Bolivia: Bechtel and the water wars
From the book The Secret History of the American Empire
Bolivia, like Ecuador and Venezuela, began the 21st century with protests against foreign corporations that plundered its resources. Demonstrations, boycotts and strikes halted commercial activities along the streets of La Paz and many other cities. Although it spearheaded by Aymara and Quechua leaders, indigenous people did not stand alone; labor unions and civil organizations supported them.
Unlike Ecuador and Venezuela, the immediate cause of unrest was not oil; it was water. During the 1990s it became increasingly apparent that water would soon be one of the most valuable resources on the planet. The corporatocracy understood that by controlling water supplies they could manipulate economies and governments.
The turmoil in Bolivia once again was detonated by the World Bank and the IMF. In 1999 the two organizations insisted that the Bolivian government sell the public water system of its third largest city, Cochabamba, to a subsidiary of engineering giant Bechtel, as part a new round of SAPs. At the World Bank's insistence, Bolivia further agreed to pass the costs associated with providing water on to all consumers, regardless of their ability to pay-an act contrary to indigenous traditions, which hold that all people have an inherent right to water, regardless of their economic status.
When I heard that Bolivia had bought into this EHM ploy, I was wracked with guilt; the Every-Person-Pay (EPP) policy was an approach to rate structuring I helped formulate in the mid-1970s. At that time the idea was applied mainly to electric tariffs and was considered innovative. It contradicted a basic premise of most rate plans advocated for helping impoverished regions since the 1930s, including those adapted by the Rural Electrification Administration (REA) in the United States: that providing services such as electricity, water and sewer to everyone was essential to general economic growth, even if such services had to be subsidized. Following the (REA) example, implementing this theory had proven highly effective in numerous countries. Despite the successes, the World Bank decided to experiment with something radically different.
As chief economist of one of the firms hired to promote Bank policies in the 1970s, I was pressured to develop econometric models that would provide the validity of EPPs. Econometrics makes it easy to justify just about anything and I had a brilliant staff of economists, mathematicians, and financial experts; so technically it was not a problem. However there were two issues that tore at me. The first was the obvious moral one. The second was pragmatic. a recognition that the old theory had demonstrated its efficiency time and again. So, I asked myself, why tinker with success, why risk increased poverty and social unrest, why advocate EPPs?
The answer was evident: the EPP approach would transform government-subsidized bureaucracies into profitable “cash cows” ripe for privatization (as I would later discover in Bolivia at COBEE). EPPs evolved out of the same mentality as infrastructure loans that benefited foreign construction companies in the local rich while leaving the poor with nothing, other than huge debts. On a trip to Argentina, I learned of another reason.
“These countries are our future security,” General Charles Noble told me as we rode together in a chauffeur-driven car through the streets od Buenos Aires in 1977. “Chuck” was a vice president at MAIN (who would later be promoted to president). A West Point graduate with a Master’s degree in engineering from MIT he had a distinguished military career, having served as commanding general of the U.S. Army Engineer Command in Vietnam and president of the Mississippi River Commission. Now he was in charge of MAIN’s water resources studies for Argentina, including those relating to the massive Salto Grande hydroelectric project the country was building in partnership with Uruguay, which would produce nearly 200,000 megawatts, create a vast lake, and flood a town of 22,000 inhabitants.
“We lost Vietnam because we didn't understand the communist mind. We gotta do a whole lot better here in Latin America.” Chuck gave me his best smile, one that was shockingly gentle for a man with his reputation for toughness. “Don't ever let the socialist talk you into believing that offering a free lunch buys anything but disrespect. People have to pay for what they get. Only way they appreciate it. Besides, it teaches them capitalism, not communism. Look at that.” He pointed at a pond in a park we were passing. “Water’s the future gold and oil combined. We need to own as much of it as possible. That will give us leverage, power.”
More than two decades later, I thought about Chuck Noble when the announcement was made that a single company had been granted the exclusive right to purchase Cochabamba’s water system, known as SEMAPA. a 40 year privatization lease was granted to Aguas del Tunari, a partnership led by a subsidiary of the infamous Bechtel Corporation. Awarding such a license-to-exploit to a U.S. company had to make the general very happy. But people in Latin America felt differently. The San Francisco-based firm had earned a reputation as an organization that managed to win favors from just about everyone in high places. It had a long history of securing lucrative contracts from the World Bank and the U.S. government. Because it was a private corporation, controlled by a single family, it did not have to open its books to the SEC or other watchdog organization and adamantly refuse to do so.
