The World Bank's Influence on Water Privatization in Latin America : The experiences of Argentina and Bolivia

A common criticism of both World Bank and IMF operations in developing countries has been that these institutions undermine the national sovereignty of indebted states by imposing structural adjustment programmes that disregard their short or long-term national objectives. Common features in World Bank and IMF policies have ultimately led to the assumption that the Bretton Woods Institutions are interested in spreading worldwide a well-defined model of economic liberalism, in which privatization of services plays an important part. In the context of growing skepticism surrounding the activity of international financial organizations and the legitimacy of their policies, it is interesting to assess what has been the role of the World Bank in the water privatization processes that have taken place in the last twenty years. The paper focuses on the experience in the city of Buenos Aires, Argentina, a Latin American country that had liberalized their water services market, diminished the role of the state therein and welcomed privatization under the encouragement of the Bank. This case study was chosen due to the interest that it drew once it was evident that privatization was not having the results hoped for. Popular unrest provoked by deficient services and expensive tariffs, mutual accusations of violations of the terms of the contracts, suits filed before international dispute settlement organs such as the ICSID, and even the revocation of the contract and return of water services to the state, have been some of the unfortunate consequences of the Buenos Aires experience with privatization of water services. The main purpose of the paper is to examine the World Bank's role in the whole process. In the framework of the recent controversies over the policies of international financial institutions and the way they are imposed upon indebted states, the paper aims at studying the influence of the World Bank on the state's decision to privatize, its subtle omnipresence during the execution of the contracts and finally its reaction to privatization gone awry. The paper also aims to contribute to the determination of whether the Bank has appraised its own performance, learned from its mistakes and changed in any way its approach to water privatization in other parts of the world after failed experiences in Latin America.