the water war of 2000.


Given the negligible role that water plays in the regional political economy, the social movements that emerged during the water wars have involved a more micro frame and politics as compared with the gas wars. This micro character is reflected in the geography of the protests, the pathway to change identified by the participants, and the protests’ lesser impact on neoliberalism. In the first water war, residents of Cochabamba, frustrated over government neglect and drastically increased water bills, protested peacefully in the streets, shutting down the city with roadblocks, marches, and demonstrations. Protests became increasingly violent, with the Bolivian government dispatching riot police to control the movement. A bullet from a sniper claimed the life of a young man, which radicalized the protests and brought 100,000 people into the streets. The social base of the mobilizations demonstrated that the water war was not about tariffs alone. Coca growers, peasant farmers, and periurban residents joined the protests even though they were not customers of Aguas del Tunari and thus were not directly affected by the tariff increase. Their primary concern was the new Water Law 2029 approved a month and a half after the privatization contract was signed, which granted exclusive property rights over water to the private operator for the duration of the concession contract. The monopoly provision meant that residents were prevented from drilling their own wells, which had long been the privileged practice of some large commercial users and wealthy residents of Cochabamba and the survival strategy of periurban residents, who had formed small water committees and cooperatives that served 15–20 percent of urban residents (Crespo Flores, 2002: 107). The law also threatened the water supplies of irrigating small farmers in the Cochabamba Valley, who had managed water resources according to communal principles (usos y costumbres) that date back to pre- Inca times (Assies, 2003; Crespo Flores, Fernández Quiroga, and Peredo, 2004; Laurie, Andolina, and Radcliffe, 2002). Social movement leaders thus framed the struggle as one to “reclaim the commons” and defend water users against an attack on communal property rights.

The blossoming academic and popular commentary on the event has emphasized that the Cochabamba water war was the first symbolic break with neoliberalism in 15 years in Bolivia (Assies, 2003; Ceceña, 2004; Crespo Flores, 2000; García Linera et al., 2001; García Orellana, García Yapur, and Quitón Herbas, 2003; Olivera and Lewis, 2004). While it resulted in some important political changes—the amendment of national water legislation, the rescission of the contract, and the return of water to public management—there were limits to what it could accomplish. The many obstacles subsequently faced by the deprivatized utility demonstrate that while the battle to expel the transnational corporation was won, the war that was required to reverse neoliberal policies was not.

After the “final battle” of April 2000, the government rescinded the contract with Aguas del Tunari and signed an agreement with the Coordinadora (the network of organizations that emerged to coordinate the protests).[6] Responsibility for operations immediately returned to the former municipal company Servicio Municipal de Agua Potable y Alcantarillado de Cochabamba (SEMAPA), under the control of the Coordinadora (Assies, 2003; Crespo Flores, 2002; Olivera and Lewis, 2004). In December 2000 the Coordinadora proposed to disband SEMAPA and form a new type of democratic water utility owned by its users, but the government refused, arguing that such forms of “social property” were not recognized under the law (Gutiérrez Aguilar, 2001: 202–203). Instead the government allowed the local water authority to be restructured to grant more “social control” over its operations. The board of directors, which was formerly constituted only by professionals and municipal politicians, now has three elected members from the different districts of Cochabamba (Sánchez Gómez and Terhorst, 2005).

The serious problems that SEMAPA had before its privatization could not be solved by merely inserting a limited degree of social control. Service to existing customers has not improved substantially since 2000, and attempts to expand the water network to residents in the poor southern zone of the city have been delayed because of lack of capital (Nickson and Vargas, 2002; Sánchez Gómez, 2004). The largest obstacle is the utility’s enormous debt, which was transferred from the central government. Because of the public utility’s poor credit rating, several plans to expand the network have been stalled because the public company had difficulty securing new loans (Pozo, 2005; Sánchez Gómez and Terhorst, 2005). Over time, the local water activists have learned that expelling a foreign company and changing the national water legislation—two central demands of the water war—were only small steps in a longer struggle to exert social control over the local water system, which remains a difficult task in a context in which local politicians and international lenders continue to favor private over public companies in the water sector. Despite the lobbying efforts of water activists, it has been impossible to change national legislation to ban profits from water, since Suez still has its contract in La Paz and El Alto.