“If Bechtel wants the job don't even bother to bid,” I had been told during my EHM days on different occasions by government officials in Indonesia, Egypt, and Columbia. Not long after my trip to Argentina with Chuck Noble, in Ecuadorian contracting officer, a personal friend of mine from my Peace Corps days, allowed me to take him out to dinner at the most expensive restaurant in Quito and then confided that he would save me thousands of times the price of that meal by advising me not to spend the next several months preparing proposals for a project he knew Bechtel was slated to get. He rubbed his thumb and forefinger together. “Everyone will grow rich,” he said. “Me, the mayor, the president, the boys from San Francisco.” He grimaced. “Except you-and the other poor suckers who think this is a competitive bidding process.”
Bechtel’s ex-officers and executives includes such luminaries as George Shultz (Bechtel president and board member, Secretary of the Treasury under Nixon, and Secretary of State under Reagan), Caspar Weinberger (Bechtel vice president and general counsel, and Secretary of Defense under Reagan), Daniel Chao (executive vice president and managing director of Bechtel Enterprises Holdings, Inc. and member of the advisory committee for the Export-Import Bank of the United States), and Riley Bechtel (Bechtel CEO and member of George W. Bush’s President’s Export Council). Bechtel's management also included my father-in-law, who, before he retired, had been the company's chief architect and then was brought out of retirement to serve as project manager of a huge Bechtel job to build cities in Saudi Arabia. My wife started her career at Bechtel. I knew the company well-from many angles.
Almost immediately after the lease for SEMAPA was granted to Bechtel, water rates skyrocketed. Some Cochabambans experienced an escalation in their bills of more than 300 percent. This was catastrophic for the city's inhabitants, who ranked among the continent's most impoverished people.
“They're faced with a choice between food and water,” a Quechua organizer told me. “The gringos wants more profits. Bolivians are dying of thirst. They're told they can't even collect rain water, that their contract with SEMAPA requires them to pay Bechtel for any and all water as they consume.”
The citizens of Cochabamba rebelled. Boycotts shut down the city for four straight days in January 2000. Mobs threatened to storm SEMAPA’s offices. Bechtel demanded protection. Bolivian President Hugo Banzer acquiesced and mobilized the army. In the violence that followed, dozens of Aymara and Quechua were wounded and a 17-year-old boy was shot to death.
Fearing a full-blown revolution. President Banzer finally imposed martial law. Then, after reportedly meeting with U.S. Embassy officials, he announced that he would nullify the Bechtel contract. In April 2000 Bechtel abandoned its operations at SEMAPA.
The people of Cochabamba celebrated their victory. They shared cups of water in the streets. They offered toasts to their new Aymara and Quechua heroes and wrote songs proclaiming this triumph as the beginning of a new era. However, soon it was apparent that they also faced a dilemma. They found that there was no one left with adequate experience to run SEMAPA. Many of the former managers had retired, relocated, or excepted other jobs.
The community elected a new board of directors and established a set of governing principles that identified social justice as SEMAPA’s guiding commitment. The water company's most important objectives would be to supply water to the poor, including those who had not previously been connected to the system; provide adequate compensation to its workers; and operate efficiently and without corruption.
Meanwhile Bolivia's government still had to deal with the corporatocracy. Bechtel was not about to give up its cash cow-and set a precedent that might encourage other countries to follow Bolivia's example-without a fight. In a classic case that demonstrates the corporatcracy’s willingness to manipulate international law in order to achieve its goal, Bechtel enlisted one of its Dutch holding companies. Drawing on a 1992 Bilateral Investment Treaty (BIT) between the Netherlands and Bolivia (since none existed between the United States and Bolivia) the Dutch subsidiary filed a $50 million lawsuit against the Bolivian people, half for profits it claimed would be lost from its “expropriated investment” and half for damages.
This incredible story of corporate intrigue, greed, insensitivity was largely ignored by the U.S. media. However, the Latin press covered extensively. As I followed reports posted on their Web sites, I kept thinking about the people at COBEE. I recalled that most of the key executives and engineers and Bolivia's most powerful electric utility-the one that supplied power to both the presidential palace and the military headquarters-were citizens of other countries (the United States, and United Kingdom, Argentina, Chile, Peru, and Paraguay). This dependency on foreign nationals was, I realized, a calculated strategy, virtually ensuring that the utility would never be nationalized.
