Ecuador’s experiment in private water markets is not ending well.
It is a well kept secret that Bechtel won a contract to privatize the water in Ecuador’s largest city, Guayaquil, just months after the massive citizen protests that threw Bechtel out of Bolivia.
In October 2000, a local Bechtel subsidiary, Interagua, signed a 30-year concession contract to run the water and sanitation services in Guayaquil. The privatization process was promoted by loans from the Inter-American Development Bank and a guarantee from the Multilateral Investment Guarantee Agency (MIGA), a World Bank agency.
Now, more than six years later, the residents of Guayaquil are demanding damages from the company for water contamination, an end to water cut-offs, and a return to local, public control.
Interagua’s operations in Guayaquil earned $300 million in revenue. Despite these profits, Interagua did not initiate the rehabilitation programs it had promised. Concerns and complaints mounted over broken pipelines, floods due to malfunctioning sewage systems, exorbitant water rates, poor water quality, and environmental damage due to the lack of wastewater treatment during this first five-year period.
I suppose there is no proof public or a public-private partnership would have done better, but it does not add to Bechtel’s resume. While there were humanitarian concerns, that was not the market failure. They did not spend the money on contract items.