June 2003

Views expressed are those of the authors, not necessarily of the AFSC.

The Nicaraguan Struggle for Water and Sovereignty

Arnie Alpert, New Hampshire AFSC Program Coordinator, visited Nicaragua in March 2003.

The Alfonso Cortes School in the Managua, Nicaragua neighborhood of La Primavera is so starved for resources that the kindergarten class has seventy students. Teacher pay in the country averages $70 a month, about 20% of the amount the government says a family needs to meet its basic needs. Under pressure from the International Monetary Fund to reduce spending on basic services, the President recently vetoed a proposal to raise teacher pay and is instead pushing schemes to shift education costs to parents, most of whom earn even less than the teachers. In the past year, the school has for the first time started getting billed $130 to $200 a month for water, without getting any additional government funds. The school is getting billed for electricity, too, and doesn't have money to pay for it either. A sign in the office reads "Contributions are voluntary, but they are needed to make improvements in the school."

In rural Nicaragua, some people have wells or piped water, but two-thirds of the people do not have reliable access to water at all. Photo: Arnie Alpert

Welcome to Nicaragua, one of the poorest nations in the western hemisphere. Of the country's five million people, three million are living in poverty, and about a third have no access to clean drinking water. Yet, the International Monetary Fund, the multi-lateral agency which lends money to governments in financial distress, has taken the position that Nicaraguans don't pay enough for water.

Since 1997, among the conditions placed by the IMF on Nicaragua's access to loans has been the requirement that Nicaragua raise water rates and sell off publicly owned water companies to private firms. While the IMF is the most powerful of the International Financial Institutions (IFIs)Ðit sets the basic conditions indebted governments have to meet to participate in the global economy–its partner organizations often implement the standard program of privatization, investment in export-oriented production, and development of infrastructure attractive to foreign investors. In the case of Nicaragua, it was the Inter-American Development Bank (IDB), which lent $35 million to Nicaragua in 1999 to finance the sale of public water systems to foreign firms, and to install water meters in the shanty barrios scattered around Managua, the capital city.

That the people of Nicaragua did not learn for two-and-a-half years that their water supplies were being peddled on the international market is a revealing fact about the secret and anti-democratic nature of the IFI schemes. But when Nicaraguans did find out, thanks to a Swiss organization that had seen the sale offer on the Internet, they formed the National Network in Defense of Consumers. A year later, the Network has already put the privatization plan on hold and started an anti-privatization campaign that threatens to stop the IDB project. If they succeed, a confrontation between the Nicaraguan government and the IMF will reveal whether the country will be run by the IFIs and foreign corporations, or by its own elected representatives.

The IBD project to privatize the country's water is described as a "program to modernize the management of water and sewerage services," with two major components. First, a program of "business strengthening" would include contracting with a foreign company to manage the public water systems in the departments of Le-n and Chinandega. It would also "support the transformation" of ENACAL, the government-run water utility, into an investor-owned corporation.

The second part of the IDB program is intended to "rehabilitate and regularize" water services in poor neighborhoods in Managua by installing water meters, made available to consumers through "microfinancing." In other words, not only would the desperately poor people who live in the sprawling shanty towns around the capital would be forced to pay much more for water, they would also have to borrow money to pay for their own water meters. Communities affected would include the poorest part of La Primavera, a new area known as "the Annex" near the shore of Lake Managua. In the Annex, families have built houses of used sheetmetal, cardboard, and scrapwood, often on land for which they have no secure title. Households have access to running water and electricity through unauthorized connections. They do not pay for their water. The residents, most of whom are marginally employed if they have work at all, have heard about plans to put in water meters. "They are afraid to think of what will happen if meters are put in," said one neighbor.

Their fears are well grounded. According to Carlos Pacheco, of the Center for International Studies, residents of one of the neighborhoods in the IBD pilot project are getting water bills of 200 to 1000 cordobas a month (a range between $13 and $66 a month at current exchange rates). Eighty percent of them are unemployed. Consumer activists say it is okay for people to pay something for water, but that there should be fixed, low rates for the poor, so no one is forced to choose between necessities such as water, food, and education. But the doctrines of the international financial institutions, with their focus on austerity budgets, make it difficult for states such as Nicaragua to subsidize water for the poor.

Janet Chavez of the Nicaragua Consumer Defense Network. Photo: Arnie Alpert

It is no surprise that the water privatization program, the first part of the IDB plan, would start in Le"n and Chinandega, says Janet Chavez, a Chinandega lawyer who is one of the leaders of the Network in Defense of Consumers. The region, in Nicaragua's northwest corner, has the nation's richest water resources, with a water table only 10 or 12 meters beneath the surface. Water should be abundant and inexpensive, Chavez said, but in poor areas it is unreliable or unavailable for people without their own wells.

Now, big European water companies (Vivendi, Suez, RWI,and Aguas de Florencia) allied with Nicaraguan business leaders, want to get their hands on it. "If water becomes privatized, it will not be in the interests of the people," said Chavez. "We reject the idea that water should be a commodity."