I also discovered that Leucadia no longer owned COBEE. The electric company had been bought and sold several times since the early 1990s, always by foreign corporations. Leucadia and the others had reputations for merchandising companies at a profit. Cash cows were a good thing; but the quick, high-return sale was even better, especially since it kept local populations off balance.
From all the turmoil, a new leader emerged. Following a pattern that seemed to be turning into a trend, Evo Morales rose out of the indigenous community. An Aymara activist, he joining the Movimiento al Socialismo (MAS) party. His was a strong voice that opposed privatization and what euphemistically was referred to by corporatocracy supporters as “liberal” or “free market” economic reforms-policies that would prevent Bolivia from protecting its farmers and businesses while at the same time forcing it to accept protectionist barriers from the United States. He denounced the Washington-driven Free Trade Area of the Americans as a plan “to legalize the colonization of the Americas.” His popularity grew and he was elected to Congress.
Almost immediately the corporatocracy labeled him a terrorist. The U.S. State Department described him as an “illegal cocoa agitator.” Although Morales had been part of the cocalero movement-a coalition of coca leaf-growing campesinos who resisted U.S. efforts to eradicate cocoa farms-he pointed out that the plant was used by Andean people as a dietary supplement and medicine long before it was made into cocaine. A remedy for altitude sicknesses, muscle aches, hunger pangs, and other digestive disorders, cocoa tea had been drunk by many dignitaries, including Pope John Paul II and Britain’s Princess Anne. Nevertheless, Monales was forced out of his congressional seat in 2002 on charges of terrorism. The Quechua and Aymara accused the CIA of masterminding his removal. Within months, his eviction was declared unconstitutional.
U.S. Ambassador Manuel Rocha warned, “I want to remind the Bolivian electorate that if you elect those who want Bolivia to become a major cocaine exporter again, this will endanger the future of U.S. assistance to Bolivia.” Rather than deterring Bolivians, Rocha inflamed them. Morales declared that the ambassador's words had helped to “awaken the conscience of the people”.” MAS plastered posters onto walls around the country; above an enormous photo of Morales, huge letters asked: “Bolivians: You Decide: Who’s in Charge? Rocha or the Voice of the People?”
In 2002 presidential elections, MAS finished only a couple points behind the leading party. Morales refused to endorse the new president, a millionaire raised in the United States, Gonzalo Sanchez de Lozada. Instead MAS opted to play the role of opposition. Like Chavez after his failed coup attempt, Morales’s reputation was bolstered by what on the surface appear to be a defeat.
President Sanchez buckled to IMF and World Bank demands. In 2002 he decreed a huge tax increase. As so often happens in such circumstances, those who could least afford to pay taxes ended up hardest hit. Amid ensuing riots, 30 people were killed. Road blocks and demonstrations brought the country to a standstill. Sanchez’s plan to export natural gas at low prices to the United States and other countries instead of distributing it to needy Bolivians further inflamed indigenous communities. Bloody fighting resulted in another 20 deaths. Finally, Sanchez was forced to flee the country. He now lives outside Washington, D.C.; the United States has refused Bolivia's request to have him return for trial.
Bolivians had defied the World Bank and they had defeated Bechtel, one of the most powerful organizations on the planet. Now one of their “original people,” one of those who had been so brutally subjugated for generations, had risen phoenixlike from the ashes of his culture’s ruins.
In a way, it seemed to me that the real message here was not just for Bolivians and Latins; it was also intended for Bechtel and the rest of the corporatocracy. It was a pro-democracy, pro-justice messaged that served to inspire the younger generations and Bolivia, the United States, and the world.
I often found myself thinking about Jessica's comment as we wound through the Zongo River Gorge. “I’m glad they didn't build a big dam and flood this whole valley,” she had said. “It's so beautiful.”
There is nothing beautiful about any aspect of U.S. foreign policy and CIA skullduggery I encountered during a trip to Brazil-Washington’s attempt to counter the message sent by the new wave of Latin leaders.
This problem of greed is so disgusting; I heard, (but am unsure of how true the statement is) that Billy Graham stated the if God does not punish the people of the United States because of this country’s malfeasance an apology will be owed for the destruction of Sodom and Gomorrah