Argentina – Water – Private failures, renationalisation and union cooperative

David Hall
Date published: 
Jul 2010

In the 1990s, Argentina, regarded as the ‘model pupil’ of the IMF, privatised water supply and sanitation services to a greater extent and from an earlier date than any other developing country. Despite widespread opposition, by the end of 1999, private operators were providing services to 71% of the country’s urban population.  

Two of the largest privatisations were in Buenos Aires. In May 1993 a company called Aguas Argentinas – jointly owned by four major multinationals, in order to reduce competition - was awarded a concession covering 10 million people in the city of Buenos Aires itself.  Six years later, another concession was awarded to a subsidiary of Enron, covering 2 million people in the province of Buenos Aires. Both contracts guaranteed that the companies would be able to maintain their profits in US dollars.

The actual performance of the private companies fell far short of the expectations. Aguas Argentinas only delivered about 60% of its promised investment programme, increased prices faster than inflation, failed to meet water quality standards or maintain the pipe network adequately, and only connected the poorest households in the slums when the local councils and citizens agreed to cover the costs.

At the end of 2001 Argentina, despite following IMF policies to the letter, was hit by a massive economic crisis. The currency was devalued, and the parliament revoked the private companies’ rights to ‘dollarised’ profits – otherwise water prices would have increased hugely at a time when people were already suffering loss of jobs and income. The multinationals brought lawsuits and attempted to renegotiate their contracts to maintain profitability, but the public authorities refused, and in the end the companies abandoned the services.

In the city of Buenos Aires, the service was finally renationalised in 2006 under a new state-owned company, known as AYSA. A new pay agreement was reached, which provided for a continuous training programme, a new health and safety policy, an end to most outsourcing, and a ‘fair wages’ clause requiring contractors to observe agreed pay and conditions.

In the province, the contract ended much earlier, in  March 2002, when Enron abruptly abandoned the service. The service was taken back into the public sector, but the provincial government did not have the technical capacity to take charge of the service. The trade union, OSBA, stepped in and established a workers cooperative which took over responsibility for running the service through. The cooperative, named “5 de setiembre”, operates under continuous consultation with the authorities, users and consumer unions. Within 3 years it increased the number of people connected to water and sewerage systems.

The “5 de setiembre” cooperative has been active in helping other unions and communities in Argentina and other countries restore and strengthen public water systems. It has signed a ‘public-public partnership’ agreement with the Peruvian water workers union, to help strengthen the public system in the Peruvian town of Huancayo, which was threatened with privatisation.

Sources and further reading