Water Privatization - History

History

Privately owned water utilities were common in Europe, the United States and Latin America in the mid- and late 19th century. Their importance gradually faded away until the early 20th century as they proved unable to expand access and publicly owned utilities became stronger. A second global dawn of private water utilities came in the early 1990s in the aftermath of the Thatcher privatizations in England, the fall of communism and the ensuing global emphasis on free market policies. The World Bank and the International Monetary Fund played an important role in this process through the conditionality of their lending. However, some water privatizations failed, most notably in 2000 in Cochabamba, Bolivia, paving the way for a new pragmatism and a reduced emphasis on privatization.

In England and Wales, the emergence of the first private water companies dates back to the 17th century. In 1820, six private water companies operated in London. However, the market share of private water companies in London declined from 40% in 1860 to 10% in 1900. In the 1980s, their share all over England and Wales was about 25%. The tide turned completely in 1989 when the conservative government of Margaret Thatcher privatized all public water and sewer companies in England and Wales. In Scotland local governments dominated by the Labour party kept water systems in public hands.

The water sector in France has always been characterized by a coexistence of public and private management, with their respective shares fluctuating over time. The two largest private companies are Veolia Environnement, formerly the Compagnie Générale des Eaux and then Vivendi Environnement, and Suez Environnement, formerly Lyonnaise des Eaux and then Ondeo. The Compagnie Générale des Eaux was founded in 1853 and Lyonnaise des Eaux in 1880. In the late 19th century, municipal governments, dissatisfied with high tariffs and the lack of expansion of networks to poor neighborhoods, did not renew private concessions and created instead municipally owned utilities. The share of private water operators declined to 17% in 1936. The share of the private sector gradually increased to 32% in 1954, 50% in 1975 and 80% in 2000 using a new model: Instead of the concession contracts, which gave the responsibility to finance investments to the private company, the new lease contracts (affermages) made the private operator only responsible for operation and maintenance, while major investments became a responsibility of the municipalities. The French water companies also escaped the nationalizations after the war and later under President François Mitterrand, because the central government did not want to interfere with the autonomy of municipalities and was unwilling to finance heavy investments. The water supply of Paris was privatized in 1984 when a conservative mayor awarded two lease contracts, each covering one half of the city. In 2010, a socialist mayor remunicipalized the water system of the French capital.

In Spain, private water companies maintained their position, budging the global trend during the late 19th and early 20th century. The largest private water company in Spain is Aguas de Barcelona. Initially created by French and Belgian investors, it was sold to Spanish investors in 1920, only to gradually come back under French control in the early 21st century.

In Germany, a British private water company had set up the first piped water system and treatment plant in Berlin in 1852, but the city, dissatisfied with the lack of investment in particular in sewerage, cancelled the contract in 1873. In 1887 Gelsenwasser was created, which remains an important regional water supplier in the Ruhr district. The German water sector has always been dominated by municipally owned utilities. Despite this, the water system of Berlin was partially privatized in 1999 for fiscal reasons.

In the United States, 60% of piped water systems were privately owned in 1850. This share declined to 30% in 1924. As of 2010, 2000 water and wastewater facilities in the U.S. were operated under public-private partnerships.

European and local private water companies expanded in Latin America, Africa and Asia in the second half of the 19th century, all while their importance declined in Europe. In Uruguay, water supply was privately managed from 1867 to 1950; in Buenos Aires, Argentina, for a brief period from 1887 to 1891 and again from 1993 to 2006; in Cairo and Alexandria, Egypt, from 1867 to 1956; in Beirut, Lebanon, from the 19th century until 1951; in Shanghai, China, from 1875 to 1949; in Casablanca, Morocco, from 1914 to 1962 and then again after 1997; in Senegal until 1971 and then again after 1996; and in Côte d'Ivoire from colonial times until today without interruption.

In Central and Eastern Europe, private companies expanded during the late 1990s, especially in Bulgaria, the Czech Republic, Hungary and Romania.