Problems with tariffs and the Aguas del Illimani contract eventually led to Bolivia’s second water war in January 2005. As a struggle against neoliberalism and privatization, this one produced an even more ambiguous victory than the first. Pressured by a general strike organized by residents of El Alto that lasted three days, the Bolivian government announced on January 12 that it would terminate the contract held by the private consortium. It could be argued that the state had learned from previous mistakes in the water war and the gas war and chose not to escalate the situation with violence. It is more likely, however, that the private company actually wanted to leave and therefore it was not necessary to defend its interests against the protestors. Over the life of the concession, the company continually complained that it could not make enough money selling water to poor people in El Alto to recover its investment at an agreeable rate of return (Poupeau, 2002). In 2002 Suez, which owned 55 percent of Aguas del Illimani’s shares, announced a policy of pulling investments from “risky markets” like Bolivia. Dissatisfied with the return on its investments in La Paz and El Alto, the company lobbied the government regulator to approve increases in the costs of its services. Having learned from Aguas del Tunari’s experience in Cochabamba, it decided to increase the costs of services for new connections rather than offend existing customers with tariff hikes. In 2001, the cost of a new water connection increased from US$155 to US$196 and the cost for sewerage from US$180 to US$249. This price hike was still not enough, and Aguas del Illimani reopened negotiations of its contract with the government a few years later. In June 2003 it managed to reduce the number of new connections that it was obliged to make from 15,000 to 8,000. In March 2004 this number was reduced to zero. This decision left 200,000 people who lacked household water connections with little hope of receiving services within the life of the 30-year concession, a figure that was publicized by neighborhood leaders to symbolize the corporation’s disregard for the population’s needs.

Similar to the ongoing struggle to exert social control over water in Cochabamba, the struggle to return water to public control in El Alto has been framed as a struggle for local democracy. The main protagonist in the conflict, the FEJUVE-El Alto, building on the new political legitimacy it had gained from the gas war, elaborated a proposal to establish a new water company that would be controlled by a board of representatives democratically elected from all the districts in La Paz and El Alto. The hope was that guaranteeing popular participation would enable citizens to secure transparency and efficiency in management through social control. In response to the proposal, the major financiers of the water sector in Bolivia—the World Bank, the Inter-American Development Bank, and the German embassy—told President Carlos Mesa that should a public water company replace Aguas del Illimani they would refuse to extend loans.
Compared with those with regard to gas, the struggles against the privatization of water in Bolivia were organized around a micro frame and politics. The protestors shared a frame that pitted the needs of the local communities of water users against the abuses of two transnational corporations, Bechtel and Suez. Both struggles involved the populations most directly affected by the exploitation of water resources either as agricultural producers or consumers. In contrast to the gas protests, the mobilizations involved people primarily from the regions affected: the residents of Cochabamba and the surrounding valley and the urban residents of the shantytown of El Alto. The urban residents who participated in the protests in Cochabamba and El Alto were disgruntled about the company’s billing practices and disregard for community needs. Despite promises that privatization would bring the financing and expertise needed to expand and improve services, residents felt that they were being asked to pay the full cost of network expansion. The increased cost of services heightened the perception that water was being turned into a “commodity,” a perception reinforced by the fact that the revenues went to private foreign companies whose aim was to make a profit. Therefore, the protestors in both cases demanded that the new water companies be publicly owned and operated on a not-for-profit basis. The protestors’ demand for social control thus reflected a struggle to democratize the management of local water supplies. The slogan of the Cochabamba protest, El agua es nuestra, ¡carajo! (The water is ours, dammit!), repeated by protestors in El Alto, referred to the water that fed these cities’ thirsty residents and not, for example, the water that supplied the residents of Santa Cruz. While the struggles against water privatization were crucially important, their impact has been smaller than that of the gas wars in terms of reversing 15 years of neoliberalism. Oscar Olivera, central spokesperson for the Coordinadora, sums up the dilemma faced by any social-movement leader when the gains made in the struggle seem limited in comparison with the sacrifices. He recalls a woman’s comments as the blockades came down after the Cochabamba water war: “‘Compañero, now the water is going to be ours, what have we really gained?. . . My husband will still have to look for work. As a wife and mother, I will still have to go out into the street to sell things, and my children will have to drop out of school because there’s just not enough money. Even if they give us the water for free, our situation still won’t have gotten any better” (Olivera and Lewis, 2004: 48). Access to potable water is fundamental to the quality of daily life but of limited significance to the political economy of the Bolivian state. As we have argued, it is precisely because of this that struggles for public water have been more quickly resolved with considerably less bloodshed than struggles over natural gas.

