Water Privatization in Argentina - Essay Example

? Water Privatization in Argentina 30 March Globalisation has sparked a concern that spurs a new insight in provision of water and sanitation services; especially in cases where a government runs short. There exists enormous demand for efficient water systems whose aspects include the supply of clean water as well as the removal and treatment of sewage. Owing to the presence of outstanding externalities, there is the need for the proper elimination of sanitation residuals that taint the sector. Water privatisation seeks to participation of the private sector with regard to provision of sanitary and water services to residents of the said region. The concept of water privatisation has remained controversial the world over, with the proponents presenting the efficiency and quality services delivered. Privatisation in the water industry often entails three aspects namely outsourcing, design, building and operation, and asset sale. This way, private companies can be contracted to provide various water and sanitary services in accordance to the stipulations agreed on. The companies are often required to design, build and operate a comprehensive system for the dispensation of water services to residents. The process also involves the release of government-owned assets or companies to the private sector for running and maintenance. This paper seeks to highlight water privatisation in Argentina with regard to history and aspects relating to effects in the society. Privatisation was widespread throughout Latin America in the 1990s including Chile, Brazil, Bolivia, and Argentina to name but a few. During the early 1990’s privatization of services and liberalization of exchange and trade systems was regarded as an easy solution to the problems of deteriorating infrastructure and unbalanced public finances. These changes contributed to economic stability and increased growth as part of a program of direct foreign investment that began in 1995 until the late 1990’s when political instability and social tensions affected economic performance. Argentina forms a prime example of privatisation in the water sector that received backing from the International Monetary fund and the World Bank (Huey, 2010). The period between 1991 and 1999 saw the successful privatisation of water and sanitary services in Argentina to covering 60% of the population in 28% of the countries municipals. Previously, water services had been under the management of public enterprises at the provincial level and as such, the government had no jurisdiction with regard to privatisation (Galiani et al, 2005).Under these circumstances, the country relied on a single company, ObrasSanitarias de la Nacion (OSN), to deliver water and sanitary services. The company held the largest operation in its mandate with regard to infrastructure and clientele. Seeing the need for change in the status quo, the World Bank exerted pressure on the Argentine government to decentralise the services (Olleta, 2007).The privatisation of OSN came about three years later after the initial appointment following restructuring changes that were required. A French company through its subsidiary, sought to purchase the government-run water company and establish a new company by the Aguas Argentinas. This move was aided by the World Bank who has stakes in the consortium as it funded the company in support of the comprehensive privatisation program. The company was charged with task of supplying clean water to the citizens as well as transporting and treating sewage. The company made returns on their investment and was regarded as a success owing to their enormous profits (Public Citizen, 2003). The concession contract was, however revoked in 2006 after 13 years of services to the citizens; with the main reason believed to contribute to the cancellation of the concession was the economic crisis in the years following 2000. The government argued that the company failed to achieve its targets as cited in the contract with regard to infrastructure investment, quality and accessibility of services. There are various aspects that precipitated the cancellation of the contract and among of the deficiencies in the regulatory agency and poor tariff systems. Due to the inexperience of the regulatory body, most decisions made were not run by the agency and as such, it failed in its mandate. For instance, decisions made during the renegotiation of the contract in 1997 saw the position of the agency weakened, as such negotiations were believed to of corrupt nature. In the same way, the new service provider established new tariff systems that would promote transparency. This move saw the company adopt old tariff systems from the OSN, which increased the amount of fees charged for the services. This is as evidenced during the economic crisis of 2001 that saw the devaluation of the Peso with critics arguing that the contract was violated following increase in cost of services. Similarly, AguasArgentinas was faced with concerns of distributing contaminated water. Independent studies provide corroborating findings indicating high levels of carcinogenic substances including napalm. Privatisation of water and sanitation services was well received among the argentine citizens. This can be attributed to various benefits that were realised following the privatisation contract. Privatisation hoped to improve the quality of service offered, improve efficiency in production, and reduce water loss. In addition, the new company hoped to strengthen the management of the water sector as well as enhancing the customer care. Studies indicated that there was a decline in child mortality in municipalities under water privatisation. This is attributed to the improvements in the water quality that saw reduced deaths caused by water-borne infections and parasitic diseases. Consequently, privatisation was encouraged in the poorest of areas, an effort that saw the expansion of the water network. Public acceptance also upheld the improved quality of service with regard to reduced spillage, cleaner water, fewer shortages and faster repairs. In addition, the public enjoyed better sewage system and water pressure, which enhanced the epidemiological environment. As such, water and sewage networks were expanded to cover households that had not been previously connected. Since households regarded as rich had already been connected to the water network, the focus was set on poor neighbourhoods. Low-income areas had poor connection and as such, efforts to expand to all regions were applauded. However, the positive opinion on water privatisation in Argentina was short lived owing to various aspects attached to the conduct of the concessionaire. Public opinion polls indicated a gradual decline of support accorded privatisation of water and sanitary services (Schargrodsky, 2009). Findings provided by studies indicated that the water systems in Argentina were deteriorating following privatisation. The findings illustrated the presence of impurities in the water distributed through its networks. Such findings were proved devastating to the image of the concept of water privatisation. The concessionaire was accused of generating enormous profits at the expense of citizens. This was evidenced during the economic crisis in Argentina and the shortcoming by the regulatory agency. Other factors contributing to the declining popularity with privatisation include the politicising of the process, rigid monetary arrangements, selective quality of service and activism. A political front pushing for market reforms was dearly engaged in illustrating the failures of the concessionaires by suggesting that they failed to provide universal access to services. The calls for market reforms were also echoed by the rigidity of monetary sources, which suffered pressure from stakeholders. Due to the significance of water in life, some people argued that it should not be treated as a commodity from which companies can derive profits, but should be provided freely for all. Nevertheless, the discontent with privatisation was variable across the social divide, particularly, the rich, and the low-income earners. The concept remained popular among low income households owing to the benefits ripped by the citizens regardless of the quality described. References Olleta, A. (2007). The World Bank’s Influence on Water Privatisation in Argentina the Experience of the City of Buenos Aires. International Environmental Law Research Centre. Retrieved from http://www.ielrc.org/content/w0702.pdf Public Citizen. (2003). Water Privatization Fiascos: Broken Promises and Social Turmoil. Retrieved from http://www.citizen.org/documents/privatizationfiascos.pdf Galiani, S., Gertler, P. and Schargrodsky, E. (2005).Water for Life: The Impact of the Privatization of Water Services on Child Mortality. Journal of Political Economy. Retrieved from http://sekhon.berkeley.edu/causalinf/papers/GalianiWater.pdf Schargrodsky, E. 2009. Water Privatization and Health Outcomes: Evidence and Beliefs. Retrieved from http://www.hks.harvard.edu/var/ezp_site/storage/fckeditor/file/pdfs/centers-programs/centers/mrcbg/programs/ssp/docs/events/workshops/2009/water/Schargrodsky_Infrastructure_disc_090720.pdf Huey, M. (2010). Water Privatisation. Greeniacs. Retrieved from http://www.greeniacs.com/GreeniacsArticles/Water/Water-Privatization.html Read More