Rate Hike
As a condition of the contract Aguas del Tunari had agreed to pay the $30 million in debt accumulated by SEMAPA. They also agreed to finance an expansion of the water system, and begin a much needed maintenance program on the existing deteriorating water system. Dider Quint, a managing director for the consortium, said "We were confident that we could implement this program in a shorter period of time than the one required by the contract. We had to reflect in the tariff increase all the increases that had never been implemented before."
On top of this, in order to secure the contract Aguas del Tunari had to promise the Bolivian government to fund the completion of the stalled Misicuni dam project. The dam was purportedly designed to pipe water through the mountains, but the World Bank had deemed it uneconomic. While the consortium had no interest in building the dam, it was a condition of their contract, as it was backed by an influential member of Banzer's megacoalition, the mayor of Cochabamba, Manfred Reyes Villa. An attempt to privatize the water system had been made without the condition of building the dam in 1997, but Reyes Villa had used his influence to squash the deal. Critics of Reyes Villa held that the dam was a "vanity project" which would profit "some of his main financial backers".
The officials in Bolivia for Aguas del Tunari were mostly engineers lacking marketing training. They were also foreigners unaware of the intricacies of Bolivian society and economics. Upon taking control the company raised water rates an average of 35% to about $20 a month. While this seemed minuscule in the developed nations that the Aguas del Tunari staff had come from, many of their new clients only earned about $100 a month and $20 was more than they spent on food. In complete ignorance of the reality of his situation, a manager for the consortium, Geoffrey Thorpe simply said "if people didn't pay their water bills their water would be turned off." The poor were joined in their protest by January 2000, when middle-class homeowners and large business owners stripped of their subsidies saw their own water bills increase. As anger over the rates mounted, Reyes Villa was quick to distance himself from Aguas del Tunari.
Read more about this topic: 2000 Cochabamba Protests
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