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5/1/1997 - It’s Only Water by William F. Foote

It OnlyWater MEXICO CITY Mexico May ByWilliam F Foote Whatkind ofgovernmenthandoutwouldaMexicanrefuse Nonethat Icould think until I learned about water meters recently installed charge across nation capital This outrage saysErnesto Rodriguez brandishinghis latestwaterbill Last employees installed meter apartmentbuilding tomeasure H20consumptionwithcomputer precision Withinweeks hiswaterbillsky rocketedbyover percent Howcantheycharge thismuch It sonlywater Hiscommentsare typicalinthissprawling capital whereangeroverrisingwa terprices iscomingtoaboil Lastyear forthe firsttime localauthoritiesbegan chargingforH20likeelectricity telephone oranyotherbasicservice accord tohowmuch people Thereasonswereclean In world largest decrepit water systems increasedrevenuewouldhelp overdue ernization Given record levels water waste meters offered motivate people conserve relying nomic incentive ecologi calawareness In another unprecedented Mexico City officials formedaninternational private partnership theirbrokenwater system Ten service contracts signed local Euro peanwatercompanies isedtoimprove efficiencyand accountability while cutting subsidiesandbureaucracy Yet buckingboththebureaucratsandthetime honoredtheorythatMexicansshould realwater costs areno tasks People consider close freewa birthright AsJuly elections voters prepare choose their first freely electedmayor candidates promising scrap metersand reduce waterrates This issue above politics declares Michael Jones British director Industrias delAgua aMexicoCity basedjointventurebetweenU K watergiant Severn Trent local environmental concern This about July elections It about guaranteeing provision DEGREE OFCOSTRECOVERYIN INFRASTRUCTURE vitalwaterto millions ofpeople SECTORS INDEVELOPINGCOUNTRIES WORRIEDABOUTWATER Degreeofcostrecovery percent According World Bank figures federal subsidy water sewage services Mexico City currently amounts billion dollars percent gross domestic product With world largest urban popula capital consumes water staggering rates given Mexico City accounts approximately percent allthe potablewater consumedin Latin America Problem Valley Mexico geographic federal district rivers lakes Whencedoes allthewatercome About60 percent drawn wells ravenous liters second twice capacity rainfallto replenish aquifers naturally Suckingthe worrisome consequence aquifers deplete themselves downtown Mexico Cityhassunkby 7meters years Vai Thesourcesofwater inMexicoCity With falling water tables Mexico City increasingly depends waterpumped intermontane valleys scores miles In 1950s federal district beganimportingwaterfrom theLermaRiver kilome Thencamethe Cutzamala Riverwater supply system whichpumps elevation meters itssource127kilometersaway Nowonderwater times costly Tampico Veracruz To simply traditional solution Mexico City water problems increase supply Just Inter American Development Bank proved million Federal District Mexico State finance fourth phase ofexpansion Financial autonomy Telecommunication Gas Power Water World Bank Cutzamala River water supply system which rentlyprovides25 percent water But there problem boostingsupply again nothing surprising stonishing waterwaste receiving Believe anywhere percent Mexico City water supply leaky distribution system Over years billions dollars N N 4NNiiNN ofwater system Almacenamiento storage regulaci6n regulation acueductos aqueducts pozos wells distribucidn network water tables manto acufferos IsmailSerageldin WaterSupply Sanitation andEnvironmental Sustainability TheFinancingChallenge TheWorldBank Cr6nica The international standard losses leakage urban water distribution percent WF spentonboostingwatervolumeonlyto halfof itpour through cracks tumble distribution ravagedbyearthquakes sinkingneighborhoods administrative abandon In places especially downtown underground water pipes coloni andeven Aztec times Add thatthe significantsquanderingofH20 reaches customers prospects really deteriorate De spite apocalyptic predictions impending water drought Mexico City residents reportedly consume dailyaverageof360litersofwater thatis over100li capita Monterrey Paris Barcelona Ifwedon tdosomethingto detainthewaste Alfonzo Martinez Vaca formerwater chief ofthe federal district years maximum wewillhaveno water PUBLIC PRIVATE PARTNERSHIP InFebruary Mexico Cityappealed world water experts assistance In international bidding process private water companieswere hired distribution system Dividing capital service zones officialstendered contractsvalued atapproximately million Allied withMexican partners Europeanwater cerespresentedwinningbids CompagnieG6n6raledesEaux France LonnaisedesEauxDumez France Northwest Wa International U K Severn Trent U K Who wouldn interested Mr Jones Severn Trent consortium This biggest world It salsoagreatbasefromwhichtoexpandopera tions LatinAmerica The stage months before Passing waterlegislation legislature createdan adminis trativebodyto supplant network splinteredandin efficient management The