How Urbanization Has Taken Place in La Paz/El Alto - Dissertation Example

Examination of How Urbanization Has Taken Place in La Paz/El Alto, Bolivia Using the Development of Water/Sanitation Infrastructure and Access to Water Service, As a Lens 1. Introduction Arnstein(1969) described citizen participation that consisted of eight levels with different experiences in order for citizen to effectively and efficiently manage their role within the community. A ladder of citizen participation starts from primary level and goes upward such as manipulation, therapy, informing, consultation, placation, partnership, delegated power and citizen control as a top. She stated that degrees of citizen participation start at partnership in which citizens collaborate with different community organizations in order to achieve the community goal. In looking at the case in La Pa-El Alto in Bolivia, privatization of basic utilities was sharply criticized and they have been re-nationalized since 2005. Water utility in particular is widely understood that increase in tariffs and high connection fees are the main reasons of its failure, however, this kind of simple conclusion does not improve the livelihood and access to affordable water service in the future. This paper shall seek to explore the background, context, measures, factors that explain the failure of the concession and the relevance to citizenship participation. The author shall then draw lessons for the regulation of future concessions and more concrete citizen participation. 2. Setting the scene : La Paz-El Alto’s urban context A. Intra-City Historical Development Bolivia holds one of the highest urban environments in the world, which are La Paz and its twin city El Alto. The conurbation with 1.9 million people precisely describes hierarchical society, ethnic group, the level of utility service, the level of income according to altitude and location where people belong to. This inequality does not spontaneously emerged, however, has been shaped by certain ‘organized factors’ Bolivia first gained global prominence during the Spanish colonial period as a dominant producer of raw materials and La Paz became the political and economic center of the country since 1899, however, it has served as a peripheral of the world. The slopes of Andes restricted expansion of the city (See figure 1) and only few La Paz’s small wealthy minorities settled down in limited flat land of La Paz. The spaces where a large group of indigenous and mestizo could live in were clearly demarcated. Mestizo and indigenous people were strongly constrained from voting, possessing the land and business entrepreneurs in Bolivia’s constitutions. This led them to build adobe houses in the periphery of city central like in many other third world cities, although in the case of La Paz, growth of population was slow until 1952. In 1952, Bolivia had encountered the revolution which aimed to end oligarchic control over the country. Land reform followed in 1953 (Urquidi 1976, cited in Urioste & Pacheco 1999, p 1) which freed the indigenous population from a tenant peasant of mass-plantation. These events allowed them to access to the country’s city center and led dramatic growth of population of La Paz. Due to the limited space of La Paz, some area in El Alto has provided middle class professionals with affordable housing with an easy commute to La Paz’s center (Arbona & Kohl 2004, p 258), however, El Alto has been growing up to now as a satellite city to absorb the city’s mainly poor immigrants. A weak urban planning and absence of low-cost public settlement encouraged to increase the adobe settlements in La Paz-El Alto. Since vacant or cheap land in and around the city were only available on the steep and unstable hill, there become natural squatting or building grounds for thousands of poor families which are often built in irregular plots with sub-standard designs and materials (Felix Trigo 1958, qtd. in Arbona & Kohl 2004, p 258). High-density environment and poorly built settlement aggressively proliferate the damage level in relation to natural hazards (Rivas, 2005) as well as difficult access to basic service such as water. Figure 1. La Paz-El Alto’s geographical characteristic B.Growing Demand of Water Access Access to water is among the lowest in Latin America and even where water services exist, their provision is often seriously deficient and water quality is also poor(Nickson et al 2002, p 101). While El Alto was primarily part of the city of La Paz and they are socially and economically interdependent, they became separate municipalities in 1988 as El Alto residents saw the municipal resources being spent only in the city center. Simultaneously, political leaders in La Paz saw the poor in El Alto as not only a burden on municipal revenue but an electoral threat (Kohl 2003, qtd. in Arbona & Kohl 2004, pp 256-257). This resulted in further inequity of built environment of the poor in El Alto and La Paz as El Alto’s tax revenue per capita is one fifth of La Paz and fewer resources were drawn for the poor in La Paz. Due to geographical barriers, municipal services are harder to reach therefore, the costs of water infrastructure installation and maintenance are higher. There had been favorable percentage of the populace that had access to water services in the twin city of Bolivia. In fact, La Paz sectors had 66% of water accessibility, with El Alto that had 45% (DFID 2005 p 4). However, even if these sectors had positive water provisions, their issue of accessibility towards the electricity services dropped (Rivas, 2005 p 245). The presumption for that notion suggests that the connection of the indigenous areas nearby La Paz and the city had been cut in order for the former to be disregarded with the water provisions. The low-income areas where households are not connected to the network