23 March 2006

Aguascalientes' experience provides insight into polemic ‘public or private’ water debate


Story by : David Agren

The faucets in Hector Carrera's small home in Aguascalientes used to run dry every morning around 10 a.m. Nothing but air would gush out. The service would usually return after 6 p.m. Nowadays water flows on demand, thanks to an upgrade in the municipal waterworks brought about by a private company.

"It's expensive, but it's a good service," he explained, echoing a common complaint about the price, but also expressing appreciation for the convenience. "The service fails less often."

Aguascalientes, a fast-growing industrial city of one million people, lacked an efficient waterworks 13 years ago. Located on a semi-arid plateau 250 kilometers northeast of Guadalajara, Aguascalientes also faced long-term water supply problems as an expanding population and new factories – most prominently a giant Nissan plant, where all of the manufacturer's Sentras are made – put increasing pressure on the aquifer the municipality draws water from.

To arrest its problem, the municipality unveiled a polemic solution in 1993: It asked a private company to provide water and sewage services. The then Institutional Revolutionary Party (PRI) municipal government granted a 20-year concession (since expanded to 30 years) to Proactiva Medio Ambiente CAASA, a French, Spanish and Mexican consortium, which operates under the name Concesionaria de Agua de Aguascalientes, S.A. (CAASA).

Critics called the arrangement privatization, but CAASA's management disagrees.

"It's not privatization, it's a partnership." said Marco Antonio Ponce, planning manager for CAASA.

Private-sector water management, a practice panned by anti-globalization groups and a host of critics gathering at this week's World Water Forum in Mexico City, has improved efficiency, fixed leaky pipes and increased conservation in Aguascalientes, but the gains have come at a cost, which customers see reflected in their monthly water bills – some of the most expensive in the country.

Under the terms of the concession granted in Aguascalientes, the municipality still owns the waterworks, but CAASA manages the day-to-day operations, billing and long-term planning.

Prior to CAASA's arrival, the Aguascalientes municipal government ran a fairly typical public waterworks – by Mexican standards. The system lost more than 60 percent of the water it drew from a rapidly shrinking aquifer during delivery – mainly due to leaky pipes. Many water bills went unpaid. Theft via clandestine connections was rife. Approximately 30 percent of city residents lacked service. Less than half of all neighborhoods received 24-hour water service. The government subsidized water delivery and CAASA's predecessor charged a rate that failed to cover the cost of providing the service. The water utility was also deeply in debt.

Since assuming responsibility for the waterworks - and its debt - CAASA has extended the system's reach; 99 percent of Aguas-calientes residences now receive water, including many homes built without proper permits. CAASA improved sewer service; it treats 98 percent of all wastewater (only 20 percent of sewage in Mexico is treated, according to the National Water Commission). Per-capita water consumption dropped by 20 percent. The utility also reduced the periods certain neighborhoods go without water.

Most controversially, it increased the price, forcing users to pay for the actual cost of the water. It also began demanding payment from delinquent customers.

CAASA measures its success in terms of efficiency; it draws less water from the waterworks' 181 wells than its predecessor, but provides service to nearly twice as many customers. CAASA's concession allows it to extract 110 million cubic meters of water annually. Due to efficiency improvements, though, the company won't surpass that figure until at least 2033.

"There are more users (but) less water is being used ... and the service is always improving," said Julian Lili Bravo, CAASA's commercial manager.

He took issue with critics, who advance the notion, "Because less water is drawn [from underground wells] the user has less water available in his home.

"The opposite is true, it's part of the efficiency that we're looking for in Aguascalientes."

The price increase brought the biggest objections from Aguascalientes residents. They pay 97 pesos for 10 cubic meters of water and 6 pesos for each additional cubic meter. (Rural customers receive 30 cubic meters of water for the same price). The rate climbs every few months to keep pace with inflation. In comparison, the average Mexican household pays 5 pesos per cubic meter – a price that includes sewage and drainage.