called Water Commission would centralize duties three public ciestraditionallyinvolved inH20distribution These Department Water Works Operation knownbyitsSpanishacronym DGCOH Anotoriously corruptbureaucracy theDGCOHhandlesprimarywater infrastructure aqueducts water mains drainage pipes houses Two Mexico City political districts known delegaciones manage eration maintenance secondary distribution network valveboxes smallerwaterpipes connections Three cityTreas uryDepartmentdeals withbillingandcollection It bureaucratic nightmare Jaime Gonzalez technical director newly formed Water Commission With centralized authority track these activities wehad managerialmayhem Underthenewinstitutionalframework theDGCOH unionized workers remains charge primary water infrastructure relinquishes theWa terCommissionany functions related secondary distri bution Overtime theTreasuryDepartmentandthe delegaciones transfer similar duties theCommis The latter private contractors perform aforementioned tasks along others specified service contracts Within range ofprivate sector options service contracts represent simplest cause public authority retains overall responsibility operation maintenance except specific scope services contracted The responsi bility ofthe private ontractor restricted tomanagingits personnel services efficiently As pffvate companiesbearno commercialrisk since themoneypaid bywaterconsumers directly government No matter happens other words contractors their services Interestingly scheme markedly different private sector experiments tried water authorities other Latin American cities Take Buenos Aires Unlike Mexico City public authorities there chose conces service contracts modernize equally backwardwater system In concession private contractorsassume overall responsibility forthe services usually for20 to30years Insteadofbeingpaidbythe government contractor directly based contractually tariffs This takes public authority Sowhy Mexico City choose concessionmodel One Gonzalez replies Water Commis Politics With ession organized DGCOHworkerswould theirjobs That politi saysthe officialwastoohigh Aconcession wouldalsohave drivenupwaterprices fasterandhigher service contractswouldhave since ratesmustreflect concessionaire costs ofservice provision Other market forces demand water compa under In Gonzalez concludes water ratesmustincrease gradually avoid social conflict Lendingorderto process allmodernization activi carriedoutoverthe yearlife ofthe service contractsthroughthreestages PhaseOne meterinstal lation networkmapping consumer register updating PhaseTwo meterreading billing paymentcollection PhaseThree systemrepairs upgradingoffacilities erationandmaintenance ofthe secondarynetwork Bylate1994wewerereallyflying saysMr Jones whorelocated toMexico CityfromLondonthe previous With nearly employees subcontractors cluded Industrias elAguawasinstalling24 000meters month Thanks robust economy record InstituteofCurrentWorld Affairs MichaelJonesofIndustrias delAgua water payment collections Jones spirits hence shockwhenMexico devalued thepeso December project screeched Water meters imported priced dollars skyrocketed price Citibank whichwasabout finance thepurchase meters suspended The Water Com mission sbudget shrank Although activities slowlyresumedbymid expectedproblemshad emerged As contractors stepped upoperations waterbureaucratsdraggedtheir Ac cording Jones reflected percent commitment project within Mexico City ernment In hindsight ofenthusiasmgrew public private partnership matured Waterbureau crats feltthreatenedbythe contractors explainedWater Readinga meterj ortheWaterCommission Federal District WF CommissionengineerLui sDiaz sotheytried stallthe process Considerthecaseofmeterreading Installationofthesede vicesbeganinthesummerof1994 yetwatercompanies startbillingorcollectingpaymentsuntilearly What explains delay Some blame devaluation Others point computerproblems Diaz however gestsTreasuryDepartment officialssimplyrefusedto transfer responsibilities theWaterCommission Authorities delegaciones resisted coopera tioninotherways although itremainsunclearwhether theirbehavior reflectedmalice ormeremanagerialinepti For example Industrias Agua Severn Trent joint venture successfully restored manholes northeastern district Venustiano Carranza Metaldetectorswereusedtolocatethesevalve accesses buried beneath asphalt Far pressing gratitude recentmonthsdelegaci6n employees pavedmorethan ofthe restoredmanholes Fixing Mexico City leaky distribution As fortheDGCOH OscarHernandez itsheadengi assuredmethathisdepartmenthasno conflictof interest water companies Because theDGCOH neverhad responsibility secondary distribu network explained reason plaud efforts private enterprise modernize water system That Hernandez acknowledged while political delegaciones havebeen theoretically charge secondary water infrastructure sorely equipped responsibility Consequently theDGCOHprovides technical support trained personnel construction materials machinery Wehave60pipe cleaningtrucksandmanyofthe egations boasted Hernandez further