highly depend on small-scale providers such as truck vendors, which tend to be more costly than piped water. Until mid-1997, water and sewer services in La Paz and El Alto were the responsibility of SAMAPA (Servicio Auto´nomo Municipal de Agua Potable y Alcantarillado) - a municipally owned, semi-independent water utility. SAMAPA had not been capable of obtaining new funding from international financial institution because of its very poor performance in loan servicing. At the same time, there was a growing demand for new finance to extend water network. In the past, international financial institutions supported the bulk of necessary fund to extend water facilities by providing soft loans. However, the World Bank and International Monetary Fund began to promote private sector participation as an alternative (Nickson et al, 2002, pp 101-102). (528) 1 Respond to the problems - Process of Privatization of Water Utility In 1994, The Bolivian government conducted national plan of establishing a new Vice ministry of Basic Services and a central government-appointed/autonomous state entity, Superintendencia de Servicios Básicos (Superintendent of Basic Services—SISAB) as a water regulator. Accordingly, the World Bank and the Inter-American Development Bank (IDB) extended a USD 4.5 million and a USD 1.3 million loans respectively (Laurie and Marvin, 1999). Main objective is to attract private investors by showing the country’s vision for future privatization of water utility in major cities with new regulatory framework. Bilateral Investment Treaty (BIT) with the Netherlands and France was also part of national plan in order for foreign investors and international financial institutions to easily facilitate privatization process in the future. Consequently, the privatization of municipal water utility was implemented on July 24, 1997, only three weeks after SISAB was appointed. A 30-year concession that served both La Paz and El Alto was granted to Aguas del Illimani, a consortium controlled by the French multinational Suez (Sprouk 2008, p5) which aims to expand coverage in low-income areas. However, these processes had been held confidential between the government and Illimani and decision making was concentrated on a solo ministry, the ministry of capitalization without active participation from other key stakeholders such as municipal authorities from La Paz-El Alto and public water company SAMAPA (Crespo Flores and Laurie, 2007, Spronk and Kohl, 2006). The previous tariffs hikes were considerably smaller than the recent rates. The recent rate had recorded an 18% increase as compared to that in 1991. In the international frontiers, tariff hikes had usually emerged in regularities because the state perceived this as an effective strategy to boost foreign investment portfolio. As the result, when water service utilities undergo into privatization, it will be difficult to roll the tariff rates back that will tend to create conflict between the new regulator and the public (PRINWASS, 2004a,b). A San Francisco headquartered building giant Bechtel, which acquired a majority of the Aguas del Tunari holdings, had indirectly controlled the water regulation in Cochabamba. The transition of control from Cochabamba’s water regulator to Aguas del Tunari was held successful in September 3, 1999 (Spronk 2008, p 5). 4. Result - Privatization of Water Utility and Its Failure However, in Cochabamba’s case, the social conflict soon arose and the government revoked the contract, reversed the water privatization legislation, and returned Cochabamba’s water utility under municipal control in early April 2000,. The water battle in Cochabamba influenced the people of La Paz-El Alto to question the water privatization scheme that was happening (Sprouk 2008, p8). Followed by several resistance activities against privatization, the militant local residents’ association, the Federation of Neighbourhood Councils of El Alto (FEJUVE) effectively engaged the citizens in the attempt to restore natural resources to public hands. FEJUVE acted as labour union during the discussions with Illimani and the government by using the expertise provided by transnational water advocacy network (Laurie et al, 2007).Consequently, the concession was cancelled in 2005. The state and the private investor both perceived that the water service utility could sue the state for detrimental effects that had caused the utility due to the revocation of the contract. This contingency is tangible over terms of the agreement and France and Bolivia’s BIT. However, at the initial phase of the contract, domestic clusters pronounced that Suez was an entity responsible for the remuneration of the detrimental effects it caused to the public and the Bolivian government was marked innocent (Spronk 2008, p 10). With the influence of the FEJUVE, the accounting of investment activities of the water service utility was under a private auditing organization for eight years (1997-2005). Price Waterhouse emerged as one of the proposed international auditors, but FEJUVE rejected the proposition owing to the contingency that such organization might be a subsidiary of Suez (Laurie 2007). However, although a deferment was held, the output of the audit was all worthwhile. The auditing body had found some of the criteria that were not executed (Spronk 2008, p 8). 