Multinational water companies 'desperate' to get out of Argentina

Catholic New Times, Dec 18, 2005

BUENOS AIRES -- More than one million residents in rural Argentina are awaiting the exit of a multi--national utility company from their country.

A consortium led by the French multi-national Suez, is leaving Santa Fe province by the end of next month, The Guard/an reported. It is also preparing an early departure from its formerly lucrative concession in Buenos Aires. The giant utility has supplied water and sewage service in the area since 1995.

The decision, which follows the high-profile collapse of other water privatization schemes in countries including Tanzania, Puerto Rico, the Philippines and Bolivia, has again raised questions about the viability of privatizing utilities in the developing world.

World Bank figures show that Aguas Argentinas expanded the delivery of water services to more than 1.5 million inhabitants and sanitation to 800,000. However, critics argue that much of the promised investment--$4 billion over three decades--never took place. According to the environmental group Friends of the Earth, price increases prevented poor people from accessing the network, while underinvestment in the sewage system led to 95 per cent of the city's waste being dumped into the Rio del Plata.

Disappointment with the privatization process is not just confined to consumers. Private sector operators in Argentina have complained about ad hoc government policy, the lack of legal or contractual security and the absence of a truly independent regulator.

"Across Latin America, we are seeing a tendency of large companies to leave," said Daniel Nolasco, a Latin American water expert. "And we don't see them bidding for new concessions either."

He anticipates that Latin American investors are likely to pick Up the concessions left by the departing multinationals. The government is looking to reprivatize Suez's 39.9 per cent stake in the operating company, Aguas Avgentinas, but no deal has yet materialized.