Globalizing resistance: whose resources are we fighting for?

We have here demonstrated the importance of recognizing the political economy of different types of Third World struggles against accumulation by dispossession. Social movements fighting against the privatization of water and natural gas in Bolivia have both made important gains in the struggle against the deepening of neoliberal capitalism. The protagonists in these movements have framed their struggles as efforts to “reclaim the commons,” drawing upon the widespread perception that foreign interests have plundered Bolivia’s natural resources for centuries and left behind little but poverty. Yet the struggles over the “commons” of water and gas have had different political implications because of the role that each resource plays in the political economy of the Bolivian state and the world market. The struggle around natural gas, as a resource that is structurally significant to the region’s political economy, stands a greater chance of laying the foundations for the type of alternative globalization movement that looks for ways that “better meet the material needs of impoverished and repressed populations” (Harvey, 2003: 179).

The violence perpetrated by the state to protect private interests in the hydrocarbons sector as opposed to water reveals one of the cruel aspects of neoliberal capitalism in the era of globalization. Access to potable water arguably has a greater immediate impact on the quality of life and contributes more to public health than the benefits that may accrue from the nationalization of gas. Nonetheless, water remains an invisible input to industrial production, and therefore its exploitation does not contribute directly to GNI. In the dollar-and-cents terms of the market, water remains a much less valuable resource than natural gas, and the state is less likely to use violence to defend private property rights to it.

It may seem paradoxical that across the globe the privatization of water has been more consistently controversial than the privatization of gas. The issue of water privatization strikes an emotional chord; water has cultural and symbolic meaning as the essence of life. It also falls from the sky and does not require complex technological mediation to bring it from source to user. Therefore, it is much easier to frame arguments that it belongs to “us.” The right to water is enshrined in the Universal Declaration of Human Rights. In global protests in Cancun and Genoa it is common to hear the argument that it is “immoral” to privatize water. There are numerous sessions on fighting water privatization at the World Social Forums. Despite the importance of the issue, there is no comparable global network defending the right to natural gas. No “right” can be said to exist because gas is a thoroughly commodified resource that has long had big dollar signs attached to it. Natural gas is not normally considered a “commons.”

It is therefore testimony to the revolutionary potential of the Bolivian social movements that they framed one of their central demands around the nationalization of natural gas. The escalation of popular struggle over a structurally significant natural resource at the national scale may have delivered a critical blow to neoliberalism in Bolivia. Such self-organization of the popular classes to hit capital where it seriously hurts serves as an example for social movements struggling for economic and social justice throughout the Third World.

Susan Spronk is a Ph.D. candidate in political science at York University. Jeffery R. Webber is a Ph.D. candidate in political science at the University of Toronto. First published in Latin American Perspectives, March, 2007.

[6] Given Oscar Olivera’s active role in the struggles for water and now gas, this network, originally called la Coordinadora de Defensa del Agua y de la Vida, now goes by different names, including the Coordinadora de Defensa del Gas (Coordinator for the Defense of Gas).


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Abhay said...

Good blog comrades

In solidarity


Alicia said...

For those of you interested on the effects of privatization on ordinary individual, especially when MNCs privatize essential infrastructure such as water, electricty, railways and health care, you should check out the new documentary “The Big Sell-Out.”

This documentary challenges current economic orthodoxy in contending that the dogmatic claims of the international business establishment for neo-liberal development policies are not supported by modern economic science. More importantly, it dramatically demonstrates how the implementation of these policies is having disastrous consequences for millions of ordinary people around the globe.

While national and international economic discourse is fixated on increasing efficiency and economic growth, The Big Sellout reminds us that there are faces behind the statistics. It raises serious questions about the neo-liberal credo that government best serves the public interest by becoming a servant to corporate interests. But brave individuals, like those showcased in this important new film, are standing up and demanding an alternative to the prevailing neo-liberal model, a model that the film shows to be as hollow as it is unsustainable.

In particular to Latin America, the films documents how citizens in Cochabamba, Bolivia (mentioned in this article) have organized enormous protests in 2000, following the decision by the Bolivian government to sell the public water company to a private corporation, which would have made water cost-prohibitive to much of the population. The Big Sellout shows how ordinary people are fighting the neo-liberal commodification of basic public goods.

If you are interested in obtaining a copy of this film, it is available from CA Newsreel at