5. Analysis 1. Pro-poor water strategy ‘Pro-poor’ strategy would actively encourage concessionaires although designing pro-poor contracts will demand careful consideration. Under this concession, several measures were taken to meet the demand for improvement of services in low-income areas, without threatening the financial viability. Primarily, the regulatory body has implemented measures with regard to the cost of water installation under the new increasing block tariff (IBT). Types of water consumption were classified, along with the water consumers. The division of four bands was accounted under the residential consumer sector. There were discriminative rates with a stationary charge; rich and middle class consumers were charged triple times the cost for indigents in installing water connection at the initial 12 cubic meters (Nickson et al. 2002, p 108). Secondly, the state had searched for the best alternative as a resolution to cut the cost of water installation. As the result, apartment sewerage installations were implemented to alleviate the cost for conventional installations. It diminished the cost of installation for about one-fourth of the total cost. However, SISAB signed an experimental project, which turned out to be the standard of water regulation and management that seeks to attain the objectives of the community through offering quality services that were inexpensive (Nickson et al. 2002, p 108). Thirdly, household participation was also an excellent alternative to alleviating the cost of water connections. Household sectors were given an option to participate in the installation process to reduce the cost, which had standard charge of $196 and $249 for water and sewerage installations, respectively. As the result, water installation would cost US$105 and sewerage at US$130. Furthermore, Aguas del Illimani had provided the citizens with a three to five year credit facilities to assist them for water installation fees. In order to elevate a better customer-utility relationship, three large organizations had stipulated to cooperate: SISAB, AISA and FEJUVE. The civil community had chosen the FEJUVE as their representatives. In a weekly basis, FEJUVE had to meet up with the Aguas del Illimani to explicate everything about the water service utility (DIFD 2005) Eventually, the initial cost for water installation in the city was considerably higher than many other municipalities, along with that was the priority of the state to expand the service coverage. The indigenous people of La Paz-El Alto benefited a lot from the private organizations that complement Aguas del Illimani’s corporate goals (Komives). Under the new concession, coverage has significantly expanded and the strategy looks well designed for the poor. However, majority of measures stayed the degree of informing according to Arnstein and the citizen could not participate in the process of designing the strategy for their benefit. II. What prevented ‘pro-poor strategy’ to be effective? Firstly, in order to achieve equal services to all households – despite rich or poor- Illimani imposed all individuals and entities to obtain permission if they have private water resources so that they could charge the volume of water they extract and consume. Standpipes, tanker truck delivery and latrines are banned in urban area (Komives 2001 p 68). Exclusivity in the contract without transition period faced firm opposition by water vendors and well-drillers in the city who had provided daily necessity. Secondly, the coverage area of the agreement was entirely an ambiguity. The contents utter that the water utility entity should provide water installations in every household of the twin city. It also depicts the area servida--extant and needed further water installations. This statement may depict the requisite for each household sector to present a property title before the water connection commences. Aguas del Illimani manifested such requisite as a threat for water installations. However, Aguas del Illimani disregard illicit settlements as a critical concern in attaining the company’s contractual accountability. Moreover, the citizens of the twin city had expected to present their property title regularly (Komives). As the result, the ambiguous contract had led to unachievable extension goal and created the community conflict, which caused the issue of privatization to be annihilated. Thirdly, the actual tariff rates may differ from each of the household sectors even if the average tariff rate proliferated at 35%. The inception of the new IBT provided favorable remarks for the poor because only 10% rate was added to the indigenous community. The residential settlers had to remunerate for tariff in their initial thirty cubic meters coverage while the household sectors only utilized seven to eleven cubic meters. Relating to this, residential settlers ended up remunerating more than the household sectors (Komives). Moreover, rich consumers remunerated for tariff proliferation at 106% because of additional consumption cost for cubic meter, which was tangible in the new IBT. Besides, increasing number of water access within the homes of both the poor and the rich led many consumer to increase their consumption. Therefore, to some extent, tariff hike was not only because of an increased in price but also because of an increase in volume consumed (Nickson et al, pp112) Fourthly, the coverage area was under the supervision of Aguas del Illimani, which was granted to install water connection in the area within 1.5 to three years. Dismally, up to now, there are water connections in the coverage area, but the issue of meters is still tangible. More than that, prices are stationary in the coverage areas without meters. As the consequence, over remuneration for installation cost is the primary problem of indigenous community because of average charge that the entity stipulates for implementation (Crespo 2001a). Finally, the concession had failed because of the inferior ability of SISAB. It also supported Aguas del Illimani’s monetary stimulant framework eventually. That scenario suggests that the developing nations have to encounter pricing and quality issues in the formulation of regulation, along with the community interests that hinder the regulation of the private organizations. The utility management of Bolivia had undergone great pace before it grasped the optimum and suitable framework of management. The greatest challenge may be tangible to the historical events of the nation, which once had not been under a concession or governed by numerous private organizations. With the presence of globally recognized water utility companies, regulators are doomed to break subjective policies as technological matters are examined well by these international organizations. The private moderator and consumers are expected to be tied in no time as the SISAB continues to construct the former and harmonize the relationship between the private and consumer sectors. Moreover, the area with no water services was Aguas del Illimani’s subject on its procurement of donor funds. These funds are accounted to expansion of water installation in the area no servida. The area is rural in nature, but there lived a number of 30,000 citizens. The place is anticipated to be the dwelling site for migrations that considerably indigenous. However, Aguas del Illimani is determined to pursue such concern as part of their corporate social responsibility (CSR) (Nickson et al.). Moreover, being able to sustain its reputation and gain support from global organizations, SISAB was still did not able to amend Aguas del Illimani’s utility regulation. I Measure should have been taken Several lessons for regulatory bodies can be drawn from the experience as follows: (Nickson et al) Strong Mandate Strong mandate must be executed, by the utility moderators, to proliferate the accessibility of water service as to ensure the transparency level of management freedom. However, this firm mandate should not concentrate on solely protecting the interest of a private organization as their top objective is to gain profit and such concern will rise tariff rates. The initial pace of the moderator should be the capacity to meet the congruence of corporate goals and community objectives for the notion of equality to be conceivable. Capacity building In order to develop above capacity, specialized training of human resources is essential in order to regulate a powerful private company in an effective manner. Transparency and accountability to consumers The absence of information and citizen participation had created social conflict It is important that regulator adopt a bottom-up approach and enhance transparency in concession design. Regulatory bodies should encourage the formation of consumer associations with oversight responsibilities over regulatory performance. Trust The citizens that have never experienced the private regulation of basic utilities in their nation could hardly manifest the significance and viability of such a scheme. There should emerge a new management regime with gradual procurement of the trust of the public and the private sectors. In relation to this, the stipulations should meet the demand of the public, and it should be consistent and everlasting. However, these regulations can be amended because of the licit framework, which initially protects the interest and eventually provides the demand of the general population. Exclusivity The management of regulation should be transparent. Transparency should be associated to the disclosure of information throughout the entirety of the populace. The general public should be prioritized in terms of formal disclosure as for them to perceive the marketing activities of the water industry. This notion implicates the cooperation of both retailers and principal utility service providers. The agreement should disclose the proper pace in executing the transition of the altering connection of retailers and the regular coverage framework. These things could only be done through effective and efficient stipulations of the regulatory body. 5. Conclusion In its initial stage of operation, Iiilmani took many steps to facilitate water connection for poor households both financially as well as procedurally and the company successfully expanded the connection. Despite the positive signs, this privatization has failed due to both SISAB and Illimani did not clearly capture the complex situation of the poor. In addition, SISAB was not capable enough to regulate Illimani’s operation which tended to pursue its financial goal to maximize profitability as a private institution. Residents experience this through a frame of economic hardship and social exclusion, which find an outlet in the formation of neighbourhood networks and the creation of political spaces in relation to local political entities. There are several measures which should have been taken which should have been considered with citizen’s participation from planning stage. Bolivia has changed the power relations of participation which resulted in the appointment of Abel Mamani, former leader of the FEJUVE as the new Bolivian Water Minister. This can be seen that FEJUVE achieved ‘citizen control’ over water utility. Nonetheless, there is an issue where ordinate citizen cannot participate in the discussion. While private sector participation is no always harmful to the citizen, BITs between developed and developing countries can be controversial as it elevates the legal status of private investors by allowing them to bring claims for damages against host states, however, the citizens of the affected state that may be directly affected by the contract have no means for a direct action to claim. BITs between developed and developing countries have to be considered carefully. As Arnstein described, the citizen in Bolivia had informed the privatization although related information was provided or occasionally eliminated for manipulation. The demise of the concession has been heralded by some observers as a major popular victory in the struggle against the forces of globalization but rather, the lesson tells us the failure was due to a combination of complex political, social and economic factors. Read More