Some residents initially balked at the increase; previously they paid a low fixed rate, allowing them almost unlimited water. The rate hike also coincided with Mexico's 1994 peso devaluation, a period of extreme financial hardship. CAASA's involvement in Aguascalientes' waterworks became a political issue in 1995, with The National Action Party (PAN) promising to nix the deal and lower water bills.

"Logically, the public began to resent the price increase," said Otto Granados Roldan, the PRI governor Aguascalientes from 1992-1998.

According to Granados, the PAN, which won the municipal election in 1995, attempted to carry out its campaign promises, but ran into legal difficulties. Ultimately the PAN administration accepted the deal and later extended the concession.

For CAASA, changing attitudes towards water delivery proved as difficult as fixing infrastructure and implementing a price increase.

"In the beginning, we were speaking of a paternalistic culture, which said the government will cover everything," Lili said.

Improving efficiency required updating the padron (customer list). Prior to 1993, 10 percent of the water was simply stolen. It also required a change in the state law, allowing CAASA to suspend service to customers with overdue water bills. (SIAPA, Guadalajara's waterworks, is forbidden from cutting service to residential customers; only 60 percent of its accounts are up to date). Nowadays, only four percent of CAASA's water is stolen and more than 90 percent of its bills get paid.

"If the user doesn't pay in Guadalajara, nothing happens," Lili explained. "Here in Aguascalientes, if you don't pay, the service is suspended."

With time, the protests died down, but when asked, many customers still grumble about the price and the intermittent service in some parts of town.

Victor Ramos, an Aguascalienetes cab driver who lives on the city's southern outskirts, endures regular service disruptions, which he said last longer than promised.

"Sometimes there's water, but often there's no water for days at a time," he said, adding that he pays around 120 pesos per month. "We often go to a family member's place to bathe."

According to CAASA, water shortages, which still occur in approximately 20 percent of all Aguascalientes homes, have become less frequent and by 2009, the practice should end. (Many residents own cisterns to supply water during outages).
Jose Luis Hurtado, a restaurant manager, also complained about the price.

"For Mexico's income level, (water prices) here are expensive," he said, but he also recognized the improved coverage and service since 1993. "Now the neighborhoods on the outskirts of town have water."

CAASA officials acknowledge their water rate is "one of the highest in the country," but, according to Ponce, 4.6 percent of revenues are set aside for users – mainly seniors – who are unable to pay their water bills.

"The tariff," he added, "Covers everything."

"Everything" in Aguas-calientes includes water, sewage and drainage. Many Mexican municipalities charge separately for the three services and sometimes include sewage and drainage fees in property taxes. Government subsidies keep the costs low, although, Ponce pointed out that users still end up footing the bill.

"At the end of the day, people either pay through their water bill or their property taxes," he explained.

Instead of relying on capricious government support, CAASA reinvests earnings into its infrastructure – something rare in Mexico, where water projects depend almost exclusively on federal and state grants.

"There are no subsidies here," Ponce said, adding that Aguascalientes still receives federal infrastructure grants like other municipalities, but doesn't exclusively depend on the money.

Other Mexican municipalities with inefficient utilities, including Saltillo and Cancun, have also turned to private water providers over the past decade. The concession agreements in each municipality differ; fees paid by the luxury hotels in Cancun largely subsidize residential water rates in the resort city. Complaints about rising water bills and a lack of accountability surfaced in Saltillo.

The Guadalajara-based Mexican Institute for Community Development objects to private-sector water participation. In an information kit on the subject, it contends that privatization leads to price increases, a reduction in water quality and job losses.

Although more expensive than before, the water CAASA delivers has won quality awards. Still, bottled water sales remain strong in Aguascalientes, something Ponce attributed to a lack of confidence in Mexican waterworks.

As for job losses, the change in management brought about layoffs. CAASA presently employs 602 people, a smaller number than when its concession began. In some instances, automation made jobs redundant. Additionally, superfluous support positions were eliminated, including chauffeurs.

"At the other water companies, all of the directors and sub-directors have drivers," Ponce pointed out.

The public versus private management topic promises to dominate this week's World Water Forum, but Ponce downplayed the issue's importance to the general public, saying, "People don't really care whether or not the service is public or private so long as they receive good service."

No comments: