Major Cities Water Privatization Case Study

In the 1980s, Bolivia was facing a major economic crisis caused by hyperinflation. By 1985 the inflation rate rose to over 23 thousand percent (Trading Economics). In an desperate effort of combat this issue, the Bolivian government borrowed from the World Bank, and would continue to do so for the next 20 years to stabilize their economy and improve infrastructure. With these loans from the World Bank came various conditionalities. The World Bank took the stance that "poor governments are often too plagued by local corruption and too ill equipped to run public water systems efficiently" (Shultz, 2005) and so in mid-1990s they made it a condition of the extension to the Major Cities Water and Sewerage Rehabilitation Project to privatize the water utilities in many of the major cities in Bolivia (Bolivia - Major Cities Water and Sewerage Rehabilitation Project, 1998).

In 1997, water utilities were contracted in Cochabamba to the American water company Bechtel. This agreement would significantly impact the Cochalas' access to water, cost of living, and overall quality of life. A 35% increase in the cost of already expensive water caused it to become unaffordable to many, particularly the poorest classes of society. In response, tens of thousands of people began rioting at the beginning of the year 2000. The rioting would continue for 4 months during which time a general strike occurred,
The World Bank could have chose not to impose the Washington Consensuses on Bolivia by making privatization a conditionality and instead respect sovereignty by providing technical resources to assist the government with whatever model they believe is best for their country. Alternatively the Bolivian government could have taken steps to facilitate the introduction of multiple water companies. This could have lead to increased competition and subsequently lower