portingthecontentionthathisdepartmenthas defacto control Mexico City secondary distribution For reason DGCOH believed staunchlyopposedto thelaunching ofPhaseThree ofthe service contracts If obliged unofficially transfer sponsibilities repair upgrading operation maintenanceofsecondarywaterinfrastructureto private companies department workers would their Be Phase Three shouldhavebegunalready accordingto timetable service contracts Priva contractors understand ablyeagertobegin having sustained sizable lossesdueto devaluation delays We forward saysJones especiallyconsideringthecostswehave readyincurred thatwemaynever recuperate Foranunbiasedopinion talkedtoawaterspecialist atMcKinsey S consulting whorequestedano nymity Summarizing situation Mexico City based professional spoke combat betweentheDGCOHandthenewly formed relatively weakWaterCommission Concludedthe consultant Big infrastructure bureaucracy money friends doyouthinkforasecondthattheDGCOHis goingto stepdownquietly RAISINGTARIFFSANDTEMPERS Would bureaucrats noise makers Since early outcryhas increasedwith rising water prices By Treasury officials finally transferred billing functions contractors latterhad installedapproximatelyone million meters Tominimize complaints thewatercompaniesdecided phase inthe billing mechanism incrementally starting middle class neighborhoods primarily But tempers Angered risingwater prices Ernesto Rodriguez complains employed plumbers northeastern Mexico City flaredanyway Whenwell offconsumerssawtheirwater billsjumpby percent manyhitthe streets protest Gustavo Fuentes specialist inmeterinstallationand preventative maintenance Industrias Agua witnessed their wrath On several occasions customers HIIALGO TI_AXCALA FEDERAL DISTRICT PUEB MORELOS Aca InstituteofCurrentWorld Affairs surrounded hiscompanycar thumpingfistsonthe demandingimmediate solutionsto theirbillingproblems I veneverbeenbeaten Fuentes lookingonthe bright justinsulted Some irate customers vandalism While ducting random tests water meter precision delegaci Benito Juarez Fuentes explained popular forms ofmeter sabotage Some torches metal casings warping spinning mechanisms causing meters register lower water consump Others simply smash hammers called touch exposed nozzles which meter readers insert their electronicmonitors Of course everyone rejects rising water rates leastnotin principle Alberto Garcia oldrestau rantowner appreciates theneedtopaymoreforwater A lifetime resident ofBenito Juarez Garcia acknowledged water bills ridiculously However quickly complained building eight apartments water meter Since landlord splits costs evenly Garcia amount their neighbors eight family members presumably consume water Untilwehaveourownmeter saysGarcia Icannot supportthis project While price increases largely confined middle class enclaves newsofmeteredconsumptionand rising rates Mexico City newspapers In runup July pivotal elections politicians seized uponthis publicoutcry electoral Acase point center candidate Cuauht6moc Cirdenas front runner proposes restrict increases inpub tariffsand prices including water halfthe increase registeredbytheconsumerprice index Politicization isseriouslyjeopardizingthe project states Mr Diaz Water Commission If populist comes power subsidies could again destroy ourabilitytochargeaccordingtohowmuchwaterpeople consume Making matters worse Alfonzo Martinez Vaca until recently theWaterCommission director resigned inFeb ruary campaign PRI mayoral candidate Alfredo delMazo Absenthis leader politicalwill necessarytopreserve theWaterCommission spublic WorkingforIndustrias delAgua Gustavo Fuentes services newly izstalled water meter delegaci6n Benito Juarez partnershipmaywither Keenlyaware ofthis Jones regretted electoral shuffle It creates problem continuity To degree person ership ofourproject Maybe maybenot Pooh poohingthe pessimists Mr Diazremains confident politicians willcometo their sensesonceapprised ofthe projectandofwhatis stake Asforthecontractors theyare stillearningmoneyfrom albeitlessthananticipated thankstotheservice contracts And forget fringe benefits Likening Mexico City university water service zones classrooms Diaz called private contractors students scholarship Added engineer All thingsconsidered theyshouldbehappy iftheysucceed theycandoitanywhereintheworld GI WF Institute ofCurrentWorld Affairs The Ins titute ofCurrentWorldAffairs FOURWESTWHEELOCKSTREET HANOVER NEWHAMPSHIRE 03755 ADDRESSCORRECTION REQUESTED Author Foote William F Title ICWA Letters The Americas ISSN Imprint Institute Current World Affairs Hanover NH Material Type Serial Language English Frequency Monthly Other Regions EastAsia Mideast North Africa Europe Russia South Asia SubSaharan Africa Chosenonthebasis ofcharacter previous experi promise Institute Fellows young professionals funded tospend aminimurn oftwo years carrying designed programs study writing outside United States The Fellows required report their findings experiencesfrom fieldonce amonth Theycan write subject formally orinformally The result unique report analysis periodic assessment interna tional events issues