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California-based engineering giant Bechtel's stepping away from a US$25mn dispute with the Bolivian government over the rescission of its 40-year concession for Cochabamba water utility Aguas del Tunari is the result of increasing public pressure and negative publicity, Democracy Center director Jim Shultz told BNamericas.
The construction and engineering conglomerate and Spanish partner Abengoa are scheduled to sign an agreement with the government Thursday in Santa Cruz, Bolivia, ending their four-year effort to seek compensation from Bolivia for canceling in April 2000 the water contract with Cochabamba, the nation's third largest city.
Under the agreement Bolivia will buy the shares of the holding companies - International Water and Abensur - that own 80% of Aguas del Tunari, the water company formed by Bechtel in 1999.
The purchase price will be two bolivianos (US$0.25). Private Bolivian investors own 20% of each company and will keep their respective control.
The Bolivian government took possession of Aguas del Tunari in April 2000 after the concession increased water charges, a causal factor in the Cochabamba riots during which the army fired on protestors, killing a 17-year old boy.
The Aguas del Tunari problem stemmed from the fact that Bolivia was coerced into water privatization by the World Bank and then the concession terms were negotiated behind closed doors by an incompetent government that was insufficiently honest to do a good job, according to Shultz.
"You don't get good deals when there is no one watching," he said.
The Democracy Center - a human rights NGO based in Cochabamba and San Francisco, California, was formed to lead international efforts against Bechtel - reviewed the new agreement to ensure that there were no hidden surprises, such as debt, for the Bolivian government.
"We are very happy with this result. There have been very hard negotiations and we think this is the best solution that we could have hoped for. No one can believe we have done this," deputy basic services minister Eduardo Rojas told BNamericas.
"This is a remarkable victory," according to Shultz, who says there is no precedent for a major corporation like Bechtel to drop such a case in response to global citizen pressure.
"It is a huge precedent for the growing web of legal cases in which the world's most powerful corporations seek to tie the hands of people and governments to shape their own economic futures," he said.
Bolivia's cause was aided by an international campaign against Bechtel and Abengoa for taking the country to the World Bank's trade court, the International Center for the Settlement of Investment Disputes (ICSID).
A network of individuals and organizations from more than 43 countries has worked with Bolivians since 2000 to promote the case of the Bolivian people against Aguas del Tunari with protests in the US, the Netherlands and Spain.
Protesters targeted the Washington DC house of Aguas del Tunari president Michael Curtin in February 2004 to demand that Bechtel and its associates drop their case against Bolivia. A September 2002 protest outside Bechtel headquarters in San Francisco resulted in the arrest of 15 people.
This followed San Francisco's board of supervisors approving a resolution calling on Bechtel headquarters to renounce the case with Bolivia in July 2002 and a vote to cancel a US$45mn management contract awarded to Bechtel in 2000 by the city government to oversee the reconstruction of the Hetch Hetchy public water system.
Company executives in San Francisco and Spain faced protests outside their houses, and demonstrations at major water industry events led Bechtel chairman and CEO Riley Bechtel to personally intervene, according to one source, due to the negative publicity the company received, which included reports in The New York Times and The New Yorker in addition to The San Francisco Chronicle.
"Bechtel was feeling the heat. It was pushed to settle from the bad publicity, given that the company relies on government contracts around the world. Bechtel... was very surprised at the resistance of the Bolivian government and citizen groups from around the world," Sarah Anderson, director of global economic projects at Washington-based NGO, the Institute for Policy Studies, told BNamericas.
"Bechtel did the math and thought it was no longer worth the damage to its public reputation," Shultz added.
PRESSURE ON ALL SIDES
Abengoa faced political pressure in Spain after it was targeted by the protest campaign in December 2004 and January 2005. Both King Juan Carlos and Prime Minister José Luis Rodríguez Zapatero asked the company to withdraw from the dispute and stop blocking progress towards a settlement, Bolivia's deputy minister Rojas said.
Bechtel says Bolivia's government changed its attitude in the negotiations in October 2005 when ICSID said it had jurisdiction in the matter.
"We had offered the government similar terms for some time. Our goal was not to punish the people of Bolivia but to win the recognition that Aguas del Tunari was not at fault in the management of the concession," Bechtel spokesperson Jonathan Marshall said.
A joint statement by the government of Bolivia and the international shareholders of Aguas del Tunari declared "the concession was terminated only because of the civil unrest and the state of emergency in Cochabamba and not because of any act done or not done by the international shareholders of Aguas del Tunari."
Despite the victory Bolivia still faces a legal bill of up to US$1.6mn for the ICSID case although deputy minister Rojas hopes it will be about US$1mn as the hearing did not progress through all of its stages.
Bolivia's determination is seen as evidence of an increasing tide of resistance by public institutions in Latin America to implement reforms that are laid down by the International Monetary Fund and other multilateral lending agencies that are believed by the general population to be in the interests of large corporations and of expansion of the use of investment protection rules under which corporations can take legal action.
Lawmakers are writing investment protection rules into treaties that undermine national laws, with little appreciation of how they will function, the Institute for Policy Studies' Anderson says.
"The treaties that contain these investment rules are proliferating and they give excessive power to corporations. Corporate lawyers draft the rules and get them in under the radar screen. Countries like Bolivia typically tend to not act for fear of scaring away investors, but the US government is also naive about the investment rules it has to operate under," she said.
Nobel economist Joseph Stiglitz conceded in an address at Hofstra University in November that he had not recognized the danger of such investment rules when they were included in the 1994 North American Free Trade Agreement (NAFTA), when he worked for the Council of Economic Advisers in the Clinton administration and lobbied in favor of NAFTA.
NAFTA investment rules have served as a model for dozens of bilateral investment treaties, including the one used by Bechtel to sue the government of Bolivia. Realizing their implications, Stiglitz now strongly opposes them.
Abengoa representatives were unavailable for comment when contacted by BNamericas.