Corporate Impacts and Water

An astonishing one billion people worldwide lack access to clean water, while global consumption of water is doubling every 20 years - more than twice the rate of human population growth. In short, the world faces a major water crisis. Increasingly, in response to this global emergency of water scarcity, multinational water corporations are asserting that they can provide the answer to the world's water needs. Yet in recent years, the rapidly rising levels of private investment in water services in both developing and developed countries has been accompanied by an alarming number of incidents involving corporate malfeasance and irresponsibility.

The world of privatized water is overwhelmingly dominated by two French multinationals: Suez (formerly Suez Lyonnaise des Eaux), with 1999 profits of $1.5 billion on sales of $32 billion, and Vivendi Universal, ($$). Both are ranked among the 100 largest corporations in the world by the Global Fortune 500, and between them they own, or have controlling interests in, water companies in over 120 countries on five continents and distribute water to almost 100 million people in the world. Other major corporate actors include German water giant RWE and its British subsidiary Thames Water, and US-based Bechtel, which is promoting privatization plans in South America. Another major player - Enron - has recently withdrawn from the scene after an aggressive effort by its water subsidiary to press forward with privatization projects on several continents failed.

The record of these companies and other major private water operators has been troubling on many fronts.

- Bribery has been endemic to the industry. For most of the past decade, French magistrates have been investigating allegations of corruption against executives of the two major French water companies. On three occasions, water executives have been convicted of paying bribes to obtain water contracts in France.

- Major controversies have erupted over high prices charged by the water corporations, including these instances:

· Public Services International (PSI) reports that in England, between 1989 (the year water was privatized) and 1995, there was a 106 percent increase in the rate charged to customers, while the profits of the companies increased by 692 percent.

· In Cochamba, Bolivia, the Bechtel Corporation took over operation of the city's water system and doubled and even tripled prices for many poor customers. When popular opposition to the price increases emerged, security forces shot and killed several protesters. Bechtel decided to leave Cochabamba, but then sued Bolivia before an international tribunal for $25 million in lost profits.

· The water system of Manila, in the Philippines, was divided by the World Bank into two zones in 1997, each run by a separate consortium. One consortium included Bechtel, the other, Suez Lyonnaise des Eaux. In October 2001, the Suez consortium was given permission to raise rates by up to 64%, contrary to their proclaimed intention to keep rates low.

· Since 1993, Suez has been the major partner in the privatized utility supplying water to Buenos Aires' 10 million inhabitants, one of the largest water concessions in the world. According to the first independent study of the utility, prices were raised by more than 20% after privatization. It reported that many poorer families - if at all connected to the supply - could no longer afford to pay their water bill.

· In 2001, Enron's water subsidiary, Azurix, was fined for overcharging thousands of customers to whom it supplied water in Buenos Aires.

- Major water multinationals have committed serious environmental violations and have failed to provide adequate or sanitary water supplies.

· Suez, Vivendi, Thames Water (RWE) and Wessex Water (Enron) all have been ranked among the top five polluters by the UK Enviornment Agency.

· In 1995, the Puerto Rico Aqueducts and Sewers Authority (PRASA) water supply and sanitation services were privatized to Vivendi's Compaia de Agua in 1995. Since then, PRASA has been the subject of two highly critical reports by the Puerto Rico Office of the Comptroller. The most recent report found 3,181 deficiencies in management of the infrastructure and said the leakage rate was around 50%. Since privatization, PRASA has reportedly been fined a total of $6.2 million for various violations of environmental laws. Whole communities on the island have had no water supply for weeks and even months at a time.

· In Buenos Aires, where Suez operates the major water concession, 95% of the city's sewage is dumped into the Rio del Plata River, causing environmental damage that must in turn be paid for with public funds.

These are only some examples of the impacts that multinational water companies have created. Meanwhile, international financial institutions - including the World Bank and IMF - have supported the expansion of these companies' operations globally by pressing countries to privatize their water service systems as a condition for loans and debt restructuring. The World Trade Organization has also recently begun negotiations to liberalize water services.

Yet there are no binding international rules addressing how these multinational water corporations operate or providing clear legal liability for irresponsible behavior or abuses. An international corporate accountability framework is needed to ensure that corporations maintain a consistently high standard of behavior wherever they operate, and to ensure that the democratic rights of citizens and stakeholders. Without such a corporate accountability measure, major water corporations will continue to operate internationally at the expense of people and the planet.

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