On the 24 July 1997, a contract was signed between Aguas del Illimani (AISA) and the Water Superintendent granting it the right to run and develop drinking water and sanitation services. The concession included the municipalities of El Alto and La Paz and was for a duration of 30 years up to 2027.

Another administration contract was signed between SAMAPA (the former public water utility) and Aguas del Illimani in which administration of the infrastructure was transferred to AISA.

In the contract, 8 reservoirs were included with a flow of 4,875 litres per second, which is four times more than is available to Cochabamba

Tuni reservoir – 398 litres/second
Condoriri reservoir – 487 litres/second
Huayna Potosi reservoir – 712 litres/second
Milluni reservoir – 847 litres/second
Choqueyapu reservoir
Incachaca reservoir – 426 litres/second
Hampaturi reservoir – 1026 litres/second
Tilata subterranean waters – 347 litres/second

But who are Aguas del Illimani?

Lyonnaise des Eaux, the major corporate partner in Aguas del Illimani is one of the most powerful multinational water companies in the world. It dominates the world water market and provides its services to more than 100 million people. Its total profits in 2003 were 39,622 Euros ($51,508 million dollars), which is 31 times the total value of Bolivia’s exports in 2003.

International Finance Corporation (IFC) is part of the World Bank and BICSA is linked to the Bolivian bank, Banco Mercantil.

1. The contract was granted in an underhand way behind the backs of the population

The award of the contract to Aguas del Ilimani, was not done through a transparent process, marginalised the participation of civil society or the municipality, and violated Bolivia’s laws.

The opening for bids for a contract was carried out based on a study undertaken by the French Paribás Bank under guidance of the Water Superintendent (which was created one month before the contract). As a result there was no possibility of analysing the terms of reference or promoting a public debate, which one would expect from a transparent process in a democratic society.

In the first round of bids, the only company that presented was Aguas del Illimani Lyonnaise des Eaux from France. Instead of organising a second round of bids, the Superintendent merely changed the terms of reference for the bidding process in order to grant the contract to Aguas del Illimani.

In the bidding process, neither the municipalities of La Paz and El Alto nor SAMAPA participated. Even though they were the most important players with the most interest in the deal, they were excluded in favour of the Ministry for Capitalisation and the Water Superintendent based on a Supreme Decree 24663.

The privatisation of SAMAPA was a condition imposed by the World Bank/IMF/Inter-American Development Bank linked to negotiations for external debt relief in 1996.

2. The contract included a “trick” clause which condemned part of the population to live without water

The contract says that by 2001:
* 100% of La Paz and 82% of El Alto should have drinking water
* 82% of La Paz and 41% of El Alto should have access to sewerage facilities
     
Aguas del Illimani said in 2003:
* 100% of La Paz and 100% of El Alto have drinking water
* 91% of La Paz and 61% of El Alto have access to sewerage facilities

The trick was that Aguas del Illimani did not base these numbers on all the areas covered by the concession, which are the municipalities of El Alto and La Paz, but only on “serviced areas.”

The concession area refers to the geographical area where the company provides services, which according to the contract covers the municipalities of La Paz and El Alto.

The serviced area are those areas within the geographical limits of the concession area, which were originally covered by SAMAPA as well as areas agreed within expansion goals agreed in negotiations with the Superintendent. The serviced area is smaller than the concession area. Aguas del Illimani’s claims of coverage were based on serviced area, not the concession area.

So who will provide drinking water to the La Paz and El Alto residents who don’t live within the serviced area covered by Aguas del Illimani?

Aguas del Illimani refuses to provide services outside the “serviced area”, except when residents cover all the costs or where external finance is provided. This means that these districts have to find the resources to pay for main and secondary pipelines, connections to houses as well as the labour required to dig trenches, install pipes etc

3. The majority of investments came from soft loans

The contract did not specify the amount of required investments. 

It is impossible to say with certainty how much money Aguas del Illimani invested, or the sources it came from.

According to the Superintendent, in 8 years (1997-2004), AISA invested $55 million dollars.

According to press releases, during this period the Inter-American Development Bank granted $15 million dollars, the IFC of the World Bank $15 million dollars, the Andean Development Corporation $10 million dollars, and other sources $12 million dollars. This comes to a total of $52 million dollars.

In other words, the investments made by Aguas del Illimani from its own funds were just $3 million dollars.

Soft loans are concessionary loans with low interest rates granted by the International
Community to private companies in order to help poor communities.  This meant that Aguas del Illimani did not make most investments from its own money, but from loans directed via the Government.

     
4. AISA paid SAMAPA much less than it received

Aguas del Illimani paid an average of $3.5 million dollars per year to SAMAPA for leasing the infrastructure which SAMAPA ran prior to privatisation.

According to SAMAPA, AISA collected $8.5 million from water and sewerage rates for use of the pipes that belonged to the municipality, but only paid SAMAPA $3.5 million.

5. Water rates or tariffs were dollarised

Even though Act 2066 signed on 11 April 2000 says that rates shouldn’t be dollarised (Art. 8, paragraph L), Aguas del Illimani continues to tie rates to the dollar.

As a result Aguas del Illimani violates Clause 17 of the contract of concession which says: “In the provision of services, the Concessionary (that is Aguas del Illimani) must comply at all times with existing Bolivian laws throughout the duration of the contract.”

The lack of detailed regulations in Act 2066 does not justify dollarised rates as the same Act says that former regulations remain applicable “as long as they are not contrary to the present law” (Article 83)

6. The water rates were increased from the time of the signing of the contract

Before the concession, water rates were increased twice in 1996 and 1997.  In 1996, rates had already increased by:
* 57.7% for domestic use
* 17.88% for commercial use
* 21% for industrial use

In the contract (July 1997), prices were increased once more by 19%.  As a result of this second rise, consumers will lose $153 million dollars over the 30 year duration of the contract.

7. Extortionate rates for the public sector

The contract in Annex 10 says that “the commercial category for water use also includes official, public and state bodies”. That means that health centres, schools, parks, ministries and other public departments pay $1.18 dollars per cubic metre as they consume more than 21 cubic metres per month.

8. Rise in connection rates to drinking water and sewerage facilities

Rates for connection had already risen before the signing of the contract (1997) to:
* $155 dollars for each drinking water connection
* $180 dollars for each sewerage connection

In 2001, these rates were increased again to:
* $196 dollars for each drinking water connection (rise of 26%)
* $249 dollars for each sewerage connection (rise of 38%)

The cost of billing also increased:
* In El Alto, billing rose from 10 cents to 22 cents (ie from 80 Centavos to 1.96 Bolivianos in local currency)
* In La Paz, billing rose from 10 cents to 34 cents

9. AISA didn’t install water meters in the poorest areas in order to increase profits

AISA was required to install meters in the whole concession area in the first 3 years. Yet many houses still don’t have meters, because AISA knows that they would then pay less. The monthly rate without a meter is between 12 and 15 Bolivianos, but this falls to 6 to 8 Bolivianos with meters because water consumption in many houses in El Alto rarely goes above 4 to 5 cubic metres per month.

10. AISA failed to properly maintain or replace the water and sewerage infrastructure

According to the contract, Aguas del Illimani is obliged to guarantee the maintenance and replacement of pipes, valves and other parts of the water and sewerage network. But as the costs for this are high and Aguas del Illimani wanted to maximise profits, it failed to make adequate investments in the network. Not surprisingly, profits for Aguas del Illimani rose to 21 million Bolivianos in 2003.

11. AISA failed to extend rain drainage system

Although the rain drainage system was included as a requirement within the bidding process, the contract that AISA signed only required it to maintain the system established by SAMAPA.

Aguas del Illimani charges higher rates than SAMAPA yet isn’t responsible for the network of street drains.

The neighbourhoods which are based on slopes are those that suffer most the results of poor rain drainage.

12. Contamination of the environment

The lack of maintenance and repairs of key pipes and valves as well as the construction of cheap sewerage systems in order to save money, have caused a number of contaminated areas in houses and districts of El Alto.

13. Aguas del Illimani imposes secrecy of information

The Superintendent can not share any information which Aguas del Illimani considers “confidential, privileged information or commercial secrets.” (Clause 14.1.1 of the contract of concession)

14. We are going to end up paying Aguas del Illimani twice-over when its contract ends

The water rates applied by Aguas del Illimani cover the total recovery of their investments as well as a guaranteed rate of profit of 13%.

Nevertheless, clause 26 of the contract states that once the concession is concluded, we will have to pay again for its investments with the payment made by the new concessionary if Aguas del Illimani doesn’t win the bids in 2027.

This means that we end up paying Aguas del Illimani twice, once for the rates that we pay and secondly for the payment they will receive when the contract ends.

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Aguas del Illimani threatens to sue Bolivia for millions of dollars as a result of an international treaty similar to the proposed Andean Free Trade Treaty with the US. That’s why the people of La Paz and El Alto must reject this treaty. No to a Free Trade Treaty with the US!