The skepticism of the Network is grounded in its experience with other privatization projects forced by the international lenders. The first stage of privatization was from 1992 to 1995, when the IMF's influence over the economy began to take hold. Magda Lanuza, an analyst at the Center for International Studies, said the government sold 342 state-owned enterprises, such as cement and sugar mills. Nobody knows where the money went, Lanuza said.

The second stage of privatization, which started in 1994, included bigger operations, such as the telephone company. A billboard at the Managua Airport now shows a photo of one of Nicaragua's characteristic lakes and volcanoes, with the slogan, "This is BellSouth Territory."

Electricity was also privatized under IMF mandate. Santos Amador, another volunteer with the Network in Defense of Consumers, said privatization was supposed to make electricity service cheaper and better. Instead, rates doubled in the two years after Union Fenosa, a Spanish company, took over. Electricity costs somewhere between 8 and 12 cents per kilowatt hour, a rate comparable to electricity in the United States.

"Todos somos iguales (All of us are equals)" April 30, Raise the Revenue, Stop the Cuts rally at the MA State House © Marilyn Humphries

During our interview with Amador, three volunteers with the Network burst into the room to announce they had just won a legal victory against Union Fenosa and the government agency that sets electricity rates. The Supreme Court had just ruled that rate hikes had taken place in violation of constitutional provisions which should have frozen them for five years. As a result, the company had collected 150 million cordobas, or about 10 million dollars, in excess fees. The Network hopes to carry the momentum from its court victory into the struggle over water.

One arena of the water struggle is the government owned hydro-electric dam, Hidrogesa, in the department of Jinotega, which the IMF has ordered the government to sell. Interested potential buyers include Enron, which is still in business, and Coastal Power, a subsidiary of another US-based company accused of shady dealings in the California energy market.

But before a deal could be signed, the Network argued that no sale should go through until laws were clarified governing ownership of the water in Lake Apanas, the large lake created by the Hidrogesa dam, and in the surrounding watershed. The land around the lake is owned by indigenous Nicaraguans, with land titles going back to the Spaniards. They use the lake water for fishing, farming, irrigation, and transportation. Existing law is vague; it is not clear whether sale of the dam would transfer control of the water, too, to a foreign company. It was this ambiguity that the Network used in September to convince members of the National Assembly from all major parties to put the Hidrogesa sale and further water privatization on hold until a new water law is adopted.

The stage is now set for the next battle. On one side is the government, headed by President Enrique Bolaños, backed by the IDB and the foreign water companies. One provision of their plan, according to Chavez, would require landowners to get permission from the private water company before digging a well on their own property.

On the other side is the Network in Defense of Consumers, with its allies from the labor movement and civil society. Their proposed water law will prohibit privatization. "We think of water as a social good that should be used for the benefit of the people," said Santos Amador. "We are the true owners of the water."

Janet Chavez put it directly, "We don't want water in the hands of a foreign monopoly."

The battle over control of Nicaragua's abundant natural resources goes back to the Spanish, and later to US entrepreneurs who wanted to build a canal across the Central American isthmus. "Little by little, our resources were stolen," said Network activist Guadelupe Sequeira, who recently conducted a speaking tour that took her from Seattle to New Hampshire to Washington DC.

Since the Sandinistas lost power to Violeta Chamorro, the US-backed candidate, in the 1990 election, "our capacity to have our own economy, to be self-sufficient, has been destroyed," according to Magda Lanuza. Trans-national companies have not only taken over state-owned banks, electric companies, and phone companies, they even control companies that supply milk, cigarettes, and bread. And if the Central American Free Trade Agreement goes into effect, she warned, "we will all be property" of the trans-nationals.

The early phases of privatization met little public opposition, including from the Sandinistas. "People began to suffer a new kind of invasion," Sequeira told an audience at the Unitarian Church in Peterborough, New Hampshire. It was not until the mid-'90s that Nicaraguans began to organize as consumers, outside the political parties, leading to passage of milestone consumer laws in 1994 and 1998. Increases in prices for essential goods while wages were frozen prompted the formation of the Network in Defense of Consumers. With few resources other than the organizing skills that come from decades of social struggle, the Network is taking on the goliaths of the global water companies, the IMF, and the Inter American Development Bank. What is at stake is not only access to water, but whether national sovereignty has any real meaning for a small, poor country in the era of globalization.

In Chinandega, when the government water agency put new water meters into the local schools, water bills went up to 7000 cordobas (nearly $500) a month. The schools couldn't pay, so they just turned off the water. Members of the Network in Defense of Consumers are convinced that water privatization would cause further increases, especially for the poor. The example of South Africa, where consumers have to pre-pay for water with an electronic debit card, stands as a warning. The Network is prepared to take to the streets if its proposed water law fails to halt the privatization process. "Injustice causes people to rebel," said Santos Amador. "They say we're radicals, but I don't believe I should